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Auy. vlc c. Momoloteo
SepL. 7, 2010
lnCCML 1Ax
• lnCCML 1Ax
– 1ax on all yearly proñLs arlslng from properLy, professlons, Lrades or
omces, or as a Lax on a person's lncome, emolumenLs, proñLs and Lhe
llke (llsbet v. 1tlolJoJ).
– lncome Lax ls a dlrecL Lax on acLual or presumed lncome (gross or neL)
of a Laxpayer recelved, accrued or reallzed durlng Lhe Laxable year.
• Wl1PPCLulnC 1Ax
– lL ls noL an lnLernal revenue Lax buL a mode of collecung lncome Lax ln
advance on lncome of Lhe reclplenL of lncome Lhru Lhe payor of
lncome. [nC1L: Sec. 21, nl8C enumeraLes varlous lnLernal revenue
– 1here are 2 Lypes of wlLhholdlng Laxes, namely: (1) ñnal wlLhholdlng
Lax, and (2) credlLable wlLhholdlng Lax.
llnAL Wl1PPCLulnC 1Ax
• llnAL Wl1PPCLulnC lnCCML 1Ax
– lW1 wlLhheld by Lhe payor of lncome (e.g., 20° lW1 on lnLeresL
lncome on bank deposlLs) represenLs luLL paymenL of lncome Lax due
on such lncome of Lhe reclplenL.
– lncome payee (or reclplenL of lncome) does noL reporL lncome
sub[ecLed Lo lW1 ln hls lncome Lax reLurn, alLhough lncome ls
reßecLed ln hls audlLed ñnanclal sLaLemenLs for Lhe year. Powever, he
ls noL allowed Lo clalm any Lax credlL on lncome sub[ecLed Lo lW1.
– WlLhholdlng agenL ñles Lhe wlLhholdlng Lax reLurn, whlch lncludes Lhe
lW1 deducLed from Lhe lncome payee, and pays Lhe Lax Lo Lhe 8l8.
1here ls no CeruñcaLe of 1ax WlLhheld lssued Lo lncome payee.
– no CeruñcaLe of 1ax WlLhheld (8l8 lorm 2307) ls auached Lo Lhe
lncome Lax reLurn of reclplenL of lncome because he does noL clalm
any Lax credlL ln hls Lax reLurn.
– Compensauon lncome noL sub[ecL Lo lW1
– 8uslness and/or professlonal lncome
– CaplLal galns noL sub[ecL Lo lW1
– Þasslve lnvesLmenL lncome noL sub[ecL Lo lW1
– CLher lncome noL sub[ecL Lo lW1
– Compensauon lncome sub[ecL Lo lW1 (salary of C8u expaL)
– CaplLal galns sub[ecL Lo lW1 (real properLy ln Lhe Þhll and shares of
domesuc corporauon)
– Þasslve lnvesLmenL lncome sub[ecL Lo lW1 (lnLeresL on bank deposlL)
– CLher lncome sub[ecL Lo lW1 (auLo won on x'mas raMe)
• 1he Þhlllpplnes adopLed Lhe seml-global or seml-schedular Lax
sysLem. LlLher Lhe global or schedular sysLem, or boLh
sysLems may apply Lo a Laxpayer.
• Cross sales/revenue
• Less: CosL of sales/servlce
• Cross lncome
• Less: ueducuons
• ÞAL (for lndlvldual)
• neL Laxable lncome
• Muluplled by appllcable
raLe (graduaLed or ßaL)
• lncome Lax due
• Less: CredlLable W1
• 8alance

• Cross selllng prlce or falr
markeL value, whlchever ls
hlgher umes appllcable Lax
raLe = 1ax due (real
• Cross selllng prlce less cosL
or ad[usLed basls = CaplLal
galn umes appllcable Lax
raLe = 1ax due (shares of
dom corp)
• Cross lncome umes
appllcable raLe = 1ax due
(passlve lnv lncome)
nA1u8L Cl ASSL1
• lnvenLory lf on hand aL end of
Laxable year
• SLock ln Lrade held prlmarlly for
sale or for lease ln Lhe course of
Lrade or buslness
• AsseL used ln Lrade or buslness,
sub[ecL Lo depreclauon
• 8eal properLy used ln Lrade or
• All oLher asseLs, wheLher or noL
used ln Lrade or buslness, oLher
Lhan Lhe above asseLs
klnuS Cl 1AxÞA?L8S
• lnulvluuAL
– Cl1lZLn
• 8esldenL - 1axab|e on wor|dw|de |ncome
• non-resldenL - 1axable on lncome from sources wlLhln Lhe Þhll
– lmmlgranL or permanenL worker - n8C from daLe of deparLure from Lhe Þhll
– ClW (seamen) - n8C lf hls aggregaLe sLay ouLslde Lhe Þhll ls more Lhan 183 days
– ALlLn - 1axable on lncome from sources wlLhln Lhe Þhll
• 8esldenL
• non-resldenL
– Lngaged ln Lrade or buslness (more Lhan 180 days ln Lhe Þhll)
– noL engaged ln Lrade or buslness (180 days or less sLay ln Þhll)
• CC8ÞC8A1lCn
– uCMLS1lC - 1axable on worldwlde lncome
– lC8LlCn - 1axable on lncome from sources wlLhln Lhe Þhll
• 8esldenL (e.g., Þhll branch of forelgn corporauon)
• non-resldenL
– 1LS1 lC8 1Ax Þu8ÞCSLS: Law of lncorporauon
• 1AxA8LL
– ÞarLnershlps, no mauer how creaLed or organlzed,
lncludlng [olnL venLures or consoruums
• LxLMÞ1
– Ceneral professlonal parLnershlp (CÞÞ), buL parLners
are Laxed on Lhelr share of parLnershlp proñLs acLually
or consLrucuvely pald durlng Lhe year
– !olnL venLure or consoruum underLaklng consLrucuon
acuvlLy or energy-relaLed acuvlues wlLh operaung
conLracL wlLh Lhe governmenL
8LSluLn1 lC8LlCn CC8ÞS
• 1AxA8LL
– Crdlnary branch of a forelgn corporauon ln Lhe Þhll (30° of neL
Laxable lncome from sources wlLhln Lhe Þhll)
• ÞLZA- & S8MA-reglsLered branch are exempL from branch proñL
remluance Lax
– 8eglonal operaung headquarLers (8CPC) - 10° of neL Laxable
lncome from sources wlLhln Lhe Þhll
– Cñshore banklng unlL (C8u) and forelgn currency deposlL unlL
(lCuu) [lnC 8ank Manlla v. Cl8] - 10° on gross lnLeresL lncome on forelgn
currency loans
– lnLernauonal carrlers by alr or waLer - 2.3° of Cross Þhll 8llllngs
– lorelgn conLracLor or sub-conLracLor engaged ln peLroleum
operauons ln Lhe Þhll - 8° of gross lncome
• LxLMÞ1
– 8epresenLauve omce
– 8eglonal headquarLers (8PC)
• Interest - lnLeresL from sources wlLhln Þhll and lnLeresL on bonds and obllgauons
of resldenLs, corporaLe or oLherwlse
• D|v|dend - lrom domesuc corporauon and from forelgn corporauon, unless less
Lhan 30° of gross lncome of forelgn corporauon for 3 years prlor Lo declarauon of
dlvldends was derlved from sources wlLhln Lhe Þhll, hence, apply only rauo of Þhll-
source lncome Lo gross lncome from all sources
• Serv|ces - Þlace where servlces are performed, excepL ln case of lnLernauonal alr
carrler and shlpplng llnes whlch are Laxed aL 2.3° on Lhelr Cross Þhll 8llllngs.
8evenues from Lrlps orlglnaung from Lhe Þhll are consldered as lncome from
sources wlLhln Lhe Þhlllpplnes, whlle revenues from lnbound Lrlps are LreaLed as
lncome from sources ouLslde Lhe Þhlllpplnes.
• kenta|s and roya|nes - Locauon or use of properLy or properLy rlghL ln Þhll
• Sa|e of rea| property - LocaLed ln Lhe Þhlllpplnes
• Sa|e of persona| property - LocaLed ln Lhe Þhlllpplnes
• Ga|n from sa|e of shares of stocks of a domesnc corporanon ls ALWA?S LreaLed as
lncome from sources wlLhln Lhe Þhlllpplnes.
• Cther |ntang|b|e property - Moblllo sepoootot petsooom - lt follows Jomlclle of
• Cross Sales
• Less: CosL of Sales:
• 8eg. lnvenLory
+ Þurchases
1oLal avallable for sale
- Lndlng lnvenLory
CosL of Sales
• Cross lncome
• 1lmes 2°
• MCl1
• nC1L: MCl1 ls now compuLed
on quarLerly basls. lf quarLerly
MCl1 > Lhan 8Cl1, excess MCl1
of prlor year ls noL allowed.
• Cross 8evenue
• Less: CosL of Servlce
• conslsung of all dlrecL
• cosLs and expenses
• Cross lncome
• 1lmes 2°
• MCl1
nC1L: MCl1 ls lmposed beglnnlng
on Lhe 4
Laxable year
lmmedlaLely followlng Lhe year ln
whlch Lhe corp commenced bus
operauons (5ec 27(í)(1), Nlkc)
Þay MCl1 aûer 4 years lmmedlaLely
followlng Lhe year bank
commenced bus operauons
(Moollo 8ook v clk, Ck 168118, Aoq 28,
• lnCCML means cash or lLs equlvalenL comlng Lo a person wlLhln a
speclñed perlod, wheLher as paymenL for servlces, lnLeresL or proñL from
lnvesLmenL. lL covers galn derlved from caplLal, from labor, or from boLh
comblned, lncludlng galn from sale or converslon of caplLal asseLs.
– l81 ls a Lax on frlnge beneñLs recelved by employees, alLhough Lhe Lax ls assumed by
Lhe employer-payor of lncome.
• 8eLurn of caplLal ls exempL from lncome Lax (e.g., Lax-free exchange of
• 1o be Laxable, Lhere musL be lncome, galn or proñL, galn ls recelved,
accrued or reallzed durlng Lhe year, and lL ls noL exempL from lncome Lax
under Lhe ConsuLuuon, LreaLy or law.
– Mere lncrease ln Lhe value of properLy does noL consuLuLe Laxable lncome. lL
ls noL yeL reallzed durlng Lhe year.
– 1ransfer of appreclaLed properLy Lo Lhe employee for servlces rendered ls
Laxable lncome.
1LS1 ln uL1L8MlnlnC lnCCML
• 8eallzauon LesL
– 1here musL be separauon from caplLal of someLhlng of
exchangeable value (e.g., sale of asseL)
• Clalm of rlghL docLrlne
– Cl8 v. !avler, 199 SC8A 824
• Lconomlc beneñL LesL
– SLock opuon glven Lo Lhe employee
– ÞaymenL of real properLy LhaL has appreclaLed ln value by
employer Lo lLs employee
• lncome from whaLever source
– All lncome noL expressly exempLed from lncome, lrrespecuve of
volunLary or lnvolunLary acuon of Laxpayer ln produclng lncome
nA1u8L Cl lnCCML
– LxlsLence of employer-employee relauonshlp
• 8uSlnLSS Anu/C8 Þ8ClLSSlCnAL lnCCML
– nC employer-employee relauonshlp
• CAÞl1AL CAln
– 8eal properLy ln Lhe Þhll and shares of sLock of domesuc corporauon
– CLher sources of caplLal galn
• ÞASSlvL lnvLS1MLn1 lnCCML
– lnLeresL, dlvldend, and royalLy lncome
– 8l8 cannoL compuLe compounded lnLeresL on delay ln paymenL of
promlssory noLes ln Lhe absence of supulauon ln conLracL (clk v. lsobelo
coltotol cotp, Ck 1722J1, leb 12, 2007).
• C1PL8 lnCCML
– Þrlzes and wlnnlngs
– All oLher lncome, galn or proñL noL covered by Lhe above classes
• A. CÞ8 applles on revenue from LransporL of passengers,
cargoes or mall orlglnaung from Lhe Þhlllpplnes
– ln1L8nA1lCnAL Al8 CA88lL8
• lrom Þhll Lo forelgn desunauon
– Conunuous and unlnLerrupLed ßlghL
– 1ranshlpmenL of passenger ln anoLher counLry on anoLher forelgn alrllne: CÞ8 Lax
applles only on allquoL poruon of revenue on Þhlllpplne leg (Þhll Lo forelgn
• lrom forelgn counLry Lo Lhe Þhll
– 1hls ls LreaLed as lncome from forelgn sources, hence, exempL from Þhll lncome
– ln1L8nA1lCnAL SPlÞÞlnC LlnL
• lrom Þhll Lo ñnal forelgn desunauon ls Laxable
• lrom forelgn counLry Lo Þhll ls exempL
• 8. C8ulnA8? lnCCML
– uemurrage fees (for laLe reLurn of conLalners) are akln Lo
renLal lncome sub[ecL Lo ordlnary corporaLe lncome Lax
raLe based on neL Laxable lncome from sources wlLhln Lhe
ln1L8LS1 lnCCML
• 1?ÞLS Cl ln1L8LS1 lnCCML
– Sub[ecL Lo lW1: lnLeresL lncome on bank deposlLs, deposlL
subsuLuLes, LrusL and oLher slmllar arrangemenLs
• 20° lW1 - peso deposlL
• 7.3° lW1 - forelgn currency deposlL
– nC1 sub[ecL Lo lW1 buL sub[ecL Lo regular Lax raLes (3°-32°, lf
lndlvldual, 30°, lf corporauon): All oLher lnLeresL lncome or ñnanclng
– LxempL lncome:
• Long-Lerm deposlL or lnvesLmenL by lndlvlduals
– 1axable lncome:
• Þreferenual Lax raLe - Þre-Lermlnauon of long-Lerm deposlL by lndlvldual
(20°: 1- less Lhan 3 yrs, 12°: 3 yrs-less Lhan 4 yrs, 3°: 4 yrs-less Lhan 3
yrs), and lnLeresL on forelgn loan
• 8egular Lax raLe (30°) - All oLher cases
ulvluLnu lnCCML
• 8LCulSl1LS lC8 ulvluLnu uLCLA8A1lCn
– Þresence of reLalned earnlngs
– no prohlbluon Lo declare dlvldend ln loan agreemenL
– ueclarauon of dlvldend by 8oard of ulrecLors
• 1?ÞLS Cl ulvluLnuS
– 1axable
• Cash dlvldend
• ÞroperLy dlvldend
– LxempL
• SLock dlvldend (excepL when Lhere ls change ln proporuonaLe lnLeresL
among sLockholders and Lhere ls subsequenL cancellauon or redempuon
of shares declared as sLock dlvldend)
• Llquldaung dlvldend - dlsLrlbuuon of asseLs Lo sLockholders
– 1axable on Lhe parL of sLockholder under Lhe global Lax sysLem
ulvluLnu lnCCML
• lnLer-corporaLe dlvldend: LxempL from Lax
– Corporauon paylng dlvldend: uomesuc corporauon
– 8eclplenL of dlvldend: AnoLher domesuc corporauon or resldenL
forelgn corporauon
• ulvldend pald Lo non-resldenL forelgn corporauon
– Corporauon paylng dlvldend: uomesuc corporauon
– 8eclplenL of dlvldend
• lorelgn head omce makes dlrecL lnvesLmenL ln Þhll company: 13° lW1
• Þhll branch of forelgn corporauon makes lnvesLmenL ln Þhll company:
LxempL from lncome Lax
– 1ax-sparlng provlslon
• lf forelgn counLry does noL lmpose lncome Lax on dlvldend pald by forelgn
• Income from any source whatever
• 1he words ºlncome from any source whaLever" dlscloses a leglslauve
pollcy Lo lnclude all lncome noL expressly exempLed from Lhe class of
Laxable lncome under our laws "MoJtlqol vs. ko[etty, sopto, commlsslooet vs.
8OAc). 1he words ºlncome from any source whaLever" ls broad enough Lo
cover galns conLemplaLed here. 1hese words dlsclose a leglslauve pollcy
Lo lnclude all lncome noL expressly exempLed wlLhln Lhe class of Laxable
lncome under our laws, lrrespecuve of Lhe volunLary or lnvolunLary acuon
of Lhe Laxpayer ln produclng Lhe galns (Couettez vs. collectot, c1A cose 65, Aoq.
J1, 1955).
• Any economlc beneñL Lo Lhe employee whaLever may have been Lhe
mode by whlch lL ls eñecLed ls Laxable. 1hus, ln sLock opuons, Lhe
dlñerence beLween Lhe falr markeL value of Lhe shares aL Lhe ume Lhe
opuon ls exerclsed and Lhe opuon prlce consuLuLes addluonal
compensauon lncome Lo Lhe employee (commlsslooet vs. 5mltb, J24 u.5. 177).
• Llfe lnsurance proceeds
• AmounL recelved by lnsured as reLurn of premlum
• Clûs, bequesLs and devlses
• Compensauon for ln[urles or slckness
• lncome exempL under LreaLy
• 8euremenL beneñLs, penslons, graLulues
– 8.A. 7641 (3 yrs & 60 yrs) and 8.A. 4917 (10 yrs & 30 yrs)
• lnLeresL lncome of employee LrusL fund or accredlLed reuremenL plan ls exempL
from lW1 (clk v. Ccl keutemeot lloo, 207 5ckA 487)
– AmounL recelved as a consequence of separauon because of deaLh, slckness
(tbot wlll eoJooqet llfe of employee) or oLher physlcal dlsablllLy or for any
cause beyond Lhe conLrol of employee
• Mlscellaneous lLems
– lncome of forelgn governmenL
– lncome of governmenL or lLs pollucal subdlvlslons from any publlc uullLy or
exerclse of governmenLal funcuon
• #$% &$'()% *(+, -. /$%0' (12302%) 1-+451/%4 .-' &'-6/7 4-%) +-/ 85(90., /$% :-'4
*&'-&%'2%);7-- 1he phrase ºany of Lhelr acuvlues conducLed for proñL" does noL quallfy
Lhe word ºproperues." 1hls makes lncome from Lhe properLy of Lhe organlzauon Laxable,
regardless of how LhaL lncome ls used - wheLher for proñL or for loûy non-proñL purposes.
1hus, Lhe lncome derlved from renLals of real properLy owned by Lhe ?oung Men's Chrlsuan
Assoclauon of Lhe Þhlllpplnes, lnc. (¥MCA), esLabllshed as a welfare, educauon and
charlLable non-proñL corporauon, ls sub[ecL Lo lncome Lax. 1he renLal lncome cannoL be
exempLed on Lhe sollLary buL unconvlnclng ground LhaL sald lncome ls noL collecLed for proñL
buL ls merely lncldenLal Lo lLs operauon. 1he law does noL make a dlsuncuon. Where Lhe
law does noL dlsungulsh, nelLher should we dlsungulsh. 8ecause Laxes are Lhe llfeblood of
Lhe nauon, Lhe CourL has always applled Lhe docLrlne of sLrlcL lnLerpreLauon ln consLrulng Lax
exempuons. ?MCA ls exempL from Lhe paymenL of properLy Laxes only buL noL lncome Laxes
because lL ls noL an educauonal lnsuLuuon devoung lLs lncome solely for educauonal
purposes. 1he Lerm ºeducauonal lnsuLuuon" has acqulred a well-known Lechnlcal meanlng.
under Lhe Lducauon AcL of 1982, such Lerm refers Lo schools. 1he school sysLem ls
synonymous wlLh formal educauon whlch ºrefers Lo Lhe hlerarchlcally sLrucLured and
chronologlcally graded learnlngs organlzed and provlded by Lhe formal school sysLem and for
whlch ceruñcauon ls requlred ln order for Lhe learner Lo progress Lhrough Lhe grades or
move Lo hlgher levels (commlsslooet vs. coott of Appeols ooJ ¥McA of tbe lblls., C.k. No.
12404J, Oct. 14, 1998).
• klnuS Cl uLuuC1lCnS
– lLemlzed ueducuons
– Cpuonal SLandard ueducuons
– Speclal ueducuons
• l1LMlZLu uLuuC1lCnS
– 8uslness expenses, lncl. research and developmenL
– lnLeresLs
– 1axes
– Losses
– 8ad debLs
– uepreclauon
– uepleuon
– CharlLable conLrlbuuons
– ConLrlbuuons Lo penslon LrusL
– PealLh or hosplLallzauon premlum
• 1. 1he expense musL be ordlnary and necessary,
• 2. Þald or lncurred durlng Lhe Laxable year,
• 3. ln carrylng on or whlch are dlrecLly aurlbuLable Lo Lhe develop-
• menL, managemenL, operauon and/or conducL of Lhe Lrade,
• buslness or exerclse of professlon,
• 4. SupporLed by adequaLe lnvolces or recelpLs,
• 3. noL conLrary Lo law, publlc pollcy or morals. Cperaung expenses
• of an lllegal or quesuonable buslness are deducuble, buL
• expenses of an lnherenLly lllegal naLure, such as brlbery and
• proLecuon paymenLs, are noL.
• 6. 1he Lax requlred Lo be wlLhheld on Lhe amounL pald or payable ls
• shown Lo have been pald Lo Lhe 8l8.

• An expense ls ºordlnary" when lL connoLes a paymenL, whlch ls normal ln
relauon Lo Lhe buslness of Lhe Laxpayer and Lhe surroundlng
• An expense ls ºnecessary" where Lhe expendlLure ls approprlaLe or helpful
ln Lhe developmenL of Laxpayer's buslness or LhaL Lhe same ls proper for
Lhe purpose of reallzlng a proñL or mlnlmlzlng a loss.
• Þ9.4 M pald ln 1983 for adveruslng a producL was sLaggerlng lncurred to
sumolote fotote soles Lo ºcreaLe or malnLaln some form of goodwlll for
Lhe Laxpayer's Lrade or buslness or for Lhe lndusLry or professlon of whlch
Lhe Laxpayer ls a member."
• ºCoodwlll" generally denoLes Lhe beneñL arlslng from connecuon and
repuLauon, and eñorLs Lo esLabllsh repuLauon are akln Lo acqulsluon of
caplLal asseLs. 1herefore, expenses relaLed LhereLo are noL buslness
expenses buL caplLal expendlLures (clk vs. Ceoetol looJs lbl., Ck No. 14J672, Apt.
24, 200J).

• Legal and accounLanL's fees for prlor years were noL bllled ln
correspondlng years (1984-1983). lL was pald by Laxpayer ln succeedlng
year (1986) when lL was bllled by Lhe lawyer and accounLanL. 1axpayers
uses accrual meLhod of accounung.
• Accrual of lncome and expense ls permlued when Lhe ºall evenLs LesL" has
been meL. 1hls LesL requlres (1) ñxlng a rlghL Lo lncome or llablllLy Lo pay,
and (2) Lhe avallablllLy of reasonably accuraLe deLermlnauon of such
lncome or llablllLy. lL does noL, however, demand LhaL Lhe amounL of
lncome or llablllLy be known absoluLely, lL only requlres LhaL a Laxpayer
has aL lLs dlsposal Lhe lnformauon necessary Lo compuLe Lhe amounL wlLh
reasonable accuracy, whlch lmplles someLhlng less Lhan an exacL or
compleLely accuraLe amounL.
• Moreover, deducuon Lakes Lhe naLure of Lax exempuon, lL musL be
consLrued sLrlcLly agalnsL Lhe Laxpayer (commlsslooet vs. lsobelo coltotol cotpotouoo,
C.k. No. 1722J1, leb. 12, 2007).
• 1. 1here musL be a valld and exlsung lndebLedness,
• 2. 1he lndebLedness musL be LhaL of Lhe Laxpayer,
• 3. 1he lnLeresL musL be legally due and supulaLed ln wrlung,
• 4. 1he lnLeresL expense musL be pald or lncurred durlng Lhe Laxable year,
• 3. 1he lndebLedness musL be connecLed wlLh Lhe Laxpayer's Lrade, buslness or
• exerclse of professlon,
• 6. 1he lnLeresL paymenL arrangemenL musL noL be beLween relaLed Laxpayers as
• mandaLed ln Secuon 34(8)(2)(b), ln relauon Lo Secuon 36(8), of Lhe 1ax Code,
• 7. 1he lnLeresL ls noL expressly dlsallowed by law Lo be deducLed from Lhe Laxpayer's
• gross lncome (e.g., lnLeresL on lndebLedness Lo ñnance peLroleum operauons),
• and
• 8. 1he amounL of lnLeresL deducLed from gross lncome does noL exceed Lhe llmlL seL
• forLh ln Lhe law. ln oLher words, Lhe Laxpayer's oLherwlse allowable deducuon for
• lnLeresL expense shall be reduced by forLy-Lwo percenL (42°) of Lhe lnLeresL
• lncome sub[ecLed Lo ñnal Lax beglnnlng november 1, 2003 under 8.A. 9337, and
• LhaL eñecuve !anuary 1, 2009, Lhe percenLage shall be LhlrLy-Lhree percenL (33°)
• j5ec. J4(8)(1), Nlkc].
• 1AkLS
• 1. ÞaymenLs musL be for Laxes, nauonal or local,
• 2. 1axes are lmposed by law upon Lhe Laxpayer,
• 3. 1axes musL be pald or accrued durlng Lhe
• Laxable year ln connecuon wlLh Lhe
• Laxpayer's Lrade, buslness or professlon, and
• 4. 1axes are noL speclñcally excluded by law from
• belng deducLed from Lhe Laxpayer's gross lncome.
• LCSSLS "kev. keqs. No. 12-77 ooJ kev. keqs. No. 10-79)
• 1. 1he loss musL be LhaL of Lhe Laxpayer,
• 2. 1he loss ls acLually susLalned and charged oñ wlLhln Lhe Laxable
• year,
• 3. 1he loss ls evldenced by a closed and compleLed Lransacuon,
• 4. 1he loss ls noL clalmed as a deducuon for esLaLe Lax purposes,
• 3. 1he loss ls noL compensaLed for by lnsurance or oLherwlse,
• 6. ln Lhe case of an lndlvldual, Lhe loss musL be connecLed wlLh hls
• Lrade, buslness or professlon, or lncurred ln any Lransacuon
• enLered lnLo for proñL Lhough noL connecLed wlLh hls Lrade,
• buslness or professlon, and
• 7. ln Lhe case of casualLy loss, lL has been reporLed Lo Lhe 8l8
• wlLhln forLy-ñve days from daLe of occurrence of Lhe loss.
• 8Au uL81S
• 1. 1here musL be an exlsung lndebLedness due Lo Lhe Laxpayer
• whlch musL be valld and legally demandable,
• 2. 1he same musL be connecLed wlLh Lhe Laxpayer's Lrade, buslness
• or pracuce of professlon,
• 3. 1he same musL noL be susLalned ln a Lransacuon enLered lnLo
• beLween relaLed parues enumeraLed under Sec. 36(8) of Lhe 1ax
• Code of 1997,
• 4. 1he same musL be acLually charged oñ Lhe books of accounLs of
• Lhe Laxpayer as of Lhe end of Lhe Laxable year, and
• 3. 1he same musL be acLually ascerLalned Lo be worLhless and
• uncollecuble as of Lhe end of Lhe Laxable year.
• 1Ax 8LnLll1 8uLL
– 1he Laxpayer ls obllged Lo declare as Laxable lncome any
subsequenL recovery of bad debLs ln Lhe year Lhey were
collecLed Lo Lhe exLenL of Lhe Lax beneñL en[oyed by Lhe
Laxpayer when Lhe bad debLs were wrluen oñ and clalmed
as deducuon from gross lncome.
– lL also applles Lo Laxes prevlously deducLed from gross
lncome buL whlch were subsequenLly refunded or credlLed
by Lhe 8l8. Pe has Lo reporL lncome Lo Lhe exLenL of Lhe
Lax beneñL derlved ln Lhe year of deducuon.
• 1. 1he allowance for depreclauon musL be reasonable<
• 2. lL musL be for properLy arlslng ouL of lLs use ln Lhe Lrade or
buslness, or ouL of lLs noL belng used Lemporarlly durlng Lhe year<
• 3. lL musL be charged oñ durlng Lhe Laxable year from Lhe Laxpayer's
books of accounLs,
• 4. uepreclauon shall be compuLed on Lhe basls of hlsLorlcal cosL or
ad[usted bas|s. Wh||e hnanc|a| accounnng a||ows computanon based on
appra|sed va|ue, recovery of |nvestment for tax purposes sha|| be ||m|ted to
h|stor|ca| cost.
• CPA8l1A8LL CCn18l8u1lCnS
• 1. 1he charlLable conLrlbuuon musL acLually be pald or made Lo Lhe
Þhlllpplne governmenL or any pollucal subdlvlslon Lhereof excluslvely for
publlc purposes, or any of Lhe accredlLed domesuc corporauon or
assoclauon speclñed ln Lhe 1ax Code,
• 2. lL musL be made wlLhln Lhe Laxable year,
• 3. lL musL noL exceed 10° (lndlvldual) or 3° (corporauon) of Lhe
Laxpayer's Laxable lncome before charlLable conLrlbuuons (wheLher
deducuble ln full or sub[ecL Lo llmlLauon),
• 4. lL musL be evldenced by adequaLe recelpLs or records, and
• 3. 1he amounL of charlLable conLrlbuuon of properLy oLher Lhan money
shall be based on Lhe acqulsluon cosL of sald properLy (5ec. J4(n), Nlkc).
1he llmlLauon ls lmposed Lo prevenL abuse of donaung palnungs and
oLher valuable properues and clalmlng excesslve deducuons Lherefrom.
• D. Cpnona| Standard Deducnon
• Þrlvllege ls avallable only Lo cluzens or resldenL allens as well
corporauons sub[ecL Lo Lhe regular corporaLe lncome Lax,
Lhus, non-resldenL allens and non-resldenL forelgn
corporauons are noL enuLled Lo clalm Lhe opuonal sLandard
• SLandard deducuon ls opuonal, l.e., unless Laxpayer slgnlñes
ln hls/lLs reLurn hls/lLs lnLenuon Lo elecL Lhls deducuon, he/lL
ls consldered as havlng avalled of Lhe lLemlzed deducuons,
• Such elecuon when made by Lhe quallñed Laxpayer ls
lrrevocable for Lhe year ln whlch made, however, he can
change Lo lLemlzed deducuons ln succeedlng year(s),
• AmounL of sLandard deducuon ls llmlLed Lo 40° of Laxpayer's gross sales or
recelpLs (ln Lhe case of an lndlvldual) or gross lncome (ln Lhe case of a
corporauon). lf Lhe lndlvldual ls on Lhe accrual basls of accounung for hls
lncome and deducuons, CSu shall be based on Lhe gross sales durlng Lhe year.
lf he employs Lhe cash basls of accounung, CSu shall be based on hls gross
recelpLs durlng Lhe year. lL should be noLed LhaL cosL of sales or cosL of servlces
shall noL be allowed Lo be deducLed from gross sales or recelpLs.
• A general professlonal parLnershlp (CÞÞ) may clalm elLher Lhe lLemlzed
deducuons or ln lleu Lhereof, Lhe CSu allowed Lo corporauons ln clalmlng Lhe
deducuons ln an amounL noL exceedlng 40° of lLs gross lncome. 1he neL
lncome deLermlned by elLher Lhe lLemlzed deducuon or CSu from Lhe CÞÞ's
gross lncome ls Lhe dlsLrlbuLable neL lncome from whlch Lhe share of each
share ls Lo be ascerLalned.
• Þroof of acLual expenses ls noL requlred, hence, he ls noL also requlred Lo keep
books of accounLs and records wlLh respecL Lo hls deducuons durlng Lhe year.

• 8A 8424: !an 1, 1998
• Slngle and esLaLe or LrusL -
• Pead of famlly - Þ23,000
• Marrled - Þ32,000
• lor each chlld, noL Lo
exceed 4 - Þ8,000
• 8A 9304: !uly 6, 2009
• lndlvldual, wheLher slngle,
PCl, or marrled - Þ30,000
• lor each chlld, noL Lo
exceed 4 - Þ23,000
• Law exempLs lncome of
mlnlmum wage earners and
lncreases CSu from 10° Lo
40° of gross sales or
recelpLs, for lndlvlduals, and
of gross lncome, for
• Status-at-the-end-of-the-year ru|e
• ºSLaLus-aL-Lhe-end-of-Lhe-year rule" whlch means LhaL whaLever ls Lhe
sLaLus of Lhe Laxpayer aL Lhe end of Lhe calendar year shall be used for
purposes of deLermlnlng hls personal and addluonal exempuons generally
applles. A change of sLaLus of Lhe Laxpayer durlng Lhe Laxable year
generally beneñLs, buL does noL pre[udlce, hlm. 1hus, lf he marrles aL Lhe
end of Lhe year, he shall be enuLled Lo personal exempuon of Þ32,000/
Þ30,000. lf a chlld ls born aL any ume durlng Lhe calendar year, even on
Lhe lasL day of Lhe year, Lhe Laxpayer ls enuLled Lo clalm hls chlld as a
dependenL enuLllng hlm Lo deducL addluonal exempuon of Þ8,000/
Þ23,000 for LhaL year. Cn Lhe oLher hand, lf one of hls quallñed
dependenL chlldren dles durlng Lhe year, Lhe law conslders LhaL Lhe chlld
dled on Lhe lasL day of Lhe year, hence, he ls enuLled Lo clalm Lhe full
amounL of addluonal exempuon of Þ8,000/Þ23,000 for Lhe deceased chlld
for Lhe year.
• Cash meLhod
• Accrual meLhod
– All evenLs LesL, amounLs recelved ln advance are noL LreaLed as
revenue of Lhe perlod ln whlch recelved buL as revenue of fuLure
perlods ln whlch earned (Moollo MooJotlo notels vs. clk, c1A cose No. 5046, Mot
24, 1997).
• lnsLallmenL sales
– Sale on Lhe lnsLallmenL plan
• lnlual paymenLs do noL exceed 23° of CSÞ
– ueferred paymenL sale, noL on Lhe lnsLallmenL plan
• lnlual paymenLs exceed 23° of CSÞ
• ÞercenLage of compleuon
• Crop year meLhod
llLlnC Cl 1Ax 8L1u8n
• Su8S1l1u1Lu llLlnC Cl l18: no lndlvldual lncome Lax reLurn
for Lhe year wlll be ñled by Lhe employee concerned, and Lhe
employer ls Lhe one LhaL ñles Lhe reLurn for hlm
– Applles only Lo lndlvlduals
– WlLh only one (1) employer
– Who correcLly wlLhholds Lhe lncome Lax on compensauon lncome pald
Lo Lhe employee and remlLs Lhe same Lo Lhe 8l8
• SubsuLuLed ñllng of reLurn does noL apply when Lhe
condluons above are noL meL, such as when Lhe lndlvldual has
(a) Lwo or more employers, (b) mlxed lncomes, © correcL W1
was noL deducLed from compensauon lncome, eLc.
llLlnC Cl 1Ax 8L1u8n
• lndlvldual derlvlng mlxed lncome, or purely buslness/ professlonal lncome,
or oLher lncome musL ñle hls quarLerly lncome Lax reLurns (8l8 lorm 1700
C) and annual lncome Lax reLurn (8l8 lorm 1700 ) as follows:
• Þerlod uue uaLe for llllng 8eLurn

• C1 8eLurn Aprll 13 of same year
• C2 8eLurn AugusL 13 of same year
• C3 8eLurn november 13 of same year
• Annual 8eLurn Aprll 13 of Lhe followlng year

llLlnC Cl 1Ax 8L1u8n
• A domesuc corporauon and resldenL forelgn corporauon shall ñle quarLerly
corporaLe lncome Lax reLurn (8l8 lorm 1702 C) and annual corporaLe lncome Lax
reLurn (8l8 lorm 1702 as follows:
• C1 8eLurn May 31 of same year
• C2 8eLurn AugusL 31 of same year
• C3 8eLurn november 30 of same year
• Annual 8eLurn Aprll 13 of Lhe followlng year (lf on calendar
year), or 13Lh day of Lhe fourLh monLh followlng
Lhe close of Lhe ñscal year (lf on ñscal year).
• CompuLauon of Lhe quarLerly and annual Lax reLurns of lndlvlduals (excepL Lhose
recelvlng purely compensauon lncome) and corporauons shall be made on Lhe
15=59(23% >()0), l.e., gross lncome and deducuons are consolldaLed and Lhe
lncome Lax llablllLy ls compuLed on Lhe consolldaLed neL lncome, and Lhe lncome
Laxes pald for Lhe precedlng quarLer(s) are credlLed agalnsL Lhe consolldaLed
lncome Lax due.

8Llunu C8 1Ax C8Lul1
• 1axpayer has 3 opuons: refund, Lax credlL, or carry over excess
wlLhholdlng Lax or paymenL.
• Powever, once Laxpayer exerclses opuon Lo carry over, such opuon ls
lrrevocable for LhaL Laxable perlod and no appllcauon for refund or Lax
credlL shall be allowed (loseo keolty v cA, Ck 119286, Oct 1J, 2004).
• Whlle a Laxpayer ls glven Lhe cholce Lo clalm refund or Lax credlL, such
elecuon ls noL ñnal. Þrlor verlñcauon and approval by Cl8 ls requlred. Such
remedy ls noL absoluLe and mandaLory (lblJ).
• Condluons for granL of refund or Lax credlL: (1) clalm was ñled wlLhln 2
years from daLe of paymenL, (2) lncome paymenL was declared ln Lax
reLurn, and (3) facL of wlLhholdlng ls esLabllshed by copy of 8l8 lorm 2307
(8l 8ook v. cA, Ck 155682, Mot 27, 2007).
• ln case of dlssoluuon of corporauon, Lhe 2-year perlod for clalm for refund
ls counLed 30 days aûer SLC approval of plan for dlssoluuon, whlch ls
consldered Lhe daLe of paymenL of Laxes wlLhheld on earned lncome (8ll v.
clk, Ck 14465J, Aoq 28, 2001).
Wl1PPCLulnC 1Ax
• An lncome paymenL ls sub[ecL Lo Lhe expanded wlLhholdlng
Lax, lf Lhe followlng condluons concur:
• a. An expense ls pald or payable by Lhe Laxpayer, whlch ls
lncome Lo Lhe reclplenL Lhereof sub[ecL Lo lncome Lax,
• b. 1he lncome ls ñxed or deLermlnable aL Lhe ume of
• c. 1he lncome ls one of Lhe lncome paymenLs llsLed ln Lhe
regulauons LhaL ls sub[ecL Lo wlLhholdlng Lax, excepL when
payor ls a 1op 20,000 Corporauon,
• d. 1he lncome reclplenL ls a resldenL of Lhe Þhlllpplnes llable
Lo lncome Lax, and
• e. 1he payor-wlLhholdlng agenL ls also a resldenL of Lhe
Wl1PPCLulnC 1Ax
• 1. nauonal governmenL and lLs lnsLrumenLallues, lncludlng provlnclal, clLy or munlclpal
governmenLs and botooqoys, excepL governmenL-owned or conLrolled corporauons,
• 2. Þersons en[oylng exempuon from paymenL of lncome Laxes pursuanL Lo Lhe provlslons
of any law, general or speclal, such as buL noL llmlLed Lo Lhe followlng:
• a. Sales of real properLy by a corporauon whlch ls reglsLered wlLh and ceruñed by PLu88
or PuuCC as engaged ln soclallzed houslng pro[ecL where Lhe selllng prlce of Lhe house
and loL or only Lhe loL does noL exceed Þ180,000 ln MeLro Manlla and oLher hlghly
urbanlzed areas and Þ130,000 ln oLher areas,
• b. Corporauons reglsLered wlLh Lhe 8Cl, ÞLZA, and S8MA, en[oylng exempuon from
lncome Lax under L.C. 226, 8.A. 7916, and 8.A. 7227,
• c. Corporauons whlch are exempL from lncome Lax under Secuon 30 of Lhe 1ax Code,
such as CSlS, SSS, ÞPlC, ÞCSC, and ÞACCC8,
• d. Ceneral professlonal parLnershlps, and
• e. !olnL venLures or consoruum formed for Lhe purpose of underLaklng consLrucuon
pro[ecLs or engaglng ln peLroleum, coal, geoLhermal and oLher energy operauons
• f. lnLernauonal carrlers (by alr or waLer) sub[ecL Lo 2.3° Cross Þhll 8llllngs
8uSlnLSS 1AxLS
• vA1
• 1axable Lransacuons
– Sale or lease of goods or
– Sale of servlces
– lmporLauon of goods
• lormula for compuung vA1
– CuLpuL 1ax
– Less: lnpuL 1ax
– vA1 Þayable/(Lxcess lnpuL
• nCn-vA1/LxLMÞ1 l8CM
vA1 18AnSAC1lCnS
– 1ransacuon ls sub[ecL Lo
CLher ÞercenLage 1ax (1lLle v,
nl8C) and exempL from vA1
– vA1 ls lmposed on
Lransacuon ln addluon Lo
Lxclse 1ax, lf any
• 1ax ls lmposed on Cross
8ecelpLs or Cross lncome
– 1ransacuon ls exempL from
vA1, CÞ1, and Lxclse 1ax (e.g.,
sale of agrlculLural food
producLs ln Lhelr orlglnal sLaLe)
vALuL AuuLu 1Ax
• CPA8AC1L8lS1lCS Cl vA1
– 1ax on voloe oJJeJ of Laxpayer
– 1ransparenL form of soles tox
– 8road-based tox oo coosompuoo of goods, properues and
servlces ln Lhe Þhll
– loJltect tox. Lax ls lmposed on seller buL burden of Lax ls
shlûed Lo Lhe buyer
– 1ax ls collecLed Lhru Lhe tox cteJlt metboJ
• CuLpuL Lax on sales, lnpuL Lax on purchases
– No coscoJloq of tox ln vA1 sysLem
– º1ox-locloslve metboJ" ls adopLed by Lhe Þhll
vALuL AuuLu 1Ax
– Seller of goods or properues
• Coods or properues are consumed or for consumpuon ln Lhe Þhll
• ln Lhe course of Lrade or buslness
• Sales of goods or properues are noL exempL from vA1
– Seller of servlces
• LlsLed servlces are performed or Lo be performed ln Lhe Þhll
• ln Lhe course of Lrade or buslness
• lor a valuable conslderauon
• Servlces are noL exempL from vA1
– lmporLer of goods
• WheLher done ln Lhe course of hls Lrade or buslness or for
personal consumpuon
vALuL AuuLu 1Ax
• Seller of real properues ls sub[ecL Lo vA1
– Seller execuLes a documenL of sale (uAS or C1S)
– 8eal properLy ls locaLed ln Lhe Þhll
– Seller ls engaged ln real esLaLe buslness elLher as dealer, developer or
– 8eal properLy ls held prlmarlly for sale or for lease ln Lhe ordlnary
course of Lrade or buslness
– Sale ls noL exempL from vA1
• Powever, 8ev. 8egs. no. 4-2007 (leb 2007) provldes LhaL ºlf
Lhe real properLy sold ls used ln hls Lrade or buslness, sald
Lransacuon ls sub[ecL Lo vA1, belng lncldenLal Lo Lhe maln
buslness" of Lhe Laxpayer, who ls a vA1-reglsLered Laxpayer
engaged ln oLher Lypes of buslness.
vALuL AuuLu 1Ax
• Sale, barLer or exchange
– Sale, barLer or exchange has Lhe same Lax consequence
– 1here musL be valuable conslderauon, hence, donauon ls exempL from vA1
– ueemed sale ls sub[ecL Lo vA1 (ouLpuL Lax) ln order Lo recoup prevlous vA1
(lnpuL Lax) allowed
– Lxclse Lax, lf any, lnLeresL, and dellvery charges form parL of gross selllng prlce
• ln Lhe course of Lrade or buslness
– 1he regular conducL or pursulL of a commerclal or an economlc acuvlLy,
lncludlng Lransacuons deemed lncldenLal LhereLo, regardless of wheLher or
noL Lhe person engaged Lhereln ls a non-sLock, non-proñL prlvaLe organlzauon
(lrrespecuve of Lhe dlsposluon of lLs neL lncome and wheLher or noL lL sells
excluslvely Lo members or Lhelr guesLs), or governmenL enuLy.
– lsolaLed Lransacuons are noL sub[ecL Lo vA1.
– lncldenLal lncome follows Laxauon of Lhe prlnclpal acuvlLy.
vALuL AuuLu 1Ax
– 1he absence of proñL ln Lhe performance of Laxable servlces does noL
make such acuvlLy for a fee exempL from vA1 (clk v. cOMA5íkcO, Ck 125J55, Mot J0, 2000).
• Coods or properues musL be locaLed ln Lhe Þhlllpplnes and
consumed or desuned for consumpuon ln Lhe Þhll.
– Speclal economlc zones under 8A 7916 (ÞLZA Law) and freeporL zones
under 8A 7227 (8CuA Law) are LreaLed as forelgn LerrlLorles by ñcuon
of law. Pence, lmporLauon of goods by a speclal economlc or freeporL
zone enLerprlse shall be exempL from vA1 and cusLoms duues and wlll
be sub[ecL Lo vA1 and duues only upon Lhelr wlLhdrawal from Lhe
cusLoms cusLody.
– uesunauon Þrlnclple:
• LxporL sales of goods are zero-raLed (0° vA1)
• lmporL of goods lnLo Lhe Þhll ls Laxable aL 12° vA1
vALuL AuuLu 1Ax
• 1ax base ls ºCross Selllng Þrlce" (CSÞ) - Lhe LoLal amounL of money or lLs
equlvalenL, whlch Lhe purchaser pays or ls obllgaLed Lo pay Lo Lhe seller ln
conslderauon of Lhe sale, barLer or exchange of Lhe goods or properues,
excludlng Lhe vA1.
• As a rule, ouLpuL Lax accrues on sale of goods or properues (oLher Lhan a
real properLy) aL Lhe ume of sale, when Lhe vA1 sales lnvolce ls lssued,
alLhough none or only a parL of Lhe gross selllng prlce ls pald by Lhe buyer
aL Lhe ume of sale.
• Lxclse Lax, lf any, shall form parL of CSÞ.
• Sales dlscounLs deLermlned and granLed aL Lhe ume of sale, whlch are
expressly lndlcaLed ln Lhe sales lnvolce do noL form parL of Lhe Lax base.
CranL of dlscounL musL noL depend upon Lhe happenlng of a fuLure evenL
or Lhe fulñllmenL of cerLaln condluon. 1hey musL be recorded ln Lhe books
of accounLs of Lhe seller.
• 20° sales dlscounLs Lo senlor cluzens under 8A 9237 (Amended Senlor
Cluzens Law) shall be deducLed from gross sales before applylng Lhe vA1
vALuL AuuLu 1Ax
• 1o deLermlne Cross Selllng Þrlce (100°), dlvlde 1oLal lnvolce
AmounL (112°) by 1.12.
• lf 1oLal lnvolce AmounL lncludes LW1, deLermlne ñrsL Lhe
Cross Selllng Þrlce.
• 1ax base for lnsLallmenL sales of real properLy
– lf lnlual paymenLs (conslsung of down paymenL and all monLhly
amoruzauons ln Lhe year of sale) exceeds 23° of Lhe gross selllng
prlce, Lhe Lax base ls Lhe enure gross selllng prlce as shown ln Lhe
documenL of sale, even Lhough only a parL of lL has been recelved
durlng Lhe perlod
– lf lnlual paymenLs durlng Lhe year of sale do noL exceed 23° of gross
selllng prlce, Lhe Lax base ls only Lhe amounL recelved
• 1ax raLes
– 12° beglnnlng leb 1, 2006 (8A 9337)
– 0° vA1 on zero-raLed sales
vALuL AuuLu 1Ax
• Sales of goods sub[ecL Lo 0° vA1
– AcLual exporL sales
– ueemed exporL sales
• lnLernal or consLrucuve exporL sales under 8Cl law (LC 226) and speclal
laws (8A 7916 and 8A 7227).
– Lcozones and freeporL zones are deemed forelgn LerrlLorles by
ñcuon of law (clk v. 5eoqote 1ecbooloqy (2005), clk v. 1osblbo lofotmouoo
ípolpmeot (2005)
– lor as long as Lhe goods remaln wlLhln Lhe zone, consumed or
desLroyed Lhere, Lhey wlll be duLy-free and Lax-free (cocooot Oll kefoets
Asso v. 1ottes (2005)
• Lñecuvely zero-raLed sales (sales Lo Au8, embassles, eLc)
– Sales of gold Lo 8SÞ
– lorelgn currency denomlnaLed sales
– Sales of goods, supplles, equlpmenL and fuel Lo persons engaged ln
lnLernauonal shlpplng or lnLernauonal alr LransporL operauons
vALuL AuuLu 1Ax
• 1ransacuon ls compleLely free of
vA1, raLe charged by seller ls zero
• vA1-reglsLered seller can reclalm
lnpuL Laxes passed on Lo lL by
sellers of goods or servlces from
8l8 ln form of refund or Lax credlL
• Zero-raLed sales are Laxable sales
for purposes of reglsLrauon as
vA1 Laxpayer Lo deLermlne
• Lxempuon removes Lhe vA1
aL Lhe exempL sLage
• LxempL Laxpayer cannoL
reclalm vA1 passed on Lo lL
by vA1-reglsLered sellers
• LxempL sales are noL
Laxable sales for vA1
vALuL AuuLu 1Ax
– ConsLrucuon and servlce conLracLors
– 8rokers
– Lessors of properLy, real or personal
– Warehouslng servlces
– Lessors or dlsLrlbuLors of clnemaLographlc ñlms
– Þersons engaged ln mllllng, processlng, manufacLurlng or
repacklng goods for oLhers
– ÞroprleLors or operaLors or keepers of hoLels, moLels,
resLhouses, penslon houses, lnns and resorLs
– ÞroprleLors or operaLors of resLauranLs and oLher slmllar
vALuL AuuLu 1Ax
– uealers ln securlues
– Lendlng lnvesLors
– 1ransporLauon conLracLors on Lhelr LransporL of goods or
– uomesuc common carrlers by alr and sea beLween polnLs
ln Lhe Þhlllpplnes
– Sales of elecLrlclLy (by generauon, Lransmlsslon, and
dlsLrlbuuon companles)
– Servlces of franchlse granLees, excepL waLer and gas
– non-llfe lnsurance companles, excepL crop lnsurance
– Slmllar servlces, regardless of wheLher or noL Lhe
performance Lhereof calls for Lhe exerclse or use of Lhe
physlcal or menLal faculues
vALuL AuuLu 1Ax
• ºCross recelpLs" means Lhe LoLal amounL of money or lLs
equlvalenL, represenung Lhe conLracL prlce, compensauon,
servlce fee, renLal or royalLy, lncludlng Lhe amounL charged
for maLerlals supplled wlLh Lhe servlces and deposlLs and
advance paymenLs acLually or consLrucuvely recelved durlng
Lhe Laxable quarLer for Lhe servlces performed or Lo be
performed for anoLher person, excludlng Lhe vA1, excepL
Lhose amounLs earmarked for paymenL Lo unrelaLed Lhlrd
parLy or recelved as relmbursemenL for advance paymenL on
behalf of anoLher, whlch do noL redound Lo Lhe beneñL of Lhe
• lor sale of servlces, Lhe LesL ls noL wheLher servlces have
been performed or noL, buL wheLher amounL of
compensauon or fee ls recelved, acLually or consLrucuvely.
1he rule ls: nC 8LCLlÞ1 Cl ÞA?MLn1, nC vA1 LlA8lLl1?.
vALuL AuuLu 1Ax
– Þrocesslng, manufacLurlng or repacklng goods for oLher persons dolng
buslness ouLslde Lhe Þhll, whlch goods are subsequenLly exporLed,
where Lhe servlces are pald for ln accepLable forelgn currency and
accounLed for ln accordance wlLh 8SÞ rules and regulauons
– Servlces oLher Lhan processlng, manufacLurlng or repacklng rendered
Lo a person engaged ln buslness conducLed ouLslde Lhe Þhll or Lo a
non-resldenL person noL engaged ln buslness who ls ouLslde Lhe Þhll
when Lhe servlces are performed, Lhe conslderauon for whlch are pald
for ln accepLable forelgn currency and accounLed for ln accordance
wlLh 8SÞ rules and regulauons (clk v. 8w5c MloJoooo, Ck 15J205, Ioo 22,
– Servlces rendered Lo persons or enuues whose exempuon under
speclal laws or lnLernauonal agreemenLs Lo whlch Lhe Þhll ls a
slgnaLory eñecuvely sub[ecLs Lhe sale of servlces Lo 0° raLe
vALuL AuuLu 1Ax
– Servlces rendered Lo persons engaged ln lnLernauonal
shlpplng or lnLernauonal alr LransporL operauons,
lncludlng leases of properLy for use Lhereof
– Servlces performed by subconLracLors and/or conLracLors
ln processlng, converung or manufacLurlng goods for an
enLerprlse whose exporL sales exceeds 70° of LoLal annual
– 1ransporL of passengers and cargo by domesuc alr or sea
carrlers from Lhe Þhll Lo a forelgn counLry
– Sale of power or fuel generaLed Lhru renewable sources of
energy (blomass, solar, wlnd, hydropower, geoLhermal
and oLher emerglng sources)
vALuL AuuLu 1Ax
• 1ax Code noL only requlres LhaL Lhe servlces oLher Lhan ºprocesslng,
manufacLurlng or repacklng of goods" and LhaL paymenL for such servlces be ln
accepLable forelgn currency accounLed for ln accordance wlLh 8SÞ rules. AnoLher
essenual condluon for quallñcauon Lo zero-raung under Sec 102(b)(2) ls LhaL Lhe
reclplenL of such servlces ls dolng buslness ouLslde Lhe Þhll.
• Whlle Lhls requlremenL ls noL expressly sLaLed ln Lhe 2
paragraph of Sec. 102(b),
Lhls ls clearly provlded ln Lhe 1
paragraph of Sec 102(b) where Lhe llsLed servlces
musL be ºfor oLher persons dolng buslness ouLslde Lhe Þhll."
• 1he above phrase noL only refers Lo servlces enumeraLed ln Lhe ñrsL paragraph,
buL also perLalns Lo Lhe general Lerm ºservlces" appearlng ln Lhe second
• CLherwlse, Lhose sub[ecL Lo Lhe regular vA1 under Sec 102(a) can avold paylng Lhe
vA1 by slmply supulaung paymenL ln forelgn currency lnwardly remlued by Lhe
reclplenL of servlces. 1o lnLerpreL Sec. 102(b)(2) Lo apply apply Lo a payer-
reclplenL of servlces dolng buslness ln Lhe Þhll ls Lo make Lhe paymenL of regular
vA1 dependenL on Lhe generoslLy of Lhe Laxpayer.
• A Lax ls a mandaLory exacuon, noL a volunLary conLrlbuuon.

vALuL AuuLu 1Ax
• SlgnlñcanLly, Lhe amended Secuon 108(b) [prevlously Sec 102(b)] of Lhe presenL
1ax Code clarlñes Lhls leglslauve lnLenL. lor zero-raung of servlces, lL musL be
rendered Lo a person engaged ln buslness conducLed ouLslde Lhe Þhll.
• 1he payer-reclplenL of respondenL's servlces ls Lhe Consoruum whlch ls a [olnL
venLure dolng buslness ln Lhe Þhll. Whlle Lhe Consoruum's prlnclpal members are
non-resldenL forelgn corps, Lhe Consoruum lLself ls dolng buslness ln Lhe Þhll. 1hls
ls shown ln 8l8 8ullng 23-93, whlch sLaLes LhaL Lhe conLracL beLween Consoruum
and nÞC ls for a 13-year Lerm. Conslderlng Lhe lengLh of ume, Lhe Consoruum's
operauon and malnLenance of nÞC's power barges cannoL be classlñed as a slngle
or lsolaLed Lransacuon.
• 1hls case ls dlñerenL from clk v. Ametlcoo íxptess lotetoouoool, loc. (lbll 8toocb),
because ln Lhe lauer case, Lhe reclplenL of servlces ls ALll (Pk 8ranch) dolng
ouLslde Lhe Þhll (clk v. 8w5c MloJoooo, loc., Ck15J205, Ioo 22, 2007).
• Cl8's ñllng of lLs Answer before Lhe C1A challenglng clalm for refund eñecuvely
serves as a revocauon of vA1 8ullng 03-99 and 8l8 8ullng 23-93. Powever, such
revocauon cannoL be glven reLroacuve eñecL slnce lL wlll pre[udlce respondenL.
vALuL AuuLu 1Ax
• vA1-LxLMÞ1 18AnSAC1lCnS
– A. Sale or lmporLauon of agrlculLural and marlne food producLs ln Lhelr
orlglnal sLaLe, llvesLock and poulLry generally produclng food for
human consumpuon, and breedlng sLock
– 8. Sale or lmporLauon of ferullzers, seeds, seedllngs and ñngerllngs,
ñsh, prawn, llvesLock and poulLry feeds (excepL speclalLy feeds for race
horses, ñghung cocks and oLher peLs)
– C. lmporLauon of personal and household eñecLs belonglng Lo
resldenLs of Lhe Þhll reLurnlng from abroad and non-resldenL cluzens
comlng Lo reseule ln Lhe Þhll
– u. lmporLauon of professlonal lnsLrumenLs and lmplemenLs, and
personal eñecLs (excepL vehlcle, vessel, alrcraû, machlnery for use ln
manufacLure) belonglng Lo persons comlng Lo seule ln Lhe Þhll
– L. Servlces sub[ecL Lo percenLage Lax under 1lLle v
vALuL AuuLu 1Ax
• vA1-LxLMÞ1 18AnSAC1lCnS
– C. Medlcal, denLal, hosplLal and veLerlnary servlces, excepL Lhose
rendered by professlonals
– P. Lducauonal servlces rendered by prlvaLe educ lnsuLuuons
accredlLed by uepLd, CPLu, 1LSuA, and Lhose rendered by
governmenL educauonal lnsuLuuons
– l. Servlces rendered by lndlvlduals pursuanL Lo an employer-employee
– C. LxporL sales by persons who are noL vA1-reglsLered
– Þ. Sale of real properLy noL prlmarlly held for sale Lo cusLomers or for
lease ln Lhe ordlnary course of Lrade or buslness, or real properLy for
low-cosL and soclallzed houslng, resldenual loL valued aL Þ1.3 M or
below, house and loL and oLher resldenual dwelllngs valued aL Þ2.3 M
or below
vALuL AuuLu 1Ax
• vA1-LxLMÞ1 18AnSAC1lCnS
– C. Lease of a resldenual unlL wlLh a monLhly renLal noL
exceedlng Þ10,000
– 8. Sale, lmporLauon, prlnung or publlcauon of books and
any newspaper or magazlne whlch appear aL regular
lnLervals wlLh ñxed prlces and ls noL devoLed prlnclpally Lo
publlcauon of pald adverusemenLs
– v. Sale or lease of goods or properLy or Lhe performance
of servlces oLher Lhan Lransacuons menuoned above, Lhe
gross sales or recelpLs do noL exceed Þ1.3 M
vALuL AuuLu 1Ax
• Sale of medlclnes by Lhe hosplLal pharmacy Lo ln-pauenLs ls exempL from vA1, buL
sale Lo ouL-pauenLs ls sub[ecL Lo 12° vA1 (5t. loke´s MeJlcol ceotet v. c1A ooJ clk,
• 1olllng fees recelved by a hoLel for ÞLu1 ls noL parL of lLs gross recelpLs
• ÞaymenL of vA1 by Lhe hoLel on fees for provldlng llmouslne servlce Lo lLs cllenL ls
correcL. lL ls noL sub[ecL Lo Lhe 3° common carrler's Lax. Clalm for Lax credlL ls
denled (Moollo MooJotlo notel v. clk)
• Cross recelpLs of LheaLre owner or operaLor from sales of uckeLs Lo movlegoers
are exempL from vA1. 1heaLres and movle houses are noL lncluded ln Lhe
enumerauon of Laxable servlces ln Lhe vA1 law. Cur Lax laws, pasL and presenL,
dld noL adopL more speclñc Lerms for ºsale or exchange of servlces" Lo lnclude
showlng of ñlms ln publlc (5M ltlme nolJloqs v. clk, c1A cose 7079, 2006).
• ÞACCC8 ls exempL from vA1 pursuanL Lo lLs charLer, Þu 1869. 8elng a speclal law,
Þu 1869 prevalls over 8A 7716, a subsequenL general law. 1o be valld, repeal of
speclal law should be express (clk v. Aceslte notel cotp, Ck 147295, leb 16, 2007).
vALuL AuuLu 1Ax
• CA1LCC8lLS Cl lnÞu1 1AxLS
– lnpuL Lax credlL on lmporLauons of goods and currenL local purchases
of goods, properues and servlces
• lnpuL Lax on caplLal goods musL be amoruzed over cerLaln perlod
– 1ransluonal lnpuL Lax credlL
– Þresumpuve lnpuL Lax credlL
– WlLhholdlng lnpuL Lax credlL
– Lxcess lnpuL Lax credlL
• Cnly vA1-reglsLered persons are enuLled Lo credlL lnpuL Laxes
agalnsL Lhelr ouLpuL Lax.
• non-reglsLrauon as a vA1 Laxpayer does noL exempL hlm from
vA1 ouLpuL Lax llablllLy on hls Laxable sales of goods,
properues or servlces.
vALuL AuuLu 1Ax
• lor sale of servlces, Lhe rule ls: nC ÞA?MLn1 Cl lLL 8?
8u?L8 Anu lSSuAnCL Cl vA1 8LCLlÞ1 8? SLLLL8, nC lnÞu1
1Ax lC8 8u?L8!
• 1ransluonal lnpuL 1ax
– 2° of value of lnvenLory or acLual vA1 pald on such goods, maLerlals
and supplles, whlchever ls hlgher
• Þresumpuve lnpuL 1ax
– Þersons or ñrms engaged ln Lhe processlng of sardlnes, mackerel and
mllk, and ln manufacLurlng reñned sugar and cooklng oll, and packed
noodle-based lnsLanL meals are enuLled Lo presumpuve lnpuL Lax
equlvalenL Lo 4° of gross value ln money of Lhelr purchases of prlmary
agrlculLural producLs whlch are used as lnpuLs Lo Lhelr producuon (5ec.
111, Nlkc)
vALuL AuuLu 1Ax
• 1ax rellefs of vA1 Laxpayers on Lhelr excess lnpuL
Laxes (Ll1) aurlbuLable Lo zero-raLed and eñecuvely
zero-raLed sales
– Carry over Lhe excess lnpuL Lax Lo Lhe nexL quarLer, unul
excess ls uullzed
– llle a clalm for refund
– llle a clalm for Lax credlL, wlLhln Lwo years aûer Lhe close
of Laxable quarLer where Lhe sales were made
• lor non-zero-raLed sales, remedy avallable ls only Lo
carry over Ll1 Lo Lhe nexL quarLer(s)
vALuL AuuLu 1Ax
• Þrescrlpuve perlod commences from Lhe close of Lhe
Laxable quarLer when Lhe sales were made and noL
from Lhe ume Lhe lnpuL vA1 was pald nor from Lhe
ume Lhe omclal recelpL was lssued. 1hus, when a
zero-raLed vA1 Laxpayer pays lLs lnpuL vA1 a year
aûer Lhe perunenL Lransacuon, sald Laxpayer only
has a year Lo ñle a clalm for refund or Lax credlL of
Lhe unuullzed credlLable lnpuL vA1. 1he reckonlng
frame would always be Lhe end of Lhe quarLer when
Lhe perunenL sales or Lransacuon was made,
regardless when Lhe lnpuL vA1 was pald (clk v. Mltoot
loqblloo cotp, 2008).
• llllng of Lax reLurn
• 1ax audlL by 8l8
• lnformal Conference
• Þrellmlnary AssessmenL
nouce (ÞAn)
• 8eply Lo ÞAn
• llnal AssessmenL nouce
• ÞroLesL Lo lAn
• SupplemenLal ÞroLesL
• Law prescrlbes due daLe
• 120 days + 120 days
• 13 days from recelpL
• 3 years or 10 years
• 30 days from recelpL
• 60 days from ñllng of
• 8l8 AC1lCn
– Cancell assessmenL
– ueny proLesL
– 8evlse assessmenL
• 8l8 lnAC1lCn
• Appeal Lo C1A
• Appeal Lo C1A en banc
• 180 days from ñllng of
proLesL, lf any, or
supplemenLal proLesL
• 30 days from daLe of recelpL
of denlal of proLesL or lapse
of 180 days
• 13 days from daLe of
recelpL, addl 13 days may
be granLed by C1A aûer
paymenL of dockeL fee.
– 8LlC8L ÞA?MLn1 Cl 1Ax
– Al1L8 ÞA?MLn1 Cl 1Ax
• 1Ax C8Lul1, C8
• 8Llunu
• ueñclency Lax ls Lhe resulL of maLhemaucal error
• ulscrepancy ls beLween amounL of Lax wlLhheld and amounL
remlued Lo 8l8
• 1axpayer who opLed Lo clalm refund/Lax credlL also carrled
over and applled Lhe same agalnsL Lax of nexL Laxable quarLer
• Lxclse Lax due has noL been pald
• ConsLrucuve lmporLauon (5ec. 228, Nlkc)

– nouce LhaL Laxpayer owes governmenL a sum
of money
– ConLalns compuLauon of Lax llablllLy and a
demand for paymenL of Lax wlLhln a cerLaln
perlod (clk v. loscot keolty & uev cotp)
– 1o esLabllsh Lax llablllLy where an assessmenL
ls requlred
1. lormal assessmenL nouce (lAn)
2. Collecuon leuer
a. Leuer demandlng paymenL of erroneously
refunded amounL (Cooqoo ílecttlc co v. clk), or amounL pald
by bounclng check (kepobllc v. llmoco & Je Cozmoo)

b. lollow-up or collecuon leuer duly recelved by
Laxpayer wlLhln Lhe prescrlpuve perlod (1AxÞA?L8 uLnlLu
8LCLlÞ1 Cl C8lClnAL uLMAnu LL11L8 Anu ASS. nC1lCL) (kepobllc v. Nlelsoo & co)
nC1L: Leuer from revenue omcer granung opporLunlLy Lo dlsprove
ñndlngs (SPCW-CAuSL LL11L8) ls nC1 an assessmenL
• WPLn MuS1 ASSLSSMLn1 8L MAuL? (Sec. 203 & 222, nl8C)
– 8L1u8n WAS llLLu
• noL false or fraudulenL - 3 years from ñllng of reLurn
• lalse or fraudulenL - 10 years from daLe of dlscovery of false
or fraudulenL reLurn
– nC 8L1u8n WAS llLLu
• 10 years from daLe of dlscovery of omlsslon
• lf assessmenL due falls on SaLurday, governmenL has nexL buslness
day wlLhln whlch Lo assess (Cl8 v. WesLern Þaclñc Corp)

CCun1lnC Cl ÞL8lCu
• 1AxA8LL ?LA8
– normal year (363 days)
– Leap year (366 days)
• lf Lhere ls a leap year wlLhln Lhe prescrlpuve perlod (3 years
from ñllng of reLurn), a year shall be deemed Lo have 363
days only (NAMAkcO v. 1ecsoo, 29 5ckA 70). 1hus, assessmenL lssued on Aprll 13 of
Lhe Lhlrd year from ñllng of reLurn shall be LreaLed as lnvalld due Lo prescrlpuon.
• LC 292 (AdmlnlsLrauve Code of 1987), belng Lhe more recenL law Lhan
Clvll Code, governs Lhe compuLauon of legal perlod. Accor-dlngly, a year
shall be undersLood Lo be 12 calendar monLhs, a monLh of 30 days, unless
lL refers Lo a speclñc calendar monLh (clk vs. ltlmetowo ltopetty Ctoop, Ck No.
162155, Aoq 22, 2007).
– lssue daLe of assessmenL nouce ls noL reckonlng polnL
for prescrlpuon
– uaLe Lhe assessmenL nouce and demand leuer ls
released, malled or senL Lo Laxpayer consuLuLes acLual
assessmenL (kepobllc v. llmoco & Je Cozmoo)
– Þresumpuon of recelpL ln Lhe regular course of mall
applles, lf lL was properly addressed, posLage was
prepald, and was malled. lf one elemenL ls absenL,
presumpuon does noL lle (íotlpoez v. 5oollfe of coooJo)

• 8l8 dlsallowed cerLaln lLemlzed deducuons and consldered some cosL lLems as
sub[ecL Lo 3° Lax, wlLhouL lndlcaung facLual and legal bases. uurlng Lhe
prellmlnary sLage, 8l8 lnformed Laxpayer Lhru prellmlnary 3-day leuer and
furnlshed copy of audlL worklng paper. C1A consldered assessmenL as vold. CA
amrmed C1A declslon.
• SC ruled above documenLs were noL valld subsuLuLes for mandaLory nouce ln
wrlung of legal and facLual bases of assessmenL. 1hese sLeps were mere
perfuncLory dlscharge of Cl8's duues ln correcLly assesslng a Laxpayer. !usL
because Cl8 lssued an advlce, prellmlnary leuer and ñnal nouce does noL
necessarlly mean Laxpayer was lnformed of law and facLs. Law requlres LhaL Lhey
be sLaLed ln uL and lAn. CLherwlse, Lhe express provlslons of ArL. 228 of nl8C and
88 12-99 would be rendered nugaLory. 1he alleged ºfacLual bases" ln Lhe advlce,
prellmlnary leuer and audlL worklng papers dld noL sumce.
• Moreover, due Lo Lhe absence of a falr opporLunlLy Lo be lnformed of legal and
facLual bases of assessmenL, Lhe assessmenL ls vold. Cld law merely requlred
Laxpayer Lo be nouñed of assessmenL. 1hls was changed ln 1998 (clk vs. íotoo 5oblc
lowet cotp, Ck No. 166J87, Ioo. 19, 2009).
• Þrellmlnary collecuon leuer presupposes Lhe
exlsLence of valld assessmenL nouce.
• Þrellmlnary collecuon leuer shall serve as
assessmenL nouce, lf lL was lnlual nouce recelved by
Laxpayer, Laxpayer dld noL recelve any assessmenL
nouce, and no follow-up leuer was senL or
prellmlnary conference was arranged.
• 30-day perlod Lo proLesL shall commence from daLe
of recelpL of prellmlnary collecuon leuer (uolteJ lotetoouoool
llctotes vs. clk, c1A cose No. 5884, Ioo. 5, 2002)
• valld proLesL of an assessmenL ls one assalllng Lhe
formal assessmenL nouce (lAn) and Lhe leuer of
demand, noL Lhe prellmlnary assessmenL nouce
(ÞAn). ÞAn ls requlred merely Lo lnform Lhe
Laxpayer of Lhe proposed assessmenL.
• lallure Lo proLesL wlLhln 30 days wlll make Lhe
formal assessmenL nouce ñnal and execuLory.
• lallure Lo respond Lo ÞAn wlLhln 13 days wlll render
Laxpayer ln defaulL and a lAn would subsequenLly be
lssued (cebo kosvet lowosbop vs. clk, c1A cose No. 6425, Mot. 17, 200J).
• Cl8 vs. 8Þl
• CcL 28, 1988 - Cl8 assessed peuuoner for def. percenLage Lax and uS1 for
• uec 10, 1988 -- 8Þl replled sLaung º?our def assessmenLs are no
assessmenLs aL all• As soon as Lhls ls explalned and clarlñed ln a proper
leuer of assessmenL, we shall lnform you of Lhe Laxpayer's declslon on
wheLher Lo pay or proLesL Lhe assessmenL."
• !une 27, 1991 -- 8Þl recelved leuer from 8l8, sLaung º.. ?our leuer falled
Lo quallfy as a proLesL under 88 12-83• sull we obllged Lo explaln Lhe
basls of Lhe assessmenLs."
• !uly 6, 1991 -- 8Þl requesLed a reconslderauon of assessmenLs.
• uec 12, 1991 -- 8l8 denled proLesL, whlch was recelved on !an 21, 1992.
• leb 18, 1992 -- 8Þl ñled peuuon for revlew ln C1A.

• nov 16, 1993 -- C1A dlsmlssed peuuon for lack of [urlsdlcuon, assessmenLs had
become ñnal and unappealable.
• May 27, 1996, C1A denled reconslderauon.
• Cn appeal, CA reversed C1A's declslon. lL ruled CcL 28, 1988 nouces were noL
valld assessmenLs because Lhey dld noL lnform Lhe Laxpayer of Lhe legal and
facLual bases Lherefor. lL declared Lhe proper assessmenLs were Lhose ln May 8,
1991 leuer whlch provlded Lhe reasons for clalmed deñclencles. Cl8 elevaLed case
Lo SC.
• Cl8 dld noL lnform 8Þl ln wrlung of Lhe law and facLs on whlch assessmenLs were
made. Pe merely nouñed 8Þl of hls ñndlngs, conslsung of Lhe compuLauon of Lhe
Lax llablllues and a demand for paymenL wlLhln 30 days from recelpL. Pe relled on
former Sec. 270, nl8C, prlor Lo lLs amendmenL by 8A 8424.
• ln CIk vs.keyes, Gk 1S9694, Ian 27, 2006, Lhe only requlremenL was for Lhe Cl8 Lo
ºnoufy" or lnform Lhe Laxpayer of hls ºñndlngs." noLhlng ln Lhe old law requlred a
wrluen sLaLemenL Lo Lhe Laxpayer of Lhe law and Lhe facLs. 1he CourL cannoL read
lnLo Lhe law whaL obvlously was noL lnLended by Congress. 1haL would be [udlclal
• !urlsprudence slmply requlred LhaL assessmenLs conLaln a compuLauon of
Lax llablllues, Lhe amounL Lo be pald plus a demand for paymenL wlLhln a
prescrlbed perlod.
• 1he senLence ºLhe Laxpayer shall be lnformed ln wrlung of Lhe law and Lhe
facLs on whlch Lhe assessmenL ls made, oLherwlse, Lhe assessmenL shall
be vold." was noL ln old Sec. 270, buL was only lnserLed ln Sec. 228 ln 1997
(8.A. 8424). 1he lnserLed senLence was noL an amrmauon of whaL Lhe law
requlred, Lhe amendmenL by 8A 8424 was an lnnovauon and could noL be
reasonably lnferred from Lhe old law.
• 1he CcL 28, 1998 nouces were valld assessmenLs, whlch 8Þl should have
proLesLed wlLhln 30 days from recelpL. 1he uec 10, 1988 reply lL senL Lo
8l8 dld noL quallfy as a proLesL, slnce Lhe leuer lLself sLaLed º• we shall
lnform you of Lhe Laxpayer's declslon on wheLher Lo pay or proLesL Lhe
• 8Þl's fallure Lo proLesL Lhe assessmenL made lL ñnal and execuLory. 1he
assessmenL ls presumed Lo be correcL (clk vs 8ll, Ck 1J4062, Apt 17, 2007).
uLnlAL Cl Þ8C1LS1
• ul8LC1 uLnlAL
– Leuer of Cl8 sLaLes ln clear Lerms hls denlal of
• lnul8LC1 uLnlAL
– llnal nouce 8efore Selzure consuLuLes as a
declslon on a proLesLed assessmenL, hence,
appealable Lo Lhe C1A (Cl8 vs. lsabela CulLural Corp, 361 SC8A 71
– lssuance by 8l8 of WarranL of ulsLralnL and Levy
consuLuLes a denlal of Lhe proLesL.
lnAC1lCn Cl CCMMlSSlCnL8
• 1he Laxpayer has Lwo opuons:
– WalL for Lhe declslon of Lhe Commlssloner on Lhe proLesL and ñle Lhe appeal
Lo Lhe C1A wlLhln 30 days from daLe of recelpL of Lhe denlal of proLesL, or
– llle appeal Lo Lhe C1A wlLhln 30 days from lapse of Lhe 180-day perlod (Lascona Land
Co vs Cl8, C1A Case no. 3777, !an 4, 2000)
• 8l8 appealed C1A declslon Lo CA.
• ln Lhe meanume, 8A 9282 was slgned by ÞCMA on Apr 2, 2004, whlch provldes
LhaL lnacuon of Cl8 durlng Lhe 180-day perlod ls consLrued as a denlal of proLesL.
• ueclslon of Lhe C1A on Lascona case was reversed by Lhe CA. lf Lhere ls no appeal
ñled wlLhln 30 days aûer Lhe lapse of 180 day perlod, Lhe mauer/declslon under
proLesL becomes ñnal. 1he word ºdeclslon" ln Sec. 228 cannoL be sLrlcLly ck
sLrlcLly consLrued as referrlng only Lo declslon per se of Cl8 buL should be
consldered synonymous wlLh dlspuLed assessmenL (clk vs. loscooo looJ co, cA Ck 5l
No. 58061, Oct 25, 2005).
• CA declslon was appealed Lo SC, where lL ls sull pendlng.
CCun1lnC Cl 180-uA? ÞL8lCu
• Slnce Lhe peuuoner dld noL submlL any
documenL ln supporL of hls proLesL wlLhln
slxLy days from Lhe ñllng of lLs proLesL, Lhe
counung of Lhe 180-day perlod was from Lhe
ñllng of Lhe proLesL. Accordlngly, when
respondenL falled Lo render hls declslon
wlLhln 180 days from Lhe ñllng of hls proLesL,
peuuoner has 30 days Lherefrom Lo ñle an
appeal Lo C1A (Oceoolc wlteless Netwotk vs. clk, c1A cose No. 6111,
Nov. J, 2004)
• AuMlnlS18A1lvL AÞÞLAL
(AqoloolJo loJosttles cotp. v. clk)
• Where a taxpayer h|ed a va||d protest w|th|n 30 days from date of
rece|pt of assessment and on same day a|so h|ed w|th C1A a
pennon for rev|ew, there |s yet no hna| dec|s|on of CIk on the
protest that |s appea|ab|e to C1A (Mooq coottols cotp vs. clk, c1A cose
No. 6700, Oct 18, 2004)
ÞL1l1lCn lC8 8LvlLW
• Þeuuoner malnLalns LhaL lLs counsel's neglecL ln noL ñllng
peuuon for revlew wlLhln reglemenLary perlod (due Lo
counsel's secreLary) was excusable.
• 1he 30-day perlod Lo appeal ls [urlsdlcuonal and fallure Lo
comply would bar Lhe appeal and deprlve Lhe C1A of lLs
[urlsdlcuon. Such perlod ls mandaLory, and lL ls beyond Lhe
power of Lhe courLs Lo exLend Lhe same (cboo kloo vs c1A, 105 lbll 906
• 1he opuons granLed Lo Lhe Laxpayer ln case of lnacuon by Lhe
Cl8 ls muLually excluslve and resorL Lo one bars Lhe
appllcauon of Lhe oLher. Þeuuon for revlew was ñled ouL of
ume (more Lhan 30 days aûer lapse of 180 days), and
peuuoner dld noL ñle M8 or appeal, hence, dlspuLed
assessmenL became ñnal and execuLory.
ÞL1l1lCn lC8 8LvlLW
• Aûer avalllng of Lhe ñrsL opuon (ñllng peuuon for
revlew wlLh C1A), peuuoner cannoL successfully
resorL Lo Lhe second opuon (awalung ñnal declslon
of Cl8) on Lhe preLexL LhaL Lhere ls yeL no ñnal
declslon on Lhe dlspuLed assessmenL because of
Cl8's lnacuon.
• AssessmenLs are presumed Lo be correcL unless
oLherwlse proven (kc8c vs clk, Ck No. 168498, Apt 24, 2007).
• 1he 3-year perlod wlLhln whlch Lo assess any deñclency Lax
commences aûer Lhe lasL day prescrlbed by law for Lhe ñllng
of Lhe lncome Lax reLurn.
• lor vA1, each Laxable quarLer shall have lLs own prescrlpuve
perlod. vA1 reLurn ls ñled quarLerly and a ñnal reLurn ls noL
requlred aL Lhe end of Lhe year.
• ln case of credlLable wlLhholdlng Laxes, Lhe 3-year perlod shall
be counLed shall be counLed from Lhe lasL day requlred by law
for ñllng monLhly remluance reLurn. Lach monLhly reLurn ls
already a compleLe reLurn. 1he annual lnformauon reLurn
submlued Lo 8l8 ls [usL an annual reporL of lncome paymenLs
and Laxes wlLhheld and ls noL ln Lhe naLure of a ñnal
ad[usLmenL reLurn (nlcO AqtlJev cotp. vs. clk, c1A cose No. 6J55, Ioly 18, 2002)
• 8equesL for reconslderauon or clarlñcauon on Lhe
assessmenL made by Lhe Laxpayer does noL suspend
Lhe runnlng of Lhe sLaLuLe of llmlLauons. Powever,
requesL for relnvesugauon may suspend Lhe runnlng
of prescrlpuve perlod when lL has been granLed by
Cl8 (8ll vs. clk, Ck No. 1J97J6, Oct 17, 2005)
• Mere ñllng of Lhe proLesL leuer wlLhouL requesung
for a relnvesugauon does noL suspend Lhe runnlng of
Lhe prescrlpuve perlod Lo collecL (lbll Clobol commoolcouoos vs.
clk, c1A í8 cose No. J7, leb. 2005)
8LCulSl1LS Cl WAlvL8
• Walver musL be ln Lhe form ldenuñed ln 8MC 20-90,
• Lxplry daLe of perlod agreed upon ls lndlcaLed ln Lhe walver,
• Walver form requlres sLaLemenL of Lhe klnd of Lax and amounL of Lax due,
lf noL lndlcaLed ln Lhe walver, Lhere ls no agreemenL,
• Walver ls slgned by Laxpayer or hls auLhorlzed represenLauve. ln case of
corporauon, walver ls slgned by any responslble omclal.
• Cl8 or hls auLhorlzed represenLauve shall slgn walver lndlcaung LhaL 8l8
has accepLed and agreed Lo Lhe walver,
• uaLe of accepLance by 8l8 ls lndlcaLed,
• uaLe of execuuon and accepLance by 8l8 should be before explrauon of
prescrlpuve perlod,
• Walver ls execuLed ln 3 coples, second copy ls for Laxpayer. lacL of recelpL
by Lhe Laxpayer should be lndlcaLed ln Lhe orlglnal copy (lfzet, loc. vs. clk, c1A
cose No. 61J5, Apt. 21, 200J, lMl uev. cotp. vs. clk, c1A cose No. 615J, Mot. 20, 200J)
8LCulSl1LS Cl WAlvL8
• Walver musL lndlcaLe deñnlLe explrauon daLe agreed upon by
Cl8 and Laxpayer
• Walver should sLaLe daLe of accepLance by 8l8. WlLhouL Lhe
daLe, lL cannoL be deLermlned wheLher walver was accepLed
before explrauon of 3-year perlod.
• 1axpayer musL be furnlshed copy of accepLed walver. under
8MC 20-90, second copy of walver ls for Laxpayer. lacL of
recelpL by Laxpayer of hls copy should be lndlcaLed ln Lhe
orlglnal copy (lbll. Iootoollsts vs. clk, sopto).
• 8MC 20-90 musL be sLrlcLly consLrued agalnsL Lhe
governmenL, Lhey are mandaLory ln characLer. More-over,
Lhe walver of Lhe sLaLuLe of llmlLauons ls noL a walver of Lhe
rlghL Lo lnvoke Lhe defense of prescrlpuon (clk vs. lMl uev cotp, Ck
No. 167765, Iooe J0, 2008).
• 1Ax AvCluAnCL ls Lhe Lax savlng devlce wlLhln Lhe means sancuoned by
law, used ln good falLh and aL arms lengLh.
• 1Ax LvASlCn ls a scheme used ouLslde of Lhose lawful means and when
avalled of, lL usually sub[ecLs Lhe Laxpayer Lo furLher or addluonal clvll or
crlmlnal llablllues. lL connoLes 3 facLors: end Lo be achleved, an
accompanylng sLaLe of mlnd LhaL ls descrlbed as evll, wlllful or dellberaLe,
and course of acuon whlch ls unlawful.
• AlLonaga's sole purpose of acqulrlng and Lransferrlng uLle of properues on
same day was Lo creaLe Lax shelLer. Sale Lo hlm by ClC was a sham and
wlLhouL buslness purpose. Sale by AlLonaga Lo 8Ml was LalnLed wlLh fraud.
Lven before Lhe purporLed sale of properLy by ClC Lo AlLonaga, lL recelved
Þ40 M from 8Ml. 1haL was reßecLed by 8Ml ln lLs ñnanclal sLaLemenL (clk
vs. ístote of 8eolqoo 1oJo, Ck No. 147188, 5ept. 14, 2004)

• BD,; E01 C; F(=(9(/%-
• Moblle: 0918-9037436
• Lmall: vlc.mamalaLeo€,
• Auy. vlc c. Momoloteo
• Moblle: 0918-9037436
• Lmall: vlc.mamalaLeo€,