Tax Reviewer 2

SEC. 105. Persons Liable.
Any person who, in the course of trade or business, sells barters, exchanges, leases goods or
properties, renders services, and any person who imports goods shall be subject to the value-added
tax (VAT) imposed in Sections 106 to 108 of this Code.

The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the
buyer, transferee or lessee of the goods, properties or services.

This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at
the time of the effectivity of Republic Act No. 7716.

The phrase "in the course of trade or business" means the regular conduct or pursuit of a
commercial or an economic activity, including transactions incidental thereto, by any person
regardless of whether or not the person engaged therein is a nonstock, nonprofit private
organization (irrespective of the disposition of its net income and whether or not it sells exclusively
to members or their guests), or government entity.

The rule of regularity, to the contrary notwithstanding, services as defined in this Code rendered in
the Philippines by nonresident foreign persons shall be considered as being course of trade or
business.

Note:
A transaction characterized as having been entered into by a person in the course of trade or business, if it
is regularly conducted and undertaken in pursuit of a commercial or economic activity. Transactions that
are undertaken incidental to the pursuit of a commercial or economic activity are considered as entered
into in the course of trade or business

Incidental
Means depending upon or appertaining to something else as primary.

Characteristics of VAT:
1. It is a tax on value added of a taxpayer
2. It is collected through the tax credit method
3. It is transparent form of sales tax
4. It is broad-based tax on consumption of goods, properties or services in the Philippines
5. It is an indirect tax
6. It is in accordance with the tax-inclusive method
7. There is no cascading in the value added tax system

Note:
The fact that no income was derived from the sale or exchange transaction is not material and is still
susceptible to payment of VAT

Nature
1. An indirect tax; hence, amount of the tax may be shifted or passed on to the buyer
2. A privilege tax; hence, the tax is imposed not on the goods, properties or services as such but on
the sale, barter, exchange or lease of goods or properties, or the sale or performance of services
for a fee, remuneration, etc
3. A uniform tax computed at the rate of 0% or 12% of the gross selling price of goods or of gross
receipts realized from the sale of services
4. An ad valorem tax because it is based on the gross selling price or gross value in money, or gross
receipts derived from the transaction
5. A tax on the value added by every seller as the goods, properties or services pass along the
distribution chain, unless the seller is exempt.

Purposes of VAT system:
1. realizing the system of taxing goods and services;
2. simplifying tax administration; and
3. making the tax system more equitable, to enable the country to attain economic recovery.

VAT
It is a form of sales tax. It is a tax on consumption levied on the sale, barter, exchange or lease of goods or
properties and services in the Philippines and on importation of goods into the Philippines. It is an
indirect tax, which may be shifted or passed on to the buyer, transferee or lessee of goods, properties or
services

Tax Rates
 On sale of goods and properties - twelve percent (12%) of the gross selling price or gross value in
money of the goods or properties sold, bartered or exchanged

 On sale of services and use or lease of properties - twelve percent (12%) of gross receipts derived
from the sale or exchange of services, including the use or lease of properties

 On importation of goods - twelve percent (12%) based on the total value used by the Bureau of
Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and
other charges, such as tax to be paid by the importer prior to the release of such goods from
customs custody; provided, that where the customs duties are determined on the basis of quantity
or volume of the goods, the VAT shall be based on the landed cost plus excise taxes, if any.

 On export sales and other zero-rated sales - 0%

Value added
It is the difference between total sales of the taxpayer for the taxable quarter subject to value added tax
and his total purchases for the same period subject also to value added tax.

Output Tax
Means the VAT due on the sale or lease of taxable goods, properties or services by any person registered
or required to register under the tax code

Input tax
Means the VAT from or paid by a VAT registered person in the course of his trade or business on
importation of goods or local purchases of goods, properties or services including lease or use of property,
from a vat registered person

Comment:
It is the value paid by a person where as the output tax is the value included in the purchase price when
sold.

Note:
As a general rule the responsibility to pay VAT is imposable upon the seller except in cases where the
buyer is also the importer of the goods

Note:
A buyer becomes entitled to the input tax upon consummation of sale and issuance of a VAT invoice, in
the case of sale of goods or properties, and upon payment of service fee or compensation, in the case of
sale of services. It is not necessary that the inventory of goods or properties be sold before the buyer
thereof become entitled to it.

2 ways of computing the value added tax of a taxpayer:
1. Cost deduction method,
2. Tax credit method.

Cost deduction method
Refers to the manner of computing the taxpayer’s value added tax liability by deducting his costs and
expenses subject to VAT from his taxable goods properties or services, and multiplying the resulting
value added by 12%

Generally there must be an actual sale of goods, properties or services in the Philippine in order that VAT
may be imposed, except in:
1. Importation of goods by any person, who may not be engaged in trade or business in the
Philippines, in which case, the tax is imposed on the importer-buyer. Importation of servies is not
subject to VAT unless such service is performed within the Philippines
2. Issuance of VAT invoice for exempt sales of GPS.
a. Note must be taken that as a rule vat exempt transactions require a non-vat invoice,
however if the seller issues a vat invoice in a vat exempt transaction, the seller shall be
held liable for the payment of VAT
b. Deemed sales of goods or properties

VAT Taxable Transactions:

- (A) Rate and Base of Tax. Sale. shall. Value-Added Tax on Sale of Goods or Properties. the place at which the tax comes to rest. after any of the following conditions has been satisfied: (i) Value-added tax collection as a percentage of Gross Domestic product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%). even if the contracting parties are both domestic corporations Note: Investments in capital goods such as machinery and equipment are effectively not subject to VAT due to the provisions of the tax code allowing taxpayers to recover input taxes paid on acquisition of capital goods through refund or tax credit Destination principle The destination of the goods determines taxation or exemption from tax. 2006. or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 1/2%). Situs of service principle: With respect to services. An importation of goods. bartered or exchanged. barter or exchange of goods or properties. . Deemed sale transactions Note: A sale of goods located and consumed outside the PH is exempt from VAT. 1. whether or not made in the course of trade or business 4. 106. a value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold. upon the recommendation of the Secretary of Finance. the impact of taxation is on the seller since it is upon him the tax has been imposed while the incidence of tax is one the final consumer. they are deemed consumed at the place where the serve is performed Note: Since VAT is an indirect tax. such tax to be paid by the seller or transferor: Provided. The reason why imports are tax exempt or subjected to a 0% VAT is because the goods will be made outside the PH. Sale of services in the course of trade o business 3. Note: Import sales are subject to 0% or are vat exempt. That the President. raise the rate of value-added tax to twelve percent (12%). SEC. barter of goods or properties in the course of a trade or business 2. assessed and collected on every sale. . effective January 1. while imports of goods are subject to the 12% VAT because they are for consumption within the PH.There shall be levied.

irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services. Radio. The right or the privilege to use in the Philippines of any industrial. equipment and fuel to persons engaged in international shipping or international air transport operations. plan secret formula or process. Export Sales. The term 'gross selling price' means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale. copyright. Foreign Currency Denominated Sale. .The phrase 'foreign currency denominated sale' means sale to a nonresident of goods. satellite transmission and cable television time. assembled or manufactured in the Philippines for delivery to a resident in the Philippines. trade brand or other like property or right. design or model.The term 'export sales' means: (1) The sale and actual shipment of goods from the Philippines to a foreign country. barter or exchange of the goods or properties. (2) Sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing. The term 'goods or properties' shall mean all tangible and intangible objects which are capable of pecuniary estimation and shall include: a.1. tapes and discs. packing or repacking in the Philippines of the said buyer's goods and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): (3) Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production. . (4) Sale of gold to the Bangko Sentral ng Pilipinas (BSP). trademark. b. c. and e. 2. and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. 226. paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). except those mentioned in Sections 149 and 150. b. The right or the privilege to use motion picture films. and other special laws. if any. The right or the privilege to use patent. The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: a. otherwise known as the Omnibus Investment Code of 1987. (5) Those considered export sales under Executive Order No. goodwill. Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business. and (6) The sale of goods. on such goods or properties shall form part of the gross selling price. d. excluding the value-added tax. television. processing. . commercial or scientific equipment. films. The excise tax.(BSP). supplies.

c. Sales to persons or entities whose exemption under special laws or international
agreements to which the Philippines is a signatory effectively subjects such sales to
zero rate.

(B) Transactions Deemed Sale. - The following transactions shall be deemed sale:

1. Transfer, use or consumption not in the course of business of goods or properties originally
intended for sale or for use in the course of business;
2. Distribution or transfer to:
a. Shareholders or investors as share in the profits of the VAT-registered persons: or
b. Creditors in payment of debt;
3. Consignment of goods if actual sale is not made within sixty (60) days following the date
such goods, were consigned; and
4. Retirement from or cessation of business, with respect to inventories of taxable aoods
existing as of such retirement or cessation.

(C) Changes in or Cessation of Status of a VAT-registered Person. - The tax imposed in Subsection
(A) of this Section shall also apply to goods disposed of or existing as of a certain date if under
circumstances to be prescribed in rules and regulations to be promulgated by the Secretary of
Finance, upon recommendation of the Commissioner, the status of a person as a VAT-
registered person changes or is terminated.

(D) Sales Returns, Allowances and Sales Discounts. - The value of goods or properties sold and
subsequently returned or for which allowances were granted by a VAT-registered person may
be deducted from the gross sales or receipts for the quarter in which a refund is made or a
credit memorandum or refund is issued. Sales discount granted and indicated in the invoice at
the time of sale and the grant of which does not depend upon the happening of a future event
may be excluded from the gross sales within the same quarter it was given.

(E) Authority of the Commissioner to Determine the Appropriate Tax Base. - The Commissioner
shall, by rules and regulations prescribed by the Secretary of Finance, determine the
appropriate tax base incases where a transaction is deemed a sale, barter or exchange of goods
or properties under Subsection (B) hereof, or where the gross selling price is unreasonably
lower than the actual market value

Note:
A contract for a piece of work is not subject to the vat on sales or exchange of goods or services but is
more appropriately subjected to the sale of services

Note:
Export sales include sale of goods and services by a taxpayer located in the customs territory to a person
located in a special economic zone or Freeport zone

SEC. 107. Value-Added Tax on Importation of Goods. -

(A) In General. - There shall be levied, assessed and collected on every importation of goods a
value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of
Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and
other charges, such tax to be paid by the importer prior to the release of such goods from
customs custody: Provided, That where the customs duties are determined on the basis of the
quantity or volume of the goods, the value-added tax shall be based on the landed cost plus
excise taxes, if any: Provided, further, That the President, upon the recommendation of the
Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve
percent (12%), after any of the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one
and one-half percent (1 1/2%).

(B) Transfer of Goods by Tax-exempt Persons. - In the case of tax free importation of goods into
the Philippines by persons, entities or agencies exempt from tax where such goods are
subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or
entities, the purchasers, transferees or recipients shall be considered the importers thereof, who
shall be liable for any internal revenue tax on such importation. The tax due on such
importation shall constitute a lien on the goods superior to all charges or liens on the goods,
irrespective of the possessor thereof

Personal; Income Tax; Retiring Alien Employee (2005)

An alien employee of the Asian Development Bank (ADB) who is retiring soon has
offered to sell his car to you which he imported tax-free for his personal use. The privilege of
exemption from tax is granted to qualified personal use under the ADB Charter which is
recognized by the tax authorities. If you decide to purchase the car, is the sale subject to tax?
Explain. (5%)

SUGGESTED ANSWER:

The sales transaction is subject to value added tax (VAT) under Sec. 107(B) of the NIRC,
although this provision is expressly excluded from the coverage of the 2005 bar exam.

The proceeds from the sale are subject to income tax. The car is considered a capital asset of
the retiring alien employee because he is not engaged in the business of buying and
selling cars. He therefore derived income, which should be reported in his income tax return.
(Sees. 32 and 39, NIRC)

Zero rated sales vs vat exempt

1. A zero rated scale is a taxable transaction but does not result in an output tax while an exempted
transaction is not subject to the output tax
2. The input vat on the purchases of a VAT registered person with zero-rated sales may be allowed
as tax credits or refunded while the seller in an exempt transaction is not entitled to any input tax
on his purchases despite the issuance of a VAT invoice or receipt
3. Persons engaged in transactions which are zero-rated, because subject to vat, are required to
register while registration is optional for VAT exempt persons.

Tax inclusive method
In this method the vat amount need not be shown in the invoice as it is presumed to be included, nor does
the seller required to prove to the BIR its imposition. The value of the VAT shall be determined by
dividing the selling price by the number 11, the resulting amount is the VAT imposed.

Characteristics of a VAT taxable person:
1. He undertakes taxable transactions in goods, properties or services consumed or destined for
consumption within the Philippines
2. Such transactions are entered into in the course of his trade or business
3. The amount of his gross sales or receipts is over the threshold fixed by law or regulations.
4. However, an importer of taxable goods, whether made in the course of trade or business, is a
taxable person

Note:
Failure to register does not exculpate a person from paying VAT taxes

Note:
As a general rule, non-stock, non-profit corporations or associations are usually VAT exempt in offering
their services to their members or for the use of their facilities under the reasoning that the services or
lease offered by them are not considered as one of the transactions which are subject to VAT. However
the moment that they enter into transactions subject to VAT, I.E opening of Canteens, the BIR has ruled
that they will be subjected to VAT.

Requisites of sale of goods to be subject to vat:
1. There must be an actual or deemed sale of goods or properties for valuable consideration
2. It must be undertaken in the course of trade or business
3. The goods are to be consumed or destined to be consumed in the Philippines
4. It is not an exempt transaction.

Note:
VAT attached only upon the consummation of the sale or of the exchange of goods, regardless of the
terms of payment between contracting parties.

Types of sales:
1. Actual sale

motels. goods or cargoes from one place in the Philippines to another place in the Philippines. services of franchise grantees of electric utilities. lessors of property. whether personal or real. or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 1/2%). shall. That the President. The phrase 'sale or exchange of services' means the performance of all kinds of services in the Philippines for others for a fee. telephone and telegraph. 2. lending investors. and distribution companies.There shall be levied. real estate. fidelity. raise the rate of value-added tax to twelve percent (12%). transmission. customs and immigration brokers. pension houses. warehousing services. proprietors. . with respect to inventories of taxable goods existing as of such retirement or cessation. including those performed or rendered by construction and service contractors. transportation contractors on their transport of goods or cargoes. a value-added tax equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services. proprietors or operators of restaurants. - (A) Rate and Base of Tax. . refreshment parlors. manufacturing or repacking goods for others. processing. (3) Consignment of goods if actual sale is not made within sixty (60) days following the date such goods were consigned. common carriers by air and sea relative to their transport of passengers. (2) Distribution or transfer to: (a) Shareholders or investors as share in the profits of the VAT-registered persons. 108. after any of the following conditions has been satisfied: (i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%). dealers in securities. including clubs and caterers. lessors or distributors of cinematographic films. including surety. including persons who transport goods or cargoes for hire and other domestic common carriers by land relative to their transport of goods or cargoes. radio and television broadcasting and all other franchise grantees except those under Section 119 of this Code and non-life insurance companies (except their crop insurances). use or consumption not in the course of business of goods or properties originally intended for sale or for use in the course of business. sales of electricity by generation companies. persons engaged in milling. assessed and collected. operators or keepers of hotels. Note: In transactions deemed sales. cafes and other eating places. commercial. inns. remuneration or consideration. and (4) Retirement from or cessation of business. or (b) Creditors in payment of debt. including the use or lease of properties: Provided. Value-added Tax on Sale of Services and Use or Lease of Properties. resorts. upon the recommendation of the Secretary of Finance. SEC. stock. Deemed sales Transactions deemed sales: (1) Transfer. effective January 1. the seller is also the buyer and no valuable consideration is thus paid. rest-houses. 2006.

7. goodwill. The phrase 'sale or exchange of services' shall likewise include: 1. industrial or commercial undertaking. compensation. Lease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of lease or licensing agreement was executed if the property is leased or used in the Philippines. satellite transmission and cable television time. or the right to use of any industrial. The lease or the use of or the right to use radio. secret formula or process. The lease of motion picture films. industrial or commercial knowledge or information. Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed. The supply of services by a nonresident person or his employee in connection with the use of property or rights belonging to. service fee. where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: 1. The supply of scientific. design or model plan. rental or royalty. technical. commercial or. assistance or services rendered in connection with technical management or administration of any scientific. . tapes and discs. (B) Transactions Subject to Zero Percent (0%) Rate. or right as is mentioned in subparagraph (2) or any such knowledge or information as is mentioned in subparagraph (3) 5. The term 'gross receipts' means the total amount of money or its equivalent representing the contract price. venture. patent. indemnity and bonding companies. the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). The lease or the use of or the right or privilege to use any copyright. or the installation or operation of any brand. and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties. excluding value-added tax. The lease or the use of. and 8. The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of any such property. 4. project or scheme. television. . including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person. trademark. 3. 2. The supply of technical advice. films. 6. trade brand or other like property or right. Processing. scientific equipment. machinery or other apparatus purchased from such nonresident person. 2. manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported.

Services performed by subcontractors and/or contractors in processing. pension houses. proprietors or operators of restaurants. carriage of persons are not vatable) 12. services of banks. commercial. radio and television broadcasting and all other franchise grantees except those under Section 119 of this Code 13. Services of franchise grantees of telephone and telegraph. 6. ocean energy. biomass. refreshment parlors. construction and service contractors 2. or manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of total annual production. dealers in securities 10. 4. customs and immigration brokers 3. solar. Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate. air and water relative to their transport of goods or cargoes (Comment. Transport of passengers and cargo by air or sea vessels from the Philippines to a foreign country. indemnity and bonding companies 15. operators or keepers of hotels. similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties . persons engaged in milling processing. geothermal. cafes and other eating places. Note: Transport of passengers are not subject to vat but is subject to percentage tax. inns. Sale of power or fuel generated through renewable sources of energy such as. including leases of property for use thereof. ending investors 11. 5. transportation contractors on their transport of goods or cargoes. including clubs and caterers 9. including surety. Note: The sale and exchange of services under the VAT law embraces all transactions sales of exchanges not covered by sales and exchanges of goods and properties regardless if it requires the application or use of the physical or mental faculties of a person provided that it is not one of the exempt transactions. motels. non-bank financial intermediaries and finance companies 14. stock. lessors of property. wind. 3. including persons who transport goods or cargoes for hire and other domestic common carriers by land. fidelity. and 7. manufacturing or repacking goods for others 7. lessors or distributors of cinematographic films 6. hydropower. Services of the following persons are subject to VAT: 1. resthouses. converting. proprietors. Services rendered to persons engaged in international shipping or international air transport operations. non-life insurance companies (except their crop insurances). warehousing services 5. but not limited to. and other emerging energy sources using technologies such as fuel cells and hydrogen fuels. resorts 8. whether personal or real 4. real estate.

Commercial or scientific equipment. industrial or commercial knowledge or information including ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of the technology transfer. However if the lessor is an enterprise registered in the Philippine Export Zone Authority the transaction shall be vat exempt Constructive receipt Occurs when the money consideration or its equivalent is placed under the control of the person who rendered the service without any substantial restrictions by the payor. Motion picture films. Transfer of technology The supply of scientific. industrial or commercial undertaking 2. Covered Transactions (1998) State whether the following transactions are a) VAT Exempt. [1%] . assistance. including the supply of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of such properties b. satellite transmission and cable television time 4. The service is not an exempt transaction Note: Sale or exchanges of goods. 3. b. or services rendered in connection with technical management or administration of any scientific. secret formula or processes c. Lease or use of tangible property. it may be grouped as follows: a. The service must be performed or is to be performed in the course of trade or business in the Philippines 2. trademarks. Industrial. tapes and discs. properties or services in special economic zones and freeports zones are considered as foreign territories by fiction of law hence not subject to vat Note: A contract of lease covering property situated in the Philippines is subject to VAT regardless of the location of lessor or where the contract was executed. Goodwill. b) subject to VAT at 10%. patents. Right to use radio. trade brand or other like property or right d. Copyrights. It may be grouped as follows: a.Categories of services: 1. professional/technical consultancy The supply of technical advice. Plans. or c) subject to VAT at 0%: 1. Requisites for taxability of services (VAT) 1. For valuable consideration actually or constructively received 3. technical. Sale of fresh vegetables by Aling Ining at the Pamilihang Bayan ng Trece Martirez. Lease or use of intangible property. television. VAT. designs or models. films.

RRNo. Services rendered by Jake's Construction Company. Total exemption Total relief from VAT is accomplished by subjecting the sales to zero value rate. NIRC. such as fresh vegetables. but the input taxes passed on to him by his suppliers may be recovered from the BOR through claims for tax credits or refunds . [1%] 5. a Filipino dress designer. Fees for lodging paid by students to Bahay-Bahayan Dormitory. (Section 109(c). [1%] 4. which is an entity exempted from taxation under international agreements to which the Philippines is a signatory. in her dress shop and other outlets. The term unit shall mean per person in the case of dormitories. 4.103-1. NIRC. VAT at 10%. 106[A1(1). the sales of which are subject to VAT at 10%. or producing foods for human consumption is exempt from VAT. This transaction also falls under the definition of goods which include all tangible objects which are capable of pecuniary estimation (Sec. it is only exempted from paying VAT as a seller and does not extend to it as a purchaser under the reasoning that as a seller it is liable to pay the VAT to the government directly whereas as a purchaser it is not liable to pay directly to the government Note: The following are the effects of exemption: 1. Tractors and other agricultural implements fall under the definition of goods which include all tangible objects which are capable of pecuniary estimation (Sec. Partial exemption The seller has no output tax liability on his sales. Since Jake's Construction Company has rendered services to the World Health Organization. 7-95) Note: If one of the parties is granted tax exempt status. [1%] 3. VAT exempt. 2. a contractor to the World Health Organization in the renovation of its offices in Manila. 5. This is subject to VAT at 10%. 2. Sale of agricultural products. which Is exempt from VAT regardless of the amount of aggregate rentals received by the lessor during the year. 3. Sale of RTW by Cely's Boutique. the sales of which are subject to VAT at 10%. in their original state. NIRC). VAT Exempt. boarding houses and bed spaces (Sec. 108[B1(3). 106[A1(1). (Sec. 4. properties or services form part of his assets or operating expenses 2. a private entity operating a student SUGGESTED ANSWER: 1. VAT at 0%. Sale of tractors and other agricultural implements by Bungkal Incorporated to local farmers. NIRC). 109(x). but the input taxes passed on to him by his suppliers of goods. The monthly fee paid by each student falls under the lease of residential units with a monthly rental per unit not exceeding Php 8. the supply of services is subject to zero percent (0%) rate. (Sec. NIRC).000. of a kind generally used as.

now claims for a refund from the Bureau of Internal Revenue in an amount corresponding to the tax passed on to it since it is tax exempt. . is not a taxpayer. is directly liable for the sales tax and no tax exemption privilege is ever given to him. later found out. The sales tax is a tax on the seller who is not exempt from taxes. is not meritorious. XYZ should not be liable to pay the sales tax. since ABC Corp. XYZ Inc. In the course of business. No. B. ABC Corp. imposts and other charges for a period of three years. Assume arguendo that XYZ had to and did pay the sales tax. claims. a law was passed giving newly established companies in certain economic zone exemption from all taxes. Exemption from taxes is personal in nature and covers only taxes for which the taxpayer-grantee is directly liable. A tax exemption is construed in strictissimi juris and it can not be permitted to exist upon vague implications (Asiatic Petroleum Co. Is the claim of ABC Corp. therefore. by the seller. Since XYZ Inc. Hence. Although the tax was shifted to ABC Corp.. ABC Corp. Further as per the vat inclusive method. V. Ltd. the sale is subject to a sales tax. it has no capacity to file a claim for refund. 49 Phil B. its claim that the sale is tax exempt is not tenable. if the amount of the vat is not specified in the invoice or document representing the sale or exchange it shall be the deemed inclusive thereof and may be determined using the divisor of 11. however. The taxpayer who can file a claim for refund is the person statutorily liable for the payment of the tax TAX BASE Note: The tax base shall be the gross selling price or gross receipt as defined in section 106 however when the consideration is paid mixed by money and property the property shall be valued using its fair market value at the time of sale or the estimated amount of the property whichever is higher. Tax Exemptions: Nature & Coverage. was organized and was granted such incentive. that XYZ merely shifted or passed on to ABC the amount of the sales tax by increasing the purchase price. Normally. fees. duties. Is this claim tenable? (5%) SUGGESTED ANSWER: A. ABC Corp. purchased mechanical equipment from XYZ Inc. which is tax exempt. what is paid by it is not a tax but part of the cost it has assumed. Llanes. No. meritorious? (5%) SUGGESTED ANSWER. Proper Party (2004) As an incentive for investors. The claim of ABC Corp. however. that since it sold the equipment to ABC Corp. ABC Corp.

As such the CIR is authorized to determine and prescribed the actual market value to be used as a tax base Gross receipts The term means the total amount of money or its equivalent representing the contract price. In the case of sale of real property on installment plan. the tax base shall be the entire gross selling price. The grant of sales discount must not depend upon the happening of a future event ii. which are expressly indicated in the sales invoice relating to sales of goods or properties do not form part of the tax base provided: i. the output tax accrues on the sale of goods or properties(other real property) at the time of the sale. when the sales invoice is issued. The discount must be recorded in the books of accounts of the seller iii. If it is a sale on cash basis. where the initial payment is more than 25% of the gross selling price. In the case of sale of real property is NOT on installment plan. the amount subject to VAT at the time of execution of the document of sale b. excluding value-added tax.Rules in determining the tax base of sale of goods 1. If the gross selling price is lower than the actual market value by more than 30% percent the gross selling price is considered as unreasonable lower than the actual market value. including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person. compensation. where the initial payment is less than 25% of the gross selling price. In sales covering real property. c. The discount must be expressly indicated in the sales invoice d. When the buyer is a senior citizen the tax base shall be net sales after deducting the 20% senior citizen discount e. In deferred payments: i. although none or only a part of the gross selling price is paid by the buyer at the time of sale 2. service fee. As a general rule. If the sale of real property is on installment plan where the zonal value/FMV is higher than the consideration exclusive of the VAT. the VAT shall be based on the ratio of actual collection of the consideration. rental or royalty. iii. the tax base shall be the amount actually or constructively received during the taxable quarter. The tax base for transactions deemed sale is generally the market value of such goods as of the occurrence of the transaction deemed sale. in the case of retirement from or cessation of business the tax base shall be the acquisition cost or the current market price of the goods. exclusive of VAT. whichever is higher ii. f. Sales discounts determined and granted at the time of sale. whichever is lower. EXCEPT those amounts earmarked for payment to unrelated third party or received as reimbursement for advance payment on behalf of another. However. the following rules shall govern: a. or FMV as determined by the CIR. which do not redound to the benefit of the payor. (unrelated party) Rules in determining the tax base of sale of service: .

Requisites in order for advances made to a customs broker for port fees. option money or a security deposit to insure faithful compliance of an obligation to the lessor is not the lease presumed under the VAT law and is therefore not subject to VAT. 5. Actual cost and charges of telecommunication companies collected by the establishment c. Service charges billed separately and actually distributed to the waiters and employees b. Generally reimbursements do not form part of the tax base of the seller of service 4. Local taxes charged 7. For conversion into or intended to form part of a finished product for sale including packaging materials. Tax Credits. 110. Doc stamp tax and local tax passed on by the insurance company to the insured. Gross receipts does not include monies or receipt entrusted to the taxpayer which do not belong to them and do not redound to the taxpayer’s benefit 8. - 1. Premiums refunded within 6 months after payment on account of rejection of risk or returned for other reason to the insured b. The customs broker must issue a non-VAT receipt for the advances given him b. The persons performing the services issues receipts to the brokers client 6. Premiums for reinsurance when the risk insured against covers property located outside the Philippines d. Hence he is liable to pay the VAT once he receives the payment even if he has not rendered the services. also he is not liable to pay the VAT despite the fact that he has rendered the service provided he has not received the payment yet 2. arrastre wharfage stamps etch services rendered by another not to be subject to vat: a. 1. life and disability insurance. Security agencies tax base is the agency fee excluding the amount earmarked for the salaries of the guards Rates of VAT SEC. The VAT accrues upon the actual or constructive receipt of payment by the seller of service. or . 9. Note payments made to another for the purpose of making payment to another for services rendered by the latter is not subject to VAT under the reasoning that the first payment when made is not for payment for a sale or exchange of property. For sale. e. Advance payment of by the lessee of rents which are actually in the nature of a loan. Purchase or importation of goods: b. and health and accident insurance policies. Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: a. Premiums collected from crop insurance. Exclusions to the tax base of insurance companies: a. Payments made to hotels and restaurants and caterers shall not be subject to vat for any of the following: a. or c. 3. - (A) Creditable Input Tax. Premiums on reinsurance of a company that has already paid the tax c.

lease or use of properties. That the input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction for depreciation is allowed under this Code. That the input tax inclusive of input VAT carried over from the previous quarter that may be . For use as materials supplied in the sale of service. 2. That if the estimated useful life of the capital good is less than five (5) years. including lease or use of property. The term 'output tax' means the value-added tax due on the sale or lease of taxable goods or properties or services by any person registered or required to register under Section 236 of this Code. the input tax shall be creditable to the purchaser. and b. from a VAT-registered person. however. . It shall also include the transitional input tax determined in accordance with Section 111 of this Code. Provided. rental. For use in trade or business for which deduction for depreciation or amortization is allowed under this Code. excluding the VAT component thereof. lessee or licensee upon payment of the compensation. 3. can be directly attributed to transactions subject to value-add tax. The term 'input tax' means the value-added tax due from or paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchase of goods or services. Total input tax which. Purchase of services on which a value-added tax has actually been paid. (B) Excess Output or Input Tax. shall be spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods. If the input tax exceeds the output tax. or f. The input tax on domestic purchase or importation of goods or properties by a VAT- registered person shall be creditable: a.000): Provided. or e. finally. as used for depreciation purposes. A VAT-registered person who is also engaged in transactions not subject to the value-added tax shall be allowed tax credit as follows: a. To the purchaser upon consummation of sale and on importation of goods or properties. and b.000. g. To the importer upon payment of the value-added tax prior to the release of the goods from the custody of the Bureau of Customs. d.If at the end of any taxable quarter the output tax exceeds the input tax. the excess shall be paid by the VAT-registered person. that in the case of purchase of services. then the input VAT shall be spread over such a shorter period: Provided. For use as supplies in the course of business. exceeds One million pesos (P1. the excess shall be carried over to the succeeding quarter or quarters: Provided. A ratable portion of any input tax which cannot be directly attributed to either activity. royalty or fee.

and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. 12% 2. irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and 2. 5% final withholding tax Note: Transitional input tax are applied to the value of foods existing at the date a person commences business and/or becomes liable to pay VAT. (C) Determination of Creditable Input Tax. . such as the Board of Investments and the Bureau of Customs. 0% Input tax 1. That any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes. 12% 2. however. Sale of raw materials or packaging materials 1. . The claim for tax credit referred to in the foregoing paragraph shall include not only those filed with the Bureau of Internal Revenue but also those filed with other government agencies. Export Export Sales. The sale and actual shipment of goods from the Philippines to a foreign country 1. 0% 3. Sales of goods and properties a.The term 'export sales' means: i. 2% transitional or 12% actual input tax 4. 4% presumptive input tax 5. credited in every quarter shall not exceed seventy percent (70%) of the output VAT: Provided. to a nonresident buyer 2. Zero rated transactions: 1.(BSP). paid for in acceptable foreign currency or its equivalent in goods or services. such as purchase returns or allowances and input tax attributable to exempt sale. for delivery to a resident local export-oriented enterprise .The sum of the excess input tax carried over from the preceeding month or quarter and the input tax creditable to a VAT-registered person during the taxable month or quarter shall be reduced by the amount of claim for refund or tax credit for value-added tax and other adjustments. Output tax 1. Whereas presumptive input tax rate is applied to purchases of VAT- exempt goods used as inputs by VAT registered person in manufacturing or processing certain food products. subject to the provisions of Section 112. ii.

means sale to a nonresident of goods. toilet waters. b. b. and vi. Those considered export sales under Executive Order No. for other persons doing business outside the Philippines ii. perfumes. 9. rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed. otherwise known as the Omnibus Investment Code of 1987. Processing. 8. . – i. Services other than those mentioned in the preceding paragraph a. Foreign Currency Denominated Sale. paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): iii. automobiles (149) 2. Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate. iv. Services rendered to persons engaged in international shipping or international air transport operations. for delivery to a resident in the Philippines. and other special laws. 3. where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). processing. iii. v. the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). equipment and fuel to persons engaged in international shipping or international air transport operations. supplies. Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate. including leases of property for use thereof. assembled or manufactured in the Philippines iv. non-essential goods. to be used in manufacturing. yatchs and other vesels intended for pleasure or sports. packing or repacking in the Philippines of the said buyer's goods and 4. iii. manufacturing or repacking goods: i. Sale of gold to the Bangko Sentral ng Pilipinas (BSP). ii. v. except those mentioned in Sections: 1. paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). Sale of raw materials or packaging materials to export-oriented enterprise whose export sales exceed seventy percent (70%) of total annual production. 226. such as jewelry. c. Sales or exchange of services a. The sale of goods. 10. which goods are subsequently exported. 2.

Note: Transactions with embassies of a foreign state and its personnel will not be zero-rated unless there is existing international agreement showing that the said foreign government allows similar tax exemption privilege to the Philippine embassy and its personnel on their purchases of goods or services in that foreign country. biomass. ocean energy. EFFECTIVELY ZERO-RATED TRANSACTIONS Refers to Sales to whom: persons or entities exempted under special laws or international agreements to which the Philippines is a signatory. whether direct or indirect. solar. . Services performed by subcontractors and/or contractors in processing. such requirement may be waived in exchange deals provided the BIR and BSP issues a ruling confirming that the exchange deals complies with the accounting requirements or liquidation of the foreign currency under the BSP circulars and the tax code Note: NPC by its special charter categorically makes it exempt from payment of all taxes. Sale of power or fuel generated through renewable sources of energy such as. Exempt Transactions. Such vat exemption shall not extend to the individual purchases made by the members of their diplomatic staff. hydropower. wind. 109. or manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of total annual production. but not limited to.The following shall be exempt from the value-added tax: (a) Sale of nonfood agricultural products. Transport of passengers and cargo by air or sea vessels from the Philippines to a foreign country. geothermal. and copra. converting. including taxes Note: In order for an effectively zero-rated transaction to be zero rated. Further the word zero-rated must be stamped on the face of the VAT invoice or receipt to be issued by the seller of the goods or services. marine and forest products in their original state by the primary producer or the owner of the land where the same are produced. . 12. (b) Sale of cotton seeds in their original state. Exempt Transactions SEC. and other emerging energy sources using technologies such as fuel cells and hydrogen fuels. and 13. Note the seller also enjoys the zero rating. 11. Note: With respect to transactions requiring foreign currency. an application must be filed with BIR and approved accordingly prior to the execution of the transaction.

roasting. fish. Culture and Sports (DECS) and the Commission on Higher Education (CHED). domestic animals. (e) Sale or importation of coal and natural gas. accompanying such persons. for their own use and not for sale. aircraft. (g) Importation of passenger and/or cargo vessels of more than five thousand tons (5. fighting cocks.000) whether coastwise or ocean-going. dental. upon the production of evidence satisfactory to the Commissioner. (j) Services subject to percentage tax under Title V. That such goods are exempt from customs duties under the Tariff and Customs Code of the Philippines. in whatever form or state. grease.(c) Sale or importation of agricultural and marine food products in their original state. seedlings and fingerlings. smoking or stripping. including engine and spare parts of said vessel to be used by the importer himself as operator thereof. vessel. that such persons are actually coming to settle in the Philippines and that the change of residence is bona fide. including ingredients. wax and petrolatum. salting. wearing apparel. and petroleum products (except lubricating oil. Polished and/or husked rice. corn grits. used in the manufacture of finished feeds (except specialty feeds for race horses. processed gas. whether locally produced or imported. processed gas. Products classified under this paragraph and paragraph (a) shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market. or arriving within ninety (90) days before or after their arrival. (d) Sale or importation of fertilizers. corn into grits and sugar cane into raw sugar. barter or exchange. (f) Sale or importation of raw materials to be used by the buyer or importer himself in the manufacture of petroleum products subject to excise tax. and those rendered by government educational institutions. and breeding stock and genetic materials therefor. (h) Importation of personal and household effects belonging to the residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines: Provided. 7716. . or yielding or producing foods for human consumption. livestock and poultry of or king generally used as. broiling. (m) Educational services rendered by private educational institutions. wax and petrolatum) subject to excise tax imposed under Title VI. (l) Medical. seeds. such as freezing. aquarium fish. (i) Importation of professional instruments and implements. as amended. drying. livestock and poultry feeds. and ordinary salt shall be considered in their original state. prawn. raw cane sugar and molasses. except lubricating oil. duly accredited by the Department of Education. and personal household effects (except any vehicle. zoo animals and other animals generally considered as pets). machinery other goods for use in the manufacture and merchandise of any kind in commercial quantity) belonging to persons coming to settle in the Philippines. (k) Services by agricultural contract growers and milling for others of palay into rice. hospital and veterinary services subject to the provisions of Section 17 of Republic Act No. grease.

as published by the national Statistics Office (NSO). (x) Lease of a residential unit with a monthly rental not exceeding Eight thousand pesos (P10. relative to the generation and distribution of electricity as well as their importation of machineries and equipment. 529 and 1590. That not later than January 31st of the calendar year subsequent to the effectivity of Republic Act No. (q) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws. . 66. communications and coordinating centers for their affiliates. the amount of ten thousand pesos (P10. house and lot and other residential dwellings valued at One million pesos (P1. including spare parts. non. Provided. (w) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing as defined by Republic Act No. which shall be directly used in the generation and distribution of electricity. literary works. That not later than January 31st of the calendar year subsequent to the effectivity of this Act and each calendar year thereafter. or his services performed for the production of such works. including spare parts thereof.(n) Sale by the artist himself of his works of art. (o) Services rendered by individuals pursuant to an employer-employee relationship.000. (v) Export sales by persons who are not VAT-registered. to non- members. 7279. musical compositions and similar creations.000) shall be adjusted to its present value using the Consumer Price Index as published by the National Statistics Office (NS0). to be used directly and exclusively in the production and/or processing of their produce. That the share capital contribution of each member does not exceed Fifteen thousand pesos (P15. their importation of direct farm inputs.000). machineries and equipment.000) shall be adjusted to its present value using the Consumer Price Index.000) and regardless of the aggregate capital and net surplus ratably distributed among the members. except those under Presidential Decree Nos. and other related laws. (u) Sales by non-agricultural. otherwise known as the Urban Development and Housing Act of 1992.electric and non-credit cooperatives duly registered with the Cooperative Development Authority: Provided.000) and below: Provided. (r) Sales by agricultural cooperatives duly registered with the Cooperative Development Authority to their members as well as sale of their produce. (s) Sales by electric cooperatives duly registered with the Cooperative Development authority or National Electrification Administration. (p) Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory.000. whether in its original state or processed form. subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines. (t) Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered with the Cooperative Development Authority whose lending operation is limited to their members. 8241 and each calendar year thereafter. the amount of One million pesos (P1.

the gross annual sales and/or receipts do not exceed the amount of Five hundred fifty thousand pesos (P550. 8241 and each calendar year thereafter. importation. and in manufacturing refined sugar. . materials and supplies. upon recommendation of the Commissioner.A person who becomes liable to value-added tax or any person who elects to be a VAT-registered person shall. Zero rated VAT exempt all VAT is removed from the goods. magazine review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements. equivalent to four percent (4%) of the gross value in money of their purchases of primary agricultural products which are used as inputs to their production. and such tax shall also be recognized as input tax credit to the purchaser under Section 110. As used in this Subsection. be allowed input tax on his beginning inventory of goods. (B) Presumptive Input Tax Credits. the amount of Five hundred fifty thousand pesos (550. - (A) Transitional Input Tax Credits. shall be allowed a presumptive input tax.000): Provided. - Persons or firms engaged in the processing of sardines. any person whose sale of goods or properties or services which are otherwise not subject to VAT. the term 'processing' shall mean pasteurization. mackerel and milk. canning and activities which through physical or chemical process alter the exterior texture or form or .000) shall be adjusted to its present value using the Consumer Price Index. That not later than January 31st of the calendar year subsequent to the effectivity of Republic Act No. 111. and (z) Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs. input taxes on his nonzero-rated transactions Input Tax SEC. whichever is higher. creditable against the output tax. materials and supplies equivalent to two percent (2%) of the value of such inventory or the actual value-added tax paid on such goods. etc. or credit such input tax passed on to him by the supplier. as published by the National Statistics Office (NSO).(y) Sale. cooking oil and packed noodle based instant meals. which shall be creditable against the output tax. be liable to the tax imposed in Section 106 or 108 without the benefit of input tax credit. if any. Transitional/ Presumptive Input Tax Credits. activity or removes the VAT only at the exempt stage transaction the taxpayer can claim the refund or input taxes the taxpayer is not entitled to credit or refund of the passed on to him by the supplier. The foregoing exemptions to the contrary notwithstanding. printing or publication of books and any newspaper. but who issues a VAT invoice or receipt therefor shall. in addition to his liability to other applicable percentage tax. subject to the filing of an inventory according to rules and regulations prescribed by the Secretary of Finance. etc. all of this Code.

the return shall be filed with and the tax paid to an authorized agent bank. Transitional input tax 3. Revenue Collection Officer or duly authorized city or municipal Treasurer in the Philippines located within the revenue district where the taxpayer is registered or required to register. whose registration has been cancelled in accordance with Section 236. however. (B) Where to File the Return and Pay the Tax. - (A) Zero-Rated or Effectively Zero-Rated Sales. . Any person. - (A) In General. Refunds or Tax Credits of Input Tax. For purposes of this Section. Input tax credit on importation of goods. within two (2) years after the close of the taxable quarter when the sales were made.The Government or any of its political subdivisions. inner substance of a product in such manner as to prepare it for special use to which it could not have been put in its original form or condition. "(C) Withholding of Value-Added Tax. SEC. Presumptive input tax 4. That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment. 5 categories of input tax 1. deduct and withhold a final value-added tax at the rate of five percent (5%) of the gross payment thereof: Provided.Except as the Commissioner otherwise permits. 114. . Excess input tax SEC. instrumentalities or agencies. apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales. Return and Payment of Value-Added Tax. shall file a return and pay the tax due thereon within twenty-five (25) days from the date of cancellation of registration: Provided. Final withholding tax 5. That only one consolidated return shall be filed by the taxpayer for his principal place of business or head office and all branches. properties and services 2. Any VAT-registered person. "The value-added tax withheld under this Section shall be remitted within ten (10) days following the end of the month the withholding was made. the payor or person in control of the payment shall be considered as the withholding agent. 112. including government-owned or -controlled corporations (GOCCs) shall. except . .Every person liable to pay the value-added tax imposed under this Title shall file a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following the close of each taxable quarter prescribed for each taxpayer: Provided. before making payment on account of each purchase of goods and services which are subject to the value- added tax imposed in Sections 106 and 108 of this Code. That VAT-registered persons shall pay the value-added tax on a monthly basis. whose sales are zero-rated or effectively zero-rated may.

Upon cancellation of his registration 2. appeal the decision or the unacted claim with the Court of Tax Appeals. (D) Manner of Giving Refund. Rules when filing a refund or tax credit for input tax: a. (B) Cancellation of VAT Registration. it shall be allocated proportionately on the basis of the volume of sales: Provided. apply for the issuance of a tax credit certificate for any unused input tax which may be used in payment of his other internal revenue taxes.Refunds shall be made upon warrants drawn by the Commissioner or by his duly authorized representative without the necessity of being countersigned by the Chairman.A person whose registration has been cancelled due to retirement from or cessation of business. The taxpayer must claim a refund or certificate of credit within two years from: a. Zero-Rated or Effectively Zero-Rated Sales b. In case of full or partial denial of the claim for tax refund or tax credit.In proper cases. the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. Commission on Audit. however. or the failure on the part of the Commissioner to act on the application within the period prescribed above. Grounds: a. within two (2) years from the date of cancellation. the taxpayer affected may. . 3. within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period. (2) and (b) and Section 108 (B)(1) and (2). That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services. That in the case of zero-rated sales under Section 106(A)(2)(a)(1). to the extent that such input tax has not been applied against output tax: Provided. The close of the quarter from which the sales were made b. finally." Rules and process for vat refund: 1. Cessation of business or dissolution of the corporation 4. and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions. or due to changes in or cessation of status under Section 106(C) of this Code may. the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided. . (C) Period within which Refund or Tax Credit of Input Taxes shall be Made. the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. That for a person making sales that are zero-rated under Section 108 (B)(6). transitional input tax. The judicial and extrajudicial claim must be made within the 2 year period mentioned above. That refunds under this paragraph shall be subject to post audit by the Commission on Audit. the provisions of the Administrative Code of 1987 to the contrary notwithstanding: Provided. further. It shall not cover transitional input tax . .

the sale of which is exempt. When he becomes liable to VAT for the first time under a new legislation or when his taxable transaction exceed the VAT registration threshold 2. 2. He can only claim for tax credit b. However in cases of purchase of capital goods. Rules regarding cancellation of his registration: a. The claimed input VAT payments are directly attributable to a zero rated or effectively zero rated sale 6. 3 instances where a person may claim transitional input tax 1. Requisites of refund of zero rated sales: 1. When he elects to register as a VAT registered person provided he is eligible 3. The claimant must deduct from its VAT quarterly return the input tax being claimed as refund or tax credit 5. To the extent of any unused input tax which may be used in payment of his other internal revenue taxes 6. The tax credit or refund is to the extent not applied against the output tax 5. The partial or full denial of the claim or when the claim has not been acted upon by the CIR. The claimed input tax were not applied against any output tax during the period 4. . If he is already VAT-registered person and also deals in goods or properties. the claimant may appeal his claim to the CTA within 30 days from: a. The claimed input tax are duly substantiated by official receipts 7. b. the purchaser is the one entitled to the refund or tax credit. but ut becomes a taxable transaction under a new or amendatory law. Date of full or partial denial b. The claimant must be a VAT-registered person. That in the case of zero-rated sales the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the BSP c. The VAT return for the succeeding quarters covered by the claim for tax refund or credit must be submitted with the CTA Note: Input taxes on purchases directly and entirely attributable to transactions exempt from value added tax becomes part of the cost of the asset or operating expens of the taxpayer deductible only from his gross income. The claim is filed within the 2 year period from the close of the taxable quarter upon which the sale was made 3. Expiration of the 120 day period Note: In cases of zero rated sales it is the seller who is entitled to a tax refund or credit. The CIR has a 120 days upon submission of complete documents to rule upon the refund or credit 7.

and by levy upon real property and interest in rights to real property. SBMA and other Freeport zone registered enterprises enjoying the preferential tax rate of 5% in lieu of taxes Effect of issuing VAT invoice for a vat exempt transaction: 1. including stocks and other securities. The purchaser shall be entitled to claim input tax credit on the said purchase. Franchise grantees of radio and/or television broadcasting whose annual gross receipts of the preceding year do not exceed 10M derived from business covered by the law granting the franchise 4. Any person who is VAT registered but enters into transaction which are exempt from VAT may opt that the VAT apply to his transactions which would have been exempt under the law 3. and other personal property of whatever character. He shall be liable to pay a 50% surcharge 4. however. Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes: Provided. fees or charges. The vat paid shall be recognized as an input tax credit to the purchaser Note: The failure of a vat registered person to mark a receipt as vat-exempt when the transaction is in fact vat exempt shall render him liable to pay the VAT thereon. He cannot claim vat input credit 3. and any increment thereto resulting from delinquency shall be: (a) By distraint of goods. bank accounts and interest in and rights to personal property. Persons not liable to pay VAT but may be registered: 1. debts. The issuing vat registered person shall be liable to pay the taxes applicable to the transation 2. That the remedies of distraint and . PEZA and under ecozone registered enterprise enhoying the preferential rate of 5% in lieu of taxes 6. credits. Remedies for the Collection of Delinquent Taxes. Tax Remedies SEC. Radio and TV broadcasting whose gross annual receipts do not exceed 10M and which do not opt to be vat registered 5. and (b) By civil or criminal action. chattels. or effects. Any person who is VAT-exempt may elect to be registered as a VAT person 2. – The civil remedies for the collection of internal revenue taxes. 205. Registration requirements Note: Failure to register as a VAT person does not relieve him of his liability to pay VAT however he can not claim the benefits of input tax.

The judgment in the criminal case shall not only impose the penalty but shall also order payment of the taxes subject of the criminal case as finally decided by the Commissioner. Reports and other Documents shall authorize: i. . record. penalties and fines in connection therewith 4. paper. and Take Testimony of Persons: a. To obtain on a regular basis from any person other than the person whose internal revenue tax liability is subject to audit or investigation any information and financial statements of any person except bank deposits unless in pursuance to sec 6 F c. Power to Obtain Information. Power to interpret tax laws and decide cases 2. Execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts Powers of the CIR: 1. subpoena power d. The Commissioner shall assess the proper tax on the best evidence obtainable. and to Summon. To cause revenue officers and employees to make a canvass from time to time of any revenue district or region 3. The Bureau of Internal Revenue shall advance the amounts needed to defray costs of collection by means of civil or criminal action. Provincial. To take such testimony e. Give effect to and administer the supervisory and police power conferred to it by the Tax Code or other laws 3. Statements. BIR 2. Assessment and collection of all national internal revenue taxes. Use of the best evidence obtainable where there is a failure to Submit Required Returns. Enforcement of all forfeitures. including the preservation or transportation of personal property distrained and the advertisement and sale thereof. Bureau of Customs 3. and charges 2. Examine. as well as of real property and improvements thereon. Examination of Returns and Determination of Tax Due b. To examine any book. fees. CTRP) (Key: AGEE) 1. Agencies Involved in Tax Administration 1. Power of the Commissioner to Make assessments and Prescribe additional Requirements for Tax Administration and Enforcement: a. and municipal assessors and treasurers Powers and Duties of the BIR (Sec.levy shall not be availed of where the amount of tax involve is not more than One hundred pesos (P100). 2. city. or other data which may be relevant or material to such inquiry b.

4. If you were the judge. Abraham Eugenio. a pawnshop operator. Authority of the Commissioner to inquire into Bank Deposit Accounts g. When there is reason to believe that the books of accounts or other records do not correctly reflect the declarations made or to be made in a return required to be filed d.The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner. c. The CIR shall have the authority to prescribe a minimum amount of gross receipts. The power to decide disputed assessments. Review Rulings of the Commissioner (2006) Mr. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases . subject to review by the Secretary of Finance. sales and taxable base which are presumed to be prima facie correct under the following instances: 1. Authority of the Commissioner to Prescribe Real Property Values f. Authority to Accredit and Register Tax Agents h. or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner. penalties imposed in relation thereto. Authority to Conduct Inventory-taking. refunds of internal revenue taxes. ii. The Commissioner shall make or amend the return from his own knowledge and from such information as he can obtain through testimony or otherwise. The tax payer failed to issue receipts and invoices 2. The RMO is in reality a ruling of the Commissioner in implementing the provisions of the Tax Code on the taxability of pawnshops. surveillance and to Prescribe Presumptive Gross Sales and Receipts i. Authority to Terminate Taxable Period e. filed with the Regional Trial Court an action questioning the validity of the RMO. ii. subject to the exclusive appellate jurisdiction of the Court of Tax Appeals. will you dismiss the case? (5%) SUGGESTED ANSWER: Yes. BIR. Jurisdiction to review rulings of the Commissioner is lodged with the Court of Tax Appeals and not with the Regional . after having been required by the Revenue District Officer to pay value added tax pursuant to a Revenue Memorandum Order (RMO) of the Commissioner of Internal Revenue. Authority of the Commissioner to Prescribe Additional Procedural or Documentary Requirements Power to interpret tax laws and decide cases SEC. Jurisdiction. which shall be prima facie correct and sufficient for all legal purposes. fees or other charges. The findings may be used as the basis for assessing the taxes for the other months or quarters of the same or different taxable years and such assessment shall be deemed prima facie correct.

Josefina Leal. associations. or in evaluating tax compliance. Title I. insurance companies. the Commissioner is authorized: (A) To examine any book. Sec. No. custody.R. 2002. fees or other charges. (B) To obtain on a regular basis from any person other than the person whose internal revenue tax liability is subject to audit or investigation. or other data.In ascertaining the correctness of any return. and to Summon. Note: The power of the CIR to decide disputed assessment. and financial statements of corporations. and to give testimony. SEC. and their members. paper. Trial Court (CIR v. RA 8424. under oath. Examine. records. any information such as. addresses. (C) To summon the person liable for tax or required to file a return. as may be relevant or material to such inquiry. or from any office or officer of the national and local governments. including the Bangko Sentral ng Pilipinas and government-owned or -controlled corporations. receipts or sales and gross incomes of taxpayers. or in determining the liability of any person for any internal revenue tax. or care of the books of accounts and other accounting records containing entries relating to the business of the person liable for tax. or any other person. government agencies and instrumentalities. or any person having possession. Tax Reform Act. but not limited to. and Take Testimony of Persons . mutual fund companies. to appear before the Commissioner or his duly authorized representative at a time and place specified in the summons and to produce such books. G. refunds of taxes. and (E) To cause revenue officers and employees to make a canvass from time to time of any revenue district or region and inquire after and concerning all persons therein who may be liable to . and the names. 4 [1997]). November 18. regional operating headquarters of multinational companies. record. 113459. or any officer or employee of such person. (D) To take such testimony of the person concerned. or in making a return when none has been made. papers. or other data which may be relevant or material to such inquiry. joint accounts. penalties and other matters arising in the tax code is subject to the exclusive appellate jurisdiction of the CTA as per RA 9282 Note: The power to review decisions of the CIR by the SEC of finance is limited to cases which are adverse to the tax payer and as such the filing of an appeal to the secretary of finance shall not stop the running of the period to make an appeal to the CTA. 5 Power of the Commissioner to Obtain Information. joint ventures of consortia and registered partnerships. or in collecting any such liability. costs and volume of production.

However. NIRC). X Bank and the suppliers have not been issued by the BIR letter of authority to examine. this power shall not be construed as granting the Commissioner the authority to inquire into bank deposits. What is your advice? (10%) SUGGESTED ANSWER: I will advise A Co. on the alleged ground that the suppliers are committing tax evasion. The examiner requested the Commissioner to authorize him to inquire into the bank deposits of the taxpayer so that he could proceed with the net worth method of investigation to establish fraud. is a big manufacturer of consumer goods and has several suppliers of raw materials. The CIR therefore: 1) Issued an access letter to A Co. BIR: Bank Deposits Secrecy Violation (2000) A taxpayer is suspected not to have declared his correct gross income in his return filed for 1997. The Commissioner of Internal Revenue or his duly authorized representative may be allowed to inquire or look into the bank deposits of a taxpayer in the following cases:  For the purpose of determining the gross estate of a decedent. and X Bank believe that the BIR is on a "fishing expedition" and come to you for counsel.. and all persons owning or having the care. pay any internal revenue tax. A Co. The provisions of the foregoing paragraphs notwithstanding. management or possession of any object with respect to which a tax is imposed. nothing in this Section shall be construed as granting the Commissioner the authority to inquire into bank deposits other than as provided for in Section 6(F) of this Code. a Philippine corporation. . 1405. 2) Issued an access letter to a bank (CX Bank) to furnish the BIR on deposits of some suppliers of A Co. A Co.. that the BIR is justified only in getting information from the former but not from the latter. to furnish the BIR information on sales and payments to its suppliers. (Section 5. the Bank Deposits Secrecy Law. and B Co. The BIR suspects that some of the suppliers are not properly reporting their income on their sales to A Co. May the examiner be allowed to look into the taxpayer's bank deposits? In what cases may the Commissioner or his duly authorized representative be allowed to inquire or look into the bank deposits of a taxpayer? (5%) SUGGESTED ANSWER: No. Taxpayer: BIR Audit or Investigation (1999) A Co. as this would be violative of Republic Act No. The BIR is authorized to obtain information from other persons other than those whose internal revenue tax liability is subject to audit or investigation.

00 under joint account with his associates in a law office. The Commissioner of Internal Revenue has the authority to inquire into bank deposit accounts of a decedent to determine his gross estate notwithstanding the provisions of the Bank Secrecy Law. SEC. changed. the Commissioner or his duly authorized representative may authorize the examination of any taxpayer and the assessment of the correct amount of tax: Provided. (8%) SUGGESTED ANSWER: No. The fact that the deposit is a joint account will not preclude the Commissioner from inquiring thereon because the law mandates that if a bank has knowledge of the death of a person. That failure to file a return shall not prevent the Commissioner from authorizing the examination of any taxpayer Any return. statement of declaration filed in any office authorized to receive the same shall not be withdrawn: Provided. which may be made possible only through the inquiry made by the Commissioner.  Where the taxpayer has filed an application for compromise of his tax liability by reason of financial incapacity to pay such tax liability. who maintained a bank deposit account alone. (Sec. 6 (F). however. Learning of X's death from the newspapers. unless the Commissioner has certified that the taxes imposed thereon have been paid. Power of the Commissioner to Make assessments and Prescribe additional Requirements for Tax Administration and Enforcement.000. it shall not allow any withdrawal from the said deposit account. the banks holding the deposits in question may not refuse to disclose the amount of deposits on the ground of secrecy of bank deposits.After a return has been filed as required under the provisions of this Code. the Commissioner of Internal Revenue wrote to every bank in the country asking them to disclose to him the amount of deposits that might be outstanding in his name or jointly with others at the date of his death.000. or jointly with another. or amended: Provided. That no notice for audit or investigation of such return. statement or declaration has in the meantime been actually served upon the taxpayer. Hence. (Section 6(F) of the 1997 Tax Code). further. (Section 97 of the 1997 Tax Code). the inclusion of the deposit is imperative. 6. BIR: Secrecy of Bank Deposit Law (2003) X dies in year 2000 leaving a bank deposit of P2. May the bank holding the deposit refuse to comply on the ground of the Secrecy of Bank Deposit Law? Explain. – (A) Examination of Returns and Determination of Tax Due . . to be able to give the required certification. Hence. the same may be modified. NIRC of 1997]  Where the taxpayer has signed a waiver authorizing the Commissioner or his duly authorized representatives to Inquire into the bank deposits. That within three (3) years from the date of such filing.

which shall be prima facie correct and sufficient for all legal purposes. the Commissioner shall assess the proper tax on the best evidence obtainable. or willfully or otherwise files a false or fraudulent return or other document. or is performing any act tending to obstruct the proceedings for the collection of the tax for the past or current quarter or year or to render the same totally or partly ineffective unless such proceedings are begun immediately. and said taxes shall be due and payable immediately and shall be subject to all the penalties hereafter prescribed. natural or juridical.When a report required by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by laws or rules and regulations or when there is reason to believe that any such report is false. Statements.(B) Failure to Submit Required Returns. (D) Authority to Terminate Taxable Period . or may place the business operations of any person. receipts. sales or receipts for internal revenue tax purposes. or such portion thereof as may be unpaid. The findings may be used as the basis for assessing the taxes for the other months or quarters of the same or different taxable years and such assessment shall be deemed prima facie correct. . unless paid within the time fixed in the demand made by the Commissioner. order inventory- taking of goods of any taxpayer as a basis for determining his internal revenue tax liabilities. incomplete or erroneous. surveillance and to Prescribe Presumptive Gross Sales and Receipts . at any time during the taxable year. Reports and other Documents .When it shall come to the knowledge of the Commissioner that a taxpayer is retiring from business subject to tax. or is intending to leave the Philippines or to remove his property therefrom or to hide or conceal his property. after taking into account the sales. sales and taxable base. the Commissioner shall make or amend the return from his own knowledge and from such information as he can obtain through testimony or otherwise. and such amount so prescribed shall be prima facie correct for purposes of determining the internal revenue tax liabilities of such person. under observation or surveillance if there is reason to believe that such person is not declaring his correct income. (C) Authority to Conduct Inventory-taking. or when there is reason to believe that the books of accounts or other records do not correctly reflect the declarations made or to be made in a return required to be filed under the provisions of this Code. income or other taxable base of other persons engaged in similar businesses under similar situations or circumstances or after considering other relevant information may prescribe a minimum amount of such gross receipts. the Commissioner. In case a person fails to file a required return or other document at the time prescribed by law. together with a request for the immediate payment of the tax for the period so declared terminated and the tax for the preceding year or quarter. When it is found that a person has failed to issue receipts and invoices in violation of the requirements of Sections 113 and 237 of this Code.The Commissioner may. the Commissioner shall declare the tax period of such taxpayer terminated at any time and shall send the taxpayer a notice of such decision.

based on their professional competence. the Bureau for taxpayers. Within one hundred twenty (120) days from January 1. (F) Authority of the Commissioner to inquire into Bank Deposit Accounts . In case a taxpayer files an application to compromise the payment of his tax liabilities on his claim that his financial position demonstrates a clear inability to pay the tax assessed. Individuals and general professional partnerships and their representatives who are denied accreditation by the Commissioner and/or the national and regional accreditation boards may appeal such denial to the Secretary of Finance. the members of which shall serve for three (3) years. individuals and general professional partnerships and their representatives who prepare and file tax returns. upon consultation with competent appraisers both from the private and public sectors. 1998. Failure of the Secretary of Finance to rule on the Appeal within the prescribed period shall be deemed as approval of the application for accreditation of the appellant. who shall rule on the appeal within sixty (60) days from receipt of such appeal. For purposes of computing any internal revenue tax. subject to such rules and regulations as the Secretary of Finance shall promulgate upon the recommendation of the Commissioner. Any taxpayer who has filed an application for compromise of his tax liability under Sec. reports. the fair market value as determined by the Commissioner.Notwithstanding any contrary provision of Republic Act No. determine the fair market value of real properties located in each zone or area. (G) Authority to Accredit and Register Tax Agents . and such waiver shall constitute the authority of the Commissioner to inquire into the bank deposits of the taxpayer. 1405 and other general or special laws.(E) Authority of the Commissioner to Prescribe Real Property Values . or 2. and shall designate from among the senior officials of the Bureau. integrity and moral fitness. his application shall not be considered unless and until he waives in writing his privilege under Republic Act No. the fair market value as shown in the schedule of values of the Provincial and City Assessors. whichever is the higher of: 1. one (1) chairman and two (2) members for each board. statements. the Commissioner is hereby authorized to inquire into the bank deposits of: 1. .The Commissioner is hereby authorized to divide the Philippines into different zones or areas and shall. the value of the property shall be. 204 (A) (2) of this Code by reason of financial incapacity to pay his tax liability. and 2.The Commissioner shall accredit and register. the Commissioner shall create national and regional accreditation boards. and other papers with or who appear before. A decedent to determine his gross estate. 1405 or under other general or special laws. protests.

any tax liability: Provided. 204 (A) and (B) of this Code.000) or less. and minor criminal violations. That the following powers of the Commissioner shall not be delegated: (a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance.The Commissioner may prescribe the manner of compliance with any documentary or procedural requirement in connection with the submission or preparation of financial statements accompanying the tax returns. 5. the Assistant Regional Director. revoke or modify any existing ruling of the Bureau. That assessments issued by the regional offices involving basic deficiency taxes of Five hundred thousand pesos (P500. Issuance of revenue regulations by administrative agency 3. (c) The power to compromise or abate. return and other statements required under the tax code. SEC. 6. shall. and (d) The power to assign or reassign internal revenue officers Substantive remedies Kinds of substantive remedies: 1. however. upon recommendation of the Commissioner. The interpretation given by an administrative officer charged by reason of his office to carry out the provisions of a statue should be respected whenever such interpretation is assailed by someone who alleges no reasons of weight to contradict or weaken it. under Sec.The Commissioner may delegate the powers vested in him under the pertinent provisions of this Code to any or such subordinate officials with the rank equivalent to a division chief or higher. may be compromised by a regional evaluation board which shall be composed of the Regional Director as Chairman. as may be determined by rules and regulations to be promulgated by the Secretary of finance. however. Imposition of withholding tax on certain income payments 2. discovered by regional and district officials. upon recommendation of the Commissioner: Provided. 7. the heads of the Legal. Any declaration. The principle of legislative approval of administrative interpretation of a statue is to the effect that the re-enactment of a statue substantially unchanged is persuasive indication of the adoption by the congress of a prior executive construction . subject to such limitations and restrictions as may be imposed under rules and regulations to be promulgated by the Secretary of finance. as members. Failure to obey summons is subject to penalty 4. Authority of the Commissioner to Delegate Power . Assessment and Collection Divisions and the Revenue District Officer having jurisdiction over the taxpayer.(H) Authority of the Commissioner to Prescribe Additional Procedural or Documentary Requirements . contain a written statement that they are made under the penalties of perjury. (b) The power to issue rulings of first impression or to reverse. in lieu of an oath.

such as. the taxpayer shall be required to respond to said notice. otherwise. If the protest is denied in whole or in part. 228. the assessment shall be void. otherwise. ASSESSMENT and Protest SEC. or from the lapse of one hundred eighty (180)-day period. all relevant supporting documents shall have been submitted. vehicles. . the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision. the decision shall become final. or (b) When a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent. capital equipment. but not limited to. the assessment shall become final.When the Commissioner or his duly authorized representative finds that proper taxes should be assessed. If the taxpayer fails to respond. Within sixty (60) days from filing of the protest. or is not acted upon within one hundred eighty (180) days from submission of documents. has been sold. machineries and spare parts. traded or transferred to non-exempt persons. he shall first notify the taxpayer of his findings: Provided. or (d) When the excise tax due on exciseable articles has not been paid. Protesting of Assessment. executory and demandable. or (c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year. The taxpayers shall be informed in writing of the law and the facts on which the assessment is made. otherwise. Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. however. Assessment It is the notice to the effect that the amount therein stated is due from a taxpayer as a tax with a demand for payment of the same within a stated period of time. That a pre-assessment notice shall not be required in the following cases: (a) When the finding for any deficiency tax is the result of mathematical error in the computation of the tax as appearing on the face of the return. . or (e) When the article locally purchased or imported by an exempt person. the Commissioner or his duly authorized representative shall issue an assessment based on his findings. Within a period to be prescribed by implementing rules and regulations.

Examination of tax returns 3. 18. The failure to state the factual and legal basis of an assessment will render the same void. Termination of taxable period 4. In case where a return is filed beyond the period prescribed by law. fee or charge imposed by this Code.Forms of assessments: 1. 6. 7. fraud or omission: General Rule: Tax collection cannot be enjoined by court injunction. Use of the best evidence obtainable 2. Prescription of additional procedural or documentary requirements. In the case of a false or fraudulent return with intent to evade tax or of failure to file a return. 3. Inventory taking. the 3 year period shall be counted from the day the return was filed. filing of the tax return. Tax Code provides that no court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax. (Sec. CTRP) (Key: BETI-PPEA) 1. or a proceeding in court for the collection of such tax may be filed without assessment. Note: An assessment is issued by the BIR based on findings of fact and/or law. NIRC) Exception: An injunction that may be issued by the CTA in aid of its appellate jurisdiction under RA 1125 Note: An assessment made by the government is presumed to be correct and the burden of proof is on the taxpayer contesting the validity or correctness of an assessment to prove that the CIR is wrong and the taxpayer is correct. Taxes shall be assessed within 3 years after the last day prescribed by law for the filing of the return and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period 2. and payment of the entire tax due shown on his return Means Employed in the Assessment of Taxes (Sec. surveillance and use of presumptive gross sales and receipts 5. at any time within ten (10) years after the discovery of the falsity. Note: The assessment process usually starts with the self-assessment by the taxpayer of his tax liability. Informal notice When may an assessment be made: 1. Formal assessment notice 2. the tax may be assessed. Examination of bank deposits to determine the correct amount of the gross estate . Prescription of real property values 6.

files the tax return and pays the tax within the prescribed rates. Examination of books of accounts and other accounting records of taxpayer by revenue officers to determine correct tax liability. Preparation of tentative findings 3. 2. the person may be required to testify or the document may be summoned and required to be presented to the BIR . Issuance of formal assessment notice Note: As a general rule internal revenue taxes are self-assessing and no further assessment by the government is required to create tax liability The taxpayer himself assesses his liability. Issuance of preliminary assessment notice 4. (Sec. 2. EXCEPT 1. 6. Role of the government in assessment process: 1. 8. (RAMO 36-99) Note: If the taxpayer does not submit the documents or information requested by the BIR. In instances where a corporation is being or will be dissolved. Who may issue letter of authority? After a return has been filed. policy cases under audit by Special Teams in the National Office. Instances mentioned in sec 6 (d) 2. Deficiency tax liability arising from a tax audit conducted by the BIR 3. the commissioner or his duly authorized representative may authorize the examination of the books of any taxpayer and the assessment of the correct amount tax. However the following instances require an assessment notice to be made by the government in order to establish tax liability of a tax payer: 1. Accreditation and registration of tax agents. cases involving civil or criminal tax fraud under the jurisdiction of the tax fraud division of the enforcement service. NIRC) The Revenue Regional Director shall approve and sign all LA’s for all audit cases within his regional jurisdiction. Instances where a tax lien is effected 4. Note: Letter of Authority must be served to the concerned taxpayer within thirty (30) days from its date of issuance otherwise it hall be null and void. Revenue officer is allowed only 120 days from the date of receipt of a letter of authority by the taxpayer to conduct the audit and submit the required report of investigation. The collection of the unpaid taxes reflected in the self-assessed return may be collected without the need of issuing an assessment since the government adopts the assessment made by the taxpayer. Examination of books of accounts and other accounting records of taxpayer by revenue officers to determine correct tax liability.

If the taxpayer fails to respond within 15 days from date of receipt of the notice for informal conference. erroneous. 8424 empowers the Commissioner to assess the proper tax and make or amend the return based on the best evidence obtainable (from his own knowledge and from such information as he can obtain through testimony or otherwise) when: 1. This may be availed of in instances where the taxpayer is reluctant or hesitant to provide documents or records required by law to be presented to the BIR or in cases where there is reason to believe that the information embodied in such documents are incorrect or fraudulent. EXCEPT: 1. if warranted. or 2. in order to afford the taxpayer with an opportunity to present his side of the case. in this instance. Taxpayer itself request for an examination of his accounts 3. incomplete c. 3. 4. The return made by the Commissioner. Can the BIR issue LOA more than once within a taxable year? A. the Revenue District Officer of the Chief of the Division shall endorse the case to the Assessment Division for review and issuance of deficiency tax assessment.Q. 6B of R. In such a case. When BIR determines that there is fraud or irregularities was committed by taxpayer 2. Power of the Commissioner to assess deficiency tax based on best evidence obtainable – Sec. a report required by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by laws or rules and regulations. If the taxpayer is not amenable. No. Doctrine of best evidence obtainable This doctrine is embodied in sec 6 (B) of the NIRC which in essence allows the CIR or his duly authorized representative to use any evidence he may obtain to determine the amount the taxpayer will be assessed.A. Procedure Preparation of tentative findings stage 1. When there is a need to verify the withholding taxes required by the BIR. false b. the taxpayer shall be informed in writing by the Revenue District Officer of by the Chief of the Division of the discrepancies in the taxpayer’s liability for the purpose of informal conference. he shall be considered in default 4. BIR officer are allowed to issue LOA only once. When capital gains tax must be verified. there is reason to believe that any such report is a. Soon after the completion of the tax audit the revenue officer will render a written report stating therein the factual and legal basis of his findings and whether or not the taxpayer agrees with his findings 2. The assessment of the BIR based on the evidence presented is presumed prima facie correct. shall be prima facie correct and sufficient for all legal purposes. .

capital equipment. Due to the shorter time given to the TX to make a reply. treated or transferred to non-exempt persons. 3. 2. Issuance of preliminary assessment notice (PAN) Rules: 1. while in a protest the TX is given 30 days to file a protest 3. or 5. machineries. If the taxpayer fails to respond within 15 days from date of receipt of the PAN. it is determined that there exist sufficient basis to assess the taxpayer deficiency taxes. . and spare parts. 2. a TX generally does not respond in an adequate manner whereas in a protest is usually sufficient and comprehensive to explain the legal and factual bases why the assessment is in correct. He shall be considered in default in which case a formal letter of demand and assessment notice shall be caused to be issued. A reply is made in response of a PAN. whereas a protest is made in contesting a FAN. when a discrepancy has been determined between the tax withheld and the amount actually remitted by the withholding agent. but not limited to vehicles. A TX is generally given under the regulations 15 fays from the date of receipt of the PAN within which to make his written reply thereto. such as. The assessment division or the CIR or his duly authorized representative shall forthwith issue to the taxpayer. 3. has been sold. at least by registered mail a PAN for the proposed assessment is based. 4. If after review and evaluation by the assessment division or by the CIR or his duly authorized representative. when a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a taxable period was determined to have carried over and automatically applied the same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable year.Note: As a general rule the government is not estopped to collect taxes by reason of the incorrect determination of its officials. when an excise tax due on excisable articles has not been paid. 2. calling for payment of the deficiency inclusive of applicable penalties 5 Instances wherein PAN is NO longer required: 1. When the finding for any deficiency tax is the result of mathematical error in the computation of the tax appearing on the face of the tax return filed by the taxpayer. Reply If the taxpayer contests the a contents of the proposed assessment he shall answer by means of a reply setting forth in writing the findings of the revenue officers contained in a PAN and his arguments and the basis thereof. Reply vs protest 1. when an article locally purchased of imported by an exempt person. However the CIR is precluded from adopting a position inconsistent with one previously taken where injustice would result therefrom or where there has been misrepresentation to the tax payer.

Designation and authority to act for and in behalf of the TX if received by a person other than the TX 4. CA. PASCOR. of a demand upon him for the payment of the tax deficiency stated. and 3. vs. 2. the making. Note If the taxpayer disagrees with the findings stated in the PAN. simultaneously with or sometime after the giving of notice. informing a taxpayer who has been audited of the findings of the BIR officer following the review of these findings. Signature 3. giving notice to that effect to the taxpayer. the computation of the sum due. Issuance of formal assessment notice It is a formal letter of demand and assessment notice issued by the Regional assessment Division. If the taxpayer contested such a determination. 4. 309 SCRA 402] Note: Notice of assessment is presumed valid. TAX ASSESSMENT It is the official action of an officer authorized by law in ascertaining the amount of tax due under the law from a taxpayer. The TX or his duly authorized representative shall acknowledge receipt thereof in the duplicate copy of the letter of demand showing the following: 1. 322 SCRA 639] . Note: If the TX disagrees with the final assessment he must file a protest within 30 days from receipt of the assessment otherwise the assessment shall become final and executory. [CIR vs. otherwise it’s fatal to BIR. Note Assessment contains not only computation of tax liabilities but also a demand for payment within a prescribed period. the burden of proving the determination wrong. It must show in detail the facts and law on which the proposed assessment is based. together with the corresponding burden of first going forward with evidence. His name 2. Date of receipt thereof. Inc. [ Cyanamid Philippines. he shall then have 15 days from his receipt of the PAN to file a written reply contesting the proposed assessment. or any other concerned BIR office. Note: The FAN must be sent by registered mail however if personally delivered to the TX or to his authorized representative. Failure to reply to a PAN makes the TX in default and authorizes the revenue official to issue a FAN. is on the taxpayer. This action necessarily involves: 1.

it could also be considered as delinquent where an assessment for deficiency tax has become final and the taxpayer has not paid it within the period given in the notice of assessment. If no amount is shown or if no return is made. or sends such notice to the taxpayer regardless whether the taxpayer received the notice within the prescriptive period. The fact that the assessment has been mailed. Distinction between remedies in collection of deficiency tax and delinquency tax 1.Q. Likewise. When is an assessment deemed made? An assessment is deemed made only when the collector of internal revenue releases. When the self-assessed tax per return filed on the prescribed date was not paid at all or was only partially paid. vs. The amount by which the income tax as determined by the BIR exceeds the amount shown as tax per return. POWER TO COLLECT: Instances where a TX is considered Delinquent: 1. The deficiency tax assessed by the BIR became final and executory. A delinquent tax can immediately be collected administratively through the issuance of the warrant of distraint and levy. and/or judicial action. The letter was properly addressed with postage prepaid 2. then the amount by which the tax as determined by the BIR exceeds the amounts previously assessed (or collected without assessment) as a deficiency Delinquency Deficiency Failure to pay the tax due on the date fixed by law The amount still due and collectible from a or indicated in the assessment notice or letter of taxpayer upon audit or investigation. while a deficiency tax can be collected also . Instances there is a Deficiency tax 1. CIR. or 2. mails. [Basilan Estates. demand Delinquent Tax Return (1998) When is a revenue tax considered delinquent? [3%) SUGGESTED ANSWER: A revenue tax is considered delinquent when it is unpaid after the lapse of the last day prescribed by law for its payment. or 2. Inc. 21 SCRA 17] Note: In order for the presumption of receipt to arise the following facts must be present: 1.

Failure to submit would render the assessment final. the assessment shall become final. a petition or review must be filed with the CTA within the 30 days to toll the running of the prescriptive period. Within 60 days from date of filing of protest b. through administrative and/or judicial remedies but it has to go through the process of filing the protest against the assessment by the taxpayer 2. while the filing of a civil action at the ordinary court for the collection of a deficiency tax during the pendency of the protest may be subject of a motion to dismiss. Inaction of the CIR a. the TX shall be required to pay the deficiency tax or rates attributable to the undisputed issues. executory and demandable 3. In addition. The filing of a civil action for collection of the delinquent tax in the ordinary court is a proper remedy. rules and regulations. c. if there are several issues involved in the FAN but the TX only disputes or protests against the validity of some of the issues raised. b. hence he shall be liable to pay for the same e. Failure to act on the protest within 180 days from date of submission of the required documents would give rise to the right of the taxpayer to appeal b. Denial of protest a. The prescriptive period for assessment or collection of the tax or taxes attributable to the disputed issues shall be suspended. executory and demandable. If the TX does not agree with the FAN he may question the same in accordance with the following process: 1. The appeal should be made within 30 days from the lapse of the said 180-day period c. in which case. Submission of documentary evidence and arguments a. The TX must state the facts. NO ACTION shall be taken on the TX disputed issues until the TX has paid the deficiency tax or taxes attributable to the said undisputed issues. executory and demandable 4. Otherwise. He must file an administrative protest against the assessment within 30 days from the date of receipt of the assessment a. the assessment shall become final. d. If the TX disputes some or all of the issues raised in the FAN but only provides for facts and law relied upon with respect to some of the issues. or jurisprudence on which his protest is based otherwise his protest shall be considered void and without force and effect. the applicable law. a collection letter shall be issued to the taxpayer calling for payment of the said deficiency tax. inclusive of the applicable surcharge and/or interest. Failure to file a protest within the protest period shall render the FAN final and executory. . 2. Otherwise. those which he did not provide for arguments and supporting facts and law shall be DEEMED undisputed. The taxpayer may appeal to the Court of Tax Appeals (CTA) within 30 days from date of receipt of the decision b.

or b. where the protest is grounded on new or additional evidence not yet submitted to the BIR. Deficiency Tax (2006) On June 1. levy. It must be valid. 2003. Within 30 days after denial full or partial by the CIR of his protest 2. 2003. The Commissioner denied the request for reconsideration only on May 30. arguments and legal authorities already submitted or presented to the BIR 2. 2006. I would advise Global Bank to appeal the denial to the Court of Tax Appeals (CTA) within 30 days from receipt. Global Bank received a final notice of assessment from the BIR for deficiency documentary stamp tax in the amount of P5 Million.Forms of protest: 1. Within 30 days after expiration of the 180 days counted from the submission of the complete set of documents. In case the CIR has not decided his protest he has 2 options: a. Request for reinvestigation. distraint. as in this case. Assessment. If you were its counsel. where the protest is anchored on documents. I will further advise the bank to file a motion for injunction with the Court of Tax Appeals to enjoin the Commissioner from enforcing the assessment pending resolution of the appeal. Request for reconsideration. and/or sale of any property of the taxpayer for the satisfaction of its tax liability. Global Bank filed a request for reconsideration with the Commissioner of Internal Revenue. . where the assessment has not become final (Lascona Land Co. he can wait for the decision of the CIR and appeal the same to the CTA within 30 days therefrom Note: Perfection of an appeal with the CTA shall not suspend the administrative remedies availed of by the government. Requirements for a protest to suspend the running of the prescriptive period: 1. However the CTA is duly authorized to issue injunctions when warranted.. at the same time serving on Global Bank a warrant of distraint to collect the deficiency tax. On June 30. While an appeal to the CTA will not suspend the payment. Taxpayer. 2. (5%) ALTERNATIVE ANSWER: The denial for the request for reconsideration is the final decision of the CIR. what will be your advice to the bank? Explain. the CTA is authorized to give injunctive relief if the enforcement would jeopardize the interest of the taxpayer. Even if after the 180 days. It must be coupled with the written waiver of the statute of limitations duly signed by the TX and the CIR or his authorized representative Note: The when to file an appeal: 1.

CTA Case No. 14 SCRA 832 [1965]). The .2 Million from the BIR demanding payment within 10 days. An appeal to the CTA shall not suspend the enforcement of the tax liability. While the appeal is pending. Taxpayer. No. ALTERNATIVE ANSWER: I will advice the Bank to promptly pay the deficiency documentary stamp tax and the interest charges to avoid any further increase in the tax liability. approved by the Supreme Court on December 15. 2000. Appeal to the Court of Tax Appeals (2005) A taxpayer received a tax deficiency assessment of P1. The reglementary period begins upon receipt of the indirect notice of denial of the protest. CIR. (5%) SUGGESTED ANSWER: RR should file a motion for injunction with the Court of Tax Appeals to stop the administrative collection process. filed an appeal with the Court of Tax Appeals. Injunction (2004) RR disputed a deficiency tax assessment and upon receipt of an adverse decision by the Commissioner of Internal Revenue. The Bank should have appealed to the Court of Tax Appeals when the BIR failed to decide on its Request for Reconsideration within thirty (30) days after the inaction of the BIR for one hundred eighty (180) days or on December 31. and (2) the taxpayer is willing to deposit the amount being collected or to file a surety bond for not more than double the amount of the tax to be fixed by the court (Section 11. the BIR served a warrant of levy on the real properties of RR to enforce the collection of the disputed tax. What is controlling is whether the response given by the BIR clearly indicates its intention to collect the taxes despite the arguments presented in the protest and that there is no other correspondence or notice which would indicate otherwise. January 4. 2005). The Tax Assessment has already become final. what could RR do to stop the process? Explain briefly. JR. 5777. Note: Denial of a protest or an MR may be direct or indirect. 1125). unless a motion to that effect shall have been presented in court and granted by it on the basis that such collection will jeopardize the interest of the taxpayer or the Government (Pirovano v. The CTA is empowered to suspend the collection of internal revenue taxes and customs duties in cases pending appeal only when: (1) in the opinion of the court the collection by the BIR will jeopardize the interest of the Government and/or the taxpayer. October 17. See also Revised CTA Rules. v. 2005). 2003. 139736.R. G. it would collect through summary remedies.A. Taxpayer: Assessment. No. otherwise. executory and unappealable at that point (BPI v.CIR. CIR. Granting arguendo that the BIR can legally levy on the properties.

and costs that may accrue in addition thereto upon all property and rights to property belonging to the taxpayer: Provided. . May this action of the Commissioner of Internal Revenue be deemed a denial of the request for reconsideration of the taxpayer to entitle him to appeal to the Court of Tax Appeals? Decide with reasons. association or insurance company liable to pay an internal revenue tax. 135210. with interests. 219. the BIR sent a Final Notice before Seizure to the taxpayer. Sale of property 4. content and tenor supports the theory that it was the BIR's final act regarding the request for reconsideration. Tax Lien It is understood to denote a legal claim or charge on property. penalties. Penalties and fines 7. its nature. July 11. not only was the notice the only response received.R. Instead of resolving the request for reconsideration. (CIR v. Criminal action SEC. the final notice before seizure was in effect a denial of the taxpayer's request for reconsideration. joint-account (cuentas en participacion). Forfeiture 5. Nature and Extent of Tax Lien.If any person. partnership. the amount shall be a lien in favor of the Government of the Philippines from the time when the assessment was made by the Commissioner until paid. or garnishment of bank deposits 3. Suspension of business operations Judicial Remedies: 1. or levy of property. Tax lien 2. (5%) SUGGESTED ANSWER: Yes. taxpayer requested for a reconsideration stating the grounds therefor. corporation. neglects or refuses to pay the same after demand. No. Civil actions 2. Distraint of personal property. That this lien shall not be valid against any mortgagee purchaser or judgment creditor until notice of such lien shall be filed by the Commissioner in the office of the Register of Deeds of the province or city where the property of the taxpayer is situated or located. 2001) Administrative remedies of the Government Administrative remedies of the government: 1. Isabela Cultural Corporation. Compromise agreement and abatement 6. G. . either personal as security for the payment of some debt or obligation.

Once filed it shall be superior to the claim of a private litigant and shall be given preference over all other claims. It shall not cover properties belonging to another 3. (OCEANIC). NLRC et al G.Rules: 1. 5. which gives laborers' claims for preference applies only in case of bankruptcy or liquidation of the employer's business. – (A) Distraint of Personal Property. It shall cover the unpaid tax with interests. Meanwhile. Claims for Unpaid Wages (1995) For failure of Oceanic Company. Distraint and/or levy SEC. . the Commissioner of Internal Revenue issued warrants of distraint on OCEANIC's personal properties and levied on its real properties. SUGGESTED ANSWER: The motion filed by the Commissioner should be granted because the claim of the government for unpaid taxes are generally preferred over the claims of laborers for unpaid wages. Oceanic is not under bankruptcy or liquidation at the time the warrants of distraint and levy were issued hence. No. (CIR vs. Four barges belonging to OCEANIC were levied upon by the sheriff and later sold at public auction. 1994). Summary Remedies. the Department of Labor through the Labor Arbiter rendered a decision ordering OCEANIC to pay unpaid wages and other benefits to its employees. 207. The levy shall affect all the properties and rights to property belonging to the taxpayer 2. if the amount involved is in excess of One million pesos . The employees of OCEANIC opposed the motion contending that Art. In the instant case. purchaser or judgment creditor until notice of such lien has been filed with the RD 4. the opposition of the employees is unwarranted. November 9. to pay deficiency taxes of P20 Million.Upon the failure of the person owing any delinquent tax or delinquent revenue to pay the same at the time required. penalties. The lien shall not be valid against any mortgagee. Resolve the motion. Explain. The provision of Article 110 of the Labor Code. 110 of the Labor Code gives first preference to claims for unpaid wages. and costs that may accrue. 6. The Commissioner of Internal Revenue filed a motion with the Labor Arbiter to annul the sale and enjoin the sheriff from disposing the proceeds thereof. 74965. BIR: Unpaid Taxes vs. the Commissioner or his duly authorized representative. The tax lien shall attach not only from the service of the warrant of distraint of personal property but from the time the tax became due and payable.R. Inc.

real property may be levied upon.in sufficient quantity to satisfy the tax. further. bank accounts. if the amount involved is One million pesos (P1. That the Commissioner or his duly authorized representative shall.000..000) or less. including stocks and other securities. a report on any levy shall be submitted by the levying officer to the Commissioner or his duly authorized representative: Provided. (P1. and to the Revenue Regional Director: Provided. chattels or effects.After the expiration of the time required to pay the delinquent tax or delinquent revenue as prescribed in this Section. within thirty (30) days after execution of the distraint. That the Commissioner or his duly authorized representative. credits. and the expenses of the distraint and the cost of the subsequent sale. together with any increment thereto incident to delinquency. or if he be absent from the Philippines. subject to rules and regulations promulgated by the Secretary of . before simultaneously or after the distraint of personal property belonging to the delinquent. written notice of the levy shall be mailed to or served upon the Register of Deeds for the province or city where the property is located and upon the delinquent taxpayer. Within ten (10) days after receipt of the warrant. or charge. further. To this end.000). to the occupant of the property in question. have the power to lift such order of distraint: Provided. That a consolidated report by the Revenue Regional Director may be required by the Commissioner as often as necessary. proceed with the levy on the taxpayer's real property. however. and the personal property. Said certificate shall operate with the force of a legal execution throughout the Philippines. to his agent or the manager of the business in respect to which the liability arose. In case the warrant of levy on real property is not issued before or simultaneously with the warrant of distraint on personal property. any internal revenue officer designated by the Commissioner or his duly authorized representative shall prepare a duly authenticated certificate showing the name of the taxpayer and the amounts of the tax and penalty due from him. within ten (10) days from receipt of the warrant. Levy shall be affected by writing upon said certificate a description of the property upon which levy is made. At the same time. and the personal property of the taxpayer is not sufficient to satisfy his tax delinquency. debts. be submitted by the distraining officer to the Revenue District Officer. (B) Levy on Real Property. That a consolidated report by the Revenue Regional Director may be required by the Commissioner as often as necessary: Provided.000. the Commissioner or his duly authorized representative shall. upon recommendation of the Commissioner. and interests in and rights to personal property of such persons . or if there be none. or the Revenue District Officer. subject to rules and regulations promulgated by the Secretary of Finance. shall seize and distraint any goods. A report on the distraint shall.

a copy of the warrant of distraint. chattels. Bank accounts shall be garnished by serving a warrant of garnishment upon the taxpayer and upon the president. chattels. which issued the said stocks or securities. shall have the authority to lift warrants of levy issued in accordance with the provisions hereof. The TX . Upon receipt of the warrant of garnishment. shall be left either with the owner or person from whose possession such goods. or at the dwelling or place of business of such person and with someone of suitable age and discretion. or with his agent. a copy of which. effects or other personal property distrained. company or association. manager. Note: Real property may be levied upon before. RD of the province or city where the property is located 2. Stocks and other securities shall be distrained by serving a copy of the warrant of distraint upon the taxpayer and upon the president. and a description of the property upon which levy is made. manager. treasurer or other responsible officer of the bank. simultaneously. the bank shall turn over to the Commissioner so much of the bank accounts as may be sufficient to satisfy the claim of the Government. Levy of real property It is a remedy whereby the collection of delinquent taxes is enforced on the real property belonging to the delinquent taxpayer. upon recommendation of the Commissioner. The officer serving the warrant of distraint shall make or cause to be made an account of the goods. Note: Levy is effected by writing upon an authenticated certificate showing the name of the TX. Debts and credits shall be distrained by leaving with the person owing the debts or having in his possession or under his control such credits. signed by himself. or effects or other personal property were taken. The warrant of distraint shall be sufficient authority to the person owning the debts or having in his possession or under his control any credits belonging to the taxpayer to pay to the Commissioner the amount of such debts or credits. treasurer or other responsible officer of the corporation. the amounts of the Tax and penalty due. or after the distraint of personal property belonging to the delinquent. Note: Notice of levy must be given: 1. Procedure for Distraint and Garnishment. Finance. SEC. 208. to which list shall be added a statement of the sum demanded and note of the time and place of sale.

00 or less than Requisites of distraint: 1.in any manner whatever. the taxpayer must be delinquent (except in constructive distraint) in the payment of tax.To safeguard the interest of the Government. 2. If there be none.000. in his opinion. . credits. If the TX is absent or cannot be found to his agent or the manager of the business in respect to which the liability arose. chattels or effect and other personal property of whatever character of the TX. Distraint of personal property It is a remedy whereby the collection of delinquent taxes is enforced on the goods. the revenue officer effecting the constructive distraint shall proceed to prepare a list of such property and. Commissioner or his duly authorized representative if the amount involved is more than P1. without the express authority of the Commissioner. 206. there must be a subsequent demand for its payment (assessment). In case the taxpayer or the person having the possession and control of the property sought to be placed under constructive distraint refuses or fails to sign the receipt herein referred to. is retiring from any business subject to tax. after which the said property shall be deemed to have been placed under constructive distraint. 4. constructive distraint .000. debts. the period within which to assess or collect the tax has not yet prescribed. to the occupant of the property in question. actual distraint 2.00 2. Kinds of distraint of personal property: 1. in the presence of two (2) witnessed. The constructive distraint of personal property shall be affected by requiring the taxpayer or any person having possession or control of such property to sign a receipt covering the property distrained and obligate himself to preserve the same intact and unaltered and not to dispose of the same. SEC. 3. the taxpayer fails to pay the tax at the time required. Constructive Distraint of the Property of a Taxpayer.000.000. leave a copy thereof in the premises where the property distrained is located. including stocks and other securities. the Commissioner may place under constructive distraint the property of a delinquent taxpayer or any taxpayer who. (Garnishment) bank accounts and interest in and rights to personal property WHO may effect distraint? 1. 3. or is intending to leave the Philippines or to remove his property therefrom or to hide or conceal his property or to perform any act tending to obstruct the proceedings for collecting the tax due or which may be due from him. Revenue District Officer if the amount involved is P1. and 4.

association 3. manager. hide or conceal his property or . A copy of an account of the property distrained. treasurer or other responsible officer of the bank b. is intending to leave the Philippines c. serving a copy of the warrant upon the taxpayer AND upon the president. treasurer or other responsible officer of the issuing corporation. 207 A NIRC) Constructive distraint It is an administrative remedy given to the government once imposed shall prohibit the owner of a personal property to preserve and not to alienate in whatever manner the property without express authority from the CIR Grounds for constructive distraint of property: 1. to remove his property therefrom or d. Stocks and other Securities a. warrant shall be sufficient authority to pay the Commissioner the amount of such debts or credits 4. shall be left either from the owner or the person from whom the property was taken or at the dwelling or place of business of such person and with someone of suitable age and discretion c.Actual Distraint It is resorted to when at the time required for payment. leaving a copy of the warrant with the person owing the debts or having in his possession such credits or his agent b. b. Goods. Debts and Credits a. effects. Bank accounts (garnishment) a. bank shall turn over to the Commissioner so much of the bank accounts as may be sufficient (Sec. The CIR or the RDO is in the opinion that the TX: a. The order of Distraint may be lifted by the Commissioner or his representative (Sec. signed by the officer. a person fails to pay his delinquent tax obligation. chattels and other personal property a. statement of the sum demanded d. time and place of sale 2. is retiring from any business subject to tax. It consists in the actual seizure and taking possession of personal property of the TX Procedure on actual distraint 1. company. 208 NIRC) Note: Report on the Distraint by the distraining officer must be submitted within 10 days from receipt of the warrant to the Revenue District Officer and to the Revenue Regional Director. The TX is delinquent or 2. Seizure of the personal property of sufficient value to cover tax liability b. manger. serve a warrant of garnishment upon the taxpayer AND upon the president.

the SC has held that the issuing of a warrant to levy or distraint property is sufficient to toll the prescriptive period. sign a receipt covering property distrained b. BIR: Summary Remedy: Estate Tax Deficiencies (1998) Is the BIR authorized to collect estate tax deficiencies by the summary remedy of levy upon and sale of real properties of the decedent without first securing the authority of the court sitting in probate over the supposed will of the decedent? SUGGESTED ANSWER: .The remedy by distraint of personal property and levy on realty may be repeated if necessary until the full amount due. Note: Distraint and levy may be repeated as often as required to satisfy unpaid taxes and its corresponding charges. in the presence of 2 witnesses. perform any act tending to obstruct the proceedings for collecting the tax due or which may be due from him Process of constructive distraint of personal property 1. SEC. including all expenses. 217. 206 NIRC) Actual Distraint of personal property Constructive Distraint of property Made only on the property of a delinquent taxpayer Made on the property of any taxpayer whether delinquent or not There is taking of possession The taxpayer is merely prohibited from disposing of his property Effected by leaving a list of distrained property or Effected by requiring the taxpayer to sign a receipt by service of a warrant of distraint or garnishment of the property or by the revenue officer preparing and leaving a list of such property An immediate step for collection of taxes Not necessarily so. obligate himself to preserve the same intact and unaltered not to dispose of the property in any manner. Where taxpayer or person in possession refuses to sign: a. distraining officer shall prepare a list of the property distrained b. . e. is collected. without the authority of the Commissioner 2. Further Distraint or Levy. leave a copy in the premises where the property is located (Sec. Note: The prescriptive period to collect taxes is suspended by initiating any of the process of collection. Require the taxpayer or any person having control of the property to: a.

the said revenue officer shall sell the goods. company or association which issued the stocks or other securities. the corresponding certificates of stock or other securities. upon recommendation of the Commissioner. immortalized in the maxim that taxes are the lifeblood of the government (Marcos v. and a copy thereof furnished the corporation. through duly licensed commodity or stock exchanges. shall be returned to the owner of the property sold. and this is justified by the necessity of government funding. ALTERNATIVE ANSWER: Yes. specifying. other than the officer referred to in Section 208 (comment: garnishing or distraining officer) of this Code shall. SEC. Yes. or effects. CIR. the time and place of sale and the articles distrained. 1997). or other personal property. No. to the highest bidder for cash. The probate court is determining issues which are not against the property of the decedent.R. . At the time and place fixed in such notice. devisee. June 5. or a claim against the estate as such. In the case of Stocks and other securities. (Marcos v. including stocks and other securities so distrained. if required to do so. G. but is against the interest or property right which the heir. and issue. 209. The time of sale shall not be less than twenty (20) days after notice. etc. if the tax assessment has already become final. forthwith cause a notification to be exhibited in not less than two (2) public places in the municipality or city where the distraint is made. without the cognition and authority of the court sitting in probate over the supposed will of the deceased. Sale of Property Distrained and Disposition of Proceeds. including expenses. June 5. One place for the posting of such notice shall be at the Office of the Mayor of the city or municipality in which the property is distrained.The Revenue District Officer or his duly authorized representative. because the collection of estate tax is executive in character. chattels. transfer the stocks or other securities sold in the name of the buyer. executory and enforceable. Upon receipt of the copy of the bill of sale. at public auction. The BIR is authorized to collect estate tax deficiency through the summary remedy of levying upon and sale of real properties of a decedent. . the corporation. the officer making the sale shall execute a bill of sale which he shall deliver to the buyer. G. Any residue over and above what is required to pay the entire claim. has in the property formerly held by the decedent.R. As such the estate tax is exempted from the application of the statute of non-claims. 1997). 120880. legatee. company or association shall make the corresponding entry in its books. CIR. or with the approval of the Commissioner. No. The approval of the court sitting in probate over the supposed will of the deceased is not a mandatory requirement for the collection of the estate tax. according to rules and regulations prescribed by the Secretary of Finance. 120880.

subject to the rules and regulations prescribed by the Secretary of Finance. the officer conducting the proceedings shall proceed to advertise the property or a usable portion thereof as may be necessary to satisfy the claim and cost of sale.Within two (2) days after the sale.When the amount bid for the property under distraint is not equal to the amount of the tax or is very much less than the actual market value of the articles offered for sale. the name of the taxpayer against whom taxes are levied. SEC. . SEC. 211.Within twenty (20) days after levy.If at any time prior to the consummation of the sale all proper charges are paid to the officer conducting the sale. by publication once a week for three (3) weeks in a newspaper of general circulation in the municipality or city where the property is located. Release of Distrained Property Upon Payment Prior to Sale. Property so purchased may be resold by the Commissioner or his deputy. The time of sale shall not be less than 20 days after notice to the owner or possessor of the property and the publication or posting of such notice 3. It shall be effectuated by posting a notice at the main entrance of the municipal building or city hall and in public and conspicuous place in the barrio or district in which the real estate lies and. . in the municipality or city where the distraint is made 2. 213. SEC. Purchase by Government at Sale Upon Distraint. penalties and costs due thereon. The advertisement shall contain a statement of the amount of taxes and penalties so due and the time and place of sale. . one place shall be at the office of the Mayor b. 210. . SEC. notification specifying the time and place of sale and the articles distrained shall be exhibited in not less than 2 public places: a. the net proceeds therefrom shall be remitted to the National Treasury and accounted for as internal revenue. and a short description of the property to be sold. and no charge shall be imposed for the services of the local internal revenue officer or his deputy Sale of distrained property: 1. Report of Sale to Bureau of Internal Revenue. Advertisement and Sale. through duly licensed commodity or stock exchanges. the sale. The property distrained shall be sold in a public auction. the officer making the same shall make a report of his proceedings in writing to the Commissioner and shall himself preserve a copy of such report as an official record. and such advertisement shall cover a period of a least thirty (30) days. . the goods or effects distrained shall be restored to the owner. 212.The expenses chargeable upon each seizure and sale shall embrace only the actual expenses of seizure and preservation of the property pending. to the highest bidder or with the approval of the Commissioner. the Commissioner or his deputy may purchase the same in behalf of the national Government for the amount of taxes.

the sale shall proceed and shall be held either at the main entrance of the municipal building or city hall. out of his collection. as the officer conducting the proceedings shall determine and as the notice of sale shall specify. including. penalties. Within five (5) days after the sale. The Revenue Collection Officer. penalties and interest. In a public and conspicuous place in the barrio or district in which the real estate lies and c. or on the premises to be sold. b. the excess shall be turned over to the owner of the property.At any time before the day fixed for the sale. Advertisement in case of sale of levied real property: 1. the preservation or transportation in case of personal property. in consultation with the Revenue district Officer. a return by the distraining or levying officer of the proceedings shall be entered upon the records of the Revenue Collection Officer. the Revenue District officer and the Revenue Regional Director. a. both in cases of personal and real property including improvements found on the latter. and the advertisement and subsequent sale. In his monthly collection reports. as the officer conducting the proceedings shall determine and as the notice shall specify 3. On the premises to be sold. That in case the proceeds of the sale exceeds the claim and cost of sale. penalties and interest: Provided. 2. At the main entrance of the municipal building or city hall. such advances shall be reflected and supported by receipts. it shall cover a period of at least 30 days a. If he does not do so. upon approval by the Revenue District Officer may. Disposition of proceeds of sale a. Location of public auction to the highest bidder. showing the proceedings of the sale. and interest) and cost of the sale. shall then make out and deliver to the purchaser a certificate from his records. the excess shall be turned over to the owner of the property. Posting a notice at the main entrance of the municipal building or city hall and b. In case the proceeds of the sale exceed the claim (taxes. however. . The Revenue Collection Officer. the taxpayer may discontinue all proceedings by paying the taxes. describing the property sold stating the name of the purchaser and setting out the exact amount of all taxes. advance an amount sufficient to defray the costs of collection by means of the summary remedies provided for in this Code. By publication once a week for 3 weeks in a newspaper of general circulation in the municipality or city where the property is located. Advertisement of the time and place of sale of the taxpayer’s property or so much thereof as may be necessary to satisfy the claim within 20 days after the levy.

together with interest thereon and the costs of sale. dispose of the same at private sale.Within one (1) year from the date of sale. penalties. and an accounting of the same shall rendered to the Chairman of the Commission on Audit. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. the forfeiture shall become absolute. penalties or costs arising under this Code or in compromise or adjustment of any claim therefore. the proceeds of the sale shall be deposited with the National Treasury. Forfeiture to Government for Want of Bidder. upon registration with his office of any such declaration of forfeiture. Abate and Refund or Credit Taxes. sell and dispose of the same of public auction or with prior approval of the Secretary of Finance. SEC. together with interest on said purchase price at the rate of fifteen percent (15%) per annum from the date of purchase to the date of redemption. when: 1. It shall be the duty of the Register of Deeds concerned. or 2. upon the giving of not less than twenty (20) days notice. The owner shall not. Redemption of Property Sold.The Commissioner shall have charge of any real estate obtained by the Government of the Philippines in payment or satisfaction of taxes. or any one for him. however. or any one for him may redeem said property by paying to the Commissioner or the latter's Revenue Collection Officer the full amount of the taxes and penalties. A reasonable doubt as to the validity of the claim against the taxpayer exists. SEC. SEC. the Internal Revenue Officer conducting the sale shall declare the property forfeited to the Government in satisfaction of the claim in question and within two (2) days thereafter. In either case. - The Commissioner may - (A) Compromise the Payment of any Internal Revenue Tax. Authority of the Commissioner to Compromise. and such payment shall entitle the person paying to the delivery of the certificate issued to the purchaser and a certificate from the said Revenue District Officer that he has thus redeemed the property. Within one (1) year from the date of such forfeiture. . and interest thereon from the date of delinquency to the date of sale. . shall have the right of paying to the Revenue District Officer the amount of the public taxes.SEC. . 215. 204. the taxpayer. be deprived of the possession of the said property and shall be entitled to the rents and other income thereof until the expiration of the time allowed for its redemption. penalties and costs. and said property thereafter shall be free form the lien of such taxes and penalties. and said Commissioner may. 214. 216. the delinquent taxpayer. Resale of Real Estate Taken for Taxes. shall make a return of his proceedings and the forfeiture which shall be spread upon the records of his office. . and the Revenue District Officer shall forthwith pay over to the purchaser the amount by which such property has thus been redeemed. to transfer the title of the property forfeited to the Government without the necessity of an order from a competent court.In case there is no bidder for real property exposed for sale as herein above provided or if the highest bid is for an amount insufficient to pay the taxes. but if the property be not thus redeemed.

subject to the provisions of Section 230 (Comment: Forfeiture of Cash Refund and of Tax Credit) of this Code: Provided. (B) Abate or Cancel a Tax Liability. or 2. and (comment: amount payable is the 10%) For other cases. for which the taxpayer is directly liable. a minimum compromise rate equivalent to forty percent (40%) of the basic assessed tax. That a return filed showing an overpayment shall be considered as a written claim for credit or refund. That in no case shall a tax refund be given resulting from availment of incentives granted pursuant to special laws for which no actual payment was made.000. The tax or any portion thereof appears to be unjustly or excessively assessed. in his discretion. or b. excluding withholding taxes. All criminal violations may be compromised except: a. A Tax Credit Certificate validly issued under the provisions of this Code may be applied against any internal revenue tax. Where the basic tax involved exceeds One million pesos (P1. those involving fraud. . when: 1. refund the value of internal revenue stamps when they are returned in good condition by the purchaser. The compromise settlement of any tax liability shall be subject to the following minimum amounts: For cases of financial incapacity. Any request for conversion into refund of unutilized tax credits may be allowed. a minimum compromise rate equivalent to ten percent (10%) of the basic assessed tax. That the original copy of the Tax Credit Certificate showing a creditable balance is surrendered to the appropriate revenue officer for verification and cancellation: Provided. (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority. however. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided. those already filed in court.000) or where the settlement offered is less than the prescribed minimum rates. further. redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. and. The administration and collection costs involved do not justify the collection of the amount due. the compromise shall be subject to the approval of the Evaluation Board which shall be composed of the Commissioner and the four (4) Deputy Commissioners.

The effects are: a. In case of financial incapacity: 10% of the basic assessed tax 2.000. provided it is approved by the Evaluation Board . 3.The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of both the Senate and House of Representatives. 2. Requisites: 1. amount compromised or abated.000. Limitation as to amount of: 1. there must be acceptance (by the Commissioner or taxpayer as the case may be) of the offer in the settlement of the original claim. b. rejection of an offer of compromise: final and binding unless revoked or set aside by the Commissioner. Commissioner of Internal Revenue is the only official vested with such power and discretion. a report on the exercise of his powers under this Section. Grounds to compromise (civil cases) 1. every six (6) months. 2. among others: names and addresses of taxpayers whose cases have been the subject of abatement or compromise. amount involved. When the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. acceptance of an offer of compromise: not final and may be reviewed by the Commissioner. When a reasonable doubt as to the validity of the claim against the taxpayer exists. The basic tax involved exceeds Php1. stating therein the following facts and information. there must be an offer (by the taxpayer of an amount to be paid by him) Officers authorized to compromise: 1. and reasons for the exercise of power: Provided. The settlement offered is less than the MCR Note: The MCR may be less than the prescribed rates of 10% or 40%. the taxpayer must have a tax liability. Subordinate officials may preliminarily enter into compromise. or 2. Compromise A contract whereby the parties by reciprocal concessions. 2. as the case may be. Other cases: 40% of the basic assessed tax The approval of the Evaluation Board (composed of the CIR and the Deputy Commissioners) is required when: 1. avoid litigation or put an end to one already commenced. That the said report shall be presented to the Oversight Committee in Congress that shall be constituted to determine that said powers are reasonably exercised and that the government is not unduly deprived of revenues.

After the complaint is filed with the prosecutor’s office but before the information is filed with the court. NCC) Compromise penalty It is a mutual agreement between the taxpayer and the government where the former agrees to pay a certain amount of money.Limitation as to coverage: 1. Extent of discretion: 1. When the tax assessed or any portion thereof appears to be unjustly or excessively demanded. those already filed in court 2. the Commissioner has full discretion to compromise except those involving fraud 2. Abatement Cancellation of the tax liability Grounds: 1. the CIR must institute a criminal action. Remedies when taxpayer refuses or fails to abide by a tax compromise: 1. the Commissioner can still compromise provided the prosecutor consented. those involving fraud. When the administration and collection costs involved do not justify the collection of the amount due GEN RULE: the power to compromise and abate cannot be delegated by the CIR EXCEPT: . extrajudicial can only be enforced by court action 2. before the complaint is filed with the prosecutor’s office. judicial compromise can be enforced by mere execution b. 3. In cases finally decided by the courts Compromise in criminal violations can be compromised except: 1. after the information is filed with the court. With respect to the liability of the taxpayer for surcharges as their imposition is mandatory 2. the Commissioner is no longer permitted to compromise with or without the consent of the prosecutor. as to compromise a tax violation that may be subject of criminal prosecution Compromise Penalty:  An amount which the taxpayer pays to compromise a tax violation  Paid in lieu of criminal prosecution  A taxpayer cannot be compelled to pay a compromise penalty  If he does not want to pay. or 2. enforce the compromise a. 2041. regard it as rescinded and insists upon original demand (Art.

The taxpayer is estopped from applying for a compromise. which are still pending. 30-02 [2002]) because of the taxpayer's financial incapacity to pay the tax due or the assessment's doubtful validity: a) DELINQUENT ACCOUNTS provided that it can be shown that the failure to pay is due to the financial incapacity or that the assessment is of doubtful validity b) Cases under administrative protest. and c) Cases where final reports of reinvestigation or reconsideration have been issued resulting in the reduction of the original assessment agreed to by the taxpayer when he signed the required agreement form. the Commissioner of Internal Revenue initiated the filing of a civil action to collect the tax due from NX. assessments issued by regional offices involving basic taxes of Php500. BIR. (5%) SUGGESTED ANSWERS: The following cases may still be compromised (R. 2. 30-02 [2002]) because the taxpayer has not paid his taxes for reasons other than his financial incapacity or the doubtful validity of the assessment: a) CRIMINAL TAX FRAUD cases by express provision of the code to discourage commission of fraud b) CRIMINAL VIOLATIONS ALREADY FILED IN COURT so that the taxpayer will not profit from his fraud which would encourage tax evasion. b) Cases under administrative protest. a decision was rendered by the court ordering NX to pay the tax due plus . The following cases MAY NO LONGER BE COMPROMISED (R. after issuance of the final assessment notice to the taxpayer. c) Criminal tax fraud cases.R. minor criminal violations. which are still pending.R. Compromise (2005) State and discuss briefly whether the following cases may be compromised or may not be compromised: a) Delinquent accounts. e) Cases where final reports of reinvestigation or reconsideration have been issued resulting in the reduction of the original assessment agreed to by the taxpayer when he signed the required agreement form. d) Criminal violations already filed in court. BIR. 1. After several years. Compromise (2004) After the tax assessment had become final and unappealable. after issuance of the final assessment notice to the taxpayer.000 or less.

BIR: Compromise. Subsequently. Does the Commissioner have the power to accept the compromise offer? Is it legal and ethical? Explain briefly. or 2. penalties and surcharges. although the inquiry need not be limited only to the bank deposits of the taxpayer but also as to his financial position as reflected in his financial statements or other records upon which his property holdings can be ascertained. NIRC). Conditions (2000) Under what conditions may the Commissioner of Internal Revenue be authorized to: A. The Commissioner has the power to accept the offer of compromise if the financial position of the taxpayer clearly demonstrates a clear inability to pay the tax (Section 204. B. NIRC). Compromise the payment of any internal revenue tax? (2%) SUGGESTED ANSWER: The Commissioner of Internal Revenue may be authorized to compromise the payment of any internal revenue tax where: 1. the acceptance of the offer is legal and ethical because the ground upon which the compromise was anchored is within the context of the law and the rate of compromise is well within and far exceeds the minimum prescribed by law which is only 10% of the basic tax assessed. only 50% of the judgment award is all he could really afford. but attempts to execute the judgment award were futile. NX offered the Commissioner a compromise settlement of 50% of the judgment award. The judgment became final and executory. This is an offer for compromise based on financial incapacity which the Commissioner shall not accept unless accompanied by a waiver of the secrecy of bank deposits (Section 6[F}. the financial position of NX as determined by the Commissioner demonstrates a clear inability to pay the tax. the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. If indeed. A reasonable doubt as to the validity of the claim against the taxpayer exists. Abate or cancel a tax liability? (3%) SUGGESTED ANSWER: . The waiver will enable the Commissioner to ascertain the financial position of the taxpayer. representing that this amount is all he could really afford. As represented by NX in his offer. (5%) SUGGESTED ANSWER: Yes.

The Commissioner of Internal Revenue may abate or cancel a tax liability when: 1. Yes. the deficiency tax remained unpaid. The BIR also found that.00. The tax or any portion thereof appears to be unjustly or excessively assessed. BIR's action for collection will prosper because the assessment is already final and executory. Minolta did not file its final corporate income tax return for the taxable year 1998.000. BIR. Taxpayer: Civil Action & Criminal Action (2002) Minolta Philippines. it can already be enforced through judicial action. A taxpayer who is constituted as withholding agent who has deducted and withheld at source the tax on the income payment made by him holds the taxes as trust funds for the government (Sec. what action will you take? Explain your answer. Withholding Agent (1998) May the Commissioner of the Internal Revenue compromise the payment of withholding tax (tax deducted and withheld at source) where the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax? [5%1 SUGGESTED ANSWER: No. After investigation of its withholding tax returns for the taxable year 1997. The administration and collection costs involved do not justify the collection of the amount due. On May 17. 58[D]) and is obligated to remit them to the BIR. NIRC of 1997] BIR: Compromise. . Will the BIR's action for collection prosper? As counsel of Minolta. because it allegedly incurred net loss from its operations. (Minolta) is an EPZA-registered enterprise enjoying preferential tax treatment under a special law. Inc. or 2. the BIR issued a deficiency withholding tax assessment in the amount of P150. On May 15. The subsequent inability of the withholding agent to pay/remit the tax withheld is not a ground for compromise because the withholding tax is not a tax upon the withholding agent but it is only a procedure for the collection of a tax. [Sec. in violation of the provisions of the National Internal Revenue Code. (5%) SUGGESTED ANSWER: A. as a result of which the assessment became final and executory. because of financial difficulty. A. the BIR filed with the Regional Trial Court an action for collection of the deficiency withholding tax for 1997. 204 (B). 2002. 1999.

(Wonder Mechanical Engineering Corporation u. May the Commissioner of Internal Revenue legally enforce the collection of compromise penalty? (5%) SUGGESTED ANSWER: No. may the Commissioner accept the offer? Explain (5%) SUGGESTED ANSWER: B. if it can be established that a tax has not been paid as a consequence of non-filing of the return. [Note: It is not clear whether this is a case of non-withholding/ underwithholding or non- remittance of tax withheld. if Minolta makes a voluntary offer to compromise the criminal violations for non-filing and non- payment of taxes for the year 1998. the tax counsel may be open to other remedies against the assessment. al. The compromise settlement of the criminal violations will not relieve the taxpayer from its civil liability. et. But the civil liability for taxes may also be compromised if the financial position of the taxpayer demonstrates a clear inability to pay the tax. I will introduce evidence that the income payment was reported by the payee and the income tax was paid thereon in 1997 so that my client may only be allowed to pay the civil penalties for non-withholding pursuant to RMO No. Court of Tax Appeals. There is no showing that the compromise penalty was imposed by the Commissioner of Internal Revenue with the agreement and conformity of the taxpayer. Judicial Remedies SEC. . All criminal violations of the Tax Code may be compromised except those already filed in court or those involving fraud (Section 204. May criminal violations of the Tax Code be compromised? If Minolta makes a voluntary offer to compromise the criminal violations for non. However. a compromise penalty was imposed for violation of the withholding tax provisions.resident foreign corporation. 38-83. As such. Form and Mode of Proceeding in Actions Arising under this Code.. As counsel of Minolta. NIRC). 220.] B. In addition to the civil penalties provided for under the Tax Code.Civil and criminal actions and proceedings instituted in behalf of the Government under the authority of this Code or other law enforced by the Bureau of Internal Revenue shall be brought in the name of the Government of the Philippines and shall be conducted by legal officers of the Bureau of Internal Revenue but no civil or .filing and non-payment of taxes for the year 1998. the Commissioner may accept the offer which is allowed by law. the civil liability for taxes may be dealt with independently of the criminal violations. Taxpayer: Failure to Withheld & Remit Tax (2000) A domestic corporation failed to withhold and remit the tax on income received from Philippine sources by a non. 64 SCRA 555). Accordingly.

e. Defenses precluded by final and executory assessments: 1. delinquent 2. Invalidity or illegality of the assessment. The fact that no civil action was filed before the ordinary courts to collect the tax liability is no ground for claiming that the right to collect had already prescribed. fee or charge imposed by this Code. Civil action filed with CTA 1. 2 ways for the BIR to institute a civil action 1. Enforced by: 1. 4. 218. Filing an answer to the petition for review filed by the TX with the CTA Note: Civil actions for collection of sum of money based on an assessment which has become final and executory for an amount of 1M or less shall be with the RTC but if it is more than 1M it is with the CTA Civil Actions Actions instituted by the government to collect internal revenue taxes. 3. 2. or 2. . Failure to file a timely appeal to the CTA on the final decision of the CIR or his authorized representative on the disputed assessment. penalty or forfeiture under this Code shall be filed in court without the approval of the Commissioner. Final assessment is not protested administratively within 30 days from date of receipt. filing an answer to the petition for review filed by the taxpayer with the CTA Requisites for the institution of a civil action filed with the ordinary court: 1.criminal action for the recovery of taxes or the enforcement of any fine. MTC or RTC). Self-assessed tax shown in the return was not paid within the date prescribe by law. It includes filing by the government with the probate court claims against the deceased taxpayer. SEC.No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax. filing a civil case for the collection of a sum of money with the proper regular court (i. and 2. Non-compliance with the condition laid in the approval of protest. Prescription of the government’s right to assess. . collectible Collectibility arises when: 1. Filing an action with the regular courts for collection of sum of money 2. Injunction not Available to Restrain Collection of Tax.

treasurer. be subject to the penalties imposed herein: Provided. the maximum penalty prescribed for the offense shall be imposed and. the SOL GEN must approved. in addition to being liable for the payment of the tax. it is appropriate for the TX to file an appeal to the CTA since the filing of the civil action constitutes the indirect denial of his protest and once he has filed his action in the CTA. Failure to comply with these requisites renders the action susceptible to a motion to dismiss. branch manager. (e) The fines to be imposed for any violation of the provisions of this Code shall not be lower than the fines imposed herein or twice the amount of taxes. (d) In the case of associations. Inc. he shall be dismissed from the public service and perpetually disqualified from holding any public office. If he is a public officer or employee. 253. to vote and to participate in any election. (Hermanos. General Provisions. 29 SCRA 552) Note: Whenever instituting an action in the civil courts. CIR. - (a) Any person convicted of a crime penalized by this Code shall. If the offender is a Certified Public Accountant. That payment of the tax due after apprehension shall not constitute a valid defense in any prosecution for violation of any provision of this Code or in any action for the forfeiture of untaxed articles. 2. upon conviction. Note: In the event a protest is pending with BIR and the latter institutes a civil action. his certificate as a Certified Public Accountant shall. vs. general manager. the sol gen files a notice of appearance in the court where the action is filed. SEC. (b) Any person who willfully aids or abets in the commission of a crime penalized herein or who causes the commission of any such offense by another shall be liable in the same manner as the principal. the penalty shall be imposed on the partner. and the employees responsible for the violation. they need only to furnish the sol gen a copy of the complaint. and thereafter. (c) If the offender is not a citizen of the Philippines. However in cases where the action was instituted by the BIR legal officers deputized by as special attorneys. he shall be deported immediately after serving the sentence without further proceedings for deportation. he can move to dismiss the action in the RTC since jurisdiction over the case is properly lodged now with the CTA. The answer filed by the government in the CTA is tantamount to the filing of a civil action for collection the regular court and has the effect of tolling the prescriptive period. whichever is higher . officer-in-charge. partnerships or corporations. president. be automatically revoked or cancelled. interest and surcharges due from the taxpayer. in addition.

upon conviction therefor. Any person who attempts to make it appear for any reason that he or another has in fact filed a return or statement. Attempt to evade or defeat tax: SEC. at the time or times required by law or rules and regulations shall. SEC. be punished by a fine of not less than Ten thousand pesos (P10. and if the same be not known at the time. Failure to file a return supply correct and accurate information. upon conviction thereof. Prescription for Violations of any Provision of this Code. make such return. keep any record. in addition to other penalties provided by law. .All violations of any provision of this Code shall prescribe after Five (5) years.000) but not more than Twenty thousand pesos (P20. be punished by a fine not less than Thirty thousand (P30.2 common crimes punishable under the NIRC: 1.000) but not more than One hunderd thousand pesos (P100. withhold and remit and refund excess taxes withheld on compensation SEC. Failure to File Return. or actually files a return or statement and subsequently withdraws the same return or statement after securing the official receiving seal or stamp of receipt of internal revenue office wherein the same was actually filed shall. pay tax. . Prescription shall begin to run from the day of the commission of the violation of the law. Supply Correct and Accurate Information.000) and suffer imprisonment of not less than one (1) year but not more than ten (10) years. 281.Any person who willfully attempts in any manner to evade or defeat any tax imposed under this Code or the payment thereof shall. from the discovery thereof and the institution of judicial proceedings for its investigation and punishment. or refund excess taxes withheld on compensation. upon conviction thereof. or withhold or remit taxes withheld. Attempt to Evade or Defeat Tax.Any person required under this Code or by rules and regulations promulgated thereunder to pay any tax make a return. 254. The prescription shall be interrupted when proceedings are instituted against the guilty persons and shall begin to run again if the proceedings are dismissed for reasons not constituting jeopardy. The term of prescription shall not run when the offender is absent from the Philippines. 2. in addition to other penalties provided by law.000) and suffer imprisonment of not less than two (2) years but not more than four (4) years: Provided. or supply correct and accurate information. be punished by a fine of not less than Ten thousand pesos (P10. who willfully fails to pay such tax. or supply correct the accurate information.000) and suffer imprisonment of not less than one (1) year but not more than three (3) years. 255. That the conviction or acquittal obtained under this Section shall not be a bar to the filing of a civil suit for the collection of taxes. keep such record. . . Pay Tax Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation.

4. BIR. Pascor Realty and Development Corporation. assessment in not a pre-requisite for its institution. No. After all. (Commissioner of Internal Revenue v. hence. Payment of the tax due after apprehension shall not constitute a valid defense in any prosecution for violation of any provision of this code or in any action for the forfeiture of untaxed articles. a criminal charge is instituted not to demand payment. No criminal action for recovery of taxes or the enforcement of any fine. the BIR filed before the Department of Justice (DOJ) a criminal complaint against a corporation and its officers for alleged evasion of taxes. Assessment. the criminal complaint was premature. 128315. Criminal Complaint (2005) In 1995. All violations of any penal provision of the tax code shall prescribed after five years from the day of the commission of the violation of the law. (5%) SUGGESTED ANSWER: The DOJ is correct in ruling that an assessment of the tax deficiency of the corporation is not a precondition to the filing of a criminal complaint. The DOJ denied the motion on the ground that an assessment of the tax deficiency of the corporation is not a precondition to the filing of a criminal complaint and that in any event. 6. 2. no assessment of its tax liability. and if the same be not known at the time. as yet. there is nothing in the problem that shows that the BIR in filing the case is also interested in collecting the tax deficiency. Except if such payment takes the form of a compromise agreement. from the discovery thereof and the institution of judicial proceedings for its investigation and punishment. . The complaint was supported by a sworn statement of the BIR examiners showing the computation of the tax liabilities of the erring taxpayer. the requirement of a final assessment is geared towards the institution of a civil action for recovery and not a criminal action for punishment of the offense provided that there is a prima facie evidence to prove that the accused willingly and knowingly evaded to pay taxes and what is being questioned in the assessment is the mathematical computation only. G. There is no need for an assessment so long as there is a prima facie showing of violation of the provisions of the Tax Code. but to penalize the tax payer for violation of the Tax Code. it does not necessarily follow that the criminal action shall have prescribed as well. penalty or forfeiture shall be filed in court without the approval of the commissioner. Even if the civil action to institute recovery of the unpaid tax has prescribe.Important Principles on criminal actions: 1. the joint affidavit of the BIR examiners may be considered as an assessment of the tax liability of the corporation. The corporation filed a motion to dismiss the criminal complaint on the ground that there has been. Note that the prescriptive period of the action begins from the day the act or omission constituting the offense has been discovered AND institution of proceedings for its investigation 5.R. Is the ruling of the DOJ correct? Explain. If there is a prima facie case against the accused for tax evasion. The CIR has delegated the authority to institute a criminal action to his subordinates in the legal services 3. June 29. 1999) Furthermore.

Gerry filed a motion to quash the Information on the ground of prescription. Assessment is not necessary before a taxpayer maybe prosecuted if there is a prima facie showing of a willful attempt to evade taxes as in the taxpayer's failure to declare a specific item of taxable income in his income tax returns (Ungab v. Section 281. 128315. The Information was filed with the RTC only last June 2006. No. the BIR issued a pre-assessment notice on . so that unless and until the BIR has made a final determination of what is supposed to be the correct taxes. and does not demand payment of the tax within a certain period of time. The joint affidavit showing the computation of the tax liabilities of the erring taxpayer is not a tax assessment because it was not sent to the taxpayer. the Information having been filed beyond the 5-year reglementary period. If you were the judge. Cusi 97 SCRA 877). the taxpayer should not be placed in the crucible of criminal prosecution (CIR v. 119322. (Commissioner of Internal Revenue v. An assessment is deemed made only when the BIR releases.R. BIR: Prescriptive Period. Fortune Tobacco Corp. the criminal case was instituted within the five-year period required by law (Tupaz v. The crime was committed when Gerry willfully refused to pay despite repeated demands in 2002. June 4.. No. G. The trial court can exercise jurisdiction. Criminal Action (2002) TY Corporation filed its final adjusted income tax return for 1993 on April 12. 1994 showing a net loss from operations. However. Since the information was filed in June 2006. June 29. Pascor Realty and Development Corporation. GR No. if the taxes alleged to have been evaded is computed based on reports approved by the BIR there is a presumption of regularity of the previous payment of taxes. 1999. Prescriptive Period. Criminal Action (2006) Gerry was being prosecuted by the BIR for failure to pay his income tax liability for Calendar Year 1999 despite several demands by the BIR in 2002. 127777. October 1. Ulep. Prescription of a criminal action begins to run from the day of the violation of the law. NIRC).R. After investigation. 1996). will you dismiss the Information? Why? (5%) SUGGESTED ANSWER: No. it is in error when it ruled that the joint affidavit of the BIR examiners may be considered as an assessment of the tax liability of the corporation. On the contrary. mails or sends such notice to the taxpayer. 1999) BIR: Criminal Prosecution: Tax Evasion (1998) Is assessment necessary before a taxpayer may be prosecuted for willfully attempting in any manner to evade or defeat any tax imposed by the Internal Revenue Code? [5%) SUGGESTED ANSWER: No. BIR. G.

The company moved to dismiss the criminal complaint on the ground that an act for violation of any provision of the Tax Code prescribes after five (5) years and. personally delivered to and received by the company's chief accountant. A final notice and demand letter dated April 15. warrants of distraint and levy on its properties were issued and served upon it. the period commenced to run on March 30. as determined by the Commissioner pursuant to the rules and regulations to be promulgated by the Secretary of Finance. Failure to pay the full or part of the amount of tax shown on any return required to be filed under the provisions of this Code or rules and regulations. The earliest date that the assessment has become final is May 16. or 2. 248. That a substantial under-declaration of taxable sales. (B) In case of willful neglect to file the return within the period prescribed by this Code or by rules and regulations. Civil Penalties. any payment has been made on the basis of such return before the discovery of the falsity or fraud: Provided. receipts or income in an amount exceeding thirty percent (30%) of that declared per return. the penalty to be imposed shall be fifty percent (50%) of the tax or of the deficiency tax. The pre. or 3. (5%) SUGGESTED ANSWER: The motion to dismiss should not be granted. receipts or income. Unless otherwise authorized by the Commissioner. or the full amount of tax due for which no return is required to be filed. 316 SCRA 118 [1999]). in addition to the tax required to be paid. Failure to file any return and pay the tax due thereon as required under the provisions of this Code or rules and regulations on the date prescribed. How will you resolve the motion? Explain your answer. Civil Penalties SEC. 1997 and since the criminal charge was instituted on January 10. the same was timely filed. – (A) There shall be imposed. 2002. on or before the date prescribed for its payment. further. It is the issuance of the final notice and demand letter dated April 15. a criminal charge for violation of the Tax Code was instituted in the Regional Trial Court with the approval of the Commissioner. 1996. Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment. in the following cases: 1. It is only when the assessment has become final and unappealable that the 5-year period to file a criminal action commences to run (Tupaz v. Ulop. For willful refusal and failure of TY Corporation to pay the tax. and a claim of . in this case. That failure to report sales. On January 10. March 30.assessment notice issued on March 30. a penalty equivalent to twenty-five percent (25%) of the amount due. in case. or a substantial overstatement of deductions. 1996 is not a final assessment which is enforceable by the BIR. 1996 when the pre-assessment was issued. 1997 was issued. shall constitute prima facie evidence of a false or fraudulent return: Provided. filing a return with an internal revenue officer other than those with whom the return is required to be filed. 2002. or in case a false or fraudulent return is willfully made. or 4. 1997 and the failure of the taxpayer to protest within 30 days from receipt thereof that made the assessment final and unappealable.

Note: The liability to pay the surcharge arises upon the lapse of the period where the taxpayer is required to pay despite the absence of any assessment. There is no showing in the problem that Danilo signed the falsified return or that it was prepared under his direction. receipts or income or for overstatement of deductions. Not really a penalty as used in criminal law but a civil administrative sanction designed primarily to: a. {On the other hand the accountant may be held criminally liable for violation of the Tax Code when he falsified the tax return by underdeclaring the sale and overstating the expense deductions. He should not be held liable for the fraud penalty because the accountant acted beyond the limits of his authority. if any. unless otherwise authorized by the CIR c. The accountant filed a falsified tax return by underdeclaring the sales and overstating the expense deductions by Danilo. his certificate as a CPA shall automatically be revoked or cancelled upon conviction. protect the State revenue. shall render the taxpayer liable for substantial under-declaration of sales. Filing a return with the wrong agent of the BIR. failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment. (5%) SUGGESTED ANSWER: Danilo is liable for the deficiency tax as well as for the deficiency interest. deductions in an amount exceeding (30%) of actual deductions. If Danny's accountant is a Certified Public Accountant. Liabilities. . d. Taxpayer. 2. Penalty of 25% of the amount due for: a. Failure to file any return and pay the tax due thereon. who is engaged in the trading business. entrusted to his accountant the preparation of his income tax return and the payment of the tax due. and b. as mentioned herein. Failure to pay the full or part of the tax as shown on the return on or before the due date ITR. Falsified Tax Return (2005) Danilo. b. Is Danilo liable for the deficiency tax and the penalties thereon? What is the liability. reimburse the government for the expenses in investigating and the loss resulting from the taxpayer’s fraud. Surcharges: 1. of the accountant? Discuss.

iii. ii. (D) Interest on Extended Payment. Interest of 20% or the Manila Reference rate. the amount of the tax due on any return required to be filed. .SEC. required to be paid in case of failure to pay: i. The amount of the tax due on any return to be filed. SUGGESTED ANSWER: DEFICIENCY INTEREST for purposes of the income tax is the interest due on any amount of tax due or installment thereof which is not paid on or before the date prescribed . Delinquency interest a. shall be subject to the interest prescribed in Subsection (A) hereof. but fails to pay the tax or any installment hereof. on the date appearing in the notice and demand of the CIR. or 3. . or where the Commissioner has authorized an extension of time within which to pay a tax or a deficiency tax or any part thereof. Interest: Deficiency Interest: define (1995 Bar) What is a "deficiency interest" for purposes of the income tax? Illustrate. (B) Deficiency Interest. Interest. interest at the rate of twenty percent (20%) per annum. 20% per annum from the date prescribed for its payment until the full payment thereof 2.Any deficiency in the tax due. Deficiency interest a.There shall be assessed and collected on any unpaid amount of tax. or such higher rate as may be prescribed by rules and regulations. Interest: 1. the deficiency tax or any surcharge or interest thereon. there shall be assessed and collected on the unpaid amount. which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof. which interest shall form part of the tax. from the date prescribed for payment until the amount is fully paid. The amount of the tax due for which no return is required. or 2. A deficiency tax. (C) Delinquency Interest. . amount of the tax due for which return is required. whichever is higher. - (A) In General. . interest at the rate prescribed in Subsection (A) hereof until the amount is fully paid. or any part of such amount or installment on or before the date prescribed for its payment. as the term is defined in this Code. or any surcharge or interest thereon on the due date appearing in the notice and demand of the Commissioner. there shall be assessed and collected interest at the rate hereinabove prescribed on the tax or deficiency tax or any part thereof unpaid from the date of notice and demand until it is paid.In case of failure to pay: 1.If any person required to pay the tax is qualified and elects to pay the tax on installment under the provisions of this Code. 249.

00 from April 15. b. 1995 which is the due date for payment per assessment notice. 1994 up to its date of payment. on the due date appearing in the notice and demand of the Commissioner of Internal Revenue.000. SUGGESTED ANSWER: Delinquency interest is the interest of 20% or the Manila Reference Rate. If for example after the audit of the books of XYZ Corp. 1994 and the amount of deficiency tax. If in the above illustration the assessment notice was released on December 31. A compromise penalty cannot be imposed in the absence of a showing that the taxpayer consented thereto. The CIR has no power to impose and collect the compromise penalties in the absence of a compromise agreement validly entered into between the taxpayer and the CIR Compromise Compromise Penalty Definition: Definition: An amount of money paid by the taxpayer to settle An amount of money paid to compromise a tax his civil liability for tax assessed violation that he has committed. for its payment computed at the rate of 20% per annum or the Manila Reference Rate. or (b) the amount of the tax due for which return is required. which may be the subject of criminal prosecution Basis of amount paid: Basis of amount paid: Basic tax assessed Gross sales or receipts during the year of the tax due Minimum amount: Minimum amount: . Compromise: 1. inclusive of surcharge and deficiency interest were computed up to January 30. They both imply mutual agreement.00 inclusive of the 25% surcharge imposed under Section 248 of the Tax Code. from the date prescribed for its payment until it is fully paid. required to be paid in case of failure to pay: (a) the amount of the tax due on any return required to be filed. failure to pay on this latter date will render the tax delinquent and will require the payment of delinquency interest. whichever is higher. Similarities of compromise and compromise penalty: a. 2. for taxable year 1993 there was found to be due a deficiency income tax of P125.000. the interest will be computed on the P125. or (c) the deficiency tax or any surcharge or interest thereon. whichever is higher. Interest: Delinquency Interest: define (1995) What is a "delinquency interest" for purposes of the income tax? Illustrate.

after payment: i. protest ii. Grounds: i. 228 NIRC) SEC. File a request for reinvestigation or reconsideration within 30 days from receipt of the assessment a.The limitation depends on the legal grounds used Depends on the nature of the tax violation and the by the taxpayer minimum amount is generally not less than Php1. action to contest forfeiture of chattel. b. and upon giving proper bond. and iii. 231. Within 60 days from filing of protest. the owner desiring to contest the validity of the forfeiture may. (Revenue Regulation No. Action to Contest Forfeiture of Chattel. the assessment shall become FINAL (cannot be appealed). if the protest is denied in whole or in part or ii. Appeal of Protest to the CTA (Sec. Judicial: a. Injunction – when the CTA in its opinion the collection by the BIR may jeopardize taxpayer. may enjoin the sale. Involves a question of fact or law or both. ii. before payment: i. bring an action against the person seizing the property or having possession thereof to recover the same. b. otherwise. Administrative: a. CTA 1. 2. Involves a question of fact or law or both. civil action: i. Protest of Assessment: 1.000 REMEDIES OF TAXPAYER 1. Request for reconsideration-a plea for re-evaluation of the assessment on the basis of existing records without need of additional evidence. 228 NIRC) a. and ii. at any time before sale or destruction of the property. criminal action: i. is not acted upon within 180 days from submission of documents . appeal to CTA – within 30 days from receipt of decision on the protest or from the lapse of 180 days due to inaction of the Commissioner.In case of the seizure of personal property under claim of forfeiture. . or after the sale and within six (6) months. (Sec. entering into a compromise. all relevant supporting documents should have been submitted. action for damages b. 12-85) 2. filing of claim for refund or tax credit within two years from date of payment regardless of any supervening cause. Filing of criminal complaint against erring BIR official and employees. Request for reinvestigation-a plea for re-evaluation of an assessment on the basis of newly discovered or additional evidence that a taxpayer intends to present in the reinvestigation. he may bring an action to recover the net proceeds realized at the sale.

. the Supreme Court has discretion whether or not to entertain a taxpayer’s suit and could brush side the lack of locus standi where the issues are transcendental importance in keeping with the court’s duty to determine that public officers have not abused the discretion given to them. the tax money is being extracted and spent in violation of specific Constitutional protections against abuses of legislative power 2. Requisites: 1. appeal to the CTA shall be made within 30 days from denial but within two years from date of payment. If there is a denial of the claim. by paying the assessed tax within 30 days from receipt of assessment and 2. SUGGESTED ANSWER: The taxpayer's remedies under the NATIONAL INTERNAL REVENUE CODE may be categorized into remedies before payment and remedies after payment. TCC Remedies (1996) Compare the taxpayer's remedies under the National Internal Revenue Code and the Tariff and Customs Code. Appellate Court: Court of Tax Appeals 3. that public money is being deflected to any improper purpose 3. 3. The remedy AFTER PAYMENT is availed of 1. Taxpayer: NIRC vs. Administrative Remedy which is the filing of protest within 30 days from receipt of assessment. 2. that the petitioner seeks to restrain the respondents from wasting public funds through enforcement of invalid or unconstitutional law Note: However. 30 days from the lapse of 180 day period 4. Effect of failure to appeal: the decision shall be final. the filing of a claim for refund or tax credit of these taxes on grounds that they are erroneously paid within two years from date of payment. and finally with the Supreme Court. Period to appeal: a. The remedy BEFORE PAYMENT consists of 1. within 30 days from receipt of decision denying the protest or b. and 2. Judicial Remedy which is the appeal of the adverse decision of the Commissioner on the protest with the Court of Tax Appeals. executory and demandable Taxpayer’s suit.

except: a. The failure of the government to inform the taxpayer in writing of the legal and factual bases of assessment makes it void 4. reversal or revocation shall not be given retroactive application to the prejudice of a taxpayer who relied on the previous ruling. if adverse to the Government.  Resort to judicial relief can be had by the taxpayer by appealing the decision of the Commissioner or of the Secretary of Finance (for cases subject to automatic review) within 30 days from the promulgation of the adverse decision to the CTA. as determined by the commissioner . irregularity or mistakes. the taxpayer should consider the continuous inaction of the Commissioner as a denial and elevate the case to the CTA before the expiration of the two-year period. 3. Substantive rights or remedies allowed a taxpayer: 1. 2. Fraud. If the decision of the Collector is adverse to the taxpayer. 5. Note: Examination of the books of account of corporations and partnership is only allowable once a year except in the following cases: 1. Where the taxpayer acted in bad faith 3. To question the constitutionality of tax statutes or regulations 2. Where the facts subsequently gathered by the BIR are materially different from the facts on which the ruling is based c. but such modification. Under the Tariff and Customs Code. Non-retroactivity of rulings. Preservation of books of accounts and once-a-year examination.  The decision of the Collector on the taxpayer's protest. Failure to publish documents which the law requires to be published.  If the Commissioner fails to act on the claim for refund or tax credit and the two-year period is about to expire. BIR rulings may be modified reversed or revoked by the CIR at anytime. and if such decision is affirmed by the Commissioner. is automatically elevated to the Commissioner for review. Where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the BIR b. he can notify the Collector within 15 days from receipt of said decision of his desire to have his case reviewed by the Commissioner. 1. The administrative remedies consist of filing a claim for refund which may take the form of abatement or drawback. The taxpayer can also file a protest within 15 days from payment if he disagrees with the ruling or decision of the Collector of Customs regarding the legality or correctness of the assessment of customs duties. the same shall be automatically elevated to and finally reviewed by the Secretary of Finance. taxpayer's remedies arise only after payment of duties.

228. the taxpayer shall submit all relevant supporting documents. Sec. then the taxpayer has a period of thirty (30) days from the lapse of said 180 days within which to interpose a petition for review with the Court of Tax Appeals. the taxpayer must administratively protest or dispute the assessment by filing a motion for reconsideration or reinvestigation within thirty (30) days from receipt of the notice of assessment. After receipt of the Pre-Assessment Notice. If the Commissioner of Internal Revenue issues an assessment notice. both at the administrative and judicial levels. collection and refund. (4th par. Verification of capital gains tax liabilities 5. Verification of compliance with withholding tax laws and regulations 4. another or separate examination and inspection may be made Taxpayer: Administrative & Judicial Remedies (2000) Describe separately the procedures on the legal remedies under the Tax Code available to an aggrieved taxpayer both at the administrative and judicial levels. b. NIRC of 1997) c.. Where the Commissioner of Internal Revenue has not acted on the taxpayer's protest within a period of one hundred eighty (180) days from submission of all relevant documents. . The taxpayer requests reinvestigation 3. he must within fifteen (15) days from receipt explain why no additional taxes should be assessed against him. The JUDICIAL REMEDIES of an aggrieved taxpayer relative to an ASSESSMENT NOTICE are as follows: a. b. may be classified into those for assessment. (5%) SUGGESTED ANSWER: The legal remedies of an aggrieved taxpayer under the Tax Code. In the exercise of the CIR power to obtain information from other persons in which case. The procedures for the ADMINISTRATIVE REMEDIES for ASSESSMENT are as follows: a.2. then he has a period of thirty (30) days from receipt of said denial within which to interpose a petition for review with the Court of Tax Appeals. Within sixty (60) days from filing of the protest. Should the Commissioner deny the taxpayer's protest.

In both cases the taxpayer must apply with the Court of Tax Appeals for the Issuance of an
Injunctive writ to enjoin the Bureau of Internal Revenue from collecting the disputed tax
during the pendency of the proceedings.

NOTE: A 2004 Amendment - The decision of the division of CTA is in turn appeallable
within fifteen (15) days to the CTA en banc. The decision of the CTA en banc is directly
appeallable to the Supreme Court on question of law on certiorari.

The employment by the Bureau of Internal Revenue of any of the Administrative Remedies
for the collection of the tax like distraint, levy, etc. may be administratively appealed by the
taxpayer to the Commissioner whose decision is appealable to the Court of Tax Appeals under
other matter arising under the provisions of the National Internal Revenue Code.

The judicial appeals starts with the Court of Tax Appeals, and continues in the same manner as
shown above.

Should the Bureau of Internal Revenue decide to utilize its Judicial tax remedies for collecting
the taxes by means of an ordinary suit filed with the regular courts for the collection of a
sum of money, the taxpayer could oppose the same going up the ladder of judicial processes
from the Municipal Trial Court (as the case may be) to the Regional Trial Court, to the
Court of Appeals, thence to the Supreme Court. (comment claims greater than 1M must be filed
with the CTA)

The remedies of an aggrieved taxpayer on a claim for refund is to appeal the adverse
decision of the Commissioner to the CTA in the same manner outlined above.

Prescription

SEC. 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section
222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by
law for the filing of the return, and no proceeding in court without assessment for the collection of
such taxes shall be begun after the expiration of such period: Provided, That in a case where a
return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from
the day the return was filed.

For purposes of this Section, a return filed before the last day prescribed by law for the filing
thereof shall be considered as filed on such last day.

SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes. -
(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return,
the tax may be assessed, or a proceeding in court for the collection of such tax may be filed
without assessment, at any time within ten (10) years after the discovery of the falsity, fraud or
omission: Provided, That in a fraud assessment which has become final and executory, the fact

of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection
thereof.

(b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax, both
the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the
tax may be assessed within the period agreed upon.

The period so agreed upon may be extended by subsequent written agreement made before the
expiration of the period previously agreed upon.

(c) Any internal revenue tax which has been assessed within the period of limitation as prescribed
in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in court within
five (5) years following the assessment of the tax.

(d) Any internal revenue tax, which has been assessed within the period agreed upon as provided in
paragraph (b) hereinabove, may be collected by distraint or levy or by a proceeding in court
within the period agreed upon in writing before the expiration of the five (5) -year period.

The period so agreed upon may be extended by subsequent written agreements made before the
expiration of the period previously agreed upon.

(e) Provided, however, That nothing in the immediately preceding and paragraph (a) hereof shall
be construed to authorize the examination and investigation or inquiry into any tax return filed
in accordance with the provisions of any tax amnesty law or decree.

Note:
The tax code provisions on prescription shall prevail over those of the civil code in actions relating to tax
collections

General rules covering prescriptive periods of taxes

Imprescriptibility of Tax Laws (1997)

General Rules:
1. When the tax law itself is silent on prescription, tax is imprescriptible;
2. When no return is required, tax is imprescriptible;
3. Defense of prescription is waivable; and
4. Provisions on prescriptions, being remedial in nature should be liberally interpreted to carry out
its intent.

Taxes were generally imprescriptible; statutes, however, may provide otherwise. State the rules
that have been adopted on this score by -

1. The National Internal Revenue Code;

2. The Tariff and Customs Code; and
3. The Local Government Code Answer:

SUGGESTED ANSWERS:

The rules that have been adopted on prescription are as follows:

1. National Internal Revenue Code - The statute of limitation for assessment of tax if a return is
filed is within three (3) years from the last day prescribed by law for the filing of the return or if
filed after the last day, within three years from date of actual filing. If no return is filed
or the return filed is false or fraudulent, the period to assess is within TEN YEARS
from discovery of the omission, fraud or falsity.

The period to collect the tax is within THREE YEARS from date of assessment. In
the case, however, of omission to file or if the return filed is false or fraudulent, the period
to collect is within TEN YEARS from discovery without need of an assessment.

2. Tariff and Customs Code - It does not express any general statute of limitation; it provided,
however, that "when articles have entered and passed free of duty or final adjustment
of duties made, with subsequent delivery, such entry and passage free of duty or
settlement of duties will, after the expiration of ONE (1) YEAR, from the date of the final
payment of duties, in the absence of fraud or protest, be final and conclusive upon all parties,
unless the liquidation of Import entry was merely tentative" (Sec 1603, TCC).

3. Local Government Code - Local taxes, fees, or charges shall be assessed within
FIVE (5) YEARS from the date they became due. In case of fraud or intent to evade the
payment of taxes, fees or charges the same maybe assessed within TEN YEARS from discovery
of the fraud or intent to evade payment. They shall also be collected either by
administrative or judicial action within FIVE (5) YEARS from date of assessment (Sec. 194,
LGC).

Note:
IAC is not covered by the prescriptive period

3 prescriptive period in the NIRC:
1. Period to assess the tax
2. Period to collect the tax
3. Period to institute a criminal action

GENERAL RULE:
three years after the date the return is due or filed, whichever is later.

EXCEPTIONS:

whereas the second is intentional and deceitful with the sole aim of evading the correct tax due (Aznar us. 97 SCRA 877). agreement in writing: to the extension (not reduction) of the period to assess between the Commissioner and the taxpayer before the expiration of the three year period. L-20569. or at least culpable negligence. Prima Facie Evidence (1998) What constitutes prima facie evidence of a false or fraudulent return? [2%] SUGGESTED ANSWER: There is prima facie evidence of a false or fraudulent return when the taxpayer has willfully and knowingly filed it with the intent to evade a part or all of the tax legally due from him (Ungab v. BIR. 2. i. Vol. false or fraudulent return with intent to evade the tax: ten (10) years from the date of the discovery of the falsity or fraud.. Prima Facie Evidence (2002) What constitutes prima facie evidence of a false or fraudulent return to justify the imposition of a 50% surcharge on the deficiency tax due from a taxpayer? Explain. August 23. 1974). page 173). False vs. Cusi. failure to file a return: ten (10) years from the date of the discovery of the omission to file the return. 1. Commissioner. the extended period agreed upon can further be extended by a subsequent written agreement made before the expiration of the extended period previously agreed upon. (Words and Phrases. There must appear a design to mislead or deceive on the part of the taxpayer. BIR: Fraudulent Return. Fraudulent Return (1996) Distinguish a false return from a fraudulent return. FALSE RETURN FRAUDULENT RETURN it merely implies a decision from the truth or fact It is intentional and deceitful with the aim of whether intentional or not evading the correct tax due. BIR: Fraudulent Return. 3. 16. (5%) . A mistake not culpable in respect of its value would not constitute a false return. SUGGESTED ANSWER: The distinction between a false return and a fraudulent return is that the first merely implies a deviation from the truth or fact whether intentional or not.

from assessment or within period for collection agreed upon in writing before expiration of the five-year period. Then. Prescriptive period for the COLLECTION of taxes: 1. receipts or income. and will justify the imposition of the 50% surcharge on the deficiency tax due from the taxpayer. the taxpayer's failure to report sales. Since the assessment was issued beyond the prescriptive period to assess. CIR. BIR. receipts or income in an amount exceeding 30% of that declared per return. Assessment.DECLARED his taxable sales. Taxpayer. 248. v. The assessment of July 31. and a claim of deduction in an amount exceeding 30% of actual deduction shall render the taxpayer liable for substantial underdeclaration and overdeclaration. binding effect (Tax Reform Act. No. 162852.R. respectively. the action to collect an invalid assessment is not warranted (Phil. Chapter I. Section 203 [1997]). 2004. Fraudulent Return (2002) . Five (5) years . 2001 and ends on April 16. Deficiency Income Tax (2006) The Commissioner of Internal Revenue issued an assess. Ten (10) years . 2004). I will file a petition for review with the CTA to question the collection. December 16. If the delinquent taxpayer is your client. Prescriptive Period.SUGGESTED ANSWER: There is a prima facie evidence of false or fraudulent return when the taxpayer SUBSTANTIALLY UNDER. I shall move to cancel the Assessment because of prescription. (Sec. ALTERNATIVE ANSWER: Since my client has lost his right to protest. The three (3) year period of assessment for the Income Tax Returns of 2000 starts on April 15. Title VIII. Assessment. I will advise him to wait for a collection action by the Commissioner. 2006 in the amount of P 10 Million inclusive of surcharge and interests.without assessment in case of false or fraudulent return with intern to evade or failure to file return. Jour.nalists. 2006 is beyond the three (3) year prescriptive period and can no longer have any legal. Inc. or SUBSTANTIALLY OVERSTATED his deductions.ment for deficiency income tax for taxable year 2000 last July 31. G. Prescriptive Period. 2. what steps will you take? What is your defense? (10%) ALTERNATIVE ANSWER: As Counsel. NIRC).

3. The waiver should be duly notarized. In writing. a.00. The estate tax return was filed and the estate tax due in the amount of P250. who died on June 10. which indicates the expiry date of the period agreed upon to assess/collect the tax after the regular three-year period of prescription. was issued against him on January 10. The date of such acceptance by the BIR should be indicated. the CIR or the revenue official . should be filled up. Decide Mr. Castro protested the assessment on the ground of prescription. the assessment was issued within that prescriptive period to make an assessment based on a fraudulent return. Santos on January 06. 1998 that the return filed by Mr. The waiver must be in the proper form prescribed by RMO 20-90. The phrase “but not after ______ 19 ___”. such delegation should be in writing and duly notarized. In the case of a corporation. What was filed is a fraudulent return making the prescriptive period for assessment ten (10) years from discovery of the fraud (Section 222. The CIR or the revenue official authorized by him must sign the waiver indicating that the BIR has accepted and agreed to the waiver. interest and penalty. before signing the waiver. However. the waiver must be signed by any of its responsible officials. The protest should be resolved against Mr. Note: The CIR may issue a revised assessment and the same shall be valid even if issued during the pendency of any appeal provided however that the same is issued within the prescriptive period.00 was paid on December 06. c. For a definite period beyond the ordinary prescriptive periods for assessment and collection 5. Castro's protest. 1994. (2%) SUGGESTED ANSWER: A.000. Accordingly. d. In case the authority is delegated by the taxpayer to a representative. As a result. The Tax Fraud Division of the BIR investigated the case on the basis of confidential information given by Mr. A. a deficiency estate tax assessment for P1. Agreed to by both the Commissioner and the taxpayer. Mr. several pieces of real property in Metro Manila. Before the expiration of the ordinary prescriptive periods for assessment and collection. 4. The waiver must be signed by the taxpayer himself or his duly authorized representative. inclusive of 50% surcharge for fraud.000. Requisites of a valid waiver of the period (222(b)) 1. 2.250. NIRC). 1994. Mr. b. 2001. Castro. Castro was fraudulent and that he failed to declare all properties left by his father with intent to evade payment of the correct tax. Castro inherited from his father.

a Philippine Corporation. Amended return Allowed when: 1. the original copy to be attached to the docket of the case. the BIR issued a . in a net income position. the second copy for the taxpayer and the third copy for the Office accepting the waiver. and 2. the return is valid . 1996. authorized by him must make sure that the waiver is in the prescribed form. the right of the BIR to assess the tax is counted from the filing of the amended return. The fact of receipt by the taxpayer of his/her file copy must be indicated in the original copy to show that the taxpayer was notified of the acceptance of the BIR and the perfection of the agreement. 1999. where the amended return is substantially different from the original. the BIR disallowed certain deductions claimed by A Co. been actually served upon the taxpayer. The waiver must be executed in three copies.it has complied substantially with the requirements of the law. Note: A defective tax return is the same as if no return was filed at all. it amended its 1995 ITR to show more losses. 1996 showing a net loss. Note: As a general rule the prescriptive period for assessment starts to run from the filing of the original return. if the same is sufficiently complete to enable the CIR to intelligently determine the proper amount of tax to be assessed. As a result. in the meantime. Requisites of a tax return for purposes of starting the running of the period of limitation: 1. After a tax investigation. on August 5. 2. the amendment is made within 3 years from the date of filing the original return. e. the return is appropriate – it is a return for the particular tax is required by law. the right to assess is counted from the filing of the amended return. Both the date of execution by the taxpayer and date of acceptance by the Bureau should be before the expiration of the period of prescription or before the lapse of the period agreed upon in case a subsequent agreement is executed. However. duly notarized. filed its 1995 Income Tax Return (ITR) on April 15. and executed by the taxpayer or his duly authorized representative. f. The prescriptive period starts to run from the filing of the original return. BIR: Prescriptive Period. Assessment & Collection (1999) A Co. putting A Co. no notice of audit or investigation of such return has. and 2.. Effect of amended return on prescription: 1.. On November 10. if the same is sufficiently complete to enable the CIR to intelligently determine the proper amount of tab to be assessed. However where the amended return is substantially different from the original retur.

when the warrant of distraint or levy is duly served upon the taxpayer. the original assessment of P150. (Adamson) filed a request for reconsideration of the deficiency withholding tax assessment on July 10. 223. There is a substantial amendment in this case because a new return was filed declaring more losses.00 was reduced to P75. However. and when the taxpayer is out of the Philippines Grounds for suspension of the running of prescriptive period for assessment and collection: 1. that. BIR: Prescriptive Period: Civil Action (2002) On August 5.. and no property is located. when the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected: Provided. SEC.000. when the Commissioner is prohibited from making the assessment or beginning the distraint or levy or proceeding in court. his authorized representative.(Section 203. 14 SCRA 52). 4. Inc. Phoenix Assurance Co. and for sixty days thereafter. 1999. Ltd. if the taxpayer informs the Commissioner of any change in address. covering the taxable year 1994. 2. when the warrant of distraint or levy is duly served. protested the assessment on the ground that it has prescribed: Decide. 1997. and no property could be located. 3. The rule is that internal revenue taxes shall be assessed within three years after the last day prescribed by law for the filing of the return. claimed.000. After administrative hearings.. the running of the Statute of Limitations will not be suspended. and 5. A Co. Suspension of Running of Statute of Limitations. when the taxpayer requests for a reinvestigation which is granted by the Commissioner. the counting of the three-year period starts from the date the amended return was filed. which can only be done either (1) in reducing gross income or (2) in increasing the items of deductions. deficiency income assessment against A Co. or a member of his household with sufficient discretion. Adamson Co. (CIR v. if the return originally filed is amended substantially.00 and a modified assessment was thereafter issued on August 05. when the taxpayer is out of the Philippines. (5%) SUGGESTED ANSWER: The right of the BIR to assess the tax has not prescribed. The running of the Statute of Limitations provided in Sections 203 and 222 on the making of assessment and the beginning of distraint or levy a proceeding in court for collection. in respect of any deficiency. 1997. shall be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for sixty (60) days thereafter. when the taxpayer cannot be located in the address given by him in the return. unless he informs the Commissioner of any change in his address. NIRC). Despite repeated . when the taxpayer requests for a reinvestigation which is granted by the Commissioner..

A request for reinvestigation shall toll the prescriptive period only if: i. When the BIR validly issues an assessment. the BIR has three years. No. The assessment of the tax is deemed made and the three-year period for collection of the assessed tax begins to run on the date the assessment notice had been released. as to commencement of the prescriptive period: a. 8. the period to collect shall be five (5) years from the date of the assessment but this period is suspended by the filing of a request for reconsideration which was acted upon by the Commissioner of Internal Revenue (CIR v. Consequently. 2. Adamson moved to dismiss the action on the ground that the government's right to collect the tax by judicial action has prescribed. – refers to a plea for a re-evaluation of an assessment on the basis of existing records without need of additional evidence. mailed or sent by the BIR to the taxpayer.R. – refers to a plea for re-evaluation of an assessment on the basis of newly-discovered or additional evidence that a taxpayer intends to present in the reinvestigation. whichever comes later.. Adamson failed and refused to pay the modified assessment. then the BIR has another five years after the assessment within which to collect the national internal revenue tax due thereon by distraint. Inc. demands. Decide the case. fraud. It must be noted that in all cases covered by an assessment. or omission. 3. levy. 5. If timely filed by the taxpayer . 7. As to motions for reconsideration and reinvestigation of assessment: a. to assess a national internal revenue tax or to begin a court proceeding for the collection thereof without an assessment. 139736) 1. counted from the date of actual filing of the return or from the last date prescribed by law for the filing of such return. 202 SCRA 125 [1991]) Summary of rules on prescription (memorize BPI vs CIR G. whichever is appropriate. the BIR brought an action for collection in the Regional Trial Court on September 15. (5%) SUGGESTED ANSWER: The right of the Government to collect by judicial action has not prescribed. Existing jurisprudence establishes that distraint and levy proceedings are validly begun or commenced by the issuance of the Warrant and service thereof on the taxpayer. The filing of the request for reconsideration suspended the running of the prescriptive period and commenced to run again when a decision on the protest was made on August 5. A request for reconsideration or reinvestigation if coupled with a valid waiver of the statute of limitations will extend the prescriptive period to the date specified therein 6. Wyeth Suaco Laboratories. 1999. b. Request for reconsideration. 2000. Request for reinvestigation. It may also involve a question of fact or law or both. In case of a false or fraudulent return with intent to evade tax or the failure to file any return at all. 4. within either the three-year or ten-year period. It may involve both a question of fact or of law or both. the prescriptive period for assessment of the tax due shall be 10 years from discovery by the BIR of the falsity. and/or court proceeding.

After the investigation of said return/the BIR issued a notice of deficiency income tax assessment on April 15. on 15 January 1996 an as. Will the protest prosper? Explain. A request for reconsideration will generally not toll the prescriptive period except when: i. extending the prescriptive period ii. The grant may be expressed in communications with the taxpayer or implied from the actions of the respondent BIR Commissioner or his authorized BIR representatives in response to the request for reinvestigation. the taxpayer forthwith filed a petition for review with the Court of Tax Appeals. It is coupled with a valid waiver of the statute of limitations. When the request for reconsideration constitutes estoppel on the part of the taxpayer. he filed a protest against the assessment on the ground that he did not receive the notice of assessment and that the assessment had prescribed. ii. he left the Philippines as an immigrant to join his family in Canada. The burden of proof that the taxpayer’s request for reinvestigation had been actually granted shall be on respondent BIR Commissioner. Reyes. Mr. Reyes was out of the Philippines or from the period December 15. and c. when the taxpayer cannot be located in the address given by him in the return. (5%) SUGGESTED ANSWER: No. for good reasons.sessment for an internal revenue tax deficiency. 1995 up to December 8. a Filipino citizen engaged in the real estate business. Taxpayer: Exhaustion of Administrative Remedies (1997) (a) A taxpayer received. persuaded to postpone collection to make the taxpayer feel that the demand is not unreasonable or that no harassment or injustice is meant by the Government. 1998. Could the Tax Court entertain the petition? . The CIR has granted the motion either expressly or impliedly by its acts of investigating again the facts and laws of the case b. the Government had been. preventing him from raising the defense of prescription as when his own repeated requests or positive acts. Reyes returned to the Philippines as a balikbayan on December 8. filed his 1994 income tax return on March 20. 9. On December 15. 1998. unless he informs the Commissioner of any change in his address. 10. b. and no property is located. when the taxpayer is out of the Philippines. Finding his name to be in the list of delinquent taxpayers. 1998. On 10 February 1996. Taxpayer: Prescriptive Period: Suspended (2000) Mr. 1995. Prescription has not set in because the period of limitations for the Bureau of Internal Revenue to issue an assessment was SUSPENDED during the time that Mr. when the warrant of distraint or levy is duly served. 1995. The existence of any of the following grounds which will toll the prescriptive period: a. When the reconsideration was in fact a request for re-investigation iii.

A Co. the taxpayer. It was denied. 26. 1988). a Philippine corporation. submitted to the BIR all relevant supporting documents. on 15 March 1997. 16 SCRA 584. . A Co. (b) Under the above factual setting. A Co. The taxpayer requested a refund from the Commissioner by submitting a written claim on 1 March 1997. Has the CTA jurisdiction over the case? SUGGESTED ANSWER. An assessment by the BIR is not the Commissioner's decision from which a petition for review may be filed with the Court of Tax Appeals. When the Commissioner decided to collect the tax assessed without first deciding on the taxpayer's protest. Taxpayer: Protest against Assessment (1999) A Co. filed a petition for review with the Court of Appeals. was served a summons and a copy of the complaint for collection of the tax deficiency filed by the BIR with the Regional Trial Court (RTC). filed its protest with the BIR. 1995. Inc. Cruz. It is the Commissioner's decision on the protest that give the Tax Court jurisdiction over the case provided that the appeal is filed within 30 days from receipt of the Commissioner's decision. (b) No. On July 30. 1. since decisions of the Commissioner on cases involving claim for tax refunds are within the exclusive and primary jurisdiction of the Court of Tax Appeals (Section 7. Dayrit v. Before taxpayer can avail of Judicial remedy he must first exhaust administrative remedies by filing a protest within 30 days from receipt of the assessment. it is the action taken by the Commissioner in response to the taxpayer's protest on the assessment that would constitute the appealable decision (Section 7. Sept. L-39910. (Republic v.. 1996.. instead of questioning the assessment he received on 15 January 1996 paid. the effect of the Commissioner’s action of filing a judicial action for collection is a decision of denial of the protest. Yes. the CTA has jurisdiction over the case because this qualifies as an appeal from the Commissioner's decision on disputed assessment. Lim Tian Teng & Sons. and should therefore be dismissed. brought a Petition for Review before the CTA. in which event the taxpayer may file an appeal with the CTA. Could the petition still be entertained? SUGGESTED ANSWER: (a) No. The CIR did not formally rule on the protest but on January 25. On May 31.RA1125). 1995. On February 20. The taxpayer. Rather. the petition for review can not be entertained by the Court of Appeals. received an income tax deficiency assessment from the BIR on May 5. RA 1125). 1995. The BIR contended that the Petition is premature since there was no formal denial of the protest of A Co. A Co. on 01 March 1996 the "deficiency tax" assessed. 1996.

.

however. . or of any sum alleged to have been excessively or in any manner wrongfully collected. . Tax Credit or Refund SEC. refund or credit any tax. whether or not such tax. no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided. even without a written claim therefor. 229.no suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected. penalty. of any sum alleged to have been excessively or in any manner wrongfully collected without authority. or of any penalty claimed to have been collected without authority. until a claim for refund or credit has been duly filed with the Commissioner. such payment appears clearly to have been erroneously paid. That the Commissioner may. or sum has been paid under protest or duress. Recovery of Tax Erroneously or Illegally Collected. In any case. but such suit or proceeding may be maintained. where on the face of the return upon which payment was made.

every six (6) months. Forfeiture of Cash Refund and of Tax Credit. 230. stating therein the following facts and information.A refund check or warrant issued in accordance with the pertinent provisions of this Code. A Tax Credit Certificate validly issued under the provisions of this Code may be applied against any internal revenue tax. which shall remain unclaimed or uncashed within five (5) years from the date the said warrant or check was mailed or delivered. Authority of the Commissioner to Compromise. Any request for conversion into refund of unutilized tax credits may be allowed. however. subject to the provisions of Section 230 of this Code: Provided. be considered invalid. That in no case shall a tax refund be given resulting from availment of incentives granted pursuant to special laws for which no actual payment was made. shall. for which the taxpayer is directly liable. That the said report shall be presented to the Oversight . shall be forfeited in favor of the Government and the amount thereof shall revert to the general fund.. amount involved. cralaw (B) Forfeiture of Tax Credit. and reasons for the exercise of power: Provided. and.A tax credit certificate issued in accordance with the pertinent provisions of this Code. a report on the exercise of his powers under this Section. . among others: names and addresses of taxpayers whose cases have been the subject of abatement or compromise. refund the value of internal revenue stamps when they are returned in good condition by the purchaser. redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. further. amount compromised or abated. unless revalidated. 204. excluding withholding taxes.SEC. That a return filed showing an overpayment shall be considered as a written claim for credit or refund. - (A) Forfeiture of Refund. and shall not be allowed as payment for internal revenue tax liabilities of the taxpayer. in his discretion. which shall remain unutilized after five (5) years from the date of issue. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two (2) years after the payment of the tax or penalty: Provided. - The Commissioner may - XXXXXX (C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority. The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of both the Senate and House of Representatives. and the amount covered by the certificate shall revert to the general fund SEC. Abate and Refund or Credit Taxes. That the original copy of the Tax Credit Certificate showing a creditable balance is surrendered to the appropriate revenue officer for verification and cancellation: Provided.

the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided. 112. Committee in Congress that shall be constituted to determine that said powers are reasonably exercised and that the government is not unduly deprived of revenues. within two (2) years after the close of the taxable quarter when the sales were made. - (A) Zero-Rated or Effectively Zero-Rated Sales. (B) Capital Goods. it shall be allocated proportionately on the basis of the volume of sales. the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of compete documents in support of the application filed in accordance with Subsections (A) and (B) hereof. however. within two (2) years from the date of cancellation. SEC.any VAT-registered person. In case of full or partial denial of the claim for tax refund or tax credit. except transitional input tax. (C) Cancellation of VAT Registration. The application may be made only within two (2) years after the close of the taxable quarter when the importation or purchase was made. Refunds or Tax Credits of Input Tax. (D) Period Within Which Refund or Tax Credit of Input Taxes Shall be Made. . or due to changes in or cessation of status under Section 106(C) of this Code may. apply for the issuance of a tax credit certificate for any unused input tax which may be used in payment of his other internal revenue taxes. That in the case of zero-rated sales under Section 106(A)(2)(a)(1). and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions. apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales. appeal the decision or the unacted claim with the Court of Tax Appeals. That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services.In proper cases. or the failure on the part of the Commissioner to act on the application within the period prescribed above. the taxpayer affected may. .A person whose registration has been cancelled due to retirement from or cessation of business.. . (2) and (B) and Section 108 (B)(1) and (2). to the extent that such input taxes have not been applied against output taxes..A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased. to the extent that such input tax has not been applied against output tax: Provided. whose sales are zero-rated or effectively zero-rated may. within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period. further.

Refund Credit There is actual reimbursement of the tax The reimbursable mount is applied against the sum that may be due of collectible from the taxpayer Grounds: 1. the provisions of the Administrative Code of 1987 to the contrary notwithstanding: Provided. . Tax credit A claim for issuance of a tax credit certificate. the corporation shall either: (A) Pay the balance of tax still due. . 2. That refunds under this paragraph shall be subject to post audit by the Commission on Audit. 3. or (B) Carry-over the excess credit. or (C) Be credited or refunded with the excess amount paid. SEC.Refunds shall be made upon warrants drawn by the Commissioner or by his duly authorized representative without the necessity of being countersigned by the Chairman. such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed therefor. it must be filed with the Commissioner within two years (2) after the payment of the tax or penalty. tax is collected erroneously or illegally. Show proof of payment. . In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid. 2. showing an amount owing from the government to the taxpayer which the latter is legally authorized to credit or offset against national internal taxes payable by him. Commission on audit. 76. penalty is collected without authority.Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. (E) Manner of Giving Refund. Final Adjustment Return. and 3. sum collected is excessive Requisites: 1. as the case may be. claim must be in writing. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable income of that year. except withholding taxes. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made.

Phi/Am Life Insurance Co. 1995). The counting of the two-year prescriptive period for filing a claim for refund is counted not from the date when the quarterly income taxes were paid but on the date when the final adjustment return or annual income tax return was filed (CIR v. No. On 10 January 1994.. The third quarter resulted in a net loss. 1994 because the written claim for refund was filed with the BIR on January 10. alleged that the claim for refund was filed beyond the reglementary period. Income tax paid in installments i. and the taxpayer indicated in the income tax return that it opted to claim a refund of the quarterly income tax payments. 1996 is beyond the reglementary period.5 million. BIR failed to act on the claim for refund. January 15. the 2-year period for the filing of the claim for refund or credit shall be counted from the date of the filing of the annual corporate ITR. CIR v. For the first quarter of 1993. and no tax was paid. G. On 20 August 1993. the corporation filed a petition for review with the Court of Tax Appeals on its claim for refund of the overpayment of its 1993 quarterly income tax. It is obvious that the annual income tax return was filed before January 10.5 million. b. it paid on 30 May 1993 its quarterly income tax in the amount of P3.Rules as to the commencement date of the 2 year prescriptive period: 1. the corporation filed with the Bureau of Internal Revenue a written claim for the refund of P3. May 29. the taxes are deemed paid. 105208. . 83736. Taxpayer: Prescriptive Period. Where a corporation paid quarterly income taxes in any of the first 3 quarters during the taxable year but incurs a net loss during the taxable year. As a general rule the commencement date of the 2 year period is from the date of payment regardless of any supervening cause that may arise after payment: 2.. Inc. it paid the second quarterly income tax of P0. No. For the fourth and final return for 1993.0 million.R. Claim for Refund (1997) A corporation files its income tax return on a calendar year basis. Did the claim for refund prescribe? SUGGESTED ANSWER: The claim for refund has prescribed.R. on 02 March 1996. BIR. Where the tax paid had been paid in installment. 1994. for purposes of determining the commencement of the 2-year period for filing a written claim for the refund or credit therefore on the date the last installment was paid. G. the petition for review filed with the CTA on March 02. the company reported a net loss for the year. Corporate Income tax i. EXCEPTIONS: a. in its answer to the petition. 1992. TMX Sales Inc.. hence. Since the two-year prescriptive period is not only a limitation of action in the administrative stage but also a limitation of action for bringing the case to the judicial stage.

Note: Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made such option shall be considered irrevocable for that taxable period and no application for cash refund or issuance of a tax credit shall be allowed therefor Taxpayer. In the subsequent quarters. Claims for Refund (1994) XCEL Corporation filed its quarterly income tax return for the first quarter of 1985 and paid an income tax of P500.000. Note: A return filed showing an overpayment shall be considered as a written claim for credit or refund. TMX Sales. the two-year prescriptive period for tax refunds (Sec. and not from the filing of the quarterly return and payment of the quarterly tax. 1985.000. which is similar to this case. If in a taxable year a bookstore has no tax due on which to apply the tax credits. 67 of the Tax Code. 1. 230.000. In the case of Commissioner v. 205 SCRA 184. XCEL suffered losses so that on April 15.00 on May 15.00 in taxes paid on May 15. the Supreme Court ruled that in the case of overpaid quarterly corporate income tax. (2.. 1988 was clearly within the reglementary two-year period from the filing of the final adjustment return of the corporation on April 15.000. 1986 it declared a net loss of P1. adjustment return under Sec. Taxpayer: Prescriptive Period. 1985. 1988 a case with the Court of Tax Appeals to recover the P500. Inc. The CTA action on March 1. 1986. Is the action to recover the taxes filed timely? SUGGESTED ANSWER: The action for refund was filed in the Court of Tax Appeals on time. After failing to get a refund. Claim for Tax Credits (2006) Congress enacts a law granting grade school and high school students a 10% discount on all school-prescribed textbooks purchased from any bookstore.00 in its annual income tax return. can the bookstore claim from the BIR a tax refund in lieu of tax credit? Explain. The law allows bookstores to claim in full the discount as a tax credit. XCEL filed on March 1.5%) SUGGESTED ANSWER: . Tax Code) is counted from the filing of the final. the two-year period for filing claims for refund in the BIR as well as in the institution of an action for refund in the CTA.

R. 2005). April 15. If the business continues to operate at a loss and no other taxes are due. No. thus compelling it to close shop. No. G. July 21. Bicolandia Drug Corp. Central Luzon Drug. A tax credit is in the nature of a tax exemption and in case of doubt. 2005).. April 15. 3. Note: A tax refund is treated as a tax exemption as such it is strictly construed against the taxpayer and the burden of proof is on the taxpayer to prove that he is entitled to the tax refund requested. 159647. CIR v.R. it may no longer be revoked. Note: Once the option of applying the tax credit has been made. to pay the balance of the tax due 2. If there is a deficiency in payment. can it claim reimbursement of the discount from the government on the ground that without such reimbursement. Options available to the taxpayer when the tax paid is not equal to the tax due: 1. If a bookstore closes its business due to losses with. Central Luzon Drug Corp.5%) SUGGESTED ANSWER: No. Carry over the excess credit 3.R. No. the credit can never be applied and will be lost altogether (CIR v. Tax credit which reduces the tax liability is different from a tax deduction which merely reduces the tax base.R. 2. cannot claim reimbursement of the discount from the government. the law constitutes taking of private property for public use without just compensation? Explain. G. (5%) SUGGESTED ANSWER: A bookstore. The grant of the discount to the taxpayer is a mere privilege and can be revoked anytime. the bookstore cannot claim from the BIR a tax refund in lieu of tax credit. However the adverse decision of the CIR is not required to the institution of the action in the . 148083. No 159647. Central Luzon Drug. G. the doubt should be resolved in strictissimi juris against the claimant.. G. Note: It is a precondition to the filing of an action for refund in the courts that an request for refund be filed with the CIR. Can the BIR require the bookstores to deduct the amount of the discount from their gross income? Explain. 2005). There is nothing in the law that grants a refund when the bookstore has no tax liabil. (2. Since the law allowed the bookstores to claim in full the discount as a tax credit. April 15. 159647.out being able to recoup the discount. closing its business due to losses.ity against which the tax credit can be used (CIR v. 2006. the BIR is not allowed to expand or contract the legislative mandate (CIR v. Be credited or refunded the amount paid. No.

he realized that he had overpaid and so he immediately filed a claim for refund with the Commissioner of Internal Revenue. the following conditions must be met: 1. Since the appeal was only made on March 24. The law provides that "no suit or proceeding shall be filed after the expiration of two years from the date of the payment of the tax or penalty regardless of any supervening cause that may arise after payment (Section 229. REN had lost his judicial remedy because of prescription. 2. Ten months later. 2003. Claims for Refund (2004) On March 12. 2003. REN filed an appeal with the Court of Tax Appeals. Refund or Credit of Taxes (2005) State the conditions required by the Tax Code before the Commissioner of Internal Revenue could authorize the refund or credit of taxes erroneously or illegally received. Authority. JVZRCJ. 3. BIR. Taxpayer: Prescriptive Period. 2003. Taxpayer. On March 24.courts hence if within the 2 year prescriptive period is about to lapse and there has been no action on the part of the CIR as to the request for refund the taxpayer must institute an action before the CTA otherwise his claim will be barred by prescription. On February 27. Withholding Agent. Accordingly. REN paid his taxes. more than two years had already elapsed from the time the taxes were paid on March 12. 2003. (5%) SUGGESTED ANSWER: The appeal was not filed on time. he received the decision of the Commissioner denying REN's claim for refund. SUGGESTED ANSWER: Under Sec. There must be a written claim for refund filed by the taxpayer with the Commissioner. The claim for refund must be filed within two (2) years from date of payment of the tax or penalty regardless of any supervening cause. NIRC. Was his appeal filed on time or not? Reason. 2001. . 204(C). The two-year period of limitation for filing a claim for refund is not only a limitation for pursuing the claim at the administrative level but also a limitation for appealing the case to the Court of Tax Appeals. The claim for refund must be a categorical demand for reimbursement. Claim of Tax Refund (2005) Does a withholding agent have the right to file an application for tax refund? Explain.

229. he has sufficient legal interest to file an application for refund. refund or credit any tax where on the face of the return upon which payment was made. or tax credit for. Collector. Procedure (2002) A. 87 Phil. When the taxpayer files a return which on its face shows an overpayment of the tax and the option to refund/ claim a tax credit was chosen by the taxpayer. taxes and penalties which he alleges to have been erroneously. 229. illegally or excessively assessed or collected: 1. 204. The claim filed must state a categorical demand for reimbursement (Bermejo v. 2. (Sec. 1991) Taxpayer: Claim for Refund.R. (Sees. the withholding tax agent who is "required to deduct and withheld any tax" is made "personally liable for such tax" should the amount of the tax withheld be finally found to be less than that required to be withheld by law. NIRC). 66838. Yes. Moreover. B. Can the Commissioner grant a refund or tax credit even without a written claim for it? (2%) SUGGESTED ANSWER: B. December 2." Since. Periods of refund with respect to VAT: . What must a taxpayer do in order to claim a refund of. Thus. NIRC). G. No. taxes and penalties which he alleges to have been erroneously. because a return filed showing an overpayment shall be considered as a written claim for credit or refund. NIRC). This is so. illegally or excessively assessed or collected? (3%) SUGGESTED ANSWER: The taxpayer must comply with the following procedures in claiming a refund of. (Commissioner of Internal Revenue v.SUGGESTED ANSWER: Yes. then he is a taxpayer. Procter & Gamble. the Commissioner shall grant the refund or tax credit without the need for a written claim. He should file a written claim for refund with the Commissioner within two years after the date of payment of the tax or penalty (Sec. 76 and 204. the law provides that the Commissioner may. of the amount he believes was illegally collected from him. even without a written claim therefor. or tax credit for. 3. 96 [1950]). A taxpayer is "any person subject to tax. such payment appears clearly to have been erroneously paid. NIRC). The suit or proceeding for recovery must be commenced in court within two years from date of payment of the tax or penalty regardless of any supervening event that will arise after payment (Sec.

Is the stand of the Commissioner correct? Reason. There was no claim for refund or credit that has been duly filed with the Commissioner of Internal Revenue which is required before a suit or proceeding can be filed in any court (Sec.3028. since it is on that date it can be determine whether the input tax has been applied to the output tax. The Executor of the Estate of Jose de la Cruz (Executor) filed a timely protest against the assessment and requested for waiver of the surcharge.R. The denial of the claim by the Commissioner is the one which will vest the Court of Tax Appeals jurisdiction over the refund case should the taxpayer decide to appeal on time. 1950) . Why is the filing of an administrative claim with the BIR necessary? (3%) SUGGESTED ANSWER: The filing of an administrative claim for refund with the BIR is necessary in order: 1) To afford the Commissioner an opportunity to consider the claim and to have a chance to correct the errors of subordinate officers (Gonzales v. 14 SCRA 79). and 2) To notify the Government that such taxes have been questioned and the notice should be borne in mind in estimating the revenue available for expenditures. The following day. 1997. The Commissioner filed a Petition for Review with the Court of Appeals assailing the jurisdiction of the CTA and the Order to make refund to the Estate on the ground that no claim for refund was filed with the BIR. (2%) SUGGESTED ANSWER: Yes. the Executor was made to pay the deficiency assessment on October 10. L. the Bureau of Internal Revenue (BIR) issued against the Estate of Jose de la Cruz a notice of deficiency estate tax assessment. A. At the administrative level. July 29. 229. interest and compromise penalty. Consequently. B. At the judicial level. Collector. No. the Executor filed a Petition with the Court of Tax Appeals (CTA) praying for the refund of the surcharge. 1997. The protest was denied by the Commissioner of Internal Revenue (Commissioner) with finality on September 13. Taxpayer: Assessment: Protest: Claims for refund (2000) On June 16. the two year prescriptive period should not immediately be counted from the close of the quarter but from the date of filing of the vat return. 1997. G. The CTA took cognizance of the case and ordered the Commissioner to make a refund. 2. interest and penalty. et al. the 2 year period for the filing of a written claim with the BIR is counted from the close of the taxable quarter when the sales or importation or purchase were made. 1. (Bermejo v. interest and compromise penalty. NIRC of 1997). CTA. inclusive of surcharge.

otherwise. The filing of the petition for review with the CTA was timely made. therefore. On July 6. a protest at the time of payment is required to preserve the taxpayers' claim for refund. or within 15 days thereafter. a written protest setting forth his objections to the ruling or decision in question (Sec. In a letter dated June 4. SUGGESTED ANSWER: For TAXES imposed under the NIRC. . 1997. a Philippine corporation. 1996. 5 days later. On December 10. 1997 and received by A Co. This is clear under Section 230 of the NIRC which provides that a suit or proceeding maybe maintained for the recovery of national internal revenue tax or penalty alleged to have been erroneously assessed or collected. filed its protest with the BIR On May 20. 185 SCRA 547).. The BIR moved to dismiss the Petition on the ground that the CTA has no jurisdiction over the case. The procedure under the TCC is to the effect that when a ruling or decision of the Collector of Customs is made whereby liability for duties is determined. Taxpayer: Protest. the BIR issued a warrant of distraint to enforce the assessment. 1996. on May 25. 1997. TCC). the period to appeal will not commence to run. That final action cannot be implied from the mere issuance of a warrant "of distraint and levy.'s protest stating that it constitutes his final decision on the matter. (10%) SUGGESTED ANSWER: The CTA has jurisdiction over the case. filed a Petition for Review with the CTA. The Supreme Court has ruled that the CIR must categorically state that his action on a disputed assessment is final. the CIR formally denied A Co. (CIR v. at the time when payment is made. A Co. the party adversely affected may protest such ruling or decision by presenting to the Collector. The appealable decision is the one which categorically stated that the Commissioner's action on the disputed assessment is final and. received an income tax deficiency assessment from the BIR on November 25. whether such tax or penalty has been paid under protest or not. 1999. For DUTIES imposed under the Tariff and Customs Code. the reckoning of the 30-day period to appeal was on June 9. 2308. This warrant was served on A Co. Claim of Refund (1996) Is protest at the time of payment of taxes and duties a requirement to preserve the taxpayers' right to claim a refund? Explain. Decide. Union Shipping Corporation.Taxpayer: Protest against Assessment (1999) A Co. protest at the time of payment is not required to preserve the taxpayers' right to claim refund. 1997. A Co.

00. If you were the Commissioner of Internal Revenue. As such. will not suspend the prescriptive period to institute an action in the CTA since it is not the officer which the law has specified to whom the appeal should be taken..Aug. which is not at all considered a tax to the buyer but a part of the purchase price. The suppliers of these goods shifted to Lily's Fashion.000. Acetylene Co. it has the effect of divesting the RTC (when appropriate) of jurisdiction under the reasoning that there is no cause of action since the RTC requires a valid assessment to anchor its decision upon since the assessment itself is being reviewed in the CTA hence there is nothing for the RTC to enforce. Non-VAT taxpayer. BIR: Court of Tax Appeals: Collection of Taxes. the 10% VAT on the purchased items amounting to P 500. it can not claim exemption for a tax shifted to it. Grounds for Compromise (1996) 1. is a garment manufacturer located and registered as a Subic Bay Freeport Enterprise under Republic Act No. it purchased various supplies and materials necessary in the conduct of its manufacturing business. Inc. is only for taxes for which it is directly liable. 229 of the .Note: An appeal to the SEC of finance over the decision of the CIR except on tariff cases. I will not allow the refund. filed with the BIR a claim for refund for the input tax shifted to it by the suppliers. Only VAT-Registered taxpayers are entitled to a refund of their unapplied/unused Input VAT (Tax Reform Act. Inc. 7227 and a non-VAT taxpayer. Lily's fashion is not the taxpayer in so far as the passed-on tax is concerned and therefore. ALTERNATIVE ANSWER: No. will you allow the refund? (5%) ALTERNATIVE ANSWER: No. 17. it is exempt from payment of all local and national internal revenue taxes. During its operations. SUGGESTED ANSWER: Yes. it can not claim for a refund of a tax merely shifted to it (Phil. L-19707. Inc. VAT. Inc. The exemption of Lily's Fashion. Lily's Fashion. v. Section 112[A] [1997]). CIR. 11 of RA. Claim for Refund (2006) Lily's Fashion. No. When a decision of the Commissioner on a tax protest is appealed to the CTA pursuant to Sec. May the Court of Tax Appeals issue an injunction to enjoin the collection of taxes by the Bureau of Internal Revenue? Explain. Inc. Hence. 1125 (law creating the CTA) in relation to Sec. 1987) Note: Once an appeal on the decision of the CIR as to the validity of assessment is filed to the CTA.

bank accounts. order or decision by the CTA favorable to the national government. to seize and distrait any goods. The presiding justice and the most senior associate justice shall serve as chairmen of the two divisions.e. 3. to administer oaths.A. and 9. to issue order authorizing distraint of personal property and levy of real personal property. 8. to punish contempt. 9282. 7. NIRC. 2. SUGGESTED ANSWER: Yes. each division consisting of 3 justices. although legal propriety demands that prior leave of court should be obtained COURT OF TAX APPEALS (R. debts. 2004) COMPOSITION 1. to receive evidence. even during appeal. During the pendency of the appeal. the Court at any stage of the proceedings may suspend or restrain the collection of the tax and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court. when in the opinion of the CTA the collection of the tax may jeopardize the interest of the Government and/or the taxpayer. and interest in and rights to personal property and/or . to render decisions on case brought before it. to assess damage against appellant if appeal to CTA is found to be frivolous or dilatory. 5.approved March 30. the CTA shall issue an order authorizing the BIR. or effects and personal property. chattels. is present. the taxpayer may still enter into a compromise settlement of his tax liability for as long as any of the grounds for a compromise i. A compromise of a tax liability is possible at any stage of litigation. credits. to summon witness by subpoena. POWERS of the Court of Tax Appeal 1. through the commissioner: 1. doubtful validity of assessment and financial incapacity of taxpayer. 4. DISTRAINT OF DISTRAINT OF PERSONAL PROPERTY AND LEVY OF REAL PROPERTY Upon the issuance of any ruling. to suspend the collection of tax pending appeal. May sit en banc or in two divisions. including stocks and other securities. May the tax liability of a taxpayer be compromised during the pendency of an appeal? Explain. 6. 10. distraint and/or sale of any of the taxpayer's property for the satisfaction of his tax liability. However.. to promulgate rules and regulations for the conduct of its business. levy. Presiding Justice and 5 Associate Justices 2. to inquire production of papers or documents by subpoena duces tecum. such appeal does not suspend the payment. 2.

fines. and ii. JURISDICTION OVER CRIMINAL CASES a. or ii. f. and jointly determined in the same proceeding by the CTA. HOWEVER. in the case of nonagricultural products. penalties imposed in relation thereto. Exclusive original jurisdiction over all criminal offenses arising from violations of the NIRC or tariff and Customs Code and other laws administered by the BIR and BOC. forfeitures and other penalties imposed in relation thereto. claimed is less than 1 million pesos. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from decisions of the Commissioner of Customs which are adverse to the government. Decisions of Commissioner of Customs in: i. b. exclusive of charges and penalties. cases involving liability from customs duties. Decisions of the Secretary of Trade and Industry. disputed assessment. order or resolution of the RTCs in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction. b. decision or inaction of the CIR in: i. Decisions. Decisions of the CBAA (Central Board of Assessment Appeals) in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real property originally decided by the LBAA. c. EXCLUSIVE APPELATE JURISDICTION TO REVIEW BY APPEAL a. e. Note: The remedy shall not be exclusive and shall not preclude the court from availing of other means under the Rules of Court. other matters arising under the NIRC. fees and other charges. refunds of internal revenue taxes. and ii. The criminal action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall at all times be simultaneously instituted with. . fees and other money charges. offenses: i. the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action. and the Secretary of Agriculture in the case of agricultural products. levy the real property of such persons in sufficient quantity to satisfy the tax or charge together with any increment thereto incident to delinquency. other matters arising under the Customs Law or other laws or part of laws administered by the BOC. seizures. JURISDICTION OF THE CTA 1. 2. involving dumping and countervailing duties 2. where the principal amount of taxes and fees. d. or other law or part of law administered by BIR. detention or release of property affected. where there is no specified amount claimed shall be tried by the regular courts and the jurisdiction of the CTA shall be appellate.

over petitions for review of the judgments. Rodriguez. c. No right to reserve the filing of such civil action separately from the criminal action shall be recognized d. 1958] Note: Appeal to the CTA does not automatically suspend collection UNLESS CTA issues suspension order at any stage of proceedings. and/or sale of any property of the taxpayer. resolutions or orders of the RTC in the exercise of their appellate jurisdiction over tax collection cases originally decided by the MTC. fees. 9282 grants CTA power to suspend collection of tax if such collection works to serious prejudice of either taxpayer or government. 218 of NIRC provides no court any grant injunction to restrain collection of any tax. ii. 3. JURISDICTION OVER TAX COLLECTION CASES a.A. resolutions or orders of the RTC in tax cases originally decided by them.A. showing by taxpayer that appeal is not frivolous or dilatory. [Blaquera vs. deposit of the amount claimed or file a surety bond for not more that double the amount of tax with the Court when required. no.R. b. charge imposed by the Tax code. 2. resolutions or orders of the RTC in tax collection cases originally decided by them. levy or distrait. and 3. there must be a showing that collection of the tax may jeopardize the interest of the government and/or taxpayer. claimed is less than 1 million pesos shall be tried by the proper MTC and RTC. over appeals from the judgments. G. EXCEPTIONS: 1. resolutions or orders of the RTC in the exercise of their appellate jurisdiction over tax cases originally decided by the MTC. over petitions for review of the judgments. Sec. L-11295. Exclusive original jurisdiction in tax collection cases involving final and executory assessments for taxes. HOWEVER. Exclusive appellate jurisdiction in tax collection cases: i. fee. 1125 as amended by Sec. March 29. . 11 of R. GEN. exclusive of charges and penalties. 9 of R. RULE: No appeal taken to the CTA shall suspend the payment. ii. charges and penalties. The provision in Tax Code refers to courts OTHER THAN the CTA. over appeals from the judgments. Exclusive appellate jurisdiction in criminal offenses: i. CAN THE CTA ENJOIN COLLECTION OF TAXES? Sec. Collection where the principal amount of taxes and fees.

Note: PD 242. Whereas the law creating CTA governs all revenue and customs controversies involving private litigants and the government Jurisdiction: Customs vs. al. Rule on the motion. The taxpayer should have appealed the decision rendered by the Collector within fifteen (15) days from receipt of the decision to the Commissioner of Customs. Dissatisfied with the decision rendered after hearing by the Collector of Customs on the confiscation of the articles. CTA (2000) a) On the basis of a warrant of seizure and detention issued by the Collector of Customs for the purpose of enforcing the Tariff and Customs Laws. including GOCC. (De la Fuente v. The Court of Tax Appeals has no jurisdiction because there is no decision rendered by the Commissioner of Customs on the seizure and forfeiture case. The Collector moved to dismiss the petition for lack of Jurisdiction. No. detention or release of property affected. et. actions for forfeiture of property for violation of the Customs laws could easily be undermined by the simple device of replevin. (3%) SUGGESTED ANSWER: No. could the importer file an action in the Regional Trial Court for replevin on the ground that the articles are being wrongfully detained by the Collector of Customs since the importation was not illegal and therefore exempt from seizure? Explain. 120 SCRA 455) .A. agenies and instrumentalities. De Veyra. The Court of Tax Appeals has jurisdiction only over decisions of the Commissioner of Customs in cases involving seizures. R. (2%) SUGGESTED ANSWER: Motion granted. assorted brands of cigarettes said to have been illegally imported into the Philippines were seized from a store where they were openly offered for sale. (Sec. b) Under the same facts. 7. The legislators intended to divest the Regional Trial Courts of the jurisdiction to replevin a property which is a subject of seizure and forfeiture proceedings for violation of the Tariff and Customs Code otherwise. the importer filed a petition for review with the Court of Tax Appeals. ALTERNATIVE ANSWER: Motion granted. The Commissioner’s adverse decision would then be the subject of an appeal to the Court of Tax Appeals. granting jurisdiction to the DOJ only of cases or controversies within and among the government offices. 1125). There is no decision yet of the Commissioner which is subject to review by the Court of Tax Appeals.

appealed the matter to the Muntinlupa Board of Assessment Appeals. the Regional Trial Court do not have Jurisdiction in order to render effective and efficient the collection of Import and export duties due the State. However. v. SUGGESTED ANSWER: . 43) Taxpayer: City Board of Assessment Decision. A Co. foe. In accordance with RA 1125 (An Act creating the Court of Tax Appeals). The CTA’s devoid of jurisdiction to entertain appeals from the decision of the City Board of Assessment Appeals.ery. Where to appeal (1999) A Co. The prescriptive periods for collection of taxes are governed by the tax law imposing the tax.sions of Local Board of Assessment Appeals. which enables the government to carry out the functions It has been Instituted to perform. The City Assessor characterized all these properties as real properties subject to the real property tax. Said decision is instead appealable to the Central Board of Assessment Appeals. L. Grounds for Compromise (1996) 1. May 31. equipment and fixtures located at its plant in Muntinlupa City. brought a petition for review before the CTA to appeal the decision of the City Board of Assessment Appeals. if the tax law does not provide for prescription. 249 SCRA 35. has appellate jurisdiction over deci. which under the Local Government Code. (Caltex Phils. The Board ruled in favor of the City.50466. is the owner of machin. A Co. BIR: Court of Tax Appeals: Collection of Taxes. the right of the government to collect taxes becomes imprescriptible. Furthermore. May the Court of Tax Appeals issue an injunction to enjoin the collection of taxes by the Bureau of Internal Revenue? Explain. There should be no unnecessary hindrance on the government's drive to prevent smuggling and other frauds upon the Customs. et al. Court of Appeals.. a Philippine corporation. and companion case. 1982). Central Board of Assessment Appeals. Is the Petition for Review proper? Explain. et al. (5%) SUGGESTED ANSWER: No. (Jao. (3%) SUGGESTED ANSWER: Yes. The collection of taxes may be barred by prescription. Collection of Taxes: Prescription (2001) May the collection of taxes be barred by prescription? Explain your answer.

when in the opinion of the CTA the collection of the tax may jeopardize the interest of the Government and/or the taxpayer. RA 1125). fees and charges subject to such guidelines and limitations as the Congress may provide. When a decision of the Commissioner on a tax protest is appealed to the CTA pursuant to Sec. SUGGESTED ANSWER: Yes. although legal propriety demands that prior leave of court should be obtained (Pasudeco vs. CIR L-39387. (Sec. A compromise of a tax liability is possible at any stage of litigation.e. such appeal does not suspend the payment. doubtful validity of assessment and financial incapacity of taxpayer. NIRC). the Court of Tax Appeals is empowered to enjoin the collection of taxes through administrative remedies when collection could jeopardize the interest of the government or taxpayer. Each local government unit shall have the power to create its own sources of revenues and to levy taxes. is present. 218. (2%) SUGGESTED ANSWER: As a general rule. (Section 11. Collection of Taxes: Authority. No. 11 of RA. and charges shall accrue exclusively to the local governments Note: The LGUs have no power to tax instrumentalities of the national government. 1125 (law creating the CTA) in relation to Sec. 1982). even during appeal.. distraint and/or sale of any of the taxpayer's property for the satisfaction of his tax liability. this doctrine emanates from the supremacy of the national government over the local government . 2. 229 of the NIRC. consistent with the basic policy of local autonomy. However. fees. June 29. Ordinary Courts (2001) May the courts enjoin the collection of revenue taxes? Explain your answer. During the pendency of the appeal. Yes. Such taxes. the courts have no authority to enjoin the collection of revenue taxes. levy. the Court at any stage of the proceedings may suspend or restrain the collection of the tax and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court. Local Government Code Article 10 Section 5. May the tax liability of a taxpayer be compromised during the pendency of an appeal? Explain. the taxpayer may still enter into a compromise settlement of his tax liability for as long as any of the grounds for a compromise i. However.

national economic policy. levy taxes. excessive. fee. charges and other impositions shall: (1) be equitable and based as far as practicable on the taxpayer's ability to pay. The collection of local taxes. be levied and collected only for public purposes. the local government unit levying the tax. . . (e) Each local government unit shall. 3. or in the restraint of trade. public policy. public policy. (b) Taxes. fees. and. fees. FUNDAMENTAL PRINCIPLES (SEC. or confiscatory. fees. (4) not be contrary to law. charge or other imposition unless otherwise specifically provided herein. 2. Fundamental Principles. evolve a progressive system of taxation. (Sec. oppressive. and charges shall accrue exclusively to the local government units. Taxation shall be Uniform in each local government unit. oppressive. d. or confiscatory.The following fundamental principles shall govern the exercise of the taxing and other revenue-raising powers of local government units: (a) Taxation shall be uniform in each local government unit. and be subject to the disposition by. (c) The collection of local taxes. and charges subject to the provisions herein. fees. consistent with the basic policy of local autonomy. LGC) The fundamental principles governing the exercise of the taxing and other revenue-raising powers of LGUs are: 1.Power to Create Sources of Revenue Each local government unit has the power to: 1. c. Taxes. or in the restraint of trade. b. charges and other impositions shall in no case be let to any private person. not be unjust. as far as practicable. Section 130. be equitable and based as far as practicable on the taxpayer's ability to pay. (3) not be unjust. 130. excessive. charges and other impositions shall a. (d) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of. create its own sources of revenue and 2. 129) Note: Such taxes. (2) be levied and collected only for public purposes. national economic policy. fees. charges and other impositions shall in no case be let to any private person. not be contrary to Law. fees.

grant tax exemptions. POWER TO ADJUST LOCAL TAX RATE (SEC.m. (8%) SUGGESTED ANSWER: No. as they may deem necessary. cities.m. Common Limitations on the Taxing Powers of Local Government Units. LOCAL TAXING AUTHORITY The power to tax is exercised by the Sanggunian of the LGU concerned through an appropriate ordinance. 186. the "elevator tax" is an invalid imposition. 5. The city mayor alone could not order the collection of the tax.Unless otherwise provided herein. other applicable laws. LGC) To levy taxes. The imposition of a tax. through ordinances duly approved. Section 133. or charges on any base or subject NOT: 1. as such. LGC) Local Taxation: Power to Impose (2003) In order to raise revenue for the repair and maintenance of the newly constructed City Hall of Makati. and 4:00 p. LGC) LGU may. shall be exercised by the SANGUNIAN of the local government unit concerned through an appropriate ordinance (Section 132 of the Local Government Code).m. evolve a progressive system of taxation. 192. called "elevator tax". as far as practicable. (Sec. . fee or charge or the generation of revenue under the Local Government Code. and barangays shall not extend to the levy of the following: . taxed under the provisions of the NIRC 3. Each local government unit shall. 191. the City Mayor ordered the collection of P1. the exercise of the taxing powers of provinces. to 10:00 a. The revenue collected shall inure solely to the benefit of the local government unit levying the tax. RESIDUAL TAXING POWERS OF THE LGU (SEC. 4. fees. every time a person rides any of the high-tech elevators in the city hall during the hours of 8:00 a. LGC) Adjustment of the tax rates as prescribed herein should not be oftener than once every five (5) years. to 6:00 p. POWER TO GRANT TAX EXEMPTIONS (SEC. incentives or relief’s under such terms and conditions.00. 132. Is the "elevator tax" a valid imposition? Explain. fee. municipalities.m. and in no case shall such adjustment exceed 10% of the rates fixed under the LGC. and. specifically enumerated in LGC 2. charge or other imposition unless otherwise specifically provided for in the LGC.

or other charges on Philippine products actually exported. barters or exchanges or similar transactions on goods or services except as otherwise provided herein.A. tolls for bridges or otherwise. fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof. except as otherwise provided herein. No. land or water. fees or charges on petroleum products. except as provided in this Code. except when levied on banks and other financial institutions. (h) Excise taxes on articles enumerated under the national Internal Revenue Code. (n) Taxes.A. and charges and other impositions upon goods carried into or out of. as amended. the territorial jurisdictions of local government units in the guise of charges for wharfage. charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned. fees. (e) Taxes. fees. 6810 and Republic Act Numbered Sixty-nine hundred thirty- eight (R. (d) Customs duties. gifts. (k) Taxes on premiums paid by way or reinsurance or retrocession. 6938) otherwise known as the "Cooperative Code of the Philippines" respectively. tonnage dues. legacies and other acquisitions mortis causa.(a) Income tax. (m) Taxes. registration fees of vessel and wharfage on wharves. or charges in any form whatsoever upon such goods or merchandise. or passing through. (j) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air. except tricycles. No. fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen. inheritance. fees. (g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non- pioneer for a period of six (6) and four (4) years. (b) Documentary stamp tax. and . or charges. fees. except as otherwise provided herein. or other taxes. (f) Taxes. (i) Percentage or value-added tax (VAT) on sales. on Countryside and Barangay Business Enterprises and cooperatives duly registered under R. and all other kinds of customs fees. respectively from the date of registration. and taxes. (l) Taxes. (c) Taxes on estates.

its agencies and instrumentalities. taxes and other charges imposed under special law. 130 LGC 4. and local government units Limitations of the Residual Power: 1. Customs duties. Taxes. taxes which are levied under the NIRC. Documentary stamp tax. 4. or other charges on Philippine products actually exported. fundamental principles governing the exercise of the taxing power of the LGU’s prescribed under Sec. PRINCIPLE OF PREEMPTION OR EXCLUSIONARY DOCTRINE Where the National Government elects to tax a particular area. tonnage dues. Taxes. fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof. common limitation prescribed in Sec. 133. 6810 and R. 6938 (Cooperative Code of the Philippines). 9. and local government units. 6. taxes imposition of which contravenes existing governmental policies or which violates the fundamental principles of taxation 4. fees. the ordinance levying such residual taxes shall not be enacted without any prior public hearing conducted for the purpose 5. and all other kinds of customs fees. 5. fees or charges of any kind on the National Government. Taxes. registration fees of vessel ( except the fee that may be imposed on the issuance of licenses for the operation of fishing vessels of three tons gross or less by municipalities) and wharfage on wharves. taxes which are imposed under the Tariff and Customs code 3. Taxes. Excluded imposition: 1.A. fees or charges of any kind on the National Government. This doctrine rest on the intention of the Congress.LGC) 1. charges and dues. . unless otherwise provided by LGC. land or water. fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen. LIMITATION ON LOCAL TAXING POWER (SEC. constitutional limitations on taxing power 2. fees. it impliedly withholds from the local government the delegated power to tax the same field. Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air. except as provided in the Code.(o) Taxes. except tricycles. Taxes. except as otherwise provided. except wharfage on wharves constructed and maintained by the local government unit concerned. 7. Taxes on premiums paid by way or reinsurance or retrocession. or charges. its agencies and Instrumentalities. 8. 2. 2. the principle of preemption. on Countryside and Barangay Business Enterprises and cooperatives duly registered under R. 133.A. LGC 3. 3.

10. respectively from the date of registration. Mandatory Public Hearings. fee. provinces 2. 13. copies of approved ordinances and the resolutions approving the local development plans and public investment programs formulated by the local development councils. the territorial jurisdictions of local government units in the guise of charges for wharfage. Taxes on business enterprises certified to by the Board of Investments as pioneer or non-pioneer for a period of 6 and 4 years. That within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal. as amended. Note: Ordinance which would prohibit the free flow of goods into. Procedure for Approval and Effectivity of Tax. Ordinances and Revenue Measures. the secretary to the sanggunian panlungsod or sangguniang bayan shall forward to the sangguniang panlalawigan for review. That public hearings shall be conducted for the purpose prior to the enactment thereof: Provided. legacies and other acquisitions mortis causa. tolls for bridges or otherwise. Taxes. gifts. the territorial jurisdictions of local governments are invalid. barangays Review of tax ordinance Section 187. 11. and charges and other impositions upon goods carried into or out of. Section 56. That any question on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal: Provided. Income tax. except on banks and other financial institutions.The procedure for approval of local tax ordinances and revenue measures shall be in accordance with the provisions of this Code: Provided. cities 4. finally. inheritance. further. That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax. or out of. municipalities 3. Excise taxes on articles enumerated under the national Internal Revenue Code. barters or exchanges or similar transactions on goods or services except as otherwise provided. . fees or charges on petroleum products. (a) Within three (3) days after approval. Estate Tax. except as otherwise provided. and taxes. 12. however. or passing through. . Review of Component City and Municipal Ordinances or Resolutions by the Sangguniang Panlalawigan. 14. OTHER IMPOSITIONS THAT THE LGU MAY LEVY 1. 15. Percentage or VAT on sales. or charge levied therein: Provided. the aggrieved party may file appropriate proceedings with a court of competent jurisdiction. fees.

the same shall be deemed approved. it must be general and consistent with public policy 6. within thirty (30) days from receipt thereof. . in which case. or modification. to the provincial prosecutor for prompt examination. return the same with its comments and recommendations to the sangguniang barangay concerned for adjustment. (c) If the sangguniang panlalawigan finds that such an ordinance or resolution is beyond the power conferred upon the sangguniang panlungsod or sangguniang bayan concerned. it shall declare such ordinance or resolution invalid in whole or in part. fails to take action on barangay ordinances within thirty (30) days from receipt thereof. the sangguniang barangay shall furnish copies of all barangay ordinances to the sangguniang panlungsod or sangguniang bayan concerned for review as to whether the ordinance is consistent with law and city or municipal ordinances. the same shall be presumed consistent with law and therefore valid. (b) If the sangguniang panlungsod or sangguniang bayan. (d) If no action has been taken by the sangguniang panlalawigan within thirty (30) days after submission of such an ordinance or resolution. Review of Barangay Ordinances by the Sangguniang Panlungsod or Sangguniang Bayan. inform the sangguniang panlalawigan in writing of his comments or recommendations. as the case may be. the effectivity of the barangay ordinance is suspended until such time as the revision called for is effected. - (a) Within ten (10) days after its enactment. it must not be unreasonable. it must not prohibit but may regulate trade 5. which may be considered by the sangguniang panlalawigan in making its decision. it must not contravene the constitution or any state 2. Requisites of a valid ordinance: 1. as the case may be. The sangguniang panlalawigan shall enter its action in the minutes and shall advise the corresponding city or municipal authorities of the action it has taken. amendment. the sangguniang panlalawigan shall examine the documents or transmit them to the provincial attorney. The provincial attorney or provincial prosecutor shall. it must not be partial or discriminatory 4.(b) Within thirty (30) days after the receipt of copies of such ordinances and resolutions. within a period of ten (10) days from receipt of the documents. (c) If the sangguniang panlungsod or sangguniang bayan. it must not be unfair or oppressive 3. or if there be none. the sanggunian concerned shall. finds the barangay ordinances inconsistent with law or city or municipal ordinances. Section 57.

the provincial. copies of the approved tax ordinance of the municipality or a component city shall be furnished to the sangguniang. amendment or notification that would thereby render the ordinance suspended until such time the revision call for is effected. If within the 30 day review period. if it finds the ordinance inconsistent with law. Any question on the constitutionality or legality of a tax ordinance may be raised on appeal with the Secretary of Justice within 30 days from the effectivity thereof. or the regular courts. LGC. if it finds that such ordinance to be beyond the power conferred upon the city or municipal sangguniang 3. or the city sangguniang as the case may be for the review of the ordinance 2. Who shall render a decision within 60 days from date of receipt of appeal 4. want to know from you. Any question on the constitutionality or legality of tax ordinances may be raised on appeal within 30 days from the effectivity thereof 2. Hagonoy Market Vendor Association v. within 3 days after its approval. within 10 days from enactment. Municipality of Hagonoy. Local Taxation: Legality/ Constitutionality. (Sec. copies thereof shall be forwarded to the municipal sanngunian. It may declare the ordinance invalid. In the case of barangay ordinance. 187. In the affirmative.Review by Sangguniang of ordinance passed by barangay. 4. X? (8%) SUGGESTED ANSWER: The appeal should be made with the Secretary of Justice. . Tax Ordinance (2003) X. or the Secretary of Justice. in whole or in part. in the case of barangay ordinances. whether or not he can file an appeal. To the Secretary of Justice 3. 376 SCRA 376 [2002]). What would your advice be to your client. the tax ordinance shall be deemed approved. b. Review by the Secretary of Justice: 1. the provincial sangguniang shall review the tax ordinance within 30 days after receipt of a copy thereof a. They shall examine the ordinance or require the provincial attorney or prosecutor to provide it with his written comments or recommendation which may be considered by the sangguniang in making its decision. his tax lawyer. Such appeal shall not suspend the effectivity of the ordinance. municipal or city sangguniang takes not action. In case of adverse decision or inaction by the Secretary of Justice. or the Court of Tax Appeals. the city or municipal sangguniang. the aggrieved party may file appropriate proceedings with a court of competent jurisdiction. he asks you where such appeal should be made: the Secretary of Finance. municipal and city sangguniang: 1. shall return the same for adjustment. a taxpayer who believes that an ordinance passed by the City Council of Pasay is unconstitutional for being discriminatory against him. as well as the accrual and payment of the tax 5.

and others of similar nature. Rate: . donor. No. prescribed by the DECS shall be exempt from the tax. dealer. annual fixed tax for delivery truck or van manufacturers or producers. Rate: Not exceeding 50% of 1% of the gross annual receipts for the preceding calendar year Exceptions: Newly started business. donation. or retailers in. professional tax 6. the tax shall not exceed 1/20 of 1% of the capital investment. pamphlets. The province may impose a tax on the sale. Rate: Not more than 50% of the 1% of the total consideration or of the fair market value. 6657 (CARL). The province may impose a tax on the business of persons engaged in the printing and/or publication of books.A. certain products. receipts. transferor or administrator to pay the tax imposed within 60 days from the date of the execution of the deed or from the date of the decedent's death Tax on Business of Printing and Publication. franchise tax 4. School texts or references. Note: It shall be the duty of the seller. Notwithstanding any exemption granted by any law or other special law. handbills. whichever is higher Exception: Sale. amusement tax 7. tax on transfer of real property 2. transfer or other disposition of real property pursuant to R. certificates. the province may impose a tax on businesses enjoying a franchise. Franchise Tax. PROVINCES Taxes that may be imposed by provinces 1. posters. tax on sand gravel and other quarry resources extracted from public land 5. leaflets. cards. Tax on Transfer of Real Property Ownership. tax on business of printing and publication 3. or on any other mode of transferring ownership or title of real property. barter. wholesalers of.

streams.30% 3. earth. . or fee for the practice of the profession. sand. pursuant to the ordinance of the sangguniang panlalawigan. rivers. Gravel and Other Quarry Resources. license. lakes. Province -30% 2. Proceeds distributed as follows: 1. creeks.00. The province may levy an annual professional tax on each person engaged in the exercise or practice of his profession requiring government examination. Component City or Municipality where the quarry resources are extracted . the tax shall not exceed 1/20 of 1% of the capital investment. Barangay where the quarry resources are extracted . pay the full tax before engaging therein. Note: To be paid to the province where he/she practices his/her profession or where he/she maintains principal office in case the practice is in several places provided. Professional Tax. Tax on Sand.40%.Not exceeding 50% of 1% of the gross annual receipts for the preceding calendar year. Exception: Professionals exclusively employed in the government shall be exempt from the payment of this tax. after payment he/she shall be entitled to practice his/her profession in any part of the Philippines. Rate: Not more than 10% of fair market value in the locality Note: The permit to extract resources shall be issued exclusively by the provincial governor. and other public waters within its territorial jurisdiction. however. Exceptions: Newly started business. To be paid on or before the 31st day of January. within its territorial jurisdiction. The province may levy and collect taxes on ordinary stones. gravel. and other quarry resources extracted from public lands or from the beds of seas. W/out being subjected to any other national or local tax. Rate: At such amount and reasonable classification as the sangguniang panlalawigan may determine but shall in no case exceed P300. Note: Any person first beginning to practice a profession after the month of January must.

Local Taxation; Situs of Professional Taxes (2005)

Mr. Fermin, a resident of Quezon City, is a Certified Public Accountant-Lawyer engaged in
the practice of his two professions. He has his main office in Makati City and maintains a
branch office in Pasig City. Mr. Fermin pays his professional tax as a CPA in Makati City and
his professional tax as a lawyer in Pasig City. (5%)

a) May Makati City, where he has his main office, require him to pay his professional tax as a
lawyer? Explain.

SUGGESTED ANSWER:

No. Makati City where Mr. Fermin has his main office may not require him to pay his
professional tax as a lawyer. Mr. Fermin has the option of paying his professional
tax as a lawyer in Pasig City where he practices law or in Makati City where he
maintains his principal office. (Sec. 139[b], Local Government Code)

b) May Quezon City, where he has his residence and where he also practices his two
professions, go after him for the payment of his professional tax as a CPA and a lawyer?
Explain.

SUGGESTED ANSWER:

No, the situs of the professional tax is the city where the professional practices his
profession or where he maintains his principal office in case he practices his
profession in several places. The local government of Quezon City has no right to collect
the professional tax from Mr. Fermin as the place of residence of the taxpayer is not the proper
situs in the collection of the professional tax.

Amusement Tax.
The province may levy an amusement tax to be collected from the proprietors, lessees, or operators of
theaters, cinemas, concert halls, circuses, boxing stadium, and other places of amusement where one
seeks admission to entertain himself by seeing or viewing a show or performance

Rate:
Not more than 30% of the gross receipts from admission fees.

Exception:
The holding of operas, concerts, dramas, recitals, painting and art exhibitions, flower shows, musical
programs, literary and oratorical presentations, except pop, rock, or similar concerts shall be exempt.

Note:
Sangguniang panlalawigan may prescribe the time, manner, terms and conditions for the payment of tax.
In case of fraud or failure to pay, the sangguniang panlalawigan may impose surcharges, interest and

penalties. The proceeds from the amusement tax shall be shared equally by the province and the
municipality where such amusement places are located.

Annual Fixed Tax for Every Delivery Truck or Van of Manufacturers or Producers, Wholesalers of,
Dealers, or Retailers in, Certain Products.
The province may levy an annual fixed tax for every truck or any vehicle used by manufacturers,
producers, wholesalers, dealers or retailers in the delivery of distilled spirits, soft drinks, cigars and
cigarettes, and other products as may be determined by the sanggunian, to sales outlets, or consumers,
whether directly or indirectly, within the province.

Rate:
Amount not exceeding P500.00.

MUNICIPALITIES (SEC. 143 LGC)

The municipality may impose taxes on the following business:
1. On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and
compounders of liquors, distilled spirits, and wines or manufacturers of any article of commerce
of whatever kind or nature.
2. On wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature.
3. On exporters, and on manufacturers, millers, producers, wholesalers, distributors, dealers or
retailers of the essential commodities
4. On retailers
5. On contractors and other independent contractors
6. On banks and other financial institutions,
7. On peddlers engaged in the sale of any merchandise or article of commerce
8. On any business, which the sangguniang concerned may deem proper to tax. For businesses
subject to the excise, value added or percentage tax, the tax rate shall not exceed 2% of gross
sales of the preceding calendar year.

Note:
Rates of Tax within the Metropolitan Manila Area shall not exceed by 50% the maximum rates prescribed
for municipalities (1-8 above). (Sec. 144 LGC)

Note:
The tax is payable for every separate or distinct establishment or place where business is conducted. (Sec.
146 LGC)

Municipal non-revenue fees and charges
The municipality may impose and collect such reasonable fees and charges on business and occupation
except professional taxes reserved for provinces. (Sec 147 LGC)

Municipalities shall have the exclusive authority to grant fishery privileges in the municipal

waters. The sanggunian may:
1. Grant fishery privileges to erect fish corrals, oysters, or other aquatic beds or bangus fry areas:
a. Duly registered organizations and cooperatives of marginal fishermen shall have the
preferential right;
b. The sanggunian may require a public bidding pursuant to an ordinance for the grant of
such privilege;
c. Absent of such orgs. and coops or their failure to exercise their preferential right, other
parties may participate in the public bidding
2. Grant the privilege to gather, take or catch bangus fry, prawn fry or fry of other species and fish
from the municipal waters by nets or other fishing gears to marginal fishermen free of rental or
fee
3. Issue licenses for the operation of fishing vessels of three (3) tons or less. (Sec. 149)

CITIES (SEC. 151,LGC)

The city may levy the taxes and other charges which the province or municipalities may impose. The tax
rates that the city may levy may exceed the maximum rates allowed for the province or municipality by
not more than 50% except the rates of professional and amusement taxes.

BARANGAYS (SEC. 152, LGC)

The barangay may levy the following taxes:
1. taxes on stores or retailers with fixed business establishments with the gross sales for the
preceding calendar year of P50,000 or less ( for barangay in the cities) and P30,000 or less
(barangays in municipalities)
2. services or charges
3. barangay clearance
4. other fees and charges.

SITUS OF LOCAL TAXATION (SEC. 150,LGC)
1. For purposes of collection of the taxes under Section 143 (tax on business), businesses
maintaining or operating branch or sales outlet elsewhere shall record the sale in the branch or
sales outlet making the sale or transaction, and the tax thereon shall accrue and shall be paid to
the municipality where such branch or sales outlet is located.
2. In case there is no branch or sales outlet in the city or municipality where the sale made, the sale
shall be recorded in the principal office and the taxes due shall accrue and be paid to such city or
municipality.
3. The following sales allocation for sales recorded in the principal office of businesses with
factories, project offices, plants, and plantations:
a. 30% of all sales recorded in the principal office shall be taxable by the city or
municipality where the principal office is located; and
b. 70% of all sales recorded in the principal office shall be taxable by the city or
municipality where the factory, project office, plant, or plantation is located.

Eighteen years of age or over c. Diplomatic and consular representatives. who owns real property with an aggregate assessed value of P1. 157) 2. 156) 1. project offices.00 worth of real property in the Philippines owned by it during the preceding year based on the valuation used for the payment of real property tax . whether domestic or resident foreign. COMMUNITY TAX Cities or municipalities may levy a community tax (Sec. the above mentioned 70% shall be divided as follows: i. 000. ii. Inhabitant of the Philippines b.00.00 of income regardless of whether from business. Transient visitors when their stay does not exceed 3 months. c. For every P5.00. Regularly employed on a wage or salary d. 000. 000. f. In the case of husband and wife. and plantations are located in proportion to their respective volumes of production during the period for which the tax is due. Who is engaged in business or occupation. b. the above mentioned 70% shall be prorated among the localities where the factories.00 and an annual additional tax.P2.000. b. the tax imposed shall be based upon the total property owned by them and the total gross receipts or earnings derived by them. 60% to the city or municipality where the factory is located. engaged in or doing business in the Philippines is also liable to pay an annual community tax. who is required by law to file an income tax return Tax rate: 1. plants. 000. basis for at least 30 consecutive working days during any calendar year. (Sec. Where there are 2 or more factories. Place of Payment: . Every corporation. d. project offices. and ii. no matter how created or organized. plants. g. 40% to the city or municipality where the plantation is located. Individual a.00 of gross receipts derived by it from its business in the Philippines during the preceding year P2. and 2. Tax rate: P500. or plantations located in different localities. For every P5. EXEMPT FROM COMMUNITY TAX 1. 158.00 in accordance with the following schedule: i. Individuals Liable to Community Tax: a.00 and an annual additional tax of P1. which shall exceed P10. P5.00 for every P1.00 or more. LGC) a.00. exercise of profession or from property which in no case shall exceed P5. Juridical Personalities (Sec. Where the plantation located at a place other than the place where the factory is located. 000. e.

50% accrues to the barangay where the tax is collected. 160) Time for Payment: accrues on the 1st day of Jan. When an individual subject to the community tax acknowledges any document before a notary public. receives any license. Note: A community tax certificate may also be issued to any person or corporation not subject to the community tax upon payment of P1. transacts other official business. takes the oath of office upon election or appointment to any position in the government service. b. 2. receives money from public funds. Individual a. d. receives any salary or wage from any person or corporation. or in the place where the principal office of the juridical entity is located. 164): 1. receives any license.place of residence of the individual.00. of each year Penalties for Delinquency. receives any money from any public fund. transacts other official business. certificate. or f. 50% accrues to the general fund of the city or municipality concerned. Note: The city or municipal treasurer deputizes the barangay treasurer to collect the community tax in their respective jurisdictions. b. Note: The proceeds of the community tax actually and directly collected by the city or municipal treasurer shall accrue entirely to the general fund of the city or municipality concerned. pays any tax or fee. Corporation a. (Sec. Note: . LGC Presentation of Community Tax Certificate On Certain Occasions 1. or d. 162. c. pays any tax or fee. of each year which shall be paid not later than the last day of Feb. e. (Sec. Proceeds of the community tax collected through the barangay treasurers shall be apportioned as follows: (Sec. certificate or permit from any public authority. 163. or permit from any public authority. c.LGC) Sec. and 2. An interest of 24% per annum from the due date until it is paid shall be added on the amount due.

The remedy by distraint shall proceed as follows: . . . The sanggunian concerned may.Unless otherwise provided in this Code. debts. practice of profession or calling. fees. and charges shall accrue on the first (1st) day of January of each year. and related surcharges and interest resulting from delinquency shall be: (a) By administrative action thru distraint of goods. as the case may be. for a justifiable reason or cause. . Either of these remedies or all may be pursued concurrently or simultaneously at the discretion of the local government unit concerned. Civil Remedies. credits. enforceable by appropriate administrative or judicial action. all local taxes. new taxes. shall accrue on the first (1st) day of the quarter next following the effectivity of the ordinance imposing such new levies or rates.Unless otherwise provided in this Code. bank accounts. However. and other personal property of whatever character. . but only for a period not exceeding six (6) months. . Time of Payment. superior to all liens. Local Government's Lien. all local taxes. or charges without surcharges or penalties. Section 167. and charges shall be paid within the first twenty (20) days of January or of each subsequent quarter.Unless otherwise provided in this Code. (b) By judicial action. fees. fees. fees. or charges. or changes in the rates thereof. charges or encumbrances in favor of any person. TAX REMEDIES UNDER THE LOCAL GOVERNMENT CODE Section 173. Section 175. and by levy upon real property and interest in or rights to real property. including stocks and other securities. chattels. Such taxes. occupation. fees and charges shall be the calendar year. fees and charges may be paid in quarterly installments. extend the time for payment of such taxes.Local taxes. Section 166.The community tax certificate shall not be required in the registration of a voter. Accrual of Tax. charges and other revenues constitute a lien. or exercise of privilege with respect to which the lien is imposed. or effects. . the tax period of all local taxes. Tax Period and Manner of Payment. The lien may only be extinguished upon full payment of the delinquent local taxes fees and charges including related surcharges and interest. not only upon any property or rights therein which may be subject to the lien but also upon property used in business. fees or charges.The civil remedies for the collection of local taxes. Accrual and Payment of Tax Section 165. Section 174. Distraint of Personal Property. fees. and interest in and rights to personal property.

or charge in question. or charge and penalty due. Distrained personal property shall be sold at public auction in the manner hereon provided for. including the surcharges. the tax delinquencies shall be cancelled. or at the dwelling or place or business of that person and with someone of suitable age and discretion. subject to the taxpayer's right to claim exemption under the provisions of existing laws. the local treasurer shall make a report of the proceedings in writing to the local chief executive concerned. all the proper charges are paid to the officer conducting the sale. a copy of which signed by himself shall be left either with the owner or person from whose possession the goods.Upon failure of the person owing any local tax. The time of sale shall not be less than twenty (20) days after the notice to the owner or possessor of the property as above specified and the publication or posting of the notice.The officer executing the distraint shall make or cause to be made an account of the goods. chattels or effects distrained. the officer conducting the sale shall sell the goods or effects so distrained at public auction to the highest bidder for cash. or charge to pay the same at the time required. with a representative of the Commission on Audit and the city or municipal assessor as members. (c) Publication . the goods or effects distrained shall be restored to the owner.The officer shall forthwith cause a notification to be exhibited in not less than three (3) public and conspicuous places in the territory of the local government unit where the distraint is made. . interest. specifying the time and place of sale. One place for the posting of the notice shall be at the office of the chief executive of the local government unit in which the property is distrained. Within five (5) days after the sale. Should the property distrained be not disposed of within one hundred and twenty (120) days from the date of distraint. the local treasurer or his deputy shall issue a duly authenticated certificate based upon the records of his office showing the fact of delinquency and the amounts of the tax. fee. (f) Disposition of proceeds . the local treasurer or his deputy may. (d) Release of distrained property upon payment prior to sale . (e) Procedure of sale .(a) Seizure . (b) Accounting of distrained goods. together with any increment thereto incident to delinquency and the expenses of seizure. Said Committee on Appraisal shall be composed of the city or municipal treasurer as chairman. fee. the same shall be considered as sold to the local government unit concerned for the amount of the assessment made thereon by the Committee on Appraisal and to the extent of the same amount. chattels or effects are taken.At the time and place fixed in the notice. Such certificate shall serve as sufficient warrant for the distraint of personal property aforementioned. and the expenses of the distraint . upon written notice. fee. seize or confiscate any personal property belonging to that person or any personal property subject to the lien in sufficient quantity to satisfy the tax. and the articles distrained.The proceeds of the sale shall be applied to satisfy the tax.If at any time prior to the consummation of the sale. In such case. and other penalties incident to delinquency. to which list shall be added a statement of the sum demanded and a note of the time and place of sale.

or charges. Section 176. or charge. the same may be assessed within ten (10) years from discovery of the fraud or intent to evade payment. . fee. be distrained until the full amount due. written notice of the levy shall be mailed to or served upon the assessor and the Register of Deeds of the province or city where the property is located who shall annotate the levy on the tax declaration and certificate of title of the property. fees. be submitted by the levying officer to the sanggunian concerned. or charges. That. The civil action shall be filed by the local treasurer within the period prescribed in Section 194 of this Code. proceed with the levy on the taxpayer's real property. Section 194. to the occupant of the property in question. within ten (10) days after receipt of the warrant. Collection of Delinquent Taxes. and no charge shall be imposed for the services of the local officer or his deputy. - (a) Local taxes. To this end. Charges or other Revenues through Judicial Action. Where the proceeds of the sale are insufficient to satisfy the claim. taxes. Fees. or charge. as the case may be. respectively.After the expiration of the time required to pay the delinquent tax. The balance over and above what is required to pay the entire claim shall be returned to the owner of the property sold. Levy shall be effected by writing upon said certificate the description of the property upon which levy is made. . At the same time. The expenses chargeable upon the seizure and sale shall embrace only the actual expenses of seizure and preservation of the property pending the sale. the provincial. or charges shall be assessed within five (5) years from the date they became due. fees. city or municipal treasurer. In case the levy on real property is not issued before or simultaneously with the warrant of distraint on personal property. the provincial. other property may. fee. No action for the collection of such taxes. fees. . in like manner. real property may be levied on before. city or municipal treasurer. Periods of Assessment and Collection. if he be absent from the Philippines. fees or charges which have accrued before the effectivity of this Code may be assessed within a period of three (3) years from the date they became due. (b) In case of fraud or intent to evade the payment of taxes. Levy on Real Property. Said certificate shall operate with the force of a legal execution throughout the Philippines. or if there be none. or after the distraint of personal property belonging to the delinquent taxpayer. and the delinquent taxpayer or. including all expenses.The local government unit concerned may enforce the collection of delinquent taxes. charges or other revenues by civil action in any court of competent jurisdiction.and sale. is collected. shall be instituted after the expiration of such period: Provided. as the case may be. simultaneously. A report on any levy shall. Section 183. and the personal property of the taxpayer is not sufficient to satisfy his delinquency. fees. whether administrative or judicial. shall within thirty (30) days after execution of the distraint. and penalty due from him. shall prepare a duly authenticated certificate showing the name of the taxpayer and the amount of the tax. to his agent or the manager of the business in respect to which the liability arose.

(c) Local taxes, fees, or charges may be collected within five (5) years from the date of assessment
by administrative or judicial action. No such action shall be instituted after the expiration of
said period: Provided, however, That, taxes, fees or charges assessed before the effectivity of
this Code may be collected within a period of three (3) years from the date of assessment.

(d) The running of the periods of prescription provided in the preceding paragraphs shall be
suspended for the time during which:

(1) The treasurer is legally prevented from making the assessment of collection;

(2) The taxpayer requests for a reinvestigation and executes a waiver in writing before
expiration of the period within which to assess or collect; and

(3) The taxpayer is out of the country or otherwise cannot be located.

Section 195. Protest of Assessment. - When the local treasurer or his duly authorized representative
finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment
stating the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and
penalties. Within sixty (60) days from the receipt of the notice of assessment, the taxpayer may file a
written protest with the local treasurer contesting the assessment; otherwise, the assessment shall
become final and executory. The local treasurer shall decide the protest within sixty (60) days from
the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he
shall issue a notice cancelling wholly or partially the assessment. However, if the local treasurer
finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with
notice to the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the
protest or from the lapse of the sixty (60) day period prescribed herein within which to appeal with
the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable.

Section 196. Claim for Refund of Tax Credit. - No case or proceeding shall be maintained in any
court for the recovery of any tax, fee, or charge erroneously or illegally collected until a written
claim for refund or credit has been filed with the local treasurer. No case or proceeding shall be
entertained in any court after the expiration of two (2) years from the date of the payment of such
tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit.

Tax Remedies of Local Government Units
1. Impose penalties (surcharges and penalty interest) in case of delinquency;
2. Avail local government’s liens;
3. Administrative action through distraint of goods, chattels and other personal property; and
4. By judicial action.

Civil remedies for collection
1. tax lien;
2. distraint;
3. levy;

4. civil action;
5. purchase of property by LGUs for want of bidder; property distrained not disposed within 120
days from date of distraint – considered sold to the LGU.

Note:
Any of these remedies or all may be pursued concurrently or simultaneously at the discretion of the local
government unit concerned.

Tax lien
Local taxes constitute a lien, superior to all liens, charges or encumbrances in favor of any person,
enforceable by appropriate administrative of judicial action, not only upon any property or rights therein
which may be the subject of the lien but also upon property used in business, occupation, practice of
profession or calling, or exercise of privilege with respect to which the lien is imposed
Judicial action
1. civil action only; it precludes a criminal case as a proper remedy for collection of delinquent
local taxes.
2. The treasurer of the concerned Local Government Unit shall file the collection case.
3. The CTA has coordinate jurisdiction over the tax collection cases of the LGU

Prescriptive Periods under the LGC:
1. Assessment of Local Taxes
a. General rule – five years (5) from the date they became due.
b. Exception: When there is fraud or intent to evade the payment of taxes, fees, or charges,
ten (10) years from discovery of the fraud or intent to evade the payment.
2. Collection of Local taxes:
a. Five (5) years from the date of assessment by administrative or judicial action.
b. Interruption of the period of prescription:
i. The treasurer is legally prevented from making the assessment or collection of
the tax;
ii. The taxpayer requests for a reinvestigation and executes a waiver in writing
before the expiration of the period within which to assess or collect;
iii. The taxpayer is out of the country or otherwise cannot be located.

Remedies of the Taxpayer under the LGC:
2. ADMINISTRATIVE
1. Prior to assessment:
i. Administrative appeal to the Secretary of Justice; and
ii. Action for declaratory relief
2. After an assessment:
i. Protest of the assessment within 60 days from receipt of assessment. Payment
under protest is not necessary.
ii. Action for refund within 2 years from payment of tax to local revenue taxes the
supervening cause applies in local taxation because the period for the filling of

claims for refund is counted not necessarily from the date of payment but from
the date the taxpayer is entitled to a refund or credit.
3. Right of redemption- 1 year from the date of sale or forfeiture. (SEC. 179, LGC)
3. JUDICIAL
1. Appeal
i. within 60 days from assessment of provincial, city or municipal assessor to Local
Board of Assessment Appeals;
ii. within 30 days from receipt of decision of LBAA to Central Board of
Assessment Appeals;
iii. in case of denial of refund or credit, appeal to the Board of Assessment Appeals
as in a protest case
2. court action – appeal of CBAAs decision to the Supreme Court by certiorari;
3. suit assailing validity of tax, recovery or refund of taxes paid;
4. suit to declare invalidity of tax due to irregularity in assessment and collection;
5. suit assailing the validity of tax sale
4. Appeal to the Secretary of Justice:
1. Any question on the constitutionality or legality of tax ordinances may be raised on
appeal within 30 days from the effectivity thereof
2. To the Secretary of Justice
3. Who shall render a decision within 60 days from date of receipt of appeal
4. Such appeal shall not suspend the effectivity of the ordinance, as well as the accrual and
payment of the tax
5. In case of adverse decision or inaction by the Secretary of Justice, the aggrieved party
may file appropriate proceedings with a court of competent jurisdiction.

Protest
Within 60 days from receipt of assessment. Payment under protest not necessary.

Note:
Payment and subsequent refund or tax credit
1. within two (2) years from payment of tax to local treasurer.
2. Right of redemption – one (1) year from the date of sale or from the date of forfeiture.

Note:
Action for declaratory relief injunction is available if irreparable damage would be caused to the taxpayer
and no adequate remedy is available.

REAL PROPERTY TAXATION CHARACTERISTIC OF REAL PROPERTY TAX

Characteristics:
1. Direct tax on the ownership of real property
2. Ad Valorem tax. The value is based on the tax base
3. Proportion - the tax is calculated on the basis of a certain percentage of the value assessed
4. Indivisible single obligation

5. Rates of Levy.The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted. directly and exclusively used by local water districts and government owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power.A province or city or a municipality within the Metropolitan Manila Area shall fix a uniform rate of basic real property tax applicable to their respective localities as follows: (a) In the case of a province. directly. . No. to a taxable person.A province or city or a municipality within the Metropolitan Manila Area my levy an annual ad valorem tax on real property such as land. whether natural or juridical. all persons. (b) Charitable institutions. . and improvements actually. (c) All machineries and equipment that are actually. non-profit or religious cemeteries and all lands. charitable or educational purposes. at the rate not exceeding two percent (2%) of the assessed value of real property. Buildings . and (b) In the case of a city or a municipality within the Metropolitan Manila Area. and (e) Machinery and equipment used for pollution control and environmental protection. Land. machinery. any exemption from payment of real property tax previously granted to. parsonages or convents appurtenant thereto. Section 233. building. According to the Local Government Code. (d) All real property owned by duly registered cooperatives as provided for under R. Local Tax PROPERTIES LIABLE UNDER REALPROPERTY TAX Section 232. including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code. for consideration or otherwise. or presently enjoyed by. Real Property liable for Real Prop tax are: 1. Except as provided herein.A. and exclusively used for religious. buildings. at the rate not exceeding one percent (1%) of the assessed value of real property. Power to Levy Real Property Tax. . 2. Exemptions from Real Property Tax. mosques. churches. 6938. Section 234. and other improvement not hereinafter specifically exempted.

early decisions of the Supreme Court in Mindanao Bus Co. . and convents thereto. Real property owned by duly registered Cooperatives under RA 6938 5. Industrial 6. Mineral 5. Machinery and Equipment actually. Uniformity in classification in each local gov’t unit should be observed 3. Hospitals 2. Residential 4. and exclusively used by local Water districts and GOCCs engaged in the supply and distribution of water and/or generation and transmission of electric power 4. 234) 1. Commercial 2. LGC) Note: Although the term real property has not been expressly defined in the LGC. Machinery and 4. FUNDAMENTAL PRINCIPLES IN Assessment REAL PROP TAXES (Art 198) 1. churches. GOCCs rendering essential public services in the supply and distribution of water and/or generation or transmission of electric power. Charitable institutions. Machinery & equipment for pollution control and Environment protection Exemptions previously granted. buildings and improvements actually directly and exclusively used for religious. Cultural and scientific purposes 3. Timberland 7. parsonages. Actual use of the property should be the basis of classification 4. owned and used by local water districts 4. 119 PHIL 328. Agricultural 3. Special SPECIAL CLASSES OF REAL PROPERTY (sec 216. levy and collection should not be let to any private person. non-profit or religious cemeteries. Manila Electric Co. Appraisal. 3. (not falling within the above enumeration) are withdrawn. 3. Board of Assessment Appeals v Meralco. assessment. 6 SCRA `97. Other improvements not otherwise exempted under said code (Sec 232. Owned by the Republic of the Philippines or its political subdivisions Except: when beneficial use has been granted to a taxable person 2. PROPERTIES EXEMPT FROM TAXES (Sec. directly. charitable or educational purposes. LGC) 1. Current and fair market value is the basis of appraisal 2. v City Assessor of Cagayan de Oro. 10 SCRA 68 seem to suggest that Art 415 of the Civil Code could also be controlling. mosques. v Board of Assessment Appeals. CLASSIFICATION OF LAND for purposes of assessment Sec 218 (a) 1.

Real Property Taxation: Fundamental Principles (1997) State the fundamental principles underlying real property taxation in the Philippines. appraisal. However. Mr. and Mrs Angeles. and 5) The appraisal and assessment of real property shall be equitable. The Provincial Assessor reclassified the property as commercial for tax purposes starting January 1998. and whoever uses it".All real property. 2) Real property shall be classified for assessment purposes on the basis of its actual use: 3) Real property shall be assessed on the basis of a uniform classification within each local government unit. the property has been rented to a single proprietor engaged in the sale of appliances and agri-products. since January 1997. levy. and assessment of real property pursuant to the provisions of this Code. valuation and assessment purposes regardless of ownership. and assessed on the basis of its actual use regardless of where located. situated in a commercial area in front of the public market. valued. contending that the Tax Declaration previously classifying their property as residential is binding. and Mrs. shall be appraised at the current and fair market value prevailing in the locality where the property is situated. Angeles appealed to the Local Board of Assessment Appeals. whether taxable or exempt. 5. Angeles. whoever owns it. SUGGESTED ANSWER: The following are the fundamental principles governing real property taxation: 1) Real property shall be appraised at its current and fair market value. assessment. . Equitable appraisal and assessment Local Taxation: Actual Use of Property (2002) The real property of Mr. 4) The appraisal. How should the appeal be decided? (5%) SUGGESTED ANSWER: The appeal should be decided against Mr. Section 217 of the Local Government Code provides that "real property shall be classified. Appraisal of Real Property. was declared in their Tax Declaration as residential because it had been used by them as their family residence from the time of its construction in 1990. when the spouses left for the United States to stay there permanently with their children. The law focuses on the actual use of the property for classification. PROCEDURE: Section 201. . and Mrs. The Department of Finance shall promulgate the necessary rules and regulations for the classification. and collection of real property tax shall not be let to any private person.

Declared by Provincial / City / Municipal Assessor (Sec 204) a. Duty of Person Acquiring Real Property or Making Improvement Thereon. SWORN statement containing FMV and description of property 2. . .When any person. Declaration of Real Property by the Assessor. Declaration of real Property by the Owner or Administrator. a sworn statement declaring the true value of subject property. or his authorized representative. or cause to be prepared.Section 202. which shall be the current and fair market value of the property. . including the improvements therein. Such declaration shall contain a description of the property sufficient in detail to enable the assessor or his deputy to identify the same for assessment purposes. or their duly authorized representative.DECLARATION OF REAL PROPERTY 1. city or municipal assessor shall himself declare the property in the name of the defaulting owner. files with assessor within 60 DAYS from date of transfer a SWORN statement containing FMV and description of property b. Proof of Exemption of Real Property from Taxation. If newly acquired property: i. city or municipal assessor. city or municipal assessor.Every person by or for whom real property is declared. . No oath is required Section 206. and shall assess the property for taxation in accordance with the provision of this Title. natural or juridical. within sixty (60) days after the acquisition of such property or upon completion or occupancy of the improvement. the provincial. and file with the provincial. only when the person under Sec 202 refuses or fails to make the declaration within the prescribed time b. a sworn statement declaring the true value of their property. to prepare. city or municipal assessor within thirty (30) days from the date of the . as determined by the declarant. Section 204. owning or administering real property.It shall be the duty of all persons. Section 203. acquiring at any time real property in any municipality or city or making any improvement on real property. who shall claim tax exemption for such property under this Title shall file with the provincial. Declared by Owner or Administrator (Sec 202-203) a. natural or juridical. to prepare. and file with the provincial. city or municipal assessor STEP 1 . or cause to be prepared. whichever comes earlier. refuses or fails for any reason to make such declaration within the time prescribed. whether previously declared or undeclared. If improvement on real property: i. taxable or exempt.It shall also be the duty of any person. No oath shall be required of a declaration thus made by the provincial. within a city or municipality. by whom real property is required to be declared under Section 202 hereof. File w/in 60 DAYS upon completion or occupation (whichever is earlier) ii. or against an unknown owner. if known. as the case may be. The sworn declaration of real property herein referred to shall be filed with the assessor concerned once every three (3) years during the period from January first (1st) to June thirtieth (30th) commencing with the calendar year 1992.

However. certifications and mortgage deeds. the property will be listed as taxable in the roll. title of ownership. That such taxes shall be computed on the basis of the applicable schedule of values in force during the corresponding period. property will be dropped from the roll Section 222. by-laws. whether taxable or exempt. 3. there shall be prepared and maintained by the provincial. IF FILING FOR EXEMPTION (Sec 206) 1. such taxes shall be subject to an interest at the rate of two percent (2%) per month or a fraction thereof from the date of the receipt of the assessment until such taxes are fully paid. - (b) In every province and city.declaration of real property sufficient documentary evidence in support of such claim including corporate charters. valued and assessed in the name of the owner or administrator. located within the territorial jurisdiction of the local government unit concerned. the same shall be dropped from the assessment roll. and similar documents. articles of incorporation. the property shall be listed as taxable in the assessment roll. If required evidence is not submitted within 30 days. including the municipalities within the Metropolitan Manila Area. Real property shall be listed. however. Note: IF PROPERTY DECLARED FOR THE FIRST TIME (Sec. or anyone having legal interest in the property. contracts. If the required evidence is not submitted within the period herein prescribed. no interest for delinquency shall be imposed thereon. otherwise. . If proven to be tax-exempt. city or municipal assessor an assessment roll wherein shall be listed all real property.Real property declared for the first time shall be assessed for taxes for the period during which it would have been liable but in no case of more than ten (10) years prior to the date of initial assessment: Provided. real property shall be assessed for back taxes for not more than 10 years prior to the date of initial assessment taxes shall be computed on the basis of applicable schedule of values in force during the corresponding periods Section 205. Assessment of Property Subject to Back Taxes. person claiming exemptions must file with assessor sufficient documentary evidence to support claim within 30 days from the date of DECLARATION of property 2. 222) If declared for 1st time. Listing of Real Property in the Assessment Rolls. . affidavits. If such taxes are paid on or before the end of the quarter following the date the notice of assessment was received by the owner or his representative. if the property shall be proven to be tax exempt.

its instrumentalities and political subdivisions.All declarations of real property made under the provisions of this Title shall be kept and filed under a uniform classification system to be established by the provincial. to a taxable person. Assessor prepares a schedule of FMV for different classes of properties c. Section 207. life X Replacement Estimated Eco. grantee or of the public entity if such property has been acquired or held for resale or lease. or co-owner shall be liable severally and proportionately for all obligations imposed by this Title and the payment of the real property tax with respect to the undivided property. Land a. That such heir. take the schedule of FMV 2. Life Cost STEP 4: DETERMINE ASSESSED VALUE (Sec 218) Procedure 1. devisee. 207) 1. city or municipal assessor. valued and assessed in the name of the possessor. (c) The real property of a corporation. valued and assessed in the same manner as that of an individual. for consideration or otherwise. In all other cases: FMV = Remaining eco. (d) Real property owned by the Republic of the Philippines. Machinery a. STEP 2: LISTING OF REAL PROPERTY IN THE ASSESSMENTROLLS (Sec 205. . Real Property Identification System. For Brand New machinery: FMV is acquisition cost b. valued and assessed in the name of one or more co-owners: Provided. Sanggunian enacts an ordinance d. the schedule of FMV is published or posted 2. city or municipal assessor. and municipalities gives summons to owners of affected properties b. Tax = Assessed value X Tax rate . Assessor of the province. and undivided real property other than that owned by a deceased may be listed. shall be listed. the beneficial use of which has been granted. valued and assessed in the name of the estate or of the heirs and devisees without designating them individually. Assessed value = FMV X Assessment level 3. All declaration shall be kept and filed under a uniform classification system to be established by the provincial. however.(c) The undivided real property of a deceased person may be listed. 224-225) Determining Fair Market Value 1. city. partnership. STEP 3: APPRAISAL AND VALUATION OF REAL PROPERY (Sec 212-214. or association shall be listed.

Sept. suitable for cultivation.The real property tax for any year shall accrue on the first day of January and from that date it shall constitute a lien on the property which shall be superior to any other lien. . Section 236. inland fishery. Date of Accrual of Tax. LGC) 2. mortgage. Dec. may levy and collect an annual tax of one percent (1%) on the assessed value of real property which shall be in addition to the basic real property tax. basic real prop tax in 4 equal installments (Mar 31. may levy an annual tax on idle lands at the rate not exceeding five percent (5%) of the assessed value of the property which shall be in addition to the basic real property tax. Idle Lands.STEP 5: PAYMENT AND COLLECTION OF TAX Section 246. idle lands shall include the following: (a) Agricultural lands. The proceeds thereof shall exclusively accrue to the Special Education Fund (SEF). 31) 2. or a municipality within the Metropolitan Manila Area. more than one (1) hectare in area. tax shall constitute as superior lien (Sec 246) HOW? 1. Additional Ad Valorem Tax on Idle Lands.A province or city. Section 235. prompt payment -discount not exceeding 10% of annual tax due (Art 342 IRR) WHO COLLECTS? The provincial. Provided in no case shall the total interest exceed thirty-six (36) months Note: FOR ADVANCE and PROMPT PAYMENT 1. Coverage. dairying. advance payment -discount not exceeding 20% of annual tax (Sec 251. special levy . Section 237. and shall be extinguished only upon the payment of the delinquent tax. or a municipality within the Metropolitan Manila Area.governed by ordinance Note: INTEREST for LATE PAYMENT Two percent (2%) each month on unpaid amt. . Agricultural lands planted to permanent or perennial . one-half (1/2) of which remain uncultivated or unimproved by the owner of the property or person having legal interest therein. . or encumbrance of any kind whatsoever. Period: January 1 of every year (Sec 246) 2. When: 1. until the delinquent amt is paid. and other agricultural uses. city. Additional Levy on Real Property for the Special Education Fund. 30. municipal or barangay treasurer within which to collect.For purposes of real property taxation.A province or city. . June 30.

Idle Lands Exempt from Tax. this Section shall likewise apply to residential lots in subdivisions duly approved by proper authorities. this provision applies to residential lots in subdivisions duly approved by proper authorities. regardless of land area.crops with at least fifty (50) trees to a hectare shall not be considered idle lands. the owner of the property or person having legal interest therein of the imposition of the additional tax. city or municipal assessor shall furnish a copy thereof to the provincial or city treasurer who shall notify. city or municipal assessor shall make and keep an updated record of all idle lands located within his area of jurisdiction. A province. who shall be liable for the additional tax c. . not exceeding 1% of the assessed value b. . not more than 2% of the assessed value 2. additional five percent tax on idle lands: i. province. non-agrcultural land. city or municipality may impose a special levy on the lands comprised within its territorial jurisdiction specially benefited by public works projects or improvements funded by the local government unit concerned: Provided.The provincial. the ownership of which has been transferred to individuals owners. special levies may be imposed by the same LGU on the said real properties such as: a. the ownership of which has been transferred to individual owners. however. however. That the special levy shall not exceed sixty percent (60%) of the actual cost of such projects and . Lands actually used for grazing purposes shall likewise not be considered idle lands.000) square meters in area one-half (1/2) of which remain unutilized or unimproved by the owner of the property or person having legal interest therein. (b) Lands. Types of real property tax: 1.A province or city or a municipality within the Metropolitan Manila Area may exempt idle lands from the additional levy by reason of force majeure. That individual lots of such subdivisions. city or municipality within metro manila on real property hereinafter specifically exempted at the following rates: a. annual ad valorem tax that is levied by a province. in addition to the basic real property tax. ½ of which remain uncultivated or unimproved by the owner or owners thereof ii. located in a city or municipality. Section 239. Listing of Idle Lands by the Assessor. who shall be liable for the additional tax: Provided. Section 238. on the basis of such record. For purposes of collection. utilizing or cultivating the same. the provincial. civil disturbance. additional 1% for the special education fund b. other than agricultural. more than one thousand (1. Regardless of land area. the ownership of which has not been transferred to the buyer shall be considered as part of the subdivision. of more than 1k 2meter iii. cities and municipalities in MM. natural calamity or any cause or circumstance which physically or legally prevents the owner of the property or person having legal interest therein from improving. and shall be subject to the additional tax payable by subdivision owner or operator. including residential lots in subdivisions. agricultural lands.

land not devoted directly to any crop or to any definite purpose for at least one year prior to the notice of expropriation. but used to be devoted or is suitable to such crop or is contiguous to land devoted directly to any crop and does not include land devoted permanently or regularly to other essential and more productive purpose. (5%) SUGGESTED ANSWER: I would advise the lot owners that a city. (Sec. I would advise them to construct or place improvements on their idle lands by making valuable additions to the property or ameliorations in the land's conditions so the lands would not be considered as idle. (Sec.) Finally. Local Taxation: Coverage (2002) Aside from the basic real estate tax. 237) The term "Idle Lands" means. (3%) SUGGESTED ANSWER: . (Philippine Legal Encyclopedia. 1986 Ed. including the costs of acquiring land and such other real property in connection therewith: Provided. even if it is outside Metro Manila. 236. except for reasons other than force majeure or any fortuitous event. Local Government Code) I would likewise advise them that the levy may apply to residential lots. improvements. the ownership of which has been transferred to individual owners who shall be liable for the additional tax. by Sibal. (Last par. 199[m]) In this manner their properties would not be subject to the ad valorem tax on idle lands. further. Sec.. regardless of land area. give three (3) other taxes which may be imposed by provincial and city governments as well as by municipalities in the Metro Manila area. Special Levy on Idle Lands (2005) A city outside of Metro Manila plans to enact an ordinance that will impose a special levy on idle lands located in residential subdivisions within its territorial jurisdiction in addition to the basic real property tax. what would your advice be? Discuss. That the special levy shall not apply to lands exempt from basic real property tax and the remainder of the land portions of which have been donated to the local government unit concerned for the construction of such projects or improvements Local Taxation. in subdivisions duly approved by proper authorities. may levy an annual tax on idle lands at the rate not exceeding five percent (5%) of the assessed value of the property which shall be in addition to the basic real property tax. If the lot owners of a subdivision located in the said city seek your legal advice on the matter.

Are those underground tanks. in addition. 23§. They are considered as real property for real property tax purposes as "other improvements to affixed or attached real property under the Assessment Law and the Real Property Tax Code (Caltex v. Oil companies install underground tanks in the gasoline stations located on land leased by the oil companies from the owners of the land where the gasoline stations [are] located. Periods Within Which To Collect Real Property Taxes. Central Board of Assessment Appeals. the pieces must be placed by the owner of the land and. 235. The period of prescription within which to collect shall be suspended for the time during which: (4) The local treasurer is legally prevented from collecting the tax. and 3. Machinery and equipment installed by the lessee of leased land is not real property for purposes of execution of a final judgment only. Special levy (Sec. considered real property for purposes of real property taxation under the local Government Code? Explain. in order for machinery and equipment to be considered real property. The following real property taxes aside from the basic real property tax may be imposed by provincial and city governments as well as by municipalities in the Metro Manila area: 1. which were not placed there by the owner of the land but which were instead placed there by the lessee of the land. (5) The owner of the property or the person having legal interest therein requests for reinvestigation and executes a waiver in writing before the expiration of the period within which to collect. LGC). LGC). 240). such action may be instituted for the collection of the same within ten (10) years from the discovery of such fraud or intent to evade payment. Real Property Tax: Underground Gasoline Tanks (2003) Under Article 415 of the Civil Code. 2. shall be instituted after the expiration of such period. .The basic real property tax and any other tax levied under this Title shall be collected within five (5) years from the date they become due. The properties are considered as necessary fixtures of the gasoline station. Section 270. (8%) SUGGESTED ANSWER: Yes. In case of fraud or intent to evade payment of the tax. whether administrative or judicial. 114 SCRA 296 [1982]). must tend to directly meet the needs of the industry or works carried on by the owner. without which the gasoline station would be useless. and . Additional levy on real property for the Special Education Fund (Sec. Additional Ad-valorem tax on Idle lands (Sec. No action for the collection of the tax.

PAYMENT UNDER PROTEST (Sec 252) a. within ten (10) yrs. annotate on tax receipt “paid under protest” d. There shall be annotated on the tax receipts the words "paid under protest". from discovery of fraud. city treasurer or municipal treasurer. city. who shall decide the protest within sixty (60) days from receipt. The protest in writing must be filed within thirty (30) days from payment of the tax to the provincial. shall be held in trust by the treasurer concerned. the taxpayer may avail of the remedies as provided for in Chapter 3. or municipality with treasurer concerned b. . the owner of the prop is out of the country or cannot be located REMEDIES IN REAL PROPERTY TAXATION REMEDIES OF TAXPAYER 1. local treasurer is legally prevented to collect tax 2. (d) In the event that the protest is denied or upon the lapse of the sixty day period prescribed in subparagraph (a). PERIOD: 1. (6) The owner of the property or the person having legal interest therein is out of the country or otherwise cannot be located. Book II of this Code. Treasurer shall decide protest within 60 days 2. within five (5) years from the date they become due 2. confirm protest in writing stating grounds therefor e. File a written claim for refund within two (2) years from date taxpayer is entitled thereto Section 252. Title II. Within 30 days. indicate amount contested c. file protest with province. the amount or portion of the tax protested shall be refunded to the protestant. (c) In the event that the protest is finally decided in favor of the taxpayer. in the case of a municipality within Metropolitan Manila Area. REFUND IN CASE OF EXCESSIVE COLLECTION (Sec 253) a. in case there is fraud or intent to evade Instances when PRESCRIPTION SHALL BE SUSPENDED: 1. - (a) No protest shall be entertained unless the taxpayer first pays the tax. the owner of prop requests for reinvestigation and writes a waiver before expiration of period to collect 3. Payment Under Protest. (b) The tax or a portion thereof paid under protest. or applied as tax credit against his existing or future tax liability.

Section 258. the taxpayer may file a written claim for refund or credit for taxes and interests with the provincial or city treasurer within two (2) years from the date the taxpayer is entitled to such reduction or adjustment. alternative or simultaneously. taxpayer may appeal to board of assessment appeal or 2.After the expiration of the time required to pay the basic real property tax or any other tax levied under this Title. irrespective of the owner or possessor thereof. and may only be extinguished upon payment of the tax and the related interests and expenses.When an assessment of basic real property tax. avail of remedies under Ch 3 title 2 Book II (Local Board of Assessment Appeals and Central Board of Assessment Appeals) Section 253. . the local government unit concerned may avail of the remedies by administrative action thru levy on real property or by judicial action. Levy on Real property (Sec 258 and 259) 2. Further Distraint or Levy (Sec 265) Section 256.The basic real property tax and any other tax levied under this Title constitutes a lien on the property subject to tax. In case the claim for tax refund or credit is denied. Local Governments Lien. refunded or 2. or simultaneously with. Section 257. Remedies For The Collection Of Real Property Tax. the taxpayer may avail of the remedies as provided in Chapter 3. superior to all liens. the institution of the .For the collection of the basic real property tax and any other tax levied under this Title. Book II of this Code. enforceable by administrative or judicial action. The provincial or city treasurer shall decide the claim for tax refund or credit within sixty (60) days from receipt thereof. Levy on Real Property. real property subject to such tax may be levied upon through the issuance of a warrant on or before. amount may either be 1. Title II. is found to be illegal or erroneous and the tax is accordingly reduced or adjusted. .Note: No protest shall be entertained unless THE TAX IS FIRST PAID. Repayment of Excessive Collections. . charges or encumbrances in favor of any person. IF PROTEST DECIDED IN FAVOR of taxpayer. applied as tax credit IF DENIED or NOT DECIDED WITHIN 60 DAYS BY TREASURER: 1. Use or non-use of one remedy shall not be a bar against the other (Sec 258) ADMINISTRATIVE Remedies 1. Local Government’s Lien (Sec 256) 4. Sale of Real Property (Sec 260) 3. . REMEDIES OF GOVERNMENT Remedies may be enforced either through administrative or judicial action or both. or any other tax levied under this Title.

The warrant shall operate with the force of a legal execution throughout the province.Without prejudice to criminal prosecution under the Revised Penal Code and other applicable laws. city or municipal building. the interest due thereon and expenses of sale. . or on the property to be sold. written notice of the levy with the attached warrant shall be mailed to or served upon the assessor and the Registrar of Deeds of the province. The advertisement shall specify the amount of the delinquent tax. Advertisement and Sale. city or municipality within the Metropolitan Manila Area where the property is located. the name of the owner of the real property or person having legal interest therein.Within thirty (30) days after service of the warrant of levy. The levying officer shall submit a report on the levy to the sanggunian concerned within ten (10) days after receipt of the warrant by the owner of the property or person having legal interest therein. Penalty for Failure to Issue and Execute Warrant. any local treasurer or his deputy who fails to issue or execute the warrant of levy within one (1) year from the time the tax becomes delinquent or within thirty (30) days from the date of the issuance thereof. the local treasurer shall proceed to publicly advertise for sale or auction the property or a usable portion thereof as may be necessary to satisfy the tax delinquency and expenses of sale. and in a publicly accessible and conspicuous place in the barangay where the real property is located. a description of the property sold. The provincial or city treasurer. the administrator or occupant of the property. respectively. the amount of the tax due and the interest thereon. Section 260. the interest due thereon. The advertisement shall be effected by posting a notice at the main entrance of the provincial. the interest due thereon and the expenses of sale. the description of the property. Section 259. the amount of the delinquent tax. At the same time. however. and a description of the property to be sold. . or in case he is out of the country or cannot be located. the local treasurer or his deputy shall make a report of the sale to the sanggunian concerned. within the Metropolitan Manila Area. city or a municipality. The warrant shall be mailed to or served upon the delinquent owner of the real property or person having legal interest therein. At any time before the date fixed for the sale. city or municipality where the property is located. the expenses of sale and a brief description of the proceedings: Provided. Within thirty (30) days after the sale. who shall annotate the levy on the tax declaration and certificate of title of the property. or at any other place as specified in the notice of the sale. when issuing a warrant of levy shall prepare a duly authenticated certificate showing the name of the delinquent owner of the property or person having legal interest therein. or a treasurer of a municipality within the Metropolitan Manila Area. or who is found guilty of abusing the exercise thereof in an administrative or judicial proceeding shall be dismissed from the service. as the case may be. . city or municipal building. the owner of the real property or person having legal interest therein may stay the proceedings by paying the delinquent tax. and by publication once a week for two (2) weeks in a newspaper of general circulation in the province. The local treasurer shall likewise prepare and deliver to the purchaser a certificate of sale which shall contain the name of the purchaser. and which shall form part of his records. the date and place of sale.civil action for the collection of the delinquent tax. The sale shall be held either at the main entrance of the provincial.

Assuming Joachin is a registered owner. G. 154027. Aug. Dec. 2005. will render an auction sale void (Tan v. 82782. otherwise the properties listed shall be sold at public auction. The local treasurer may. will your answer be the same? (2. .2005.R.That proceeds of the sale in excess of the delinquent tax.R. 120435. 2006 a list of delinquent real property taxpayers in 2 newspapers of general circulation and posted this in the main lobby of the City Hall. Requirements. CA. Bantegui. 5. v. For his part. the real owner. the non-fulfillment of which vitiates the same (Tiongco v.. by ordinance duly approved.Levy may be repeated if necessary until the full amount due. Joachin is one of those named in the list. 154027.e. No. October 24. No. G. No. 22. CA. Veterans Bank. He alleged that the auction sale of his property is void for lack of due process considering that the City Treasurer did not send him personal notice. October 24. is collected. and the expenses of sale shall be remitted to the owner of the real property or person having legal interest therein. G.R. Phil. If you were the judge. The failure to give notice to the right person i. He purchased a real property in 1996 but failed to register the document of sale with the register of Deeds and secure a new real property tax declaration in his name. Section 265. including all expenses. Dec. 120974. Bantegui. the interest due thereon. City Treasurer of Q. Estate of Mercedes Jacob v. In auction sales of property for tax delinquency. Further Distraint or Levy. how will you resolve this issue? (2. 22. Real Property Tax.5%) SUGGESTED ANSWER: Yes. No. the City Treasurer maintains that the publication and posting of notice are sufficient compliance with the requirements of the law. 1992).C. Auction Sales of Property for Tax Delinquency (2006) Note: the answer of mamaleteo seems to be more accurate pp 593 Quezon City published on January 30. G. notice to delinquent landowners and to the public in general is an essential and indispensable requirement of law.R. 1997). . No. 1. advance an amount sufficient to defray the costs of collection thru the remedies provided for in this Title. including the expenses of advertisement and sale. G.5%) SUGGESTED ANSWER: I will resolve the issue in favor of Joachin. 1997). The law requires that a notice of the auction sale must be properly sent to Joachin and not merely through publication (Tan v. 2. The notice requires all owners of real properties in the list to pay the real property tax due within 30 days from the date of publication.R.

Imposition of Real Property Tax Rate (2002) An Ordinance was passed by the Provincial Board of a Province in the North. Within 30 days . or calamity in any province. .CENTRAL BOARD OF ASSESSMENT APPEALS 4. the sanggunian concerned. calamity (Sec 276)by an ordinance a.SUPREME COURT Local Taxation: Legality.In case of a general failure of crops or substantial decrease in the price of agricultural or agribased products. wholly or partially. there is a general failure of crops 2. condone or reduce the real property tax and interest for any year in any province or city or a municipality within the Metropolitan Manila Area.JUDICIAL (Sec 266) Civil action filed by the local treasurer within 5 yrs. city. (LBAA should decide win 120 DAYS from receipt of petition) 3. increasing the rate of basic real property tax from 0. city or municipality. . Section 277. With Supporting Documents 2. Condonation or Reduction of Real Property Tax and Interest. Within 15 days . The PRESIDENT may remit or reduce real prop tax in any province. substantial decrease in the price of products 3. OWNER OR PERSON WITH LEGAL INTEREST Files within 60 days: a. by ordinance passed prior to the first (1st) day of January of any year and upon recommendation of the Local Disaster Coordinating Council. Written Petition under Oath b.The President of the Philippines may. Condonation or Reduction of Tax by the President of the Philippines. . the taxes and interest thereon for the succeeding year or years in the city or municipality affected by the calamity. may condone or reduce.006% to 1 % of the assessed value of the real .The local government unit concerned may enforce the collection of the basic real property tax or any other tax levied under this Title by civil action in any court of competent jurisdiction. Collection of Real Property Tax Through the Courts. The civil action shall be filed by the local treasurer within the period prescribed in Section 270 of this Code CONDONATION and REMISSION: Section 276. Within 30 days-LOCAL BOARD OF ASSESSMENT APPEALS a. municipalities if he deems that PUBLIC INTEREST so requires (Sec 277) THE SANGGUNIAN concerned may CONDONE or REDUCE the tax in cases where: 1. when public interest so requires. passed before Jan 1 of any year and upon recommendation by an ordinance and upon recommendation of the Local Disaster Coordinating Council APPEALS IN REAL PROPERTY TAXATION 1. from due date Section 266.

any increase in the rate of real property tax is void. No public hearing is required before the enactment of a local tax ordinance levying the basic real property tax (Art. 324. March 25. those whose rates are relatively high to keep certain imports out of the domestic market or to raise domestic price on certain imports so that they may be manufactured profitably at domestically.[ Garcia vs. the Supreme Court recognized that public hearings are required to be conducted prior to the enactment of an ordinance imposing real property taxes. (Belen Figuerres v. 2. or exported to. or merchandise. ALTERNATIVE ANSWER: Yes. GRNo. no. 101273. Is there merit in the protest? Explain your answer. Residents of the municipalities of the said province protested the Ordinance on the ground that no public hearing was conducted and. articles. the tariff or tax assessed upon merchandise imported from. the Court should have ruled that the tax ordinance is invalid. CUSTOM DUTIES This is a tax which are assessed at the at the prescribed tariff rates which are likely imposed for both revenue raising and for regulatory purposes. . a foreign country. Although it was concluded by the highest tribunal that presumption of validity of a tax ordinance can not be overcome by bare assertions of procedural defects on its enactment. 1999). TARIFF AND CUSTOMS CODE TARIFF custom duties. July 3. They both refer to the taxes imposed on imported or exported wares. It is the name given to taxes on the importation and exportation of commodities. LGC Regulations). Purposes of tariffs: 1. those whose rates are relatively low so that goods may be readily imported and duties may be easily collected. (2%) SUGGESTED ANSWER: The protest is devoid of merit. there is merit in the protest provided that sufficient proof could be introduced for the non-observance of public hearing. By implication. therefore. it would seem that if the taxpayer had presented evidence to support the allegation that no public hearing was conducted.R. Court of Appeals. G.. Executive Sec. 119172. 2000. toll of tribute payable upon merchandise to the government. Protective tariffs. 1992] Note: Customs duties and tariffs are synonymous with one another. property effective January 1. Revenue tariffs.

The enforcement of tariff and custom laws and all other laws. general anything that may be the subject or exportation. The assessment and collection of the lawful revenues from imported articles and all other dues. 2. The prevention and the suspension of smuggling and other frauds upon the customs 3. The supervision and control over the entrance and clearance of vessels and aircraft engaged in foreign commerce. and penalties accruing under the tariff and customs laws. CIR] . POWERS AND JURISDICTION OF THE BOC 1. Bargaining tariffs. shall be subject to duty upon each importation. wares and in. including container yards and freight stations. airport. fees. when used with reference to importation or exportation. As to the scope Tariff and Custom laws extend not only to the provisions of the TCC but to all other laws as well the enforcement of which is entrusted to the BOC. when imported from any foreign country into the Philippines. are merchandise. rules and regulations relating to tariff and custom administration. to include goods. even though previously exported from the Philippines. ARTICLES SUBJECT TO CUSTOM DUTIES Articles. EXCEPT as otherwise specifically provided for in this Code or in other laws. BUREAU OF CUSTOMS (BOC) DUTIES. 3. 6. charges. fines. [Bastida vs. The supervision and control over the handling of foreign mails arriving in the Philippines. Scope of Tariff and Custom Laws: Include not only the provisions of the Tariff and Custom Code (TCC) and regulations pursuant thereto. Checks. terminal facilities. money orders and dollar bills properly within the concept of merchandise as used in Revised Administrative Code. [SEC. landed or stored in piers. Exclusive original jurisdiction over seizure and forfeiture cases under the tariff and custom laws. 4. those whose schedules include rates designed primarily for bargaining purposes or which contain some general provision for the imposition of higher duties upon products of countries whose tariff policies are considered unsatisfactory or unfair. 5. for the protection of government revenue. for the purpose of the collection of the lawful duty on the dutiable articles thus impoprted and the prevention of smuggling through the medium of such mails. Supervision and control over all import and export cargoes. 100. TOC] MERCHANDISE The Revised Administrative Code defines merchandise. but all other laws and regulations that are subject to the Bureau of Customs (BOC) or otherwise within its jurisdiction. 7.

Prohibited importation 3. antique 20. Articles subject to duty ( Dutiable Goods) 2.TCC) . Electrical and mechanical machineries 18. 34) 11. beverages. Wood and related articles 17. narcotics and pharmaceutical products EXCEPT when made by the government designed for medical purpose. headgear. Optical products. TCC] PROHIBITED IMPORATTIONS [Code: HOT-DOG-TAMAD] 1. Dynamite. Written or printed articles involving Obscene or immoral character 6. Mineral products 12. Products of Chemical or allied industries 5. other Articles (P. Vegetable products 11. vessels. Opium pipes and other drugs paraphernalia 3. Hides ( skin. Articles. marijuana and other dangerous drugs. ammunition and other explosive weapons EXCEPT when authorized by law 5. Pulp or wood. Articles made of precious Metal but actual fineness of quality not indicated 10. Any Adulterated or misbranded drug in violation of the Food and Drugs Act. rebellion materials. Prepared foodstuffs. 14. Written or printed materials containing any matter advocating of inciting Treason. Natural or cultural stones 8.Kinds of Goods/Merchandise 1. Aircraft. Plastic and rubber articles 6. drugs and substances designed and intended to produce unlawful Abortion and printed materials promoting unlawful abortion 9. Footwear. 7. Lottery and sweepstakes Tickets EXCEPT those authorized by the Philippine Government 8. tobacco and manufactured tobacco 4. Heroine. Animals and animals product 2. Manufactured/miscellaneous articles 21. Arms and ammunitions 10. instruments. Metals 19. 2. medical and surgical products [SEC. Title 1. oil and their cleavage products 3. spirits and vinegar. 102. 4. sedition. Plaster. Textile and textile products 16. fur. Artworks.(SEC. leather) 13. Gambling Devices 7. Conditionally-free importations DUTIABLE GOODS [Code: AFP-CPPNPA-VMH-FAT-WE-MAMO] 1. Animal or vegetable Fats. vehicles and all other mode of transportation 15. 104. cements and other related articles 9.D. etc.

trophies. Exhibition. of Finance. Mining equipment and tools 18. Books 6. re-conditioning for export 17. articles which are previously exported but returned in the Philippines 20. Wearing apparels 11. Film production by foreign media or movie outfit 9. Personal and household effects 12. thing bestowed as an award 22.imposed and collected merely as a source of revenue . Basis of Dutiable Value The dutiable value of the imported article subject to an ad valorem of duty shall be transaction value. importation for the use of foreign Embassies 13. CONDITIONALLY-FREE IMPORTATION [Code: PSST-BAR-FEW-PERA-SAM-CPPVICE] 1. 4. containers holders and other similar boxes 14. Special Custom duties. Equipment used in salvaging vessels 10. medals. Receptacles. Salvage articles recovered from an abandoned vessel 4. Articles for repair. .Note: All the above merchandise/goods cannot be brought in or out of the Philippines. competition articles for display Note: These articles which are exempt from import duties upon compliance with the formalities prescribed in or with regulations promulgated by the Commissioner of Customs with the approval of the Sec. Sea store supplies to the vessel or aircraft 3. Relief organization and articles used for relief operations 8. Prizes. Vessels spare part of foreign vessel and aircraft 23. EXCEPT race horse 15. Ordinary or Regular Custom duty. Cost of repair made abroad upon a vessel registered in the Philippines 19. articles which are Imported subsequently in the Philippines 24. 2. Classification of Custom Duties 1. Samples of any kind 16.the duty is based on the weight or volume of the imported article.imposed and collected in addition to ordinary customs duties usually to protect local industries against foreign competition. Animals. 3. Trailer chassis by a shipping company 5. Professional instruments and implements 2. Coffin. badges and other 21. Ad Valorem. Aquatic products 7. caskets 25.the duty is based on the market value or price of the imported article. Specific.

of Labor if non-agricultural product. unloading and handling charges. Discriminatory Duty. net weight KINDS OF SPECIAL CUSTOM DUTIES 1. imposed upon those not properly marked as to place of origin of the goods. Imposing authority: Special Committee on Anti-Dumping composed of: i. a. transaction value 2. members: 1. 2. and the cost of the insurance. of Agriculture if the article in question is agricultural product or the Sec. Dumping Duty. b. gross weight 2. cost of transport. parts and items incorporated in the imported goods. It is adjusted by adding certain expenses to the extent that they are incurred by the buyer but are not included in the price actually paid or payable for the imported goods. of DTI. Rate: any amount not exceeding 100% ad valorem of the subject articles b.imposed upon goods coming from countries that discriminate against Philippine products. a. Sequence in Determination of Value 1. Rate: 5% ad valorem of articles b. Rate: difference between the actual price and the normal value of the article. transaction value of similar goods 4. ii. amount of royalties and license fees. Imposing authority: Sec. components. Countervailing Duty. The Sec. legal weight 3. imposed upon foreign goods enjoying subsidy thus allowing them to sell at lower prices to the detriment of local products similarly situated. Of Finance 3. of Finance as chairman. Imposing authority: Commissioner of Custom 4. computed value 6. the value of the materials. Marking Duty. 1. a. loading. deductive value 5.TRANSACTION VALUE It is the price actually paid or payable for the goods when sold for export to the Philippines. transaction value of identical goods 3. Imposing authority: president of the Philippines . a. other reasonable means or fallback value Basis for dutiable weight for specific custom duties 1. subsidy or subvention b. imposed upon foreign products with value lower than their fair market value to the detriment of local products. and either the Sec. 2. Sec. Rate: equivalent to the bounty.

are assessed on articles for storage in customs premises. the liability for duties. and other charges attaching on importation constitutes a personal debt due to the importer of the government which can be . Arrastre dues. along a coast. receiving. are assessed against the cargo of a vessel engaged in foreign or coastwise trade. DUES. operator or master of a vessel engaged in foreign trade based on the net tonnage of the vessel or weight of the articles discharged or laden. or if consigned to order by the consignor. (Sec. Liability for Custom Duties a.charged and collected for services rendered and documents issued by the BOC. fees. are assessed against a vessel for mooring or berthing at a pier. are imposed on vessels entering into or departing from a port of entry of the Philippines. The importer being holder of the bill of lading.DRAWBACK It is a device resorted to for enabling a commodity affected by taxes to be exported and sold in foreign markets upon the same terms as if it not been taxed at all. OTHER CUSTOMS FEES. wharf. 4. Wharfage dues. OR CHARGES PAYABLE 1. taxes. Tonnage dues. or A person duly empowered to act as agent or attorney-in-fact. 5. Exemptions granted government agencies or GOCCs with existing contracts. or in any area of the Philippines. TCC) b. or obligations with foreign countries. Tariff and Custom Code] Unless otherwise relieved by laws or regulation. based on the quantity weight or measure received and/or discharged by such vessel. A customs broker acting under authority of the holder of the bill. 105. IMPORTATION UNDER TCC 1. Exemption under the TCC ii. It may be full or partial. b. RULE: All importations exportations of goods are subject to custom duties. Storage dues. maybe regarded as the consignees [Section 1203. EXCEPTIONS: i. International organization pursuant to agreement and special law iv. Who are authorized to make import entry? a. commitments. GEN. and custody. iii. are imposed on all imported and exported articles and baggage of passenger for their handling. or river at any port in the Philippines. 2. Liability of importers for duties The Code provides that all articles imported into the Philippines shall be held to be the property of the person to whom the same are consigned: and the holder of the bill of lading duly endorse by the consignee thereof therein named. Harbor Fees. 3. shall be deemed the consignee thereof.are paid by the owner. 7. The under writers of abandoned articles and the salvors of articles saved from a wreck at sea. 6. agreements. Berthing dues. 2. cargo shed. agent. Other fees. Exemption granted by the President of the Philippines upon recommendation of NEDA.

sell. 3602 1. conceal. concealment. It may be express or implied. o In the case of articles that are free of duties. (sec. taxes .discharged only by payment of said duties and charge. It also constitutes a lien upon the articles imported which maybe enforced while such articles are in custody or subject to the control of the government. or sale of such article after importations. Abandonment It is the renunciation by an importer of all his interest in the property rights in the imported article. or in any manner facilitate the transportation. any article. taxes and other charges. Returning residents 1. value. at the port of entry ant the legal permit for withdrawal shall have been granted.[Section 1205. Government importations All importations by the government for its own use or that of its own subordinates branches or instrumentalities or corporations. Filling of any false or fraudulent entry for the payment of drawbacks or refund of duties. or shall receive. Smuggling or Unlawful Importation Any person who shall fraudulently import or bring into the Philippines. . 3. they are nationals who have stayed in a foreign country for a period of at least six (6) months. or secured to be paid. tariff classification and other particulars of the imported article to enable the customs authorities to determine the correct customs duties and internal revenue taxes due on the importation. For the purpose of conditionally free importation of personal and household effects. buy. knowing the same to have been imported contrary to law. importation is deemed terminated from the time they have legally left the jurisdiction of the customs Import Entry A declaration to the BOC showing the description. 3601 TCC) Fraudulent Practices (Criminal Offense) against Custom Revenues under Sec.  Importation terminates: o Upon payment of the duties and other charges due upon the articles. 2. fees and charges provided in the Tariff and Customs Code. contrary to law. Entry of imported articles by means of any false or fraudulent invoice. Entry of goods at less than the true weight or measure. shall be guilty of smuggling. or assist in doing so.Tariff and Customs Code] When importation begins and deemed terminated  Importation begins when carrying vessel or aircraft enters the jurisdiction of the Philippines with an intent to unload. agencies or instrumentalities owned or controlled by the government shall be subject to the duties.

TCC: In the interest of national economy.BALIKBAYAN For the purpose of tax-free purchase at Philippine Duty-free shops. The Commission shall investigate: 1. to increase. agency or instrumentality concerned. Former Filipino citizen and his family who had been naturalized in a foreign country and comes or returns to the Philippines 4. LIMITATIONS TO FLEXIBLE TARIFF CLAUSE 1. The term family shall mean the spouse and children of the balikbayan who are not balikbayan in their own right traveling with the latter to the Philippines. and 3. FLEXIBLE TARIFF CLAUSE Authority of the President to adjust the tariff rates prescribed under the Tariff and Customs Code. VI. 401. tariff rates. the relations between the rates of duty on raw materials and finished or partly finished goods. a. (Sec. . import and export quotas. other duties or imports within the framework of the national development program of the government (Art. reduce. he must be: 1. general welfare and/or national security. The Congress may. 2. The NEDA thereafter submits the recommendation to the President. which is the enabling law that made effective the delegation of the taxing power to the President under the Constitution. Filipino overseas worker. to impose additional duty on all imports not exceeding 10% ad valorem. 28(2). Sec. the administration of and the fiscal and industrial effects of the country’s tariff and customs laws. by law. or remove existing protective rates of import duty. and b. 2. tonnage and wharfage dues. 1. Conduct by the Tariff Commission of an investigation in a public hearing. 2. authorize the President to fix within specified limits and subject to such limitations and restrictions as it may impose: a. The commission shall submit their findings and recommendations to the NEDA within 30 days after the termination of the public hearing. Constitution) Sec. to establish import quota or to ban imports of any commodity. The commission shall also hear the views and recommendations of any government office. In such case the corresponding ad valorem or specific equivalents of the duty with respect to the imports from the principal competing foreign country for the most recent representative period shall be used as bases. The power of the President to increase or decrease the rates of import duty within the abovementioned limits fixed in the Code shall include the modification in the form of duty. b. or 3. TCC) THE TARIFF COMMISIONS (TC) FUNCTIONS OF THE TARIFF COMMISSION A. is empowered: 1. Filipino citizen who has been continuously out of the Philippines for a period of at least one (1) year. or 2. 401. the President upon recommendation of the NEDA. provided that the increase should not be higher than 100% ad valorem.

search. 3. the effects of ad valorem and specific duties and of compound specific and ad valorem duties. Availed of when the importation is neither prohibited nor improperly made. applied when the importation is unlawful and it may be exercised even where the articles are not or no longer in custom’s custody UNLESS the importation is merely attempted in which case it may be effected only while the goods are still within the Customs jurisdiction or in the hands of a person who is aware thereof. Reduction of Custom Duties/ Compromise i. 6. (sec. the tariff relations between the Philippines and foreign countries. may 16. it is not necessary that the vessel or aircraft must itself carry the contraband. all questions relative to the arrangement of schedules and classifications of articles under the tariff laws. etc. Board of Investments. 1204 TCC) ii. L-28809. G. The complementary if collateral use of there Cessna plane for smuggling operation is sufficient for it to be deemed to have been used in smuggling. 2530 (a).. [Llamado vs. 1983] c. Central Bank. i. attaches on the goods. in general. of Finance(sec. and Sec. composition. the nature. 506. 7. TCC) TAX REMEDIES UNDER THE TARIFF AND CUSTOMS CODE (TCC) TAX REMEDIES OF THE GOVERNMENT 1. Under Sec. the volume of importation compared with domestic production and consumption. 1204 TCC) i. Administrative Fines and Forfeitures i. 2205. arrest (sec. b. Subject to approval of Sec. while still in the custody or control of the Government ii. regardless of ownership. Civil action (se. Seizure.R. 2531 and 2530 TCC) ii. and effects relating to competition of foreign industries with those of the Philippines. Tax Lien (sec. JUDICIAL a. This remedy is normally availed of when the tax lien is lost by the release of the goods. and 9. of Finance. commercial treaties. 2211 TCC) 2. ADMINISTRATIVE a. 5. 2316 TCC) ii. 709. 4. 2210. causes. Commissioner of Customs. 8. Criminal Action . to investigate the operation of customs and tariff laws and to submit report of its investigation. TCC in order to warrant forfeiture. conditions. no. B. Administrative assistance to the President and Congress (Sec. and classification of articles for customs revenue and other related purposes which shall be furnished to NEDA.

2313 TCC). Taxpayer within 15 days from assessment. 2307 TCC). Settlement of any seizure by payment of fine or redemption i. A written claim for refund may be submitted by the importer in abatement cases on missing packages. and ii. (sec. articles. 9 RA 9282) ii.TAX REMEDIES OF THE TAXPAYER 1. ii. Action to question the legality of seizure c. sec. is entitled to refund if payment is rendered erroneous or illegal by events occurring after the payment. Within 15 days to the Commissioner after notification by Collector of his decision (sec. 2210 TCC) 1. it would appear that an importer may appeal without first paying the duties. Appeal i. such as in seizure. failure to file an import entry within 30 days from the discharge of goods or having filed an entry fails to claim within 15 days but it shall not be so effective until so declared by the collector. Note: Before filing a protest. 1801 as amended by RA 7651) REMEDIES IN THE BUREAU OF CUSTOMS (BOC) CUSTOM PROTEST CASES These are cases which deal solely with liability for custom duties. Abandonment i. and other charges. 2403 TCC. b. dead or injured animals. The CTA is empowered to issue injunctions. Appeal i. 1701-1708 TCC) c. Any importer or interested party if dissatisfied with published value within 15 days from date of publication or within 5 days from the date of importation. But this shall not be allowed in any case where importation is absolutely prohibited or the release would contrary to law. but not in protest cases. or when there is an actual and intentional fraud (sec. and for manifest clerical errors. . Refund i. 2. Drawback cases where the goods are reexported (sec. there must first be a payment under protest. ADMINISTRATIVE a. b. fees. Within 30 days from receipt of decision of the Commissioner or Secretary of Finance to the division of the CTA (sec. 7 RA 1125. JUDICIAL a. deficiencies in the contents of packages or shortages before arrival of the goods in the Philippines. 2308. (sec. as amended by sec. d. Note: Payment under protest is necessary. lost or destroyed after such arrival. Protest i.

protest must furnish samples of goods under protest when required.Requirements for making a Protest: 1. must be filed when the amount claimed is paid or within 15 days after the payment 6. must point out the particular decision or ruling of the Collector of Customs to which exception is taken or objection made 3. must be in writing 2. must state the grounds relied upon for relief 4. . must be limited to the subject matter of a single adjustment 5.

R. It is administrative and civil in nature and is directed against the res or imported articles and entails a determination of the legality of importation. buy. [Lladoc vs. shall be guilty of smuggling (sec. contrary to law. or assist in doing so. Smuggling or Unlawful Importation Any person who shall fraudulently import or bring into the Philippines. knowing the same to have been imported contrary to law. Com of Custom. or in any manner facilitate the transportation. May 16. 3601. or shall receive. concealment. conceal. 3601 TCC). sell.TCC) . SEIZURE AND FORFEITURE CASES This refers to the matters involving smuggling. Note: These are action in rem. Note: anything that was used for smuggling is subject to confiscation. or sale of such article after importations. Note: Mere possession of the article in question by the defendant renders him liable UNLESS defendant could explain that his possession is lawful to the satisfaction of the court (sec. 1983] EXCEPT Common carriers that are not privately chartered cannot be confiscated. any article. L- 28809.R.

2. May exercise only in conformity with the laws and TCC. animal or other movable property when the same is subject to forfeiture or liable for any time as imposed under TCC. 2. if the conveyance has been used for smuggling at least twice before.[Rodriguez vs. Instruments used in the loading or unloading of goods subject of forfeiture 12. 1995] Port of Entry A domestic port open to both foreign and coastwise trade including airport of entry (sec. no forfeiture or seizure in the absence of prima facie evidence. cargo. TCC). boxes used to conceal good subject of forfeiture (sec. if the owner is not in the business for which the conveyance is generally used. documents filed at the custom house 2. Excessive cargoes 6. Fraudulent removal of cargoes 2. Prohibited articles 10. . September 18.Note: Payment of the tax due after apprehension is not a valid defense. that a prima facie presumption shall exist against the vessel. G. no. actually used for the consequence that is subject of forfeiture 11.TCC) Article NOT subject to Forfeiture or Seizure The forfeiture of vessel or aircraft or seizure of articles shall not be effected if it is established that the owner thereof or his agent in charge of the means of conveyance used as aforesaid has no knowledge of a participation in the unlawful act. Unlawful use of aircraft or vessel EXCEPT if there is Certificate of Public Convenience and Necessity 5. CA. no. and 3. In other words. Three meanings of term “ENTRY” 1. HOWEVER.R. procedure of passing the goods through the custom house. 115218. September 18. [ Rodriguez vs. CA.R. Excessive sea store 3. article. Beast. submission and acceptance of the documents 3. 2205 TCC) Articles subject to Seizures and Forfeitures [Code: FEU-UE-UM-UP-BIR] 1. G. 3514.  All articles imported into the Philippines whether subject to duty or not shall be entered through a customhouse at a port of entry. Money used to bribe 8. 2530. Unauthorized removal of goods 9.(sec. Receptacles. 115218. aircraft. vehicle or aircraft under any of the following circumstances: 1. rules and regulation. May seize any vessel. Unlawful transfer of cargoes 7. if the owner is financially not in a position to own such conveyance. Undeclared cargoes 4. 1995] Right of Custom Officers to Effect Seizure and Arrest 1.

exclusive jurisdiction still belongs to the BOC. CA. EXCEPT a dwelling house 2. Right of police officer to enter enclosure WITHOUT a warrant. beast and person 5.TCC). right to search vehicles or aircrafts and person or articles conveyed therein 4. even if no warrant of seizure or detention had previously been issued by the Collector of Custom in connection with seizure and forfeiture proceedings. Search with dwelling house must be with proper warrant 3. Over Imported Articles a. rivers and inland waters whether navigable from the sea or not. Even if a Custom seizure is illegal. Sec. G. ports. The power to secure itself from injury may certainly be exercised beyond the limits of its territory. a pursuit of such vessel began within the jurisdictional waters which may continue beyond the maritime zone and the vessel may be seized on the high seas. no.October 6.  It is the settled rule that the BOC acquires exclusive jurisdiction over imported goods. harbours. Note: In Assali vs. 1995] DOCTRINE OF HOT PURSUIT Requisites: 1. Over Vessels a. 104604. 603.R. . for the purpose of enforcement of the customs laws. the RTC does not have jurisdiction over seizure and forfeiture proceedings conducted by the BOC. they may be pursued in the Philippines with the jurisdiction over them at any place therein for the enforcement of the law. the SC held as a valid the interception and seizure of a vessel on the high seas. 2. 27SCRA312. an act is done in Philippine water which constitutes a violation of the TCC b.TCC). (sec. Places where searches and seizures may be conducted: 1. form the moment the goods actually in its possession or control. 603. saying that the authority of a nation within its territory is absolute and exclusive. Jurisdiction of the BOC The BOC has the right of supervision and police authority over all seas within the jurisdiction of the Philippines and over all coasts. [Jao vs. Search of person arriving from foreign countries.DOCTRINE OF PRIMARY JURISDICTION OVER SEIZURE AND FORFEITURE CASES The prevailing doctrine is that the exclusive jurisdiction in seizure and forfeiture cases vested in the collector of customs precludes a regular court from assuming cognizance of such matter. bays. Commissioner. there is a violation of TCC b. (2nd par. Right to search vehicles.  Thus.

2307. when there is fraud.SETTLEMENT OF FORFEITURE CASES GEN. (sec. Since criminal proceeding are actions in personam while the latter is action in rem. Note: Burden of proof in seizure or forfeiture case is on the claimant.TCC) Note: Acquittal in criminal charged is not a res judicata in seizure or forfeiture proceedings. the surrender of the property to the person offering to redeem would be contrary to law 3. the importation is absolutely prohibited or 2. EXCEPTIONS: 1. RULE: Settlement of cases by payment of fine or redemption of forfeited property is allowed. 2535. (sec. TCC) .

. unmanifested cargo is subject to forfeiture. It is enough that the cargo was unmanifested and that there was no showing that payment of duties thereon had been made for it to be subject to forfeiture.MANIFEST Manifest in coastwise trade for cargo and passengers transported from one place to another are required when one or both of such places are a port of entry (sec.  Manifest is not only required to imported goods. 2519.TCC) 4. It is also required for articles found on vessels or aircraft engaged in coastwise trade. Judicial Remedies (1997) The Tariff and Customs Code allows the Bureau of Customs to resort to the administrative remedy of seizure.2502.TCC).TCC) 2. TCC) Customs: “Flexible Tariff Clause” (2001) What do you understand by the term "flexible tariff clause" as used in the Tariff and Customs Code? (5%) SUGGESTED ANSWER: The term "flexible tariff clause "refers to the authority given to the President to adjust tariff rates under Section 401 of the Tariff and Customs Code. 2504. Failure to pay Duties (sec. TCC) 3. Unlawful loading and unloading of cargoes (Secs. such as by enforcing the tax lien on the imported article. Breach of a 2.906.2507.2508-2514.Thus. 2517. Failure to supply or manifest requirements provided by law (sec. 2524. Customs: Administrative vs. Failure or refusal of a party to submit evidence (sec. which is the enabling law that made effective the delegation of the taxing power to the President under the Constitution. Failure to exhibit the documents related to the vessel (Secs. Failure to produce all the crew members 5. and to the judicial remedy of filing an action in court. Failure to submit or supply invoice (sec. 2501.TCC) FINES Subject to Fines [Code: BRUCE] 1. Articles Subject to Surcharge [Code: DEMI] 1.  Whether the act of smuggling is established or not under the principle of res ipsa loquitur.TCC) 3. SURCHARGE To overcharge or to charge again as in an accounting between parties. 2521. When does the Bureau of Customs normally avail itself. misdeclaration or under-evaluation of article 4. Misclassification.

. 1996. is still in the custody or control of the Government. or (b) of the latter. This prompted Mr. While inside the premises. members of the customs enforcement and security services coordinated with the Quezon City police to search the premises owned by a certain Mr. instead of the judicial remedy. Ho to file a case for injunction and damages with a prayer for a restraining order before the Regional Trial Court of Quezon City against the Bureau of Customs on January 27. Customs: Importation (1995) When does importation begin and when does it end? SUGGESTED ANSWER: IMPORTATION begins from the time the carrying vessel or aircraft enters Philippine territorial jurisdiction with the intention to unload therein and ends at the time the goods are released or withdrawn from the customhouse upon payment of the customs duties or with legal permit to withdraw (Viduya vs. regardless of ownership. Ho along Kalayaan Avenue. 1996. (b) On the other hand. the member of the customs enforcement and security services noted articles which were not included in the list contained in the warrant. instead of the judicial remedy when the goods to which the tax lien attaches. the Trial Court issued a temporary restraining order. In the case. Seizure & Forfeiture Proceedings (1996) On January 1. Hence. therefore. such as by enforcing the tax lien on the imported articles. Customs: Jurisdiction. 73 SCRA 553). On the same date. 1996. On January 25. of importations which are prohibited or undeclared. the customs personnel started hauling the articles pursuant to the amended warrant. which allegedly contained untaxed vehicles and parts. (a) of the administrative. instead of the former. remedy? SUGGESTED ANSWER: (a) The Bureau of Customs normally avails itself of the ADMINISTRATIVE REMEDY of seizure. the remedy of seizure and forfeiture may still be exercised by the Bureau of Customs even if the goods are no longer in its custody. 1996. the government can seek payment of the tax liability through judicial action since the tax liability of the importer constitutes a personal debt to the government. armed with warrants of seizure and detention issued by the Bureau of Customs. enforceable by action. when the goods are properly released and thus beyond the reach of tax lien. however. an amended warrant and seizure was issued. Quezon City. In this case judicial remedy is normally availed of instead of the administrative remedy. on January 15. Berdiago.

These duties are designed to prevent possible deception of the customers. 1995). and the importation would cause or likely cause an injury to local industries engaged in the manufacture or production of the same or similar articles or prevent their establishment. G. SUGGESTED ANSWER: The motion to dismiss should be granted. September 2. 104604. 1992. b) Countervailing duties are special duties imposed by the Secretary of Finance upon prior investigation and report of the Tariff Commission to offset an excise or inland revenue tax upon articles of the same class manufactured at home or subsidies to foreign producers or manufacturers by their respective governments. These are collected by the Commissioner of Customs except when the improperly marked articles are exported or destroyed under customs supervision and prior to final liquidation of the corresponding entry.R. Seizure and forfeiture proceedings are within the exclusive jurisdiction of the Collector of Customs to the exclusion of regular Courts. imposed by the President of the Philippines against goods of a foreign . October 6. what are a) dumping duties b) countervailing duties c) marking duties d) discriminatory duties? SUGGESTED ANSWER: a) Dumping duties are special duties imposed by the Secretary of Finance upon recommendation of the Tariff Commission when it is found that the price of the imported articles is deliberately or continually fixed at less than the fair market value or cost of production.R. Jao vs. 43747. c) Marking duties are special duties equivalent to 5% ad valorem imposed on articles not properly marked. A motion to dismiss was filed by the Bureau of Customs on the ground that the Regional Trial Court has no jurisdiction over the subject matter of the complaint claiming that it was the Bureau of Customs that has exclusive jurisdiction over it. CFI of Manila [Branch XXII]. No. d) Discriminatory duties are special duties collected in an amount not exceeding 100% ad valorem. Regional Trial Courts are devoid of competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings (Republic vs. G. CA. No. Customs: Kinds of Custom Duties (1995) Under the Tariff and Customs Code. Decide.

expenses and costs which may be adjudged in the case. The importer may also offer to pay to the collector a fine imposed by him upon the property to secure its release or in case of forfeiture. Customs: Kinds of Custom Duties (1997) Explain briefly each of the special customs duties authorized under the Tariff and Customs Code. SUGGESTED ANSWER: During the pendency of seizure proceedings the importer may secure the release of the imported property for legitimate use by posting a bond in an amount to be fixed by the Collector. country which discriminates against Philippine commerce or against goods coming from the Philippines and shipped to a foreign country. (c) Marking Duty .This is a duty levied on imported goods where it appears that a specific kind or class of foreign article is being imported into or sold or is likely to be sold in the Philippines at a price less than its fair value. (d) Discriminatory or Retaliatory Duty . conditioned for the payment of the appraised value of the article and/or any fine. SUGGESTED ANSWER: The following are the Special Duties imposed under the Tariff and Customs Code: (a) Dumping Duty . provided. the importer shall offer to pay for the domestic market value of the seized article.This is a duty equal to the ascertained or estimated amount of the subsidy or bounty or subvention granted by the foreign country on the production. or exportation into the Philippines of any article likely to injure an industry in the Philippines or retard or considerable retard the establishment of such industry.This is a duty on an ad valorem basis imposed for improperly marked articles. which offer subject to the approval of the Commissioner may . that articles the importation of which is prohibited by law shall not be released under bond. manufacture. The law requires that foreign importations must be marked in any official language of the Philippines the name of the country of origin of the article. (b) Countervailing Duty .This is a duty imposed on imported goods whenever it is found as a fact that the country of origin discriminates against the commerce of the Philippines in such a manner as to place the commerce of the Philippines at a disadvantage compared with the commerce of any foreign country. Customs: Remedies of an Importer (1996) Discuss briefly the remedies of an importer during the pendency of seizure proceedings.

Filipinos living in the Philippines. treating their personal effects. the truck owner. not in commercial quantities. Danny did not know that the shipment of garlic was illegally imported. Y. Customs: Returning Residents: Tourist/Travelers (2003) X and his wife. Are they "returning residents" for purposes of Section 105 of the Tariff and Customs Code? Explain. appropriate and normally used in leisure trips. (Section 105(f) of the Tariff and Customs Code). as conditionally free importation. Can the Collector of Customs of the port seize and forfeit the truck as an instrument in the smuggling? SUGGESTED ANSWER: Yes. considering that travelers or tourists are given the same tax treatment as that of returning residents. they accumulated some personal effects which were necessary. the smugglers used an eight-wheeler truck which they hired for the purpose of taking out the shipment from the customs zone. The term "returning residents" refers to nationals who have stayed in a foreign country for a period of at least six (6) months. In the course of their trip. [Note: Credit must likewise be given if the candidate answered in the affirmative. Danny.] Customs: Seizure & Forfeiture: Effects (1994) In smuggling a shipment of garlic. the Collector of Customs of the port can seize and forfeit the truck as an instrument in the smuggling activity. did not have a certificate of public convenience to operate his trucking business. Upon payment of the fine or domestic market value. the property shall be forthwith released and all liabilities which may or might attach to the property by virtue of the offense which was the occasion of the seizure and all liability which might have been incurred under any bond given by the importer in respect to such property shall thereupon be deemed to be discharged. The mere carrying of such articles on board the truck (in commercial quantities) shall . (8%) SUGGESTED ANSWER: No. Due to their limited duration of stay abroad X and Y are not considered as "returning residents" but they are merely considered as travelers or tourists who enjoy the benefit of conditionally free importation. July and August 2002. be accepted by the Collector in settlement of the seizure case. went on a three-month pleasure trip around the world during the months of June. except when there is fraud. since the same was used unlawfully in the importation of smuggled articles. as well as souvenirs in non-commercial quantities.

(Sec. TCC) (f) The importer aggrieved by the action or ruling of the Commissioner in any case of seizure may appeal to the Court of Tax Appeals. since it was not being used as a duly authorized common carrier. not having a certificate of public convenience to operate a trucking business. Tariff and Customs Code) (b) The Collector gives the importer a written notice of the seizure and fixes a hearing date to give the importer an opportunity to be heard. 2402. there arises a prima facie presumption or knowledge or participation if the owner is not in the business for which the conveyance is generally used. Tariff and Customs Code) Customs: Steps involving Protest Cases (1994) The Collector of Customs instituted seizure proceedings against a shipment of motor vehicles for having been misdeclared as second-hand vehicles. Customs. (15) days which may be extended for another fifteen (15) days or such period as the Court of Tax Appeals may decide. TCC) (e) The Importer aggrieved by the action of the Collector in any case of seizure may appeal to the Commissioner for his review within fifteen (15) days from written notice of the Collector's decision. Basis of Dutiable Value. (Sec. TCC) (c) A formal hearing is conducted. 2531. TCC) (g) The importer adversely affected by the decision of the Court of Tax Appeals (Division) may appeal to the Court of Tax Appeals (en banc) within fifteen a. . (Sec. 2312. 2303. Imported Article (2005) State and explain the basis of dutiable value of an imported article subject to an ad valorem tax under the Tariff and Customs Code. (Sec. which was chartered or leased as such. although forfeiture of the vehicle will not be effected if it is established that the owner thereof had no knowledge of or participation in the unlawful act. State the procedure for the review of the decision up to the Supreme Court of the Collector of Customs adverse to the importer. he is legally deemed not to have been engaged in the trucking business. 2313. SUGGESTED ANSWER: The procedure in seizure cases may be summarized as follows: (a) The collector issues a warrant for the detention or forfeiture of the imported articles. 2312. TCC) (d) The Collector renders a declaration of forfeiture. TCC) Moreover. (Sec. 2301. (Sec. subject the truck to forfeiture. Thus. (Sec. 2530 [a]. (Sec.

C.E. . 9135) If such value could not be determined. 4-2004). Transaction value of similar goods (Sec. 201[B]). Tariff and Customs Code. (5%) SUGGESTED ANSWER: The distinctions between countervailing duty and dumping duty are the following: 1.A. 2. 4-2004).l. No. CA. No. (Sec. Tariff and Customs Code.O. 201[F]) Customs. Basis: The countervailing duty is imposed whenever there is granted upon the imported article by the country of origin a specific subsidy upon its production.1.O. Computed value (Sec.A.F. II. as amended by R. manufacture or exportation and this results or threatens injury to local industry while the basis for the imposition of dumping duty is the importation and sale of imported items at below their normal value causing or likely to cause injury to local industry. 201[C]). 201[F]) ALTERNATIVE ANSWER: The basis of dutiable value of an imported article subject to an ad valorem tax under the Tariff and Customs Code is its transaction value. Amount: The countervailing duty imposed is equivalent to the value of the specific subsidy while the dumping duty is equivalent to the margin of dumping which is equal to the difference between the export price to the Philippines and the normal value of the imported article. Deductive value (Sec.O. 1-20040) and Fallback value.F.ALTERNATIVE ANSWER: The basis of dutiable value of an imported article subject to an ad valorem tax under the Tariff and Customs Code is its TRANSACTION VALUE.A. (Sec. then the following values are to be utilized in their sequence: Transaction value of identical goods (Sec. as amended by R.A. (Sec. 201[A]. adjusted by adding certain cost elements to the extent that they are incurred by the buyer but are not included in the price actually paid or payable for the imported goods. 201[B]). 201[C]). CA.O.. 9135) If such value could not be determined. (Sec. Dumping Duty (2005) Distinguish countervailing duty from dumping duty. C.E.l. II. Countervailing Duty vs. Transaction value of similar goods (Sec. No. 201[A]. No. Deductive value (Sec. then the following values are to be utilized in their sequence: Transaction value of identical goods (Sec. II. II. No. Computed value (Sec.1. 1-20040) and Fallback value. which shall be the price actually paid or payable for the goods when sold for export to the Philippines.

He is entitled to tax exemption on his personal and household effects including a car. (Last par. Tariff and Customs Code) . c) He is returning to the Philippines after serving his tour of duty. after serving a 5-year tour of duty as military attache in Jakarta. provided: a) The car must have been ordered or purchased prior to the receipt by the Philippine mission or consulate in Jakarta of Jacob's recall order.. c) the exemption shall apply to the value of the car. Taxability. 922 (1976): a) He was a military attache assigned to Jakarta. (5%) SUGGESTED ANSWER: No. returned to the Philippines bringing with him his personal effects including a personal computer and a car. He has met the following requirements for exemption under P.D. and d) He has not availed of the tax exemption for the past four (4) years. Jacob is not liable for taxes on his personal computer and the car because he is tax-exempt by law. No. b) He has served abroad for not less than two (2) years. b) the car is registered in Jacob's name. Personal Effects (2005) Jacob. Sec. Customs. but not to exceed four (4) years. e) Jacob must not have availed of the exemption more oftener than one every four years. d) the exemption shall apply to the aggregate value of his personal and household effects (including the personal computer) not exceeding thirty per centum (30%) of the total amount received by Jacob as salary and allowances during his assignment in Jakarta. Would Jacob be liable for taxes on these items? Discuss fully. 105.