University of the Philippines

College of Law
Taxation 2, Fridays 3 p.m. to 6 p.m. (Prof. Carina C. Laforteza)
Second Semester SY 2012-2013

ESTATE TAX

(Sec. 84-97, Sec. 104, NIRC, Revenue Regulations No. 17-93, Estate Tax Regulations, as
amended by RR 2-2003 dated December 16, 2002)

Lorenzo v. Posadas, G.R. No. 43082, June 18, 1937

GROSS ESTATE – Rule for Imposition

1. Resident, non-resident alien

2. Reciprocity of exemption (Collector v. Fisher, 1 SCRA 93)

3. Valuation of gross estate

a. Decedent’s interest

b. Transfers in contemplation of death

c. Revocable transfers

d. Property passing under general appointment

e. Proceeds of life insurance

f. Prior interest

g. Transfer for insufficient consideration

4. Exclusion from gross estate: capital of surviving spouse

5. Deduction from gross estate

1. Funeral expenses

2. Judicial expenses

c. Claims v. the estate

d. Claims v. insolvent persons

e. Unpaid mortgages and losses

f. Property previously taxed – vanishing deduction

 2

g. Transfer for public purpose

h. Family house

i. Share in the conjugal property

j. Standard deduction

6. Tax credit for estate taxes

7. Exemption of certain acquisitions

8. Tax returns

i. Time to file and notice

ii. Payment of tax

9. Obligations of executor, administrator, officers, others

DONOR’S TAX

(Sec. 98-103)

1. Imposition of gift tax

2. Transfer of inadequate consideration

3. Exemption from gift tax

4. Tax credit

5. Tax return (time and filing and payment)

6. Political contributions: tax treatment

Abello v. CIR, GR No. 120721, February 23, 2005

VALUE-ADDED TAX

1. Sec. 105-115, NIRC as amended by RA 8424 & RA 9238, February 5, 2004 and
RA 9337 effective July 1, 2005, implemented by RR 16-2005 (November 1,
2005) & RR No. 4-2007 (February 7, 2007)

2. Rev. Regs. 2-88, Rev. Memo Order No. 22-92

3. Rev. Regs. 7-95

4. RMO 39-95
 3

5. RMC 1-96 up to 7-96

6. Philamlife, CA GR SP 31283, April 25, 1995 (definition of royalty)

7. Are reimbursements subject to VAT?

CIR v Court of Appeals, et al., G.R. No. 125355, March 30, 2000

See also RMC 9-2006, January 25, 2006; clarifying amount subject to VAT of
brokers; RMC No. 39-2007, January 22, 2007

8. Opinion 40. April 22, 1996 – effectivity of VAT on other taxpayers

9. Improved VAT (IVAT) – RA 8241, December 20, 1996 (effectivity date –

January 1, 1997) (Rev. Regs. 6-97, January 2, 1997)

10. RR 8-99, April 26, 1999 – penalties for indicating separately VAT in sales
invoice or O.R. on sale of goods or services

12. RR 1-2005, December 28, 2004 amends RR 7-95 & RR 8-2002 re: VAT
exemption on real estate sales and rentals

13. RR 13-97

14. RR 7-99 – submission of diskettes for summary list of sales and purchases within
the following month at the close of each calendar quarter

15. RMC 74-99, October 15, 1999 – tax treatment of sales of goods and services
made by suppliers from western territory to a PEZA registered enterprise and sale
transactions made by PEZA registered enterprises within and without the zone.
(Destination or Cross Border Principle first adopted November 5, 1998, BIR
ruling 032-98, Shimizu Philippines)

16. American Express v. Commissioner, CA GR SP 62727, February 28, 2002 (zero

rated sale of service), SC GR 152609, June 28, 2005

17. CIR v. Burmeister and Wain, GR No. 153205, January 22, 2007

18. CIR v. Magsaysay Lines, GR No. 146984, July 28, 2006 (No VAT on sale not
made in trade or business)

19. Rev. Regs 6-2001, July 31, 2001 (payment of VAT within 10 days after end of
the month), as amended by RR 8-2002 (filing of VAT returns, June 13, 2002)

20. RR 17-2003, VAT on refined sugar as amended by RR 2-2004 (March 1, 2004)

and RR 16-2005 and amended by RR 13-2008 (September 14, 2008)

21. RA No. 9361 (December 13, 2006) Repeal of 70% input VAT Cap as
implemented by RR No. 2-2007 (December 29, 2006)
 4

22. CIR v. Seagate Technology Phils., GR No. 153811, February 11, 2005
(effectively zero-rated transactions with PEZA)

23. Microsoft Philippines, Inc. v. CIR, G.R. No. 180173, April 6, 2011

24. Commissioner of Internal Revenue v. Sony Philippines, Inc., G.R. No. 178697,
November 17, 2010

25. KEPCO Philippines Corporation v. CIR, G.R. No. 181858, November 24, 2010

26. AT & T Communications Services Philippines, Inc. v. CIR, G.R. No. 182364,
August 3, 2010

27. Silicon Philippines, Inc. v. CIR, G.R. No. 172378, January 12, 2011

28. Renato V. Diaz and Aurora Timbol v. Secretary of Finance, G.R. No. 193007,
July 19, 2011

29. PAGCOR v. BIR, G.R. No. 172087, March 15, 2011

30. Commissioner of Internal Revenue v. Aichi Forging Company of Asia, G.R. No.
184823, October 6, 2010

31. Fort Bonifacio Devt. Corp. v. CIR, G.R. Nos. 158885 and 170680, April 2, 2009

32. Commissioner of Internal Revenue v. Benguet Corporation, G.R. Nos. 134587

and 134588. July 8, 2005

33. Commissioner of Internal Revenue v. SM Prime Holdings, Inc. et al, G.R. No.
183505, February 26, 2010

34. Commissioner of Internal Revenue v. The Philippine American Accident

Insurance Company, et al., G.R. No. 141658, March 18, 2005

Revenue Regulations No. 18-2011(penalties for violation of requirement that output tax
be separately indicated in invoice/OR)

Revenue Regulations No. 16-2011 (increasing threshold amounts under Section 109 (p),
(q) and (v))
OTHER PERCENTAGE TAXES

Sec. 116 Tax on persons exempt from VAT

Sec. 117-118 Carriers tax as amended by RA 9377 (July 1, 2005)

Revenue Regulations No. 11-2011 (20 July 2011) - Revenue Regulations Defining Gross
Receipts for Common Carrier's Tax for International Carriers pursuant to Section 118 of
the Tax Code Amending Sec. 10 of Revenue Regulations No. 15-2002

Sec. 119 Tax on franchises

 5

Sec. 120 Overseas communications tax

Sec. 121 Tax on banks and financial intermediaries as amended by RA 7716 & RA 9238
(China Banking Corp. v. CTA, SC GR 146749, June 10, 2003 (base of 5% GRT
on interest income), RA 9238 as implemented by RR 9-2004 (GRT on banks),
RA 9337, effective July 1, 2005 on increase of GRT to 7% on other income of
banks)

Sec. 122 Tax on finance companies (BIR Ruling, August 16, 1990 on credit card
companies as amended by RA 9238)

Sec. 123 Tax on Insurance premiums, as amended by RA 10001

Sec. 124 Tax on agents of foreign insurance companies

Sec. 125 Amusement taxes (RMC 8-88, February 19, 1888, p. 785, Nolledo)

Sec. 126 Tax on winnings

Sec. 127 Percentage tax on IPOs

Sec. 128 Payment of percentage taxes

Rev. Regs 6-2001, July 31, 2001

Republic of the Philippines v. Sunlife Assurance Company of Canada, G.R. No. 158085,
October 14, 2005

CIR v. Lhuiller, SC GR 150947, July 15, 2003 (pawnshop are not lending investors)

First Planters Pawnshop, Inc. v CIR, G.R. No. 174134, July 30, 2008

RR 10-2004, 5% GRT on pawnshops (beginning January 2004); also Money Shops or

Forex Shops (RR 4-2007)

EXCISE TAXES ON CERTAIN GOODS

Chapters 1 and 2

Sec. 129 to Sec. 140, NIRC, as amended by RA 9334 (January 1, 2005),

implemented by RR 12-2004 and RR 3-2006, implementing guidelines on
revised tax rates on alcohol, etc. (January 3, 2006)

Chapter 3 – Excise tax on alcohol products

RA 9334, implemented by RR 12-2004

Philippines-Taxes on Distilled Spirits WTD/S396/AB/R and WT/DS403/AB/R, December 21,

2011

Chapter 4 – Excise tax on tobacco products

 6

Sec. 144 – 147, NIRC

RA 7654 – revised excise tax on cigars and cigarettes

RR 22-2003 – cigarettes

RR-9334 implemented by RR 12-2004

British American Tobacco v Jose Camacho et al., G.R. No. 163583, August 20, 2008;
motion for reconsideration, April 15, 2009

Chapters 5 and 6 – Excise tax on petroleum products and miscellaneous articles

Sec. 148 – 150, NIRC as amended by RA 9337 effective July 1, 2005 (deleting
excise tax on certain petroleum products)

RR 4-2003, January 29, 2003, Revised Regulations on Excise Tax of

Automobiles amended RR 14-99, October 13, 1999 (before Amendment by RA
No. 9224)

Exxonmobil Petroleum and Chemical Holdings, Inc. Philippine Branch v CIR, G.R. No.
180909, January 19, 2011

Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, G.R. No.

188497. April 23, 2012

Chapter 7 – Excise tax on mineral products

Sec. 151, NIRC as amended by RA 7729, June 2, 1994

RA 8240, revision of excise taxes on cigarettes and alcoholic beverages

Revenue Regulations 1-97, December 13, 1996, method of computing specific
tax on cigars and cigarettes

Excise tax on cars, RA 9224, October 2003

RR 25-2003, new rules implementing RA 9224

Revenue Regulations 2-97, Specific tax on beer and alcoholic drinks

RR 9-2003, February 17, 2003, amending RR 1-97 and RR 2-97, excise tax on
alcohol products, cigars and cigarettes
RR 7-2002, June 4, 2002, revalidation of issued permits to establishments subject
to excise tax

DOCUMENTARY STAMP TAX

Sec. 173 – 201, NIRC, as amended by RA 8424 & RA 9243 (February 7, 2004) & RR
13-2004
 7

CIR v. Construction Resources of Asia, Inc. – 145 SCRA 673 (issuance of shares of
stock)

Phil. Consolidated Coconut Industries ( 70 SCRA 22)

RMC 44-86, December 4, 1986, p. 877, Nolledo

RA 7660, December 23, 1993, effective January 14, 1994

Rev. Regs. 9-94, March 8, 1994, New DST Regulations

Rev. Regs. 6-2001, July 31, 2001 (Payment of DST within 5 days)

As amended by RR 15-2001 (October 16, 2001)

Exemption from DST of shares listed and traded in Stock Exchange for 5 years from
2004 (RA 9243) and tax free exchanges (RA 9243) and RR 13-2004

Banco de Oro v. CIR, CTA E.B. No. 165 (August 15, 2005), SSA subject to DST as time
deposit certificate

CIR v. First Express Pawnshop Company, Inc., G.R. Nos. 172045-46, June 16, 2009

CIR v. Filinvest Development Corporation, G.R. No. 163653, July 19, 2011

CIR v. Manila Bankers’ Life Insurance Corporation, G.R. No. 169103, March 16, 2011

Supreme Transliner, Inc. et al. v. BPI Family Savings Bank, Inc., G.R. No. 165617,
February 25, 2011

REMEDIES

1. Sec. 4, NIRC, Power of Secretary of Finance to review rulings of CIR as

implemented by RMC 44-2201, October 11, 2001 and DOF Order 7-02, May 7,
2002

2. Sec. 6 - Sec. 17, NIRC

3. Sec. 2002 – Sec. 282, NIRC

4. Rev. Regs. 12-99 implementing the provisions of the NIRC on rules of

assessment, civil penalties and interest and extra-judicial settlement of taxpayer’s
criminal violation under RMO 1-90

5. RR No. 11-2006, June 15, 2006 (Accreditation of Tax Practitioners to Practice

before BIR)

6. Cases:
 8

a. RP v. CTA & Nielson & Co., GR L-38540, 149 SCRA 351

Demand letter/follow-up letter for payment of taxes considered notice of
assessment

b. Collector v. Bautista, L-12250, L-12259, May 27, 1959

Notice of Assessment deemed made when notice is released, mailed and
does not require that notice be received within 3 years period

CIR v. Metro Star Superama, Inc., G.R. No. 185371, December 8, 2010

c. Republic v. Ricarte, GR L-46893, November 12, 1985 (action to assess

prescribed since there was not proof that notice was sent)

d. i) Advertising Associates v. CTA, 133 SCRA 765, p. 939,

Nolledo. Reviewable decision of CIR is where he directs
taxpayers to appeal to CTA not mere issuances of warrants of
distraint and levy

ii) CIR v. Union Shipping, GR 66160, May 21, 1990. Demand to

pay deficiency tax considered final decision of CIR

iii) Surigao Electric v. CTA, 57 SCRA 523. CIR should

categorically state whether order is final determination so that it
can be appealed to CTA

e. i) CIR v. Isabela Cultural Corporation, GR 135210, July 11,

2001. Final demand letter from BIR is tantamount to denial of
request for reconsideration which is therefore appealable to CTA

ii) Oceanic Wireless Network v. CIR, GR 148380, December

9, 2005. Final demand letter from Accounts Receivable Division
Head was final decision of the CIR and constituted appealable
decision to CTA

f. Gibbs v. Commissioner, L-17406, November 29, 1965 (period to file

refund claim) and Gibbs v. Collector, GR No. L-13453, February 29,
1960 (2-year period is absolute)

(If income of taxpayer is withheld at source he is deemed to have paid

his tax liability at the end of the tax year. It is from this date that the 2-
year period will run.)

g. CIR v. TMX Sales & CTA, GR 83736, January 16, 1992 (when to count
2-year period if on installment basis). If TP pays income tax on quarterly
basis, the 2-year period is counted from the time of filing final
adjustment return.

Commissioner v. Philamlife Insurance Co., GR 105208, May 29, 1995.

Obiter by Justice Vitug referring the 10-year period on taxes not
erroneously/illegally paid. Likewise, the claim must be filed within 2
years regardless of supervening cause.
 9

Also, this case, Pacific Pro., Ltd. Case (GR 68013, November 12, 1984)
counting of two-year prescriptive period for filing claim for refund of
overpaid corporate income tax starts from time final adjustment return is
filed.

United Airlines v. CIR, G.R. No. 178788, September 29, 2010

h. CIR v. Wyeth, GR 762281, September 30, 1991. (Sec. 222 & 223
request for reinvestigation suspends the 5-year period for collection of
tax.

i. ABS-CBN Broadcasting Corp. v. CTA, 108 SCRA 143 (non-

retroactivity of rulings) requiring 3 years back taxes after previous
circular violated Sec. 246

j. Emilio S. Lim v. Court of Appeals, GR L-48134-37, October 18, 1990.

Prescriptive period to file criminal case under Sec. 281, NIRC, 5 years
from failure to pay tax after notice and demand

k. Commissioner v. Court of Appeals, Lucio Tan, et al., GR 119322, June

4, 1996

l. Commissioner v. Court of Tax Appeals and Fortune Tobacco, GR

119761, August 29, 1996

m. CIR v. Pascor Realty & Development Corp., GR 128315, June 29, 1999.
Assessment not necessary before filing criminal complaint for tax
evasion based on Sec. 222 itself

n. CIR v Lascona Land Co., Inc. CA-G.R. SP No. 58061. October 25, 2005
When to elevate assessment to CTA

o. San Agustin v. CIR, GR 138485, September 10, 2001. TP can appeal a

disputed assessment despite payment of deficiency tax. Filing of refund
not necessary for this purpose.

p. Philippine Journalists, Inc. v. CIR, GR 162852, December 16, 2004.

Waiver of prescription must be executed properly per RMO 20-90,
otherwise, invalid.

q. CIR v. Phil. Global Communications, GR No. 167146, October 31, 2006.

Prescriptive period to collect taxes assessed by CIR.

r. RCBC v. CIR, GR No. 168498, April 24, 2007. Options for disputing
tax assessment mutually exclusive under Section 227.

s. BPI v. CIR, GR No. 174942. Suspension of collection requires request

for reinvestigation to be granted.

t. Petron Corporation v. CIR, G.R. No. 180385, July 28, 2010.

 10

u. CIR v. Gonzales, et al., G.R. No. 177279, October 13, 2010

8. Regulations

Revenue Regulations 12-85, November 27, 1985 (Nolledo, p. 947)

Revenue Regulations 2-90, May 25, 1990 (Nolledo, p. 999)

RR 12-99 implementing the provisions of the NIRC, Sec. 6, 7, 204, 228, 247,
248 and 249 on assessments of taxes and civil penalties and interest and
extrajudicial settlement of taxpayers criminal violation under RMO 1-90

Revenue Regulations 2-78 (Nolledo, p. 1001)

RMC 48-90, April 23, 1990 (counting of 3-year period of 365 x 3 regardless of
leap year and Asianbank v. Commissioner, CTA Case No. 6095, October 9,
2001)

9. RA 9282, expanding the jurisdiction of the CTA, elevating it to collegiate court,

amending RA 1125 (effective April 23, 2004)

10. RA 9503, further expanding the composition of CTA by adding 3 new justices (9
in all)

CIR v. Enron Subic Power Corp. G.R. No. 166387, January 19, 2009

CIR v. FMF Development Corp. G.R. No. 167765, June 30, 2008

FEBTC v. CIR, G.R. No. 138919, May 2, 2006

CIR v. Azucena Reyes, G.R. No. 159694, January 27, 2006

Judy Anne L. Santos v. People of the Phils, G.R. No. 173176, August 26, 2008

Fitness by Design, Inc. v. CIR, G.R. No. 177982, October 17, 2008

Asia International v. Parayno, 540 SCRA 536 (2007)

British American Tobacco v. Camacho, 562 SCRA 511 (2008)

LOCAL TAXATION
(Local Government Code – RA 7160)

Local Government Taxation

Section 128 – 196 (LGC)

Alejandro Ty v. Hon. Trampe & Municipal Assessor of Pasig, GR 117577, December 1,

1995
 11

Rule XXX, Art. 217 – 287 (Rules and Regulations Implementing the Local Government
Code)

Local Finance Circular 1 – 93 (banks)

Local Finance Circular 2-93 (insurance companies)

Local Finance Circular 3-93 (finance companies)

Memo Circular 92-02, January 16, 1992, issued by the Department of Interior and Local
Government

Memo Circular 5-93, October 22, 1993, issued by the Department of Finance

Sec. Drilon v. Mayor Lim, GR 112497, August 4, 1994, Manila Tax Ordinance

Coca-Cola Bottlers Phils., Inc. v. City of Manila, GR No. 156252, June 27, 2006 (validity
of Manila Tax Ordinance)

International Container Terminal Services, Inc. v. City of Manila, CTA A.C. No. 11, May
22, 2006 (Manila Tax Ordinance Sec. 21(A) – Double Taxation)

Phil. Match Co., Ltd. v. City of Cebu, 81 SCRA 99, January 18, 1999 (situs of payment
of local business tax)

PLDT v. City of Davao, GR No. 143867, March 25, 2003. (PLDT liable to franchise tax
imposed by city)

Palma Development Corp. v. Municipality of Malangas, GR 152492, October 16, 2003

PLDT v. Province of Laguna, GR 151899, August 16, 2005

Yamane v. BA Lepanto Condo. Corp., SC GR 154993, October 25, 2005 (condominium
corporation is not business entity)

Ericsson Telecoms Inc. v. City of Pasig, GR No. 176667, November 22, 2007

Lepanto Consolidated Mining Company v. Hon. Mauricio B. Ambaloc in his capacity as

the Provincial Treasurer of Benguet, G. R. No. 180639, June 29, 2010

Angeles City v. Angeles City Electric Corporation and Regional Trial Court Branch 57,
Angeles City, G.R. No. 166134, June 29, 2010

REAL PROPERTY TAXATION – LOCAL GOVERNMENT CODE (RA 7160)

Sec. 197 to 283 Local Government Code

Definition of Machinery and Equipment

Sec. 199 Local Government Code

 12

Sec. 299 Implementing Rules and Regulations

Sec. 202 Declaration of real property

Sec. 215-216 Classes of real property

Sec. 218 Assessment levels

Sec. 226-230 Local Board Assessment Appeals

Central Board Assessment Appeals

Sec. 232-235 Rates of levy

Sec. 234 Exemption from real property tax

Sec. 237 Idle lands

Sec. 250-251 Payment of real property taxes and discounts

Sec. 252 Protest

Sec. 255 Interest on unpaid taxes

Sec. 270 Period to collect real property taxes

Cases:

1. Lung Center of the Philippines v. Quezon City, GR 144104, June 29, 2004
(Exemption based on actual use)

2. Mactan Airport Authority v. Pres. Marcos, GR 120082, September 11, 1996

(Exemption from real property tax lifted by RA 7160 (LGC))

3. Manila International Airport Authority v. Court of Appeals, GR No. 155650, July

20, 2006 (Exemption from RPT of MIAA)

4. Quezon City Gov’t. v. BayanTelCorp., GR No. 162015, March 6, 2006

5. Sta. Lucia Realty and Development, Inc. v. City of Pasig, G.R. No. 166838, June
15, 2011

TARIFF AND CUSTOMS CODE

I. CONCEPT

A. The Tariff and Customs Code

B. The Bureau of Customs

Duties, power and jurisdiction
 13

II. ARTICLES SUBJECT TO DUTY

A. Export (suspended except on logs) and import duties

B. Meaning of Importation (Sec. 1201, 1202)

C. Classes of Importation

a. Dutiable importation – Section 100

b. Prohibited importations – Sec. 101, 1207

c. Conditionally-free importation – Sec. 105

III. RATES OF DUTY

A. General Rules (Sec. 104)

B. Basis of Duty (Secs. 201, 202, 204, 205, 1308-10, 1313)

Customs Administrative Order 2-96, June 14, 1996

RA 8181 (transaction value), as amended by RA 9135

CAO 2-99, implementing RA 8181 on customs dutiable value and CAO

05-2001 implementing RA 9135

C. Special Duties

a. Dumping Sec. 301

b. Countervailing Sec. 302

c. Marking Sec. 303

d. Discriminatory Sec. 304

D. Flexible Tariff rates (Sec. 401)

IV. IMPOSITION OF DUTIES

A. Persons liable – Sec. 1203-5

B. Declaration – Sec. 1302-1307

C. Examination, appraisal and classification – Sec. 1405-8

Commissioner of Customs v. Marina Sales, Inc., G.R. No. 183868

D. Assessment of Taxes
 14

E. Liquidation – Sec. 1601-1603

V. REMEDIES OF THE GOVERNMENT

A. Extrajudicial

1. Enforcement of Tax Lien – Sec. 1508

2. Seizure and Forfeiture – Sec. 2205, 2301-2316

B. Judicial

VI. REMEDIES OF THE TAXPAYER

A. Refund – Sec. 1707-8

B. Protest – Sec. 2308, 2310, 2309, 2312

C. Abandonment – Sec. 1801-3

D. Amendments by RA 9135 – Sec. 3514 (post entry audit); Sec. 3517

(compulsory acquisition of grossly undervalued goods)

Commissioner of Customs v. AGFHA Incorporated, G.R. No. 187425, March 28, 2011

Chevron Philippines, Inc. v. Commissioner of the Bureau of Customs, G.R. No. 178759,
August 11, 2008