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TAXATION LAW REVIEW (CONCISE VERSION – PART I)

I. GENERAL PRINCIPLES

A. Classification of Taxes
1. Different Classifications
a. Separate Opinion of Justice Bersamin in CIR vs. Pilipinas Shell, GR No. 188497
dated February 19, 2014

B. Fees vs. Charges vs. Taxes


1. Angeles University Foundation vs. City of Angeles, GR No. 18999 dated June 27, 2012

C. Are taxes subject to set-off?


1. Francia vs. IAC, GR No. 67649 dated June 28, 1988
2. Philex Mining vs. CIR, GR No. 125704 dated August 28, 1988
3. Domingo vs. Garlitos, GR No. L-18994 dated June 29, 1963
4. Air Canada vs. CIR, GR No. 169507 dated January 11, 2016 (set-off issue only)

D. Double Taxation
1. Kinds
2. Modes of eliminating double taxation
3. CIR vs. Solidbank, GR No. 148191 dated November 25, 2003
4. Nursery Care Corporation vs. Acevedo, GR No. 180651 dated July 30, 2014
5. CIR vs. S.C. Johnson and Sons, Inc., GR No. 127105 dated June 25, 1999
6. Deutsche Bank AG Manila Branch vs. GR No. 188660 dated August 19, 2013
7. CBK Power Company Limited vs. CIR, GR No. 193383-84 dated January 14, 2015 (Perlas-
Bernabe)

E. Taxpayer’s suit
1. Mamba vs. Lara, GR No. 165109 dated December 14, 2009
2. Land Bank of the Philippines vs. Cacayuran, GR No. 191667 dated April 17, 2013 (Perlas-
Bernabe)

F. Law vs. Regulation


1. Secretary of Finance vs. Philippine Tobacco Institute, Inc., GR No. 210251 dated April 17,
2017

G. Inherent Limitations
1. Enumeration
2. Delegation to Local Government Units
a. Pepsi Cola Bottling Co. of the Phils. vs. Municipality of Tanauan, GR No. L-31156
dated February 27, 1976
3. Delegation to the President
a. Sec. 28(2) Article VI of the Constitution
b. Flexible Tariff Clause – Sec. 1608 of the Customs Modernization and Tariff Act
c. Abakada Guro Party List vs. Executive Secretary, GR No. 168056 dated
September 1, 2005

H. Constitutional Limitations
1. Enumeration
2. Due Process and Equal Protection
a. PAGCOR vs. The BIR, GR No. 172087 dated March 15, 2011
3. Non-impairment of obligation of contracts / Grant of Franchise
a. Sec. 10 Art. III of the Constitution
b. Sec. 11 Art. XII of the Constitution
c. Meralco vs. Province of Laguna, GR No. 131359 dated May 5, 1999
d. Smart Communications, Inc. vs. City of Davao, GR No. 155491 dated September
16, 2008
4. Infringement of Religious Freedom
a. Sec. 5 Art. III of the Constitution
b. American Bible Society vs. City of Manila, GR No. L-9637 dated April 30, 1957
c. Tolentino vs. Secretary of Finance, GR No. 115455 dated August 25, 1994 and
October 30, 1995 (motion for reconsideration)

5. Infringement of Press Freedom


a. Sec. 4 Art. III of the Constitution
d. Tolentino vs. Secretary of Finance, GR No. 115455 dated August 25, 1994 and
October 30, 1995 (motion for reconsideration)

I. Tax Rulings
1. Definition
2. Revenue Regulations (“RR”) No. 5-2012 dated April 2, 2012
3. Commissioner’s Ruling (Sec. 7(B) of the NIRC)
4. Power of the CIR to Interpret /Review/Appeal to Sec. of Finance (Sec. 4 of the NIRC)
a. Honda Cars Philippines, Inc. vs. Honda Cars Technical Specialist Supervisors
Union, GR No. 204142 dated November 19, 2014
b. Banco De Oro vs. Republic, GR No. 198756 dated January 13, 2015
c. Confederation for Unity, Recognition and Advancement of Government
Employees vs. Commissioner - BIR, GR No. 213446 dated July 3, 2018
5. Non-Retroactivity of Rulings (Sec. 246 of the NIRC)
a. CIR vs. Phil. Healthcare Providers, GR No. 168129 dated April 24, 2007
b. CIR vs. Burmeister and Wain, GR No. 153205 dated Jaunary22, 2007
c. CIR vs. CA, GR No. 117982 dated February 6, 1997 [read also concurring opinion
of Justice Vitug]
d. CIR vs. Filinvest Development Corporation, GR Nos. 163653 and 167689 dated
July 19, 2011
e. CIR vs. San Roque Power, GR No. 187485 dated February 12, 2013 and other
cases
f. CIR vs. San Roque Power, GR No. 187485 dated October8, 2013
g. Banco De Oro vs. Republic, GR No. 198756 dated August 16, 2016 – resolution on
the Motion for Reconsideration
6. Appeal of Rulings – RTC or CTA?
a. Banco De Oro vs. Republic, GR No. 198756, January 13, 2015 and resolution on
the Motion for reconsideration, GR No. 198756 dated August 16, 2016
b. Confederation for Unity, Recognition and Advancement of Government
Employees vs. Commissioner - BIR, GR No. 213446 dated July 3, 2018
c. Compare with CIR vs. CTA and Petron, GR No. 207843 dated July 15, 2015
(Perlas-Bernabe)

II. INCOME TAX

A. General Principles on Income Taxation


1. General Situs Rules:
a. Sec. 23 of the NIRC
2. Specific Situs Rules:
a. Sec. 42 of the NIRC
b. National Development Company vs. CIR, G.R. No. 53961 dated June 30, 1987
c. CIR vs. British Overseas Airways Corporation, GR Nos. L-65773-74 dated April 30,
1987
d. CIR vs. Juliane Baier-Nickel, GR No. 153793 dated August 29, 2006

B. Individual Income Taxation


1. Resident Citizens vs. Non-Resident Citizens
2. Nonresident Citizens vs. Overseas Contract Workers
a. Sec. 22(E) of the NIRC
b. BIR Ruling No. 033-00 dated September 5, 2000
i. RR No. 1-2011 dated February 24, 2011
3. Nonresident Aliens Engaged in Trade or Business vs. Nonresident Aliens Not Engaged in
Trade or Business
a. Sec. 25(A)(1) of the NIRC
b. BIR Ruling No. DA-056-05 dated February 16, 2005
4. Minimum Wage Earners
a. Sec. 22(HH) of the NIRC
b. Sec. 2.78.1(B)(13) of RR No. 11-2018 dated January 31, 2018
c. Sec. 3(B) of RR No. 8-2008 dated January 25, 2018
d. Q10-13/A10-13 of Revenue Memorandum Circular (“RMC”) No. 50-2018 dated
May 11, 2018
e. Soriano vs. Secretary of Finance, GR No. 184450 dated February 8, 2017
5. Option to be Taxed at 8% on Gross Sales/Receipts
a. Sec. 24(A)(2)(b) of the NIRC (as amended by RA 10963)
b. Sec. 3(C) of RR No. 8-2018 dated January 25, 2018
c. Sec. 3(D) of RR No. 8-2018 dated January 25, 2018
d. Relevant portions of RMC No. 50-2018 dated May 11, 2018
6. Compensation Income
a. Definition
b. Exempt Compensation Income
c. Confederation for Unity, Recognition and Advancement of Government
Employees vs. Commissioner - BIR, GR No. 213446 dated July 3, 2018

C. Corporate Income Taxation


1. Definition of corporations for tax purposes
a. Sec. 22(B) of the NIRC
2. Partnerships taxed as a corporation
a. CIR vs. Batangas Transportation Co., GR No. L-9692 dated January 6, 1958 (take
note of the discussion of the Evangelista Case)
b. Ona vs. CIR, GR No. L-19342 dated May 25, 1972
c. Obillos vs. CIR, GR No. L-68118 dated October 29, 1985
d. Pascual vs. CIR, GR No. 78133 dated October 18, 1988
e. AFISCO Insurance Corporation vs. CA, GR No. 112675 dated January 25, 1999
3. Joint Ventures engaged in construction projects
a. Secs. 2 and 3 of RR No. 10-2012 dated June 1, 2012
4. General Professional Partnerships vs. Regular Partnerships
a. Sec. 26 of the NIRC
b. RMC No. 3-2012 dated January 11, 2012
c. Sec. 73(D) of the NIRC
d. Q58/A58 of RMC No. 50-2018 dated May 11, 2018
5. Resident Foreign Corporation vs. Nonresident Foreign Corporation
a. Marubeni Corporation vs. CIR, GR No. 76573 dated September 15, 1989
6. Private Educational Institutions and Non-Profit Hospitals
a. Sec. 27(B) of the NIRC
b. Sec. 34(A)(2) of the NIRC
c. CIR vs. St. Luke’s Medical Center, GR Nos. 195909 and 195960 dated September
26, 2012 reiterated in CIR vs. St. Luke’s Medical Center, GR Nos. 203514 dated
February 13, 2017
d. Obiter in CIR vs. De La Salle University, GR No. 196596 dated November 9, 2016
7. International Carriers
a. Sec. 28(A)(3) of the NIRC
b. Sec. 1 of RA No. 10378 dated March 7, 2013
c. Secs. 1 to 4 of RR No. 15-2013 dated September 20, 2013
d. South African Airways vs. CIR, GR No. 180356 dated February 16, 2010
e. Air Canada vs. CIR, GR No. 169507 dated January 11, 2016 (Tax Treaty issue)
8. Exempt Corporations
a. Sec. 27(C) as amended by RA 10963
b. Sec. 30 of the NIRC - Enumeration
c. RMC No. 35-2012 on taxability of clubs operated exclusively for pleasure,
recreation and other non-profit purposes.
d. CIR vs. Club Fililpino de Cebu, GR No. L-12719 dated May 31, 1962 - on definition
of "Non-profit", discussed in the St. Luke's Case.
e. Non-stock non-profit educational institutions
i. Sec. 4(3) Art. XIV of the Constitution
ii. DOF Order No. 137-1987 dated December 16, 1987
iii. DOF Order No. 149-1995 dated November 24, 1995
iv. Sec. 30 of RR No. 2-1940 on what may be considered income exempt from
income tax
v. CIR vs. V. G. Sinco Educational Corporation, GR No. L-9276 dated October 23,
1956
vi. CIR vs. De La Salle University, GR No. 196596 dated November 9, 2016

D. Income Tax applicable to Corporations


1. Minimum Corporate Income Tax
a. Secs. 27(E) and 28(A)(2) of the NIRC
b. RR No. 9-1998 dated August 25, 1998
c. CREBA vs. Romulo, GR No. 160756 dated March 9, 2010
d. Manila Banking Corporation vs. CIR, GR No. 168118 dated August 28, 2006
2. Branch Profits Remittance Tax
a. Sec. 28(A)(5) of the NIRC
b. Bank of America NT & SA vs. CA, GR No. 103092 dated July 21, 1994
3. Improperly Accumulated Earnings Tax
a. Sec. 29 of the NIRC
b. RR No. 2-01 dated February 12, 2001
c. Clarification by RMC No. 35-2011 dated March 14, 2011
d. Cynamid Phils., Inc. vs. CA, GR No. 108067 dated January 20, 2000

E. Specific Items of Income


1. Final Tax Rates amended by RA 10963
a. Tax Tables (to be provided – must be memorized verbatim)
2. Royalties
a. Iconic Beverages, Inc. vs. CIR, CTA Case No. 860 7 dated August 14, 2015
3. Interest
a. Compare with gains relative to bonds
b. BDO vs. Republic of the Philippines, GR No. 198756 dated January 13, 2015 and
dated August 16, 2016 (motion for reconsideration).
c. CIR vs. Filinvest Development Corporation, GR No. 16353 dated July 19, 2011
d. Rule on OCWs
i. RR No. 1-2011 dated February 24, 2011
4. Dividends
a. Stock Dividends
i. Sec. 73(B) of the NIRC
ii. CIR vs. Manning, GR No. L-28398 dated August 6, 1975
iii. CIR vs. CA, GR No. 108576 dated January 20, 1999
b. Cash and/or Property Dividends / Tax Sparing Rule
i. Marubeni Corporation vs. CIR, GR No. 76573 dated September 15, 1989
ii. CIR vs. Goodyear Philippines, Inc., GR No. 216130 dated August 3, 2016
(Perlas-Bernabe)
iii. CIR vs. Wander Philippines, Inc., GR No. 68375 dated April 15, 1988
iv. CIR vs. Procter & Gamble Philippine Manufacturing Corp., GR No. 66838 dated
December 2, 1991
c. Liquidating Dividends
i. Sec. 73(A) of the NIRC
ii. Sec. 8 of RR No. 6-2008 dated April 22, 2008
iii. Wise & Co., Inc. vs. Meer, GR No. L-48231 dated June 30, 1947
5. Sale of Shares of Stock
a. Unlisted Shares (Secs. 24 to 28 of the NIRC, as amended by RA 10963)
b. Net Capital Gain
i. Jardine Davies, Inc. vs. CIR, CTA Case No. 5738 dated August 1, 2000.
c. Listed Shares (Sec. 127 of the NIRC, as amended by RA 10963)
d. Redemption of Shares vs. Treasury Shares
i. Sec. 9 of RR No. 6-2008 dated April 22, 2008
6. Sale of Real Property
a. Secs. 24 to 27 of the NIRC
b. SMI-ED Technology Corporation, Inc. vs. CIR, GR No. 175410 dated November 12,
2014
c. Republic vs. Spouses Salvador, GR No. 205428 dated June 7, 2017
d. Foreclosure Sales
i. RR No. 4-99 dated March 9, 1999
ii. RMC No. 058-08 dated August 15, 2008 – who should pay/statutory seller
iii. RR No. 9-2012 dated May 31, 2012
e. Sale of Principal Residence
i. RR No. 13-99 dated July 26, 1999
ii. RR No. 14-00 dated November 20, 1999
7. Others – Tax Benefit Rule
a. Refunded Taxes
i. Sec. 34(C)(1) of the NIRC
b. Recovered Bad Debts
i. Sec. 34(E)(1) of the NIRC
ii. Sec. 4 of RR No. 5-99 dated March 10, 1999

F. Exclusions from Gross Income


1. Specific Items Excluded:
a. Sec. 32(B) of the NIRC as amended by RA 10963
2. Are Damages Taxable?
a. O'Gilvie v. United States, 519 U.S. 79 (1996)
b. Take note of exempt damages mentioned in Confederation for Unity,
Recognition and Advancement of Government Employees vs. Commissioner -
BIR, GR No. 213446 dated July 3, 2018
c. Compare with backwages – RMC No. 39-2012 dated August 3, 2012
3. Retirement Pay
a. Sec. 32(B)(6)(a) of the NIRC
b. Art. 287 of the Labor Code, as amended
c. International Broadcasting Corporation, Inc. vs. Amarilla, GR No. 162775 dated
October 27, 2006
d. BIR Ruling No. DA-151-04 dated March 31, 2004
e. BIR Ruling No. 052-00 dated October 30, 2000
4. Terminal Leave Pay
a. CIR vs. CA, GR No. 96016 dated October 17, 1991
b. In Re: Zialcita, AM No. 90-6-015-SC dated October 18, 1990
c. BIR Ruling No. 496-14 dated December 12, 2014
5. Income of the government
a. CIR vs. Mitsubishi Metal Corporation, GR No. 54908 dated January 22, 1990
6. Gains from Bonds
a. BDO vs. Republic of the Philippines, GR No. 198756 dated January 13, 2015 and
dated August 16, 2016 (motion for reconsideration).
7. Rule on Excess De Minimis Benefits
a. Q5/A5 of RMC No. 50-2018 dated May 11, 2018
G. Fringe Benefits Tax
1. Sec. 33 of the NIRC (as amended by RA 10963)
2. RR No. 3-98 dated May 21, 1998 as amended by RR No. 11-2018 dated January 31,
2018 (exclude tax accounting rules)
3. CIR vs. Secretary of Justice and PAGCOR, GR No. 177387 dated November 9, 2016
4. Rules on Health Insurance and Housing
5. De Minimis Benefits
a. Q4/A4 of RMC No. 50-2018 dated May 11, 2018
b. Q5/A5 of RMC No. 50-2018 dated May 11, 2018

H. Deductions from Gross Income


1. Expenses
a. Sec. 34(A) of the NIRC
b. RR No. 10-02 dated July 10, 2002
c. Sec. 36(A) of the NIRC
d. Sec. 45 of the NIRC
e. Sec. 34(K) of the NIRC
f. CIR vs. Isabela Cultural Corporation, GR No. 172231 dated February 12, 2007
g. CIR vs. General Foods, Inc., GR No. 143672 dated April 24, 2003
h. Atlas Consolidated Mining & Dev’t Corp., GR No. L-29111 dated January 27, 1981
i. H. Tambunting Pawnshop, Inc. vs. CIR, GR No. 173373 dated July 29, 2013
2. Interest
a. Sec. 34(B)of the NIRC
b. Sec. 36 of the NIRC
c. RR No. 13-00 dated November 20, 2000
d. Tax Arbitrage Rule/Scheme
e. CIR vs. Vda. De Prieto, GR No. L-13912 dated September 30, 1960
f. Paper Industries Corporation of the Philippines vs. CA, GR Nos. 106949-50 dated
December 1, 1995
g. Sky Internet, Inc. vs. CIR, CTA Case No. 6587 dated August 10, 2005
3. Taxes
a. Sec. 34(C)of the NIRC
b. CIR vs. Vda. De Prieto, GR No. L-13912 dated September 30, 1960
4. Losses
a. Sec. 34(D)of the NIRC
b. Casualty Losses
i. RMO 31-09 dated October 16, 2009
ii. H. Tambunting Pawnshop, Inc. vs. CIR, GR No. 173373 dated July 29, 2013
c. Net Operating Loss Carry-Over
i. RR No. 14-01 dated August 27, 2001
ii. Paper Industries Corporation of the Philippines vs. CA, GR Nos. 106949-50
dated December 1, 1995
5. Bad Debts
a. Sec. 34(E)of the NIRC
b. RR No. 5-99
c. Philippine Refining Company vs. CA, GR No. 118794 dated May 8, 1996
d. Fernandez Hermanos vs. CIR, GR No. L-21551 dated September 30, 1969
6. Optional Standard Deduction
a. Sec. 34(L) of the NIRC (as amended by RA 10963)
b. Sec. 8 of RR No. 8-2018 dated January 25, 2018

I. Gains and Losses from Sale or Exchange of Property


1. Capital Gains and Losses
2. Capital Assets vs. Ordinary Assets
a. Sec. 39(A)(1) of the NIRC
b. Secs. 1 to 3 of RR No. 7-03 dated February 11, 2003
c. Sec. 22(Z) of the NIRC
d. Calasanz vs. CIR, GR No. L-26284 dated October 8, 1986
e. China Banking Corporation vs. CA, GR No. 125508 dated July 19, 2000
3. Holding Period Rule
a. Sec. 39(B) of the NIRC
4. Loss Limitation Rule
a. Sec. 39(C) of the NIRC
b. China Banking Corporation vs. CA, GR No. 125508 dated July 19, 2000
5. Net Capital Loss Carry-over Rule
a. Sec. 39(D) of the NIRC
6. Tax Free Exchanges
a. Sec. 40(C)(2) of the NIRC – Basic provisions only

J. Estates and Trusts


1. Secs. 60-66 of the NIRC (as amended by the RA 10963)
2. Employees’ Trust
a. Sec. 60(B) of the NIRC
b. RMC 39-14 dated May 12, 2014
c. Ossorio Pension Foundation, Inc., vs. CA, GR No. 162175 dated June 28, 2010

K. Returns and Payment of Tax under the NIRC


1. Persons not Required to File Income Tax Returns
a. Sec. 51(A)(2) of the NIRC (as amended by RA 10963)
2. Substituted Filing
a. Sec. 51-A of the NIRC (as amended by RA 10963)
b. RR No. 03-02 dated March 22, 2002, as amended
c. Section 13 of RR No. 11-2018 dated January 31, 2018
3. Creditable Withholding Tax vs. Final Withholding Tax
a. CREBA vs. Romulo, GR No. 160756 dated March 9, 2010
b. Time of Withholding
c. Sec. 2.57 of RR No. 2-98, as amended by RR No. 12-2001.
d. Sec. 2.78 and 2.83 of RR No. 2-98.
e. ING Bank vs. CIR, GR No. 167679 dated July 22, 2015