Professional Documents
Culture Documents
- Tax on the right to transmit property at the death. Not a tax on property
- Imposed upon the basis of net estate regardless of beneficiaries
- Accrues at the moment of death. Obligation to pay is 6 months after the death of the
decedent
- The executor or judicial administrator shall not deliver a distributive share to any party
interested in the estate unless there is a certification form the commissioner that the estate has
been paid.
- 200K - EXEMPT
GROSS ESTATE - The value of the property, real or personal, tangible or intangible, of the
decedent wherever situated to the extent of his interest at the time of his death.
NET ESTATE - Value of gross estate less the ordinary and special deductions
COMPOSITION
1. Citizen or Resident Alien - All properties WHEREVER SITUATED.
2. Non Resident Alien - Only if situated in PH. PROVIDED THAT with respect to intangible personal
property, its inclusion is subject to the rule of reciprocity. No SPECIAL DEDUCTION ALLOWED
#3 Revocable trust
Revocable if:
1. There is transfer by trust or otherwise and
General - When it authorizes the donee to appoint any person he pleases including himself thus
giving full dominion over the property
Special - Can only appoint restricted or designated class of persons other than himself. - NOT
INCLUDED.
FORMULA: FMV at the time of decedent’s death LESS Actual consideration received
ORDINARY DEDUCTIONS
1. Expenses, Losses, Indebtedness and Taxes (ELIT)
1. Funeral expenses
- Whichever is LOWEST
1. Actual funeral
2. 5% of gross estate
3. PHP 200,000
- Funeral expenses already paid in memorial plans may be deducted subject to limit. It can
only be deducted if it is included in gross estate
- The cut off of funeral expenses is internment
2. Judicial Expenses
- Must be incurred during the settlement of estate but not beyond 6 months from the
death of the decedent
- Extrajudicial expenses may be deducted.
- If it will individually benefit the heirs - NOT DEDUCTIBLE
3. Unpaid mortgages
- Included in the gross estate
4. Unpaid taxes
REQUISITES
1. Accrued as of or before the death
2. Unpaid as of the time of his death regardless of whether or not incurred in connection with
trade or business.
5. Losses
REQUISITES:
1. Arising from fire, storms, shipwreck, or other casualties or from robbery, theft or embezzlement
2. Not compensated by insurance
3. Incurred not later than the 6 months at the time of death
4. Not claimed as deduction for income tax purposes.
5. Incurred during settlement of estate
5. Vanishing deductions
- Properties previously subject to donor’s or estate tax.
- Deduction allowed diminishes over a period of 5 years
- Two transfers must occur within 5 years and the first transfer has already been subjected to
transfer
REQUISITES:
1. Death of present decedent within 5 years from the receipt of property
2. Identity of property
3. Prior tax determined and paid
4. Formed part of gross estate situated in PH or the prior decedent or total amount of gifts
5. No previous vanishing deduction
SPECIAL DEDUCTIONS
1. FAMILY HOME
REQUISITES:
1. Actual residential home as certified by Barangay captain
2. Total value must be included as part of gross estate
3. Allowable deduction must be the lowest of:
1. Current FMV
2. Extent of interest
3. 1M
TAX CREDIT - Allowed for the estate tax or taxes paid to foreign country
- If net estate exceeds 2M, estate tax return shall be supported and certified by CPA and
separate TIN
PAYMENT
- Pay as you file
- May be extended but it must be filed before the expiration of 6 months
- Extension must not be for a period exceeding 5 years or 2 years if extrajudicial
- It is subject to interest BUT NOT TO SURCHARGE
- Running of statute of limitations is suspended
- There may be payment by installment
- Estate tax shall be paid by the executor or administrator (PRIMARY). Beneficiary shall be
subsidiarily liable but it shall not exceed the value of inheritance
- Judge shall not issue authorization to deliver until certification of payment is shown
- ROD shall not register also without such certification
- Debtor of the deceased shall not pay unless certification
- The administrator of the estate or anyone of the heirs may upon authorization by the
commissioner withdraw an amount not exceeding 20K without certification
- In survivorship agreement, the bank deposit does not form part of the gross estate. It is
allowed.
DONOR’S TAX
- An excise tax imposed on the privilege to transfer property by way of gift intervivos based on
a pure act of liberality without any or less than adequate consideration and without any legal
compulsion to give
COVERAGE
1. Real or personal property wherever situated belonging to the donor - Resident or Citizen
2. Non resident Alien - Within PH only - Intangible subject to reciprocity
STRANGER:
1. Not brother, sister whether full or half blood, spouse, ancestor, and lineal descendants
2. Person not a relative of consanguinity in the collateral line within 4 CD
3. Between business org
4. Business and individual
SITUS:
- Where the transfer took place
VALUE:
1. REAL - FMV at the time of the gift.
2. All other - FMV at the time of the gift
- Void donations are not subject to donor’s tax. But if already paid, only 2 years to refund from
the date of payment
- Renunciation of share of surviving spouse in favor of the SPECIFIC PERSON is subject to donor’s
tax
- If merely renounces without specification - NOT SUBJECT TO DT. Automatically transfers
2. Forgiveness of indebtedness
- If for service: Income tax
- If no: Gift
- If because of restructuring, it shall not be liable for DT. It was not a result of mutual agreement
of debtors and creditors. It was because of rehabilitation
2. Gift made to or for the use of the national government or any entity created by any of its
agencies which is not conducted for profit or to any political subdivision of the said government
3. Gift in favor of an educational and or charitable, religious cultural, social welfare corporation,
institution, ACCREDITED NGO or Philanthrophic organization or research institution.
REQ:
1. Not more than 30% of said gift shall be used for administrative purpose
2. Non stock non profit
3. Governed by trustees who do not receive any compensation
4. Not authorized to receive dividends
- Donation of ordinary assets to charitable institution is exempt from donor’s tax provided
requisites are complied
BASIS OF DT:
- NET GIFT
- When the donation is more than 10M, the cumulative method is no longer relevant. - Rate is
fixed at 15%
VAT
- Tax on the consumption levied on the Barter, Exchange, Lease or Sale (BELS) of goods or
properties or services in the PH and on importation of goods into the PH
- The buyer cannot invoke an exemption privilege to avoid paying output tax passed on them
- Barter has the same tax consequence as a sale
Cascading - Tax passed on by the previous seller which is now a component of gross selling price
is again subjected to tax (tax on tax)
- No cascading in VAT
DESTINATION PRINCIPLE - Goods and series are taxed only in the country where these are
CONSUMED
CROSS BORDER DOCTRINE - No vat shall be imposed to form part of the cost of the goods
destined for consumption outside the territorial border of the taxing authority
- Exports are zero rated because they are consumed outside. and imports are liable to vat
PEZA REGISTERED ENTERPRISES - VAT EXEMPT and no vat can be passed on them
- A taxable business can claim for the refund of the Input VAT only if the claim is supported by
purchase invoices
AGGREGATION RULE - A spouse who derives revenue not only from the practice of his profession
but also from other lines shall be aggregated for the purposes of threshold amount.
2. Joint Venture - Shall be liable for vat even those undertaking construction or energy related
activities with government.
4. Government
A. Essential Function - Exempt
B. Proprietary - Not exempt
7. Importer - Seller pays out the VAT except technical importation above.
- Transmission of property to a trustee shall not be subject to vat if the property is merely held in
trust for the beneficiary.
THRESHOLD:
1. RESIDENTIAL LOT - Exceeding PHP1,919,500
2. RESIDENTIAL HOUSE AND LOT or other residential dwellings - Exceeding PHP3,199,200
3. Sale, Transfer or disposal within 12 months of two or more adjacent:
1. Residential Lot
2. House and lot
3. Other residential dwelling in favor of one buyer from the same seller for the purchase of
utilizing lots, house and lots or other residential dwellings as one residential area wherein
the AGGREGATE VALUE of the adjacent property exceeds PHP1,919,500 for lots and
PHP3,199,200 for house and lot
- Sale of parking lots in a condo is a separate and distinct transaction and is not covered by the
threshold - LIABLE FOR VAT REGARDLESS OF AMOUNT
- Threshold applies even if nominated as conditional sale or absolute sale
- Low cost housing units even though above threshold may still be exempt if not beyond the
PHP 1,919,500 and PHP3,199,200
GROSS RECEIPTS: Total amount of money or its equivalent actually or constructively received
EXCLUDING
1. Amounts earmarked for payment to unrelated third party
2. Amounts received as reimbursement for advanced payment on behalf of another which do
not redound to the benefit of the payor
- Transfer of assets of a corporation to another corporation in exchange for shares of the latter is
subject to vat
- Lending investor other than banks, non bank financial intermediaries, finance companies non
performing quasi banking function - LIABLE FOR VAT
- Banks or nonbank financial intermediaries performing quasi banking functions and other
non bank financial intermediaries are VAT EXEMPT TRANSACTIONS
- Extending cash advances for a fee - vatable
- Franchise grantees of radio or tv broadcasting whose annual gross income receipts do not
exceed 10M shall be exempt
- Non life insurance companies ARE VATABLE
- Non life REINSURANCE PREMIUMS are not vatable
- Insurance and Reinsurance COMMISSIONS whether life or non life shall be VATABLE
- When the INCOME PAYOR is a PEZA REGISTERED ENTITY to whom VAT may not be passed, the
royalties shall be exempted from VAT
- The lease of MOTION FILMS shall be VATABLE.
- The exemption of cinema/theater operators or proprietors from VAT is only limited to gross
receipts derived from ticket sales.
GR: Contributions in exchange of goods or service to associations are subject to Income and VAT
EXC: Association dues and income derived from rentals of property of the Homeowners
association may be exempted from income tax, vat and percentage tax PROVIDED:
It complement, support and strengthen the LGU in providing vital service to their members
LAWYER’S VAT
1. There must be no EER
2. Gross receipts exceeds PHP1,919,500
1. Transfer, Use, consumption of goods or properties NOT in the course of business of goods or
properties ORIGINALLY INTENDED for sale or for use in the course of business
- EX: When VAT registered person withdraws goods from his business for personal use.
- Donation by VAT registered person of its ordinary assets is Transaction deemed sale
3. Consignment of goods if actual sale is not made within 60 days following the date of
consignment.
- EXCEPT when physically returned within 60 days
4. Retirement from or cessation of business with respect to all goods on hand whether capital
goods, stock in trade, supplies or materials as of date of retirement.
- There must be change of ownership or dissolution of a partnership and creation of a new
partnership.
Apply to all the goods or properties EXISTING Not apply to goods or properties which are
at the time of occurrence of: originally intended for sale or use in the course of
1. Change of business activity from VAT status business as they are mere changes in form NOT
to VAT exempt status. IN SUBSTANCE
3. Merger or consolidation
SERVICES
1. Processing, manufacturing or repacking of goods for other persons doing business outside
the PH which goods are subsequently exported and paid for in acceptable foreign currency
2. Same services rendered to a person engaged in business conducted Outside the PH or to a
non resident person not engaged in business who is outside the PH when services are
performed and paid for in acceptable foreign currency
3. Exempted under laws and international agreements
4. Services rendered to persons engaged in INTERNATIONAL SHIPPING or air transport including
leases of property for use thereof. (NOT FROM ONE PLACE IN PH TO ANOTHER)
5. Services performed by subcontractors and or contractors in processing, converting or
manufacturing goods for an enterprise whose export sales exceed 70% of total annual
production.
6. Transport of passengers and cargo by domestic air or sea carriers from PH to foreign country
(but subject to percentage tax if doing business in PH)
7. Sale of pows or fuel generated through renewable sources
Export sale of goods or properties and supply LOCAL SALE of goods and properties and supply
of service by a VAT REGISTERED PERSON of services by VAT Reg person to a person or
entity who was granted INDIRECT TAX
EXEMPTION under special laws or IA
Primarily intended to be enjoyed by the seller Intended to benefit purchaser who not being
who is directly and legally liable for the vat, directly or legally liable for the payment of VAT
making such seller internationally competitive
by allowing refund or credit
- Pagcor’s exemption from corporate income tax was removed. But it is still exempt from VAT.
Completely free of VAT because tax rate is zero Exemption only as it removes vat at exempt
stage
Can claim credit or refund for input tax. Hence Cannot claim credit or refund
Total relief
3. Sale, importation or lease of passenger or cargo vessel and aircraft including engine
equipment and spare parts thereof for domestic and international transport operations
weighing 150 tons and above.
4. Sale, importation, printing or publication of books and any newspaper, magazine, review or
bulletin.
REQUISITES: Newspapers, magazine, review and bulletin must:
1. Printed or published at regular interval
2. Available for subscription and sold at fixed prices
3. Not principally devoted to publication of paid ads
SALE
1. Real properties
EXEMPT IF:
1. Not primarily held for ordinary course of trade or business.
2. Low cost or socialized housing
3. Residential lot valued at PHP1,919,500 and BELOW.
4. House and lot and other residential dwellings at PHP3,199,200 and BELOW
5. Two or more adjacent residential lots sold within 12 month period and aggregate exceeds
PHP 1,919,500 or PHP3,199,200
3. Sale by Agricultural COOPERATIVES of food and non food products whether original or
processed duly registered by CDA
- Members - exempt even if not the producer
- Non members - only if cooperative is the producer.
4. Sales by non agricultural, non electric and non credit cooperatives not duly registered and in
good standing with CDA
IMPORTATION
1. Personal and household effects belonging to residents of PH returning from abroad and non
resident citizen coming to resettle in PH. provided they are exempt in customs duties.
2. Importation of professional instruments and implements, wearing apparel, domestic animals
and personal household effects.
REQUISITES:
1. Belonging to person coming to PH
2. For their own use
3. Accompanying such persons or arriving within 90 days before or after arrival
4. Except vehicle, vessel, aircraft, machinery, and other goods for manufacture in
commercial quantity
5. Satisfactory evidence given to CIR
3. Fuel, goods and supplies by persons engaged in international shipping or air transport
operations directly to a foreign port without stopping
4. Life saving equipment, safety and rescue equipment for shipping operations
5. Capital equipment, machinery, spare parts of machine vessel operated in PH
SERVICES
1. Subject to percentage tax
2. Agricultural contract growers and milling for others of play into rice
3. Medical, dental, hospital and veterinary services except those rendered by professionals.
- Sale of drugs to hospital in patients - non VAT
- If out patient - VATABLE
4. Services of banks, non bank financial intermediaries performing quasi banking functions and
non bank financial intermediaries such as pawnshops and money changers.
- Pawnshops - liable to percentage tax
OTHERS
1. LEASE of residential units if monthly
1. Does not exceed PHP12,800 regardless of aggregate rentals - Not liable for VAT and
Percentage tax
2. Exceeds PHP12,800 but aggregate does not exceed PHP1,919,500 - Liable only for
percentage tax 3%
- To be liable for Vat - both shall be present
- In case of several units, each shall be treated separately for percentage tax.
Output Tax - Vat due on sale or lease of taxable goods or properties or services by any person
registered or required to register under vat.
- Output tax of the SELLER is the INPUT tax of the purchaser.
If does not exceed 1m: Total amount of input taxes shall be allowed in the month of acquisition.
ACQUIRED BY INSTALLMENT - Subject to amortization of input tax despite the fact that the
monthly payments or installments may not exceed 1M
PRESUMPTIVE INPUT TAX - 4% of the gross value in money of their purchases of primary
agricultural products used to their production.
- Persons engaged in:
1. Processing of Mackerel, Milk and sardines
2. Manufacturing cooking oil, packed noodle based instant meals and refined sugar
WITHHOLDING VAT
1. Payments by government - 5%
2. Payments to Nonresidents - 12% with respect to
1. Lease or use of properties or property rights owned by non resident
2. Other services rendered in PH by non residents
PRESCRIPTION:
1. Administrative claim with BIR
- Filed within 2 years after the close of the taxable quarter where such sale was made
- Applies only to filing of administrative claim with CIR and not with the filing of Judicial claims
with CTA
- Tax payer shall file his claim with COMPLETE SUPPORTING DOCUMENTS. He is barred from
submitting additional documents after he has filed his administrative claim.
2. Judicial Claim
- Filed with CTA within 30 days from receipt of CIR’s decision OR from expiration of 120day
period without action from CIR
- Observance of 120+30 days period is MANDATORY AND JURISDICTIONAL
- The 30day period to file a judicial claim need not necessarily fall within 2 year prescriptive
period as long as the administrative claim is filed within 2 year period.
- Prior such period, Claims are premature.
- From December 10, 2003 - October 6, 2010 - Claims need not to observe stringent
requirements.
- Failure to print the word Zero-rated on the invoices or receipts is fatal to a claim for credit of
refund.
- Input vat attributable to zero rated sales incurred BEFORE its registration may not be subject to
refund
- A vat registered person may apply for the issuance of tax credit certificate for any unused
input tax within 2 years from the cancellation of registration
- It shall commence from the date of cancellation of registration
REGISTRATION
Persons required to register:
1. Every person who is liable for payment of vat - VAT PERSON
2. Every person who is exempted from VAT - Non Vat person or Vat Exempt
3. Every person who is engaged in vatable and exempt transaction must both register as VAT
AND NON VAT.
- Registration of income tax as a tax type does not automatically carry with it the registration of
VAT and or percentage tax.
- Person shall register for every separate or distinct establishment or place of business
- If the sale is exempt, the term VAT EXEMPT SALE shall be printed prominently in the invoice.
- Also in zero rated sale.
Time of filing:
1. Monthly and Quarterly
OTHER PERCENTAGE TAX - Essentially a tax on the transaction and not on the articles sold. 3%
Documentary Stamp Tax - Tax on documents, instruments, loan agreements and papers
evidencing the acceptance, assignment, sale, transfer of an obligation, right or property.
- Excise tax for certain privileges conferred by law
- Court considers the nature and character
- Transfer by means of merger is not subject to DST
- May be imposed even on electronic form
- Paid on the issuance of the said instruments
- Imposed upon person making, signing, issuing, accepting, transferring
ASSESSMENT
- SELF ASSESSING SYSTEM - Tax payer has the obligation to conduct an assessment of himself so
he could determine and declare the amount to be used as tax basis.
- After the return has been filed, the CIR or his duly authorized representative may authorize the
examination of any tax payer and the assessment of the correct amount.
- Failure to file a return does not prevent CIR from authorizing examination
DELINQUENCY DEFICIENCY
2. Pay the deficiency tax on the date 2. No amount is sown or no return was filed
demanded by CIR
Can be collected administratively via distraint, Must be assed prior to collection as deficiency
levy or judicial action has to be determined first
GR: Any return statement or declaration filed to office authorized to receive shall not be
withdrawn.
EXC: It may be changed, modified or amended
1. Done within 3 years from the filing of return
2. No notice of audit or investigation has been actually SERVED upon the tax payer.
- CIR may order inventory taking of goods at any time during the taxable year
- CIR may place the business under observation and surveillance if they have reason to believe
that they are not declaring proper taxes.
TYPES OF SURVEILLANCE:
1. Covert surveillance - Undercover watch
2. Overt - Inventory taking and actual observation
3. Short duration surveillance (TAX COMPLIANCE CHECK) - Business operations are checked
- Liberally construed
- 12 months - 1 year - Administrative code
EXCEPTION: if the return is SUFFICIENTLY COMPLETE in order for CIR to intelligently determine the
proper assessment - Commence at the original filing
Merely implies a deviation from truth or fact Intentional or deceitful entry with intent to evade
whether intentional or not the taxes due
3. When tax payer cannot be located in the address given by him in the return unless he informs
CIR of change of address
4. When warrant of distraint is duly served
5. Taxpayer is out of the PH
ASSESSMENT - Finding by a taxable agency that the taxpayer has not paid his correct taxes.
REQUISITES
1. Issued within the prescriptive period for the issuance of assessment notices
2. Issued only after a PRELIMINARY ASSESSMENT NOTICE (PAN) has been served upon the tax
payer
3. State facts and laws which it is based or else void.
4. Taxpayer personally received the assessment notice or a tax agent who is appointed
received it.
ASSESSMENT PROCESS
1. Issuance of Letter of Authority (LA)
2. Tax Audit investigation
3. Issuance of PAN
4. Issuance of Formal Letter of Demand (FLD) or Final Assessment Notice (FAN)
5. Administrative action / Inaction
REQUISITES OF VALID LA
1. Issued by proper approving official
2. Not contain any manually written character
3. Must cover only one taxable year except in TAX FRAUD CASES.
4. Served within 30 days
3 POSSIBLE SCENARIOS
1. Tax payer pays
2. Tax Payer replies
3. Tax payer ignores
PAYS:
- After payment, FLD/FAN shall be issued to formalize assessment.
REPLIES:
- Within 15 days from receipt of PAN filed by the taxpayer or authorized representatives
IGNORES
- Considered default and FAN/FLD shall be issued.
ISSUANCE OF FLD/FAN
REQUISITES:
1. Issued after valid PAN except when not required
2. Issued by CIR or AuthRep
3. Served to tax payer personally or mail
4. Served before lapse of prescriptive period of making assessment
5. In writing and stating basis
6. Conducted within the scope as stated in LA
- It must be issued 15 days from the receipt of Taxpayer of the PAN WHETHER PROTESTED OR
NOT.
WHEN PAN IS NOT REQUIRED / WHEN FLD OR FAN MAY BE FILED OUTRIGHT
1. Mathematical error in the computation of tax appearing on the face
2. Excise due on excisable articles has not been paid
3. Discrepancy has been determined between tax withheld and the amount actually remitted
by agent
4. Article locally purchased or imported by exempt person has been sold or transferred to non
exempt person
5. When Taxpayer automatically applied the same amount claimed against the estimated tax
liabilities for the taxable quarter.
FAN IS DEEMED MADE: On the date when the demand letter or notice of assessment is released,
mail or sent, even though the same is actually received by taxpayer AFTER the expiration of
prescription period.
PAYS
- FULL PAYMENT.
FILES PROTEST
REQUISITES:
1. Accompanied of waiver of prescription
2. Writing
3. Addressed to the CIR or Duly authorized rep
4. Submitted WITHIN 30 DAYS from the receipt of FAN/FLD
5. Filed by tax payer or AuthRep
Not in an adequate manner to the specific Sufficient and comprehensive to explain the legal
findings and factual bases why the assessment is incorrect
Failure to file - No liability for additional Failure to file: Assessment becomes final and
deficiency tax executory
Directory Mandatory
FORMS OF PROTEST
1. Request for Reconsideration - Reevaluation of assessment on the basis of existing records
without need of additional evidence
2. Request for Reinvestigation - Based on newly discovered evidence
RECONSIDERATION REINVESTIGATION
Does not toll the prescription Tolls because it entails presentation of new
evidence
Submission of new documents not requried Required within 60 days from the filing of protest
180 day period to decide of CIR commences Commences from the submission of complete
from the filing of the protest supporting documents
SCENARIOS:
1. DIRECT DENIAL
REMEDIES:
1. FDAA BY ARep
1. File Administrative appeal to CIR within 30 days from receipt of FDAA
- Administrative appeal SHALL TOLL the 30 day period to appeal to CTA
2. Appeal to CTA within 30 days
- No request for reinvestigation shall be allowed
2. FDAA BY CIR
1. MR with CIR
- MR will not toll the 30 day period to appeal
2. Appeal to CTA within 30 days
TENOR OF FINALITY RULE - If tenor of the letter shows the firm stand of the BIR against
reconsideration of the disputed assessment, the letter should be considered the final decision of
BIR
- Where CIR not only demanded payment but gave warning that in the event that the
taxpayer failed to pay the same, he would be constrained to enforce the collection
EXAMPLE:
1. Final notice before seizure
- VOID FDDA on assessment - ASSESSMENT REMAINS VALID. Assessment differs from a decision of
disputed assessment
2. Inaction by Arep
1. Appeal to CTA within 30 days after the expiration of 180 day period counted from the date of
filing for request of reconsideration or from the date of submission by taxpayer of required
documents in reinvestigation
2. Await for final decision
GROUNDS
1. Doubtful validity
2. Financial incapacity
- A minimum rate for 40% of the basic tax assessed or lower amount subject to approval
- A COMPROMISE CAN NEVER BE ENTERED AFTER FINAL JUDGMENT BECAUSE GOVERNMENT HAS
ALREADY ACQUIRED VESTED RIGHTS
GROUNDS:
1. Unjustly or excessively assessed
2. Collection costs involved do not justify the collection of amount due
COMPROMISE ABATEMENT
Actual reimbursement of the tax Amount of tax due to a tax payer resulting from
overpayment of a tax liability or erroneous
payment
- BIR Issues Tax credit certificate
- All TCC shall not be allowed to be transferred or assigned to any person
REQUISITES OF TR/TC
1. Legal ground
2. Written claim
EXCEPTIONS:
PARTIES ENTITLED
GR: Taxpayer who paid the same
- Failure to submit documents in support of a taxpayer’s claim for refund at the administrative
level does not prevent CTA from entertaining the appeal. Non submission in administrative
level IS NOT FATAL in the judicial claim.
- Offsetting of taxes is allowed only when the determination of the taxpayer’s liability is
intertwined with the resolution of the claim for tax refund of erroneously or illegally collected
taxes.
FORFEITURE -If unclaimed or unencashed within 5 years from the date of mailing or delivery or
issue
COLLECTION - Actual effort exerted by the government to effect the exaction of what is due
from the taxpayer. Final stage and goal of tax administration
REQUISITES
1. Final, executory and collectible
2. Part of government’s accounts receivable
3. Not written off or cancelled
4. Not prescribed
5. Proper procedure followed
6. Tax payer can still be located
7. Not enjoined from collecting
ADMINISTRATIVE REMEDIES
1. Tax Lien - A legal claim or charge on property, real or personal, established by law as security
in default of payment of taxes.
1. Personal property - Arise from the time the tax became due
2. Distraint - Enforced on the goods, chattels or personal property of whatever kind by taxpayer.
1. Actual - Actual seizure and taking possession of personal property
2. Constructive - Where no actual delinquency of the taxpayer is necessary before the
same is reported to by the government.
Who commences:
1. CIR - More than 1M
2. RDO - 1M or less
ACTUAL DISTRAINT
- Bank accounts may be distrained notwithstanding the Bank secrecy act. BIR simply seizes the
deposit as is sufficient to discharge the obligation.
- It must be sold at public auction. Any residue over and above what is required shall be
RETURNED to the owner.
- There is right of PRE-EMPTION - Payment before the actual sale.
- NO RIGHT OF REDEMPTION
- CIR or his deputies may purchase in behalf of the national government
CONSTRUCTIVE DISTRAINT
1. Retiring from any business subject to tax
2. Intending to leave PH
3. Intending to remove property or conceal it
4. Perform any act tending to obstruct the proceeding
ACTUAL CONSTRUCTIVE
Effective by service of warrant of distraint Requiring the taxpayer to sign a receipt of the
property or leaving a list of such property
DISTRAINT LEVY
Effected by seizure of personal property Effected by writing and written notice of the levy
shall be mailed to or served upon the ROD
No need for publication. Only posting There is a need for publication in newspaper
No redemption Redemption
- Real property may be sold in levy for less than its market value because it is subject to right of
redemption.
- Forfeited property shall not be destroyed until at least 20 days after seizure.
JUDICIAL REMEDIES
1. CIVIL ACTION - Collection
- BIR can file a civil action for collection PENDING DECISION of administrative protest.
Considered denied.
- No civil or criminal action for recovery shall be filed without the approval of CIR
- In case of falsity or fraud with intent to evade, the right of government is generally
imprescriptible because it is only deemed instituted from discovery and institution of judicial
proceedings
INTERRUPTED WHEN:
1. Instituted
2. Absent from PH
- Assessment is not necessary before filing of criminal action and criminal action may be filed
during the pendency of an administrative protest in BIR
- Acquittal in criminal action does not necessarily result to exoneration of civil liability to pay
taxes
- Payment of tax due after apprehension shall not constitute a valid defense in any prosecution
for violation of the code
- Subsequent satisfaction of civil liability or prescription does not extinguish criminal liability
- In case of insolvency, no subsidiary imprisonment
- Filing of criminal action is not an implied assessment by CIR
- No reservation to file civil action
- Assessment is still necessary even when found guilty of criminal offense.
POWERS OF BIR
1. Assess and collect NIR taxes
2. Enforce all forfeitures, penalties and fines
3. Execute judgment in all cases decided in its favor by the CTA
4. Effect and administer the supervisory and police powers
POWER OF CIR
1. Interpret tax laws
2. Decide cases
3. Obtain information to summon and examine
4. Make assessments and prescribe additional requirements
THIRD PARTY INFORMATION RULE - May gather information to other persons. BIR can assess the
records of the taxpayer’s customers or suppliers to confirm the accuracy if the declared sales or
purchases in the tax returns.
- The power to require production of books is subject only to the rule prescribing a period to
preserve books and other records. Beyond it, cannot be subject to subpoena.
- CIR have the authority to make arrests and seizures for the violation of penal law and rules.
- This does not require any previous warrant but it must cover only violations committed within
the view of internal revenue officers.
- CIR has no power to prescribe penalties because it is SOF who issues rules and regulations
COMPLIANCE REQUIREMENTS
GR: The books of accounts shall be subject to examination and inspection only once every
taxable year
EXC:
1. Fraud, irregularity, mistake
2. Requests reinvestigation
3. Verification of compliance with withholding tax
4. Verification of capital gains tax
5. Cir’s power to obtain information to people
- All corporations, partnerships that retire shall submit their books to the CIR within 10 days
- Before a taxpayer transfers his place of business, he must secure tax clearance
ADMINISTRATIVE ISSUANCES
1. Revenue regulations - Issued by SOF
REQUISITES
1. Necessary to proper enforcement
2. Not contrary to law
3. Published in official gazette
- This does not apply when the ruling is NULL AND VOID for being contrary to law
CIVIL PENALTIES - Surcharge and interests in addition to all taxes, fees and charges imposed by
NIRC
GR: Payment of surcharge is mandatory and CIR is not vested with authority to waive
EXC:
1. Good faith and honest belief that one is not subject to tax
2. Imposition of tax statute was controversial
TAX EVASION
ELEMENTS
1. End to be achieved
2. Accompanying state of mind which is evil, in bad faith, willful or deliberate not accidental
3. Unlawful course of action or failure of action
- Crime is deemed complete when the violator knowingly or willfully files a fraudulent return with
intent to evade or defeat tax
- CIR may not collect compromise penalty through an action in court or by distraint or levy. The
remedy is to file a criminal action against the taxpayer.
INFORMERS REWARD
- Any qualified person who voluntarily provides definite and sworn information NOT YET IN THE
POSSESSION of BIR nor public knowledge, leading the discovery of fraud upon the internal
revenue laws resulting to the recovery of revenues.
REQUISITES:
1. Not disqualified.
NOT QUALIFIED:
1. BIR official or employee
2. Relative within 6 degrees of BIR
3. Already retired
APPEALS
- Only final decisions
- Not interlocutory orders
- PAN not appeasable
- Commissioner did not rule on taxpayer’s motion for Recon, It was only when taxpayer
received the summons on civil action for the collection of deficiency that the period to
appeal commence to run.
GR: New issues cannot be raised for the first time on appeal
EXC:
1. Prescription
2. Error of administrative officials
- The government cannot raise the issue of incapacity for the first time on appeal.
- Withdrawal of an appeal rendered the assailed decision final and executory
- Findings of fact of CTA is not reviewable in the absence of any clear and convincing proof to
the contrary
PERIOD - within 30 days after the receipt of decision or after expiration of period fixed by law
- In case of disputed assessments, the inaction of CIR within 180 day period shall be deemed a
denial for purposes of allowing the taxpayer to appeal to court and does not necessarily
constitute a formal decision.
- The taxpayer may await for such decision even beyond 180 days.
- MR of denial of administrative protest does not toll the 30 day period to appeal to CTA.
- The 30 day period is reckoned from the date taxpayer is notified of denial
- Appeal shall not suspend the payment, levy, distraint or sale: LIFEBLOOD
- Injunction shall not be available
3. Analogy
- If necessary to the business, even when not placed by the owner of the tenement or was
merely placed by the lessee, It is still REAL PROPERTY and subject to RPT
DECLARED FOR THE FIRST TIME - Shall be assessed FOR BACK TAXES for not more than 10 years
prior to the date of initial assessment
- Based on values in force during corresponding period
- Any person who transfers real property ownership to another is required to notify the assessor
concerned within 60 days from the date of transfer.
- Each buyer of real property must make a new declaration thereof.
- When a person refuses or fails, provincial, municipal or city may declare. No oath is required.
- All RP whether taxable or exempt shall be appraised at its current market value
APPRAISAL - Act or process of determining value of property as of a specific date for a specific
purpose.
DETERMINATION OF FMV -
1. Machinery - Acquisition cost
ASSESSMENT - Act or process of determining the value of a property or proportion thereof subject
to tax including the discovery, listing, classification and appraisal of properties.
- RP shall be classified, valued and ASSESSED based on ACTUAL USE regardless of owner.
ACTUAL USE - Purpose for which the property is PRINCIPALLY OR PREDOMINANTLY UTILIZED by
person in possession thereof.
ASSESSMENT LEVEL - Percentage applied to the fair market value to determine the assessed
value.
- City or municipality through their respective sanggunian shall have the power to classify lands
with their zoning ordinances
- For Condominiums, Each condo owners shall be separately assessed for purposes of RPT.
REVERSION OR RP
- Every after 3 years.
- Assessment of RP shall not be increased oftener than once every 3 years
- EXC: Improvements substantially increasing the value and actual use.
GR: All assessments shall take effect on Jan 1 on the succeeding year
EXC: Beginning the next quarter if
1. Partial or total destruction
2. Major change
3. Great and sudden inflation
4. Gross illegality
- RPT is chargeable against the person who has actual and beneficial use and possession of
regardless of ownership.
PRESCRIPTION OF COLLECTION
1. 5 YEARS FROM DUE - Basic RPT
2. 10 YEARS FROM DISCOVERY OF FRAUD OR INTENT TO EVADE
FAIR MARKET VALUE - Price at which a property may be sold by a seller who is not compelled to
sell and bought by the buyer who is not compelled to buy.
- An installment purchasers of land within housing project of GSIS is LIABLE TO PAY RPT from the
time possession is transferred to him although pending full payment of the purchase price.
- A fishing port which is devoted for public use is exempt from RPT
3. ALL MACHINERIES AND EQUIPMENT THAT ARE ACTUALLY, DIRECTLY AND EXCLUSIVELY USED BY
LOCAL WATER UTILITIES AND ELECTRIC GENERATION AND TRANSMISSION.
- Machineries and Equipment only
5. MACHINERY AND EQUIPMENT USED FOR POLLUTION CONTROL AND ENVIRONMENT PROTECTION
DISTRIBUTION OF PROCEEDS
1. PROVINCES
1. 35% Province
2. 40% Municipality
3. 25% Barangay
2. CITIES
1. 70% City
2. 30% Barangay
1. 50% located
2. 50% all component barangays
REMEDIES OF LGU
1. Lien
2. Administrative Action
1. Levy on the property
2. Distraint
3. Judicial action
REDEMPTION PERIOD
- 1 year from the Date of sale
- EXCEPTION: DATE OF REGISTRATION OR ANNOTATION if it was stated in the ordinance.
CLAIM FOR REFUND - Tax levied is illegal or erroneous with the city treasurer within 2 years from
the date the taxpayer is entitled to reduction or adjustment
- 60 days to decide
- APPEAL TO LBAA (within 60 days upon expiration or denial)
- APPEAL TO CBAA
- APPEAL TO CTA EN BANC
NATURE
1. Not inherent but a direct grant
2. Limited
3. Legislative in nature - Exercised only by sanggunian
4. Territorial
LOCAL TAXATION
FUNDAMENTAL PRINCIPLES
1. Public purpose
2. Inure solely to the benefit of and subject to disposition by the LGU levying the tax
3. Equitable
4. Not contrary to public policy, national economic policy or restraint of trade
5. Uniform in each LGU
6. Collection and other imposition shall not be let to any private person.
7. Not Unjust, excessive or oppressive or confiscatory
RESIDUAL TAXING POWER - Fees, taxes beside those specifically enumerated in LGC
WHARFAGE - Fee assessed against the cargo of the vessel based on quantity, weight or measure
2. Taxes, fees or charges on countryside and barangay business enterprise and cooperative
8. Percentage or VAT
9. Charges on Ph products actually exported.
EXCEPT: Municipalities may imposes taxes on exporters of essential commodities.
10. Taxes on business enterprises certified by BOI for a period of 6 and 4 years.
11. TFC for registration of motor vehicles and issuance of all kinds of licenses for driving
12. Taxes on premiums paid by way of reinsurance or retrocession
13. TFC on agricultural and aquatic products when sold by Marginal farmers or fishermen
14. Income tax
EXCEPT: Bank and other financial institutions
15. Any kind on National government, its agencies and instrumentalities.
SPECIFIC POWERS TO IMPOSE TAX
3. Franchise Tax
REQUIREMENTS BEFORE A TAX PAYER BE LIABLE FOR FRANCHISE TAX:
1. It has a franchise in a secondary or special franchise
2. Exercising its rights or privileges under this franchise within the territory of LGU
- Business tax imposed on the privilege of engaging in the business and franchise tax is
imposed for exercise of enjoying franchise. No double taxation.
5. Professional tax
EXCEPT: Exclusively employed in the government
- In province where he practices his profession or where principal office is located.
- May exercise on any part of PH
- Imposed only to those who have passed the BAR or BOARDS
- CPA Lawyer, Pay as CPA and as a Lawyer.
6. Amusement tax
- Ownership, lease or operation of theaters, cinemas, concert halls and other places of
amusement.
EXCEPTION: Operas, concerts, dramas, recitals, paintings and art exhibitions,
flower shows, musical programs, literary and oratorical presentation.
EXCEPT: Pop, rock concerts.
- ADMISSION TICKETS are not subject to vat because it is already subject to amusement
tax
9. #6 Annual fixed tax for every delivery truck or van of manufacturers or producers,
wholesalers, dealers or retailers in certain products
- They shall be exempt from the tax on peddlers
2. Fees and charges - Municipalities may impose and collect such reasonable fees and
charges on business and occupation except reserved to the province.
- The municipalities within metro manila may levy taxes at rates which shall not exceed
50% the maximum rates prescribed in LGC
CIRCUMSTANCE SITUS
No branch, sales office or warehouse Where the route trucks withdraw their products for
sale
CITIES
- May levy TFC which the province or municipality may impose.
BARANGGAY
1. Stores with gross receipt of 50k or less for cities and 30k or less in municipalities
2. Service fees and charges
3. Barangay clearance
- Adjustment of tax rates shall not be oftener than once every 5 years.
- Sanggunian may impose surcharges not exceeding 25% of taxes and interest of not
more than 2% per month but in no case shall the same exceeds total of 36 months.
- Withdrawal of tax exemptions can only affect those franchises granted prior to the
effectivity of said law..
- IN LIEU OF ALL TAXES - shall only apply to national internal revenue taxes and not to
local taxes.
2. ADMINISTRATIVE ACTION
1. Distraint
2. Levy
3. Judicial Action
WHEN PERSONAL PROPERTY CONSIDERED SOLD TO LGU: When property distrained is not
disposed within 120 days
- PRELIMINARY INJUNCTION IS ALLOWED IN LOCAL TAXES. No specific prohibition
2. RTC
1. ORIGINAL - Principal amount EXCEEDS 300/400 PROVIDED IT DOES NOT EXCEED
1MILLION
2. APPELLATE - All cases decided by MTC
3. CTA DIVISION
1. ORIGINAL - 1Million or above
2. APPELLATE - Appeals from RTC ORIGINALLY DECIDED
4. CTA EN BANC
1. APPELLATE
1. Decisions over petitions for review of CYA in exercise of appellate
2. Petitions for review of RTC in exercise of Appellate jurisdiction over cases
decided by MTC.
- Taxpayer’s failure to avail of the remedy to SOJ does not necessarily bar recourse to
Appeal with court of competent jurisdiction. They are separate and distinct appeals
- SOJ can only review the constitutionality or legality of the ordinance and if warranted
REVOKE it. He cannot replace it with his own version
- No need for written protest in this case
- Appeal shall not suspend the effectivity of the ordinance
- When disputing an ordinance, appeal to SOJ is MANDATORY
2. AFTER ASSESSMENT
1. PROTEST - Written protest must be filed within 60 days from receipt of
notice of assessment.
PROCEDURE
PROTEST WITHIN 60 DAYS ———> Local treasurer: decision within 60 days ———> appeal
with the court of competent jurisdiction (See jurisdiction above, MTC, RTC, CTA)
- The court cannot consider the city treasurer as entity that exercises original juridiction
POLICY REFORMS
1. Application of information and communications technology
2. Types of importation
3. Goods declaration for consumption and provisional goods declaration
TARIFF - List or schedule of articles on which a duty is imposed upon the importation into
the country payable to the government.
KINDS
1. Export
2. Import
CUSTOMS DUTIES - Taxes on the importation and exportation of commodities, the tariff or
tax assessed upon the merchandised imported from or exported to a foreign country.
- Unless otherwise provided, goods admitted into the free zone shall not be subject to
duty and tax
FUNCTIONS OF BOC
1. Assessment and collection of revenue
2. Simplification of customs procedure
3. Border control to prevent entry of smuggled goods
4. Facilitation and security of international trade
5. Supervision and control over the entrance and clearance of vessel engaged in
foreign trade
6. Supervision and control over all import and export.
7. Conduct compensation studies
8. Exercise exclusive original jurisdiction over forfeiture cases under CMTA
POWER OF COMMISSIONER
1. Review any action or decision of any customs officer performed
- Any person exercising police authority has the power to seize any vessel, aircraft,
cargo, goods, animal or any other movable when the same is subject to forfeiture
- It shall only be exercised within customs premises and within the limits of the
authority granted by the commissioner.
- BOC shall have exclusive control, direction and management
AUTHORITY TO ENTER PROPERTIES - At any time, to enter, pass through and search any
land, enclosure, warehouse, store, building or structure not principally used as dwelling
house.
- Upon reasonable cause, travelers arriving from foreign countries may be subjected to
search and detention
- The BOC has the power to demand evidence of payments of duties and taxes
openly for sale or kept in storage. In case failure to present within 15 days, it may be
seized.
JURISDICTION OF BOC
1. All seas within the jurisdiction of PH
1. Territorial waters
2. Contiguous zone
3. EEZ
4. All coasts, ports, airports, harbors, bays, rivers and inland waters
- Exclusive jurisdiction of BOC cannot be interfered with by regular courts even upon
allegation of ownership
- Treatment of Subic bay freeport as a separate customs territory cannot completely
divest the government of its right to intervene in the operations and management of
SBF especially with patent violations of customs and tax laws.
HOT PURSUIT - Bureau shall pursue goods subject to seizure during the transport by land,
water, air and shall exercise jurisdiction as may be necessary for the effective
enforcement of CMTA
KINDS OF GOODS
3. RESTRICTED IMPORATIONS
1. Gambling devises
2. Firearms or weapons of war EXCEPT when authorized by law
3. Lottery and sweepstakes ticket
4. Opium pipes and parts
5. Any other goods restricted
6. Drugs
CUSTOMS DUTIES
CLASSIFICATION
1. REGULAR - for purpose of raising revenue
1. AD VALOREM - Based on VALUE
2. SPECIFIC - Based WEIGHT
2. SPECIAL
1. ANTI DUMPING - A trade remedy measure adopted by government to protect a
domestic industry against unfair trade practice of dumping - When foreign
producers sell their products to an importer in the domestic market at prices
lower than in their own national markets or prices below cost of production
CAUSING or is threatening to cause material injury to domestic industry.
KINDS OF SUBSIDIES
1. Countervailable or actionable OR yellow - Specific subsidies to an enterprise or
industry or designated geographical region
2. Non actionable or green - Applied across the board to all industries. General nature.
3. Prohibited subsidies / Red - Include export subsidies.
FLEXIBLE CLAUSE - The congress may by law authorize the president to fix within the
specified limits tariff rates, import and export quotas, tonnage and wharfage dues and
other duties or imposts within the framework of NEDA
REQUISITES:
1. In the interest of general welfare
2. Recommendation of NEDA
EXCEPT:: WHEN ADDITIONAL DUTY NOT EXCEEDING 10% ADVALOREM
TARIFF BARRIER - Imposition of high customs duties which results in making foreign goods
more expensive
BEGINS: Carrying vessel enters the jurisdiction of PH with the intention to unload.
DEGREES OF CULPABILITY
1. Negligence - Deficiency results from an offender’s failure to exercise reasonable
care.
2. Fraud - With imprisonment
- Payment of duties constitutes as personal debt due from the importer to the
government. It constitutes lien upon the articles imported.
ASSESSMENT DEEMED FINAL - 15 days after the receipt of the notice of assessment by
importer.
SURCHARGE - For failure to pay duties within 15 days from date of final assessment.
- All importers are required to keep relevant importation documents for 3 years from
date of final payment.
SMUGGLING
1. Fraudulently import or export or bring into or outside the PH any good contrary to
law
2. Assist in doing to
3. Receive, conceal, buy, sell or in any manner facilitate the transportation or sale
4. Commit technical smuggling
REQUISITES
1. Fraudulently or knowingly imported contrary to law
2. Received, concealed, bought, sold, or in any manner facilitated the transportation,
concealment or sale of merchandise
3. Shown to have knowledge that merchandise had been illegally imported.
TYPES:
1. Misdeclaration - surcharge of 250% of duty and tax due
2. Misclassification - surcharge of 250% of duty and tax due
- No surcharge when discrepancy is less than 10% or declared tariff heading is rejected
in formal customs or relied in tariff ruling
TAX REMEDIES
A. ADMINISTRATIVE REMEDIES
A. Compulsory acquisition
B. Reduction of custom duties/Compromise
C. Alert orders
D. Seizure and forfeiture
E. Distraint/Levy
B. JUDICIAL REMEDIES
Administrative remedies
1. Compulsory acquisition - may motu proprio acquire imported goods under question
for a price equal to their declared customs value plus any duties already paid on
the goods
Seizure - Actual or constructive taking or bring into custody the goods, things or cattle
by virtue of warrant of seizure or detention
BOC acquires exclusive jurisdiction over imported goods for purposes of enforcement of
customs laws.
- RTC is devoid of any competence to pass upon the validity or regularity of seizure
and forfeiture proceedings conducted by BOC and to enjoin or otherwise interfere
with these proceedings.
- Even through certiorari, Prohibition or mandamus
FORFEITURE PROCEEDINGS - Administrative and civil and directed to the thing itself.
- Private respondent’s defense that he has no actual knowledge that the vessel was
used illegally is personal to him but cannot absolve the vessel
- Customs compromise does not extinguish criminal liability
JUDICIAL REMEDIES
1. APPEAL TO CTA
2. ACTION QUESTION OF LEGALITY OF SEIZURE
JUDICIAL REMEDIES
A. APPEAL - Within 30 days from decision of Commissioner or SOF to CTA Division
- May issue injunction
DISPOSITION OF PROPERTY
- If injurious to public health - DESTROY
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Sorry for all the typographical errors. Good luck and God bless you! Kindly pass
this or pay it foward! In God's perfect timing I know you will be the person you
aspire to be.
- Edward Arriba