Taxation Law Questions and Answers On Significant Supreme Court Jurisprudence and Bir Issuances For The 2015 Bar

TAXATION LAW
QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT

JURISPRUDENCE AND BIR ISSUANCES FOR THE 2015 BAR
ATTY. PIERRE MARTIN D. REYES
This covers the significant and relevant Supreme taxes pursuant to Section 21 of the Revenue
Court jurisprudence on taxation law and BIR Code. Section 21 imposes a tax on a person
issuances from March 31, 2014 to March 31, who sold goods and services in the course of
2015. trade or business based on a certain
percentage of his gross sales or receipts in the
GENERAL PRINCIPLES preceding calendar year. The taxpayers
contend the imposition of the tax under
Q. What is a tax amnesty? Section 21 constituted double taxation
because they were already paying local
A. A tax amnesty is a general pardon or the business taxes pursuant to Section 15 or
intentional overlooking by the State of its Section 17. Is there double taxation?
authority to impose penalties on persons
otherwise guilty of violation of a tax law. It A. Yes. Firstly, because Section 21 of the
partakes of an absolute waiver by the Revenue Code of Manila imposed the tax on
government of its right to collect what is due a person who sold goods and services in the
it and to give tax evaders who wish to relent course of trade or business based on a certain
a chance to start with a clean slate. A tax percentage of his gross sales or receipts in the
amnesty, much like a tax exemption, is never preceding calendar year, while Section 15
favored or presumed in law. The grant of a and Section 17 likewise imposed the tax on a
tax amnesty, similar to a tax exemption, must person who sold goods and services in the
be construed strictly against the taxpayer and course of trade or business but only identified
liberally in favor of the taxing authority. (LG such person with particularity, namely, the
Electronics Philippines v. CIR, G.R. No. wholesaler, distributor or dealer (Section
165451, December 3, 2015) 15), and the retailer (Section 17), all the
taxes – being imposed on the privilege of
Q. Can a claimant have personality to file a tax doing business in the City of Manila in order
refund even if it only bears the economic to make the taxpayers contribute to the city’s
burden of the tax? revenues – were imposed on the same
subject matter and for the same purpose.
A. Yes. The Supreme Court has held that the Secondly, the taxes were imposed by the
propriety of a tax refund claim is hinged on same taxing authority (the City of Manila)
the kind of tax exemption upon which the and within the same jurisdiction in the same
refund calim is based. If the law confers an taxing period (i.e., per calendar year).
exemption from both direct or indirect taxes, Thirdly, the taxes were all in the nature of
a claimant is entitled to a tax refund even if it local business taxes. (Nursery Care
only bears the economic burden of the Corporation v. Treasurer of Manila, G.R. No.
applicable tax. On the other hand, if the 180651, July 30, 2014).
exemption conferred only applies to direct
taxes, then the statutory taxpayer is regarded INCOME TAX
as the proper party to file the refund claim.
(CIR v. PAL, G.R. Nos. 212536-37, August Q. What are deemed de minimis benefits?
27, 2014)
A. As provided in RR No. 3-98, as last amended
Q. The City of Manila assessed and collected by RR No. 1-2015, the following are
taxes from certain taxpayers pursuant to considered as de minimis benefits granted to
either Section 15 (Tax on Wholesalers, each employee:
Distributors, or Dealers) or Section 17 (Tax
on Retailers). The City imposed additional
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NOTICE
This material supplements the author’s 2013 Bar Reviewer, 2014 Bar Supplement, and Tax Audit Primer.
No portion of the supplement may be copied or reproduced without the written permission of the author.
Possessors may reproduce and distribute this supplement provided the name of the author remains clearly
associated with my work and no alterations in the form and content of this supplement are made. No
stamping is allowed.
TAXATION LAW
a) Monetized unused vacation leave credits Q. What is now the threshold amount of the 13th
of private employees not exceeding ten month pay and other benefits excluded from
(10) days during the year; gross income pursuant to Section 32(B) of
b) Monetized value of vacation and sick the Tax Code?
leave credits paid to government officials
and employees; A. RA No. 10653 increased the ceiling from
c) Medical cash allowance to dependents of Thirty Thousand Pesos (P30,000) to Eighty
employees, not exceeding Seven Two Thousand Pesos (P82,000).
Hundred Fifty Pesos (P750) per
employee per semester or One Hundred RR 3-2015, which implements RA 10653,
Twenty Five (P125) per month; clarifies that the threshold amount of
d) Rice subsidy of One Thousand Five P82,000 shall only apply to the following;
Hundred (P1,500) or one (1) sack of 50
kg. rice per month amounting to not 1. Thirteenth-month pay equivalent to the
more than P1,500; mandatory one month basic salary of
e) Uniform and clothing allowance not officials and employees of the
exceeding Five Thousand Pesos (P5,000) government, (whether national or local),
per annum; including government-owned or -
f) Actual medical assistance, e.g. medical controlled corporations, and or private
allowance to cover medical and offices received after the 12th-month pay;
healthcare needs, annual medical check- and
up, maternity assistance, and routine 2. Other benefits, such as Christmas bonus,
consultations, not exceeding Ten productivity-incentive bonus, loyalty
Thousand Pesos (P10,000) per annum; award, gifts in cash or in kind and other
g) Laundry allowance not exceeding Three benefits of similar nature actually
Hundred Pesos (P300) per month; received by officials and employees of
h) Employees achievement awards, e.g. for both government and private offices.
length of service or safety achievement,
with an annual monetary value not Q. What are the conditions that must be met in
exceeding Ten Thousand Pesos order to exempt interest income from long-
(P10,000); term deposit or investments from income
i) Gifts given during Christmas and major taxes?
anniversary celebrations not exceeding
Five Thousand Pesos (P5,000) per A. The following conditions must be met:
employee per annum;
j) Daily meal allowance for overtime work 1. The depositor or investor is an individual
and night/graveyard shift not exceeding citizen (resident or non-resident) or
Twenty-Five Percent (25%) of the basic resident alien or non-resident alien
minimum wage per region basis. engaged in the trade or business in the
k) Benefits received by an employee by Philippines;
virtue of a collective of a collective 2. The long-term deposits or investment
bargaining agreement (CBA) and certificates should be under the name of
productivity incentive schemes provided the individual and not under the name of
that the total annual monetary value the corporation or the bank or the trust
received from both CBA and productivity department/unit of the bank;
incentive schemes combined do not 3. The long-term deposits or investments
exceed ten thousand pesos (P10,000) per must be in the form of savings, common
employee per taxable year. or individual trust funds, deposit
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substitutes, investment management well as the requirements mentioned

accounts and other investments above;
evidenced by certificates in such form 3. The common or individual trust account
prescribed by the Bangko Sentral ng or investment management account must
Pilipinas (BSP); hold on to such underlying investment in
4. The long-term deposit or investments continuous and uninterrupted period for
must be issued by banks only and not by at least five (5) years. (RMC No. 7-2015)
other entities or individuals;
5. The long-term deposits or investments Q. Fort Bonifacio Development Corporation
must have a maturity period of not less (FBDC) transferred some of its real
than five (5) years; properties to the Bases Conversion and
6. The long-term deposits or investments Development Authority (BCDA), in
must be in denominations of Ten redemption of its preferred shares held by
Thousand Pesos (P10,000) and other BCDA. What is the income tax treatment on
denominations as may be prescribed by the said redemption?
the BSP;
7. The long-term deposits or investments A. When preferred shares are redeemed for
should not be terminated by the original retirement in accordance with its nature, the
investor before the fifth (5th) year, capital gain or capital loss derived upon
otherwise they shall be subjected to the redemption shall be recognized on the basis
graduated rates of 5%, 12% or 20% on of the difference between the amount/value
interest income earnings; and received at the time of redemption and the
8. Except those specifically exempted by law cost of the preferred shares. The capital gain
or regulations, any other income such as or capital loss shall be subject to the regular
gains from trading, foreign exchange gain income tax rate under the Tax Code, as
shall not be covered by income tax amended, on individual taxpayers or to the
exemption. corporate income tax rate under the Tax
Code, in case of corporations.
For the interest income derived by
individuals investing in common or Here, on the part of BCDA, any gain realized
individual trust funds or investment by it on the redemption of shares by FBDC
management accounts to be exempt from shall be subject to corporate income tax and
income tax, the following additional consequently, to creditable withholding tax.
characteristics/conditions must all be On the part of FBDC, the transaction is not
present: subject to income tax considering that the
redeeming corporation does not realize any
1. The investment of the individual investor gain or loss on the redemption of its shares.
in the common or individual trust fund or (RMC No. 3-2014 citing Section 9, RR 6-
investment management account must be 2008)
actually held/managed by the bank for
the named individual at least five (5) Q. What is the income tax treatment of stock
years without interruption. option plans?
2. The underlying investments of the
common or individual trust account or A. A stock option is an option granted by a
investment management accounts must person, natural or juridical, to a person or
comply with the requirements of Section entity entitling said person or entity to
22(FF) of the Tax Code, as amended, as purchase shares of stock of a corporation,
which may or may not be the shares of stock
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of the grantor itself, at a specific price to be the exercise price to the grantor and
exercise at a specific date or a period. Stock the latter is obligated to deliver the
options are “shares of stock” as defined stocks to the owner of the option, the
under the Tax Code and are taxable as such. tax treatment is as follows:
The grant, sale, transfer, or exercise of a
stock option may result to taxable events as i. If the option was granted by an
follows: employer involving the
employer’s own shares of stock
1. Grant of Option or shares it owns, upon the
exercise of the option by a rank-
a. If the option was granted due to an and-file employee, an additional
employer-employee relationship compensation equivalent to the
where the grantor is the employer difference of the book
and the grantee is the employee, and value/fair market value of the
no payment was received for the shares, whichever is higher, at
grant of said option, on the year an the time of the exercise of the
option was granted, the grantor stock option and the price fixed
cannot claim deductions for the grant on the grant date, shall be
of the stock option. recognized and subject to
b. If the option was granted for a price, income tax and consequently,
the full price of the option shall be to withholding tax on
considered capital gains, and shall be compensation.
taxed as such. ii. However, if the employee
occupies a supervisory or
2. Sale or transfer of option managerial position, the
difference of the book
a. The sale is treated as a sale, barter, or value/fair market value of the
exchange of shares of stock not listed shares, whichever is higher, at
on the stock exchange. Thus, any the time of the exercise of the
grant of an option for consideration, stock option and the price fixed
or transfer of the option is subject to on the grant date, shall be
capital gains tax. treated as fringe benefit subject
b. If the option was granted without to fringe benefit tax.
consideration, the cost base of the iii. If the option was granted to a
option for purposes of computing the supplier of goods or services,
capital gains shall be zero. the difference of the book
c. If the option is transferred by the value/fair market value of the
grantee/subsequent owner without shares, whichever is higher, at
any consideration, the same be shall the time of the exercise of the
treated as a donation of shares of stock option and the price fixed
stock subject to donor’s tax. The basis on the grant date, shall be
shall be the fair market value of the recognized as additional
option at the time of donation. consideration for the services
rendered or goods supplied by
3. Exercise of option said supplier, and shall be
subject to the relevant
a. In an equity-settlement option (where withholding tax at source and
the grantee/subsequent owner pays other applicable taxes.
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iv. If the option was granted to a foreign governments. (CIR v. Meralco, G.R.
person, natural or juridical, No. 181459, June 9, 2014)
who is not an employee, or a
supplier of goods or services to Q. Differentiate between the tax treatment of
the grantor, the difference of capital gains of individuals and corporations
the book value/fair market from the sale of real properties.
value of the shares, whichever is
higher, at the time of the A. Capital gains of individuals and corporations
exercise of the stock option and from the sale of real properties are taxed
the price fixed on the grant differently. Individuals are taxed on capital
date, shall be considered a gains from sale of all real properties located
donation subject to donor’s tax. in the Philippines and classified as capital
assets. For corporations, the National
b. In a cash-settlement option, the same Internal Revenue Code of 1997 treats the
rules apply. The only difference is that sale of land and buildings, and the sale of
cash-settled options do not require machineries and equipment, differently.
actual delivery of the stocks. Instead, Domestic corporations are imposed a 6%
the market value, at exercise date, of capital gains tax only on the presumed gain
the stock is compared to the exercise realized from the sale of lands and/or
price, and the difference if in a buildings. The National Internal Revenue
favorable direction is paid by the Code of 1997 does not impose the 6% capital
grantor to the holder of the option. gains tax on the gains realized from the sale
(RMC 79-2014) of machineries and equipment. Therefore,
only the presumed gain from the sale of
Q. MERALCO obtained a loan from petitioner’s land and/or building may be
Norddeutsche Landesbank Girozentrale subjected to the 6% capital gains tax. The
(NORD/LB) Singapore Branch, which is a income from the sale of petitioner’s
foreign government-owned financing machineries and equipment is subject to the
institution of Germany. Under the loan provisions on normal corporate income tax.
agreement, the income received by (SMI-ED Philippines v. Commissioner of
NORD/LB, by way of MERALCO’s interest Internal Revenue, G.R. No. 175410,
payments, shall be paid in full without November 12, 2014)
deductions, as MERALCO shall bear the
obligation of paying and remitting to the BIR Q. The Republic, through the Department of
the final withholding tax. MERALCO paid Public Works and Highways (DPWH), filed
and remitted to the BIR the corresponding a complaint for expropriation against a
final withholding taxes. Is the income derived property owner before the RTC. In addition
by NORD/LB subject to income tax? to the order to pay just compensation, the
RTC likewise ordered DPWH to pay the
A. No. NORD/LB is owned, controlled or property owner consequential damages,
enjoying refinancing from the Federal which shall include the value of the transfer
Republic of Germany, a foreign government. tax necessary for the transfer of the subject
Section 32(B)(7)(a) of the Tax Code, as property from the name of the owner to that
amended, exempts from income tax income of the Republic. The Republic contends that
derived from investments in the Philippines the transfer taxes, in the nature of Capital
in loans by financing institutions owned, Gains Tax and Documentary Stamp Tax,
controlled, or enjoying refinancing from necessary for the transfer of the subject
property are liabilities of the property owner
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and not the Republic. Is the Republic NGO represented that all income derived
correct? from the Bonds, inclusive of premium on
redemption and gains on the trading of the
A. Yes. Pursuant to Sections 24(D) and 56(A)(3) same, are exempt from all forms of taxation
of the 1997 National Internal Revenue Code, as confirmed by BIR Rulings. RCBC then
capital gains tax due on the sale of real sold the government bonds in the secondary
property is a liability for the account of the market. However, in 2011, the BIR issued
seller. It has been held that since capital gains BIR Ruling No. 370-2011 declaring that the
tax is a tax on passive income, it is the seller, PEACe Bonds being deposit substitutes are
not the buyer, who generally would shoulder subject to the 20% final withholding tax.
the tax. As far as the government is Pursuant to this ruling, the Secretary of
concerned, therefore, the capital gains tax Finance directed the Bureau of Treasury to
remains a liability of the seller since it is a tax withhold a 20% final tax from the face value
on the seller's gain from the sale of the real of the PEACe Bonds upon their payment at
estate. (Republic v. Soriano, G.R. No. maturity on October 18, 2011. Is the
211666, February 25, 2015) discount or interest income arising from the
PEAce bonds subject to the 20% final
Q. In 2001, the Caucus of Development NGO withholding tax?
Networks (CODE-NGO) with the assistance
of its financial advisors, requested an A. No. The term ‘deposit substitutes’ shall mean
approval from the Department of Finance for an alternative form of obtaining funds from
the issuance by the Bureau of Treasury of 10- the public other than deposits, through the
year zero-coupon treasury bonds. The said issuance, endorsement, or acceptance of debt
bonds would initially be purchased by a instruments for the borrower’s own account,
special purpose vehicle on behalf of CODE- for the purpose of relending or purchasing of
NGO and then repackaged and sold at a receivables and other obligations, or
premium to investors as Poverty Eradication financing their own needs or the needs of
and Alleviation Certificates or PEACe their agent or dealer. The term 'public' means
Bonds. The net proceeds from the sale will be borrowing from twenty (20) or more
used to endow a permanent fund to finance individual or corporate lenders at any one
meritorious activities and projects of time). Based on this definition, the number of
accredited non-government organizations lenders is determinative of whether a debt
(NGOs) throughout the country. The BIR instrument should be considered a deposit
issued BIR Ruling No. 020-2001 which substitute and consequently subject to the
confirmed that the PEACe Bonds would not 20% final withholding tax.
be classified as deposit substitutes and would
not be subject to the corresponding BIR Ruling No. 370-2011 is void because it
withholding tax. This was reiterated in completely disregarded the 20 or more
subsequent rulings. During the auction, lender rule. The transactions executed for the
RBCB which participated on behalf of sale of the PEACe Bonds are: (1) the issuance
CODE-NGO was declared the winning of the Bonds by the Bureau of Treasury to
bidder having tendered the lowest bids. RCBC/CODE-NGO; and (2) the sale and
RCBC entered into an underwriting distribution by RCBC (underwriter) on
agreement with CODE-NGO whereby RBCB behalfof CODE-NGO of the PEACe Bonds to
was appointed as the Issue Manager and undisclosed investors. It may seem that there
Lead Underwriter for the offering of the was only one lender — RCBC on behalf of
PEACe Bonds. In the agreement, CODE- CODE-NGO — to whom the PEACe Bonds
were issued at the time of origination.
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withholding agents. (Banco de Oro v.

However, a reading of the underwriting Republic, G.R. No. G.R. No. 198756,
agreement and RCBC term sheet reveals that January 13, 2015)
the settlement dates for the sale and
distribution by RCBC Capital (as underwriter Q. What are the substantiation requirements of
for CODE-NGO) of the PEACe Bonds to donors claiming donations and contributions
various undisclosed investors would fall on to accredited non-stock, non-profit
the same day, October 18, 2001, when the corporation/NGO as deductions from their
PEACe Bonds were supposedly issued to taxable business income?
CODE-NGO/RCBC. In reality, therefore, the
entire borrowing received by the Bureau of A. The donors must submit Certificate/s of
Treasury in exchange for the PEACe Bonds Donation indicating the following:
was sourced directly from the undisclosed
number of investors to whom RCBC 1. Actual receipt by the accredited non-
Capital/CODE-NGO distributed the PEACe stock, non-profit corporation/NGO of
Bonds — all at the time of origination or the donation or contribution and date of
issuance. However, the number of investors receipt thereof; and
to which the PEACe Bonds were sold to by 2. The amount of the charitable donation or
RCBC is not known. Should there have been contribution, if in cash; if property,
a simultaneous sale to 20 or more whether real or personal, the acquisition
lenders/investors, the PEACe Bonds are cost of the said property. (RMC No. 86-
deemed deposit substitutes and RCBC 2014 citing Section 8, RR No. 13-98)
Capital/CODE-NGO would have been
obliged to pay the 20% final withholding tax RMC 86-2014 now provides a Certificate of
on the interest or discount from the PEACe Donation (BIR Form 2322) which consists of
Bonds. Further, the obligation to withhold two parts – a donee certification and a
the 20% final tax on the corresponding donor’s statement of values. The first part is
interest from the PEACe Bonds would a certification by the donee that it has
likewise be required of any lender/investor received on the date indicated the subject
had the latter turned around and sold said matter of the donation. The second part
PEACe Bonds, whether in whole or part, requires the donor to execute a statement
simultaneously to 20 or more lenders or which provides descriptions, acquisition
investors. costs, and net book values of the properties
donated as reflected in the financial
It must be noted, however, that interest statements of the donor. The statement must
income received by individuals from long- be accompanied by deed of sale/bill of sale to
term deposits or investments with a holding prove the acquisition cost of the properties.
period of not less than five (5) years is
exempt from the final tax. Thus, should the Q. RMO No. 1-2000 provides that any availment
PEACe Bonds be found to be within the of the tax treaty relief shall be preceded by an
coverage of deposit substitutes, the proper application by filing BIR Form No. 0901
procedure was for the Bureau of Treasury to (Application for Relief from Double
pay the face value of the PEACe Bonds to the Taxation) with ITAD at least 15 days before
bondholders and for the Bureau of Internal the transaction i.e. payment of dividends,
Revenue to collect the unpaid final royalties, etc., accompanied by supporting
withholding tax directly from RCBC documents justifying the relief. Is the prior
Capital/CODE-NGO, or any lender or application for an ITAD ruling pursuant to
investor if such be the case, as the RMO No. 1-2000 necessary before a
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taxpayer can avail of the preferential tax rates

under income tax treaties entered into by the 1. The payment of compensation, salaries,
Philippines with other countries? or honorarium to its trustees or
organizers;
A. No. The Philippine Constitution provides for 2. The payment of exorbitant or
adherence to the general principles of unreasonable compensation to its
international law as part of the law of the employees;
land. The time-honored international 3. The provision of welfare aid and financial
principle of pacta sunt servanda demands the assistance to its members. An
performance in good faith of treaty organization is not exempt from income
obligations on the part of the states that enter tax if its principal activity is to receive and
into the agreement. In this jurisdiction, manage funds associated with savings
treaties have the force and effect of law. The and investment programs, including
obligation to comply with a tax treaty must pension or retirement programs. This
take precedence over the objective of RMO does not cover a society, order,
No. 1-2000. Not only is the requirement association, or non-stock corporation
illogical, but it is also an imposition that is not under Section 30(C) of the Tax Code
found at all in the applicable tax treaties. The providing for the payment of life,
BIR should not impose additional sickness, accident, and other benefits
requirements that would negate the exclusively to its members or their
availment of the reliefs provided for under dependents;
international agreements, especially since 4. Donation to any person or entity
said tax treaties do not provide for any (exception donations made to other
prerequisite at all for the availment of the entities formed for the purpose/purposes
benefits under said agreements. It bears similar to its own;
reiterating that the application for a tax treaty 5. The purchase of goods or services for
relief from the BIR should merely operate to amounts in excess of the fair market
confirm the entitlement of the taxpayer to the value of such goods or value of such
relief. So long as the taxpayer requests for services from an entity in which one or
confirmation before it filed its administrative more of its trustees, officers, or
claim for refund, the same should be deemed fiduciaries has an interest; and
substantial compliance with RMO No. 1- 6. When upon dissolution and satisfaction
2000. (CBK Power Company Limited v. CIR, of all liabilities, its remaining assets are
G.R. No. 193383-84 and G.R. No. 193407- distributed to its trustees, organizers,
08, January 15, 2015) officers or members. Its assets must be
dedicated to its exempt purpose.
Q. What are considered “inurements” prohibited Accordingly, its constitute documents
under Section 30 of the NIRC? must expressly provide that in the event
of dissolution, its assets shall be
A. In order for an entity to qualify as a non-stock distributed to one or more entities
and/or non-profit corporation/ association/ formed for the purpose/purposes similar
organization exempt from income tax under to its own, or to the Philippine
Section 30 of the Tax Code, as amended, its government for public purpose (RMC 51-
earnings or assets shall not inure to the 2014)
benefit of any of its trustees, organizers,
officers, members, or any specific person. Q. Distinguish income tax from withholding tax.
The following are considered “inurements”
of such nature: A. Income tax is different from withholding tax.
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Income tax is the “tax on all yearly profits professional partnerships. RMC No. 3-2012
arising from property, professions, trades or sufficiently discussed that income payments
offices, or as a tax on a person’s income, made to a GPP in consideration of its
emoluments, profits and the like. On the professional services are not subject to
other hand, withholding tax is a method of income tax and consequently to withholding
collecting income tax in advance. “In the taxes. (RMC No. 60-2014)
operation of the withholding tax system, the
payee is the taxpayer, the person on whom Q. Is the Special Allowance for the Judiciary
the tax is imposed, while the payor, a (SAJ) of court officials and employees
separate entity, acts no more than an agent of subject to income tax?
the government for the collection of the tax
in order to ensure its payment. Obviously, A. Yes. In fact, the Supreme Court issued A.M.
the amount thereby used to settle the tax No. 12-4-6-SC which approves the
liability is deemed sourced from the proceeds withholding and remittance of the correct
constitutive of the tax base. (LG Electronics amount of tax as required to be deducted and
Philippines v. CIR, G.R. No. 165451, withheld from the Special Allowance for the
December 3, 2015) Judiciary (SAJ) of officials and employees, as
well as the withholding tax of the
Q. What document shall withholding agents corresponding taxes from the following:
require from all individuals and entities
claiming exemption from income taxes and 1. The monthly SAJ of incumbent justices,
consequently withholding taxes? judges, and judiciary officials with the
equivalent rank of a Court of Appeals
A. Concerned withholding agents shall require justice or Regional Trial Court judge;
all individuals and entities claiming such 2. The monthly special allowance in an
exemption to provide a copy of a valid, amount equivalent to the SAJ being
current, and subsisting tax exemption received by judiciary officials not
certificate or ruling. The tax exemption included in item no. 1; and
certificate or ruling must explicitly recognize 3. The additional allowance from the
the grant of tax exemption, as well as the surplus of the SAJ Fund that may be
corresponding exemption from imposition of authorized to be given to judiciary
withholding tax. Failure on the part of the officials and employees who are not
taxpayer to present said tax exemption direct beneficiaries under RA 9227
certificate or ruling shall subject him to the (RMC 58-2014)
payment of the appropriate taxes. On the
other hand, the withholding agent’s failure to DONOR’S TAX
withhold notwithstanding the lack of tax
exemption certificate or ruling shall cause the Q. Philamlife owns 498,590 shares in Philam
imposition of penalties. (RMC No. 8-2014) Care Health Systems. To divest itself of
interests in the health maintenance
Q. Does the requirement to present tax organization industry, Philamlife sold the
exemption certificate or ruling pursuant to said shares to STI Investments at a price
RMC No. 8-2014 apply to general lower than their book value. The BIR
professional partnerships? contends that donor’s tax became imposable
on the price difference. Philamlife argues
A. No. The requirement to present tax that the same is not subject to donor’s tax as
exemption certificate or ruling pursuant to there was no donative intent. Is the
RMC No. 8-2014 does not apply to general Philamlife correct?
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(RMC No. 3-2014)

A. No. The absence of donative intent, if that be
the case, does not exempt the sales of stock Q. What are the rules on the determination of the
transaction from donor's tax since Sec. 100 prescriptive period for filing a tax refund or
of the Tax Code categorically states that the credit of unutilized input VAT as provided in
amount by which the fair market value of the Section 112 of the 1997 Tax Code?
property exceeded the value of the
consideration shall be deemed a gift. Thus, A. In Mindanao II Geothermal Partnership v.
even if there is no actual donation, the Commissioner of Internal Revenue, and
difference in price is considered a donation Mindanao I Geothermal Partnership v.
by fiction of law. Pursuant to RR 6-2008, Commissioner of Internal Revenue, G.R. Nos.
“fair market value” shall be, in the case of 193301 and 194637, March 11, 2013, the
shares of stock not listed and traded in the Supreme Court provided the following rules
local stock exchanges, the book value of the on prescriptive periods involving VAT:
shares of stock as shown in the financial
statements duly certified by an independent 1. An administrative claim must be filed with
certified public accountant nearest to the the CIR within two years after the close of
date of sale shall be the fair market value. The the taxable quarter when the zero-rated or
difference between the book value and the effectively zero-rated sales were made.
selling price in the sales transaction is taxable 2. The CIR has 120 days from the date of
donation subject to donor’s tax. (Philippine submission of complete documents in
American Life and General Insurance support of the administrative claim within
Company v. The Secretary of Finance and which to decide whether to grant a refund
Commissioner of Internal Revenue, G.R. No. or issue a tax credit certificate. The 120-
210987, November 24, 2014) day period may extend beyond the two-year
period from the filing of the administrative
VALUE-ADDED TAX claim if the claim is filed in the later part of
the two-year period. If the 120-day period
Q. Fort Bonifacio Development Corporation expires without any decision from the CIR,
(FBDC) transferred some of its real then the administrative claim may be
properties to the Bases Conversion and considered to be denied by inaction.
Development Authority (BCDA), in 3. A judicial claim must be filed with the CTA
redemption of its preferred shares held by within 30 days from the receipt of the
BCDA. Is the transfer of the subject real CIR’s decision denying the administrative
properties subject to VAT? claim or from the expiration of the 120-day
period without any action from the CIR.
A. Yes. In general, the sale of real properties 4. All taxpayers, however, can rely on BIR
held primarily for sale to customers or held Ruling No. DA-489- 03 from the time of its
for lease in the ordinary course of trade or issuance on 10 December 2003 up to its
business of the seller shall be subject to VAT. reversal by this Court in Aichi on 6 October
The transfer of the real properties of FBDC 2010, as an exception to the mandatory
to BCDA to redeem its shares although not and jurisdictional 120+30 day periods.
occurring in the regular conduct or in the
course of FBDC’s trade or business and is a (Miramar Fish Company Inc. v. CIR, G.R. No.
transaction which is not done with regularity, 185432, June 4, 2014; Visayas Geothermal
is nevertheless subject to VAT the same being Power Company v. CIR, G.R. No. 197525,
considered a transaction “deemed sale” June 4, 2014; CIR v. Mindanao II Geothermal
under Section 106(B)(1) of the Tax Code Partnership, G.R. No. 189440, June 18, 2014;
Page 10 of 27
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Taganito Mining Corporation v. CIR, G.R. No.

197591, June 18, 2014; San Roque Power Note: The shift from “inaction deemed a
Corporation v. CIR, G.R. No. 205543, June denial” to “inaction as a decision of denial in
30, 2014; CIR v. CE Luzon Geothermal itself” is significant. This means that the
Power Company, G.R. No. 190198, taxpayer can no longer expect a decision
September 17, 2014; CNK Power Company from the BIR after the lapse of the 120-day
Limited v. CIR, G.R. No. 202066 and G.R. period. Since the CIR’s inaction is a decision
No. 205353, September 30, 2014; CIR v. in itself, the BIR is barred from further
Aichi, G.R. No. 183421, October 22, 2015; processing the claim.
CIR v. Burmeistor, G.R. No. 190021, October
22, 2014; Taganito Mining Corporation v. RMC 54-2014 also provides that in case the
CIR, G.R. No. 198076, November 19, 2014; taxpayer has already filed a petition for
AT&T Communications Services Phils., Inc. v. review with the CTA, the CIR loses
CIR, G.R. No. 185969, November 19, 2014; jurisdiction over the administrative claim.
Taganito Mining Corporation v. CIR, G.R. No. The CIR can still evaluate internally the claim
201195, November 26, 2014; CBK Power but only for the purpose of intelligently
Company Limited v. CIR, G.R. No. 198928, opposing the taxpayer’s judicial claim.
December 3, 2014; Mindanao II Geothermal
Partnership v. CIR, G.R. No. 204745, Q. What is the exception to the rule that the two-
December 8, 2014; Panay Power Corporation year prescriptive period within which the
v. CIR, G.R. No. 203351, January 21, 2015; administrative claim must be filed should be
Nippon Express (Philippines) Corporation v. counted from the close of the taxable quarter
CIR, G.R. No. 185666, February 4, 2015; when the relevant sales were made?
Northern Mindanao Power Corporation v.
CIR, G.R. No. 185115, February 18, 2015; A. Reckoning the two-year period from the date
Cargill Philippines, Inc. v. CIR, G.R. No. of payment of the output tax is allowed if the
203774, March 11, 2015) claim is filed between 8 June 2007 and 12
September 2008, when the Atlas Doctrine
Q. In a refund of unutilized input taxes, is the was still in effect. (Visayas Geothermal
inaction of the Commissioner “deemed a Power Company v. CIR, G.R. No. 197525,
denial” or a decision denying the claim? June 4, 2014; AT&T Communications
Services Phils., Inc. v. CIR, G.R. No.
A. Previously, it was held as an “inaction is 185969, November 19, 2014)
deemed a denial.” However, the Supreme
Court has unequivocally stated that the CIR’s Note: Previously, in Atlas Consolidated
inaction within the 120-day period is a Mining v Commissioner of Internal Revenue,
decision in itself. When the 120-day period G.R. Nos. 141104 & 148763, June 8, 2007,
lapses and there is inaction on the part of the the Supreme Court held that the two-year
CIR, the taxpayer must no longer wait for the prescriptive period should be reckoned from
CIR to decide. The inaction is already a the date of the return and payment of the tax
decision denying the refund claim. due, which should be made within twenty
Consequently, the taxpayer must file his (20) days from the end of each quarter. The
appeal within 30 days from the lapse of the Atlas doctrine was abandoned in
120-day period. (Rohm Apollo Commissioner of Internal Revenue v Mirant
Semiconductor Philippines v Commissioner Pagbilao Corporation, G.R. No. 172129,
of Internal Revenue, G.R. No. 168950, September 12, 2008, where the Supreme
January 14, 2015) Court held that the two-year period should be
reckoned from the close of the taxable
Page 11 of 27
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quarter where the relevant sales were made. unutilized input VAT?
The Mirant ruling adopted the verbal legis
rule, thus applying Section 112(A) in A. Section 113 of the NIRC of 1997, as
computing the two-year prescriptive period amended, categorically provides that a VAT-
in claiming refund or credit of input VAT. registered entity, like petitioner, shall issue a
duly registered VAT invoice or official
Q. A taxpayer filed a claim for refund or tax receipt, which must contain “a statement that
credit of unutilized input VAT. The CIR the seller is a VAT-registered person.” Non-
argued that the 120-day period for her to compliance is fatal to the claim. (Miramar
decide has not yet commenced as the Fish Company Inc. v. CIR, G.R. No. 185432,
taxpayer failed to submit the complete June 4, 2014)
documents as enumerated in RMO 53-98. Is
the CIR’s contention correct? Note: In claims for refund of unutilized input
VAT, it is required that the taxpayer prove
A. No. The CIR’s reliance on RMO 53-98 is that it is first and foremost a VAT-registered
misplaced. There is nothing in Section 112 of entity. If the taxpayer is not VAT-registered,
the NIRC, RR 3-88 or RMO 53-98 itself that then the claim for refund will fail.
requires submission of the complete
documents enumerated in RMO 53-98 for a To recall, a claim for refund or tax credit for
grant of a refund or credit of input VAT. The unutilized input VAT may be allowed only if
subject of RMO 53-98 states that it is a the following requisites concur, namely:
“Checklist of Documents to be Submitted by
a Taxpayer upon Audit of his Tax Liabilities 1. The taxpayer is VAT-registered;
x x x.” Even assuming that RMO 53-98 2. The taxpayer is engaged in zero-rated or
applies, it specifically states that some effectively zero-rated sales;
documents are required to be submitted by 3. The input taxes are due or paid;
the taxpayer “if applicable.” If the taxpayer 4. The input taxes are not transitional input
indeed failed to submit the complete taxes;
documents in support of its application, the 5. The input taxes have not been applied
CIR could have informed the taxpayer of its against output taxes during and in the
failure. In this case, the CIR did not inform succeeding quarters;
the taxpayer of the document it failed to 6. The input taxes claimed are attributable
submit, even up to the present petition. (CIR to zero-rated or effectively zero-rated
v. Team Sual Corporation, G.R. No. 205055, sales;
July 18, 2014) 7. For zero-rated sales under Section
106(A)(2)(1) and (2); 106(B); and
Note: RMC 54-2014 states that an 108(B)(1) and (2), the acceptable foreign
application for VAT refund/tax credit must currency exchange proceeds have been
be accompanied by complete supporting duly accounted for in accordance with
documents as enumerated in Annex A the rules and regulations of the Bangko
provided in said circular. The taxpayer will Sentral ng Pilipinas;
now also have to execute a statement under 8. Where there are both zero-rated or
oath attesting to the completeness of the effectively zero- rated sales and taxable or
submitted documents. exempt sales, and the input taxes cannot
be directly and entirely attributable to any
Q. What is the effect of the absence of the of these sales, the input taxes shall be
statement that the seller is a VAT-registered proportionately allocated on the basis of
person to the claim for refund or tax credit of sales volume; and
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9. The claim is filed within two years after subsidiary ledger. Here, the claim for refund
the close of the taxable quarter when is for the full amount of the input VAT on the
such sales were made importation, rather than for an amortized
amount, thus the claim must fail. (Taganito
Q. What is the effect of the absence and non- Mining Corporation v. CIR, G.R. No.
printing of the word “zero-rated” in the 201195, November 26, 2014)
taxpayer’s invoices to the claim for refund or
tax credit of unutilized input VAT? Note: Capital goods or properties refers to
goods or properties with estimated useful life
A. The absence or non-printing of the word greater than 1 year and which are treated as
“zero-rated” in the taxpayer’s invoices is fatal depreciable assets under Sec. 34(F) of the tax
to its claim for the refund and/or tax credit Code, used directly or indirectly in the
representing its unutilized input VAT production or sale of taxable goods or
attributable to its zero-rated sales. (Miramar services.
Fish Company Inc. v. CIR, G.R. No. 185432,
June 4, 2014; Eastern Telecommunications Q. ABC Corporation purchased from the
Philippines v. CIR, G.R. No. 183531, March government in 1995 portion of the Fort
25, 2015) Bonifacio reservation, now known as the
Fort Bonifacio Global City. No VAT on the
Q. Is there a difference between an invoice and sale of the land was passed on by the
official receipt for purposes of government to ABC. On January 1, 1996,
substantiation? Republic Act 7716 took effect, which
extended the coverage of the VAT to sale of
A. A VAT invoice is necessary for every sale, real properties held primarily for sale to
barter or exchange o f goods or properties customers or held for lease in the ordinary
while a VAT official receipt properly pertains course of business. In September 1996, ABC
to ever; lease of goods or properties, and submitted to the BIR an inventory of all its
every sale, barter or exchange of services. In real properties, claiming that it is entitled to
other words, the VAT invoice is the seller's the transitional input tax credit on said
best proof of the sale of the goods or services inventories. ABC started selling Global City
to the buyer while the VAT receipt is the lots in October 2006. For the 1st quarter of
buyer's best evidence of the payment of 1997, ABC paid output taxes on the sale of
goods or services received from the seller. lots after deducting input taxes. Realizing
(Nippon Express (Philippines) Corporation that the transitional input taxes were not
v. CIR, G.R. No. 185666, February 4, 2015; applied against the output VAT, which would
Northern Mindanao Power Corporation v. have resulted to no net output VAT liability
CIR, G.R. No. 185115, February 18, 2015) (the transitional input taxes being higher),
FBDC filed a claim for refund for the VAT
Q. ABC Mining Corporation purchased and payment. The BIR argues that (1)
imported dump trucks. ABC filed a claim for transitional input tax is limited to
refund of the full input VAT relating to its improvements to real properties; and (2)
importation of said dump trucks, treated as there should have been prior payment of
capital goods. Will ABC’s claim prosper? taxes. Is the BIR correct?
A. No. The claim will not prosper because the A. No. There is nothing in the law that prohibits
law requires that the related input VAT be the inclusion of real properties, together with
properly amortized over the estimated useful the improvements thereon, in the beginning
life of the capital goods in the taxpayer’s
Page 13 of 27
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inventory of goods, materials and supplies, human consumption, there must be a

based on which inventory the transitional showing the same is unfit for human
input tax credit is computed. Further, there consumption or that the ingredient cannot be
is nothing in the law that indicates that prior used for the production of food for human
payment of taxes is necessary for the consumption as certified by the Food and
availment of the transitional input tax credit. Drug Administration. (RMC 55-2014 as
All that is required is for the taxpayer to file amended by RMC No. 66-2014)
a beginning inventory with the BIR. (Fort
Bonifacio Development Corporation v CIR, Note: The list of specific feed ingredients is
G.R. Nos. 175707, 180035, and 181092, exclusive as of the date of issuance of RMC
November 19, 2014) No. 66-2014. The BIR is not precluded from
adding to the list which would necessitate the
Note: The same issues have been passed issuance of another RMC. (RMC No. 78-
upon in Fort Bonifacio Development 2014)
Corporation v CIR, G.R. No. 173425,
January 22, 2013; Fort Bonifacio TAX REMEDIES
Development Corporation v CIR, G.R. No.
173425, September 4, 2012; Fort Bonifacio Q. The BIR issued a Final Assessment Notice
Development Corporation v CIR, G.R. Nos. against a taxpayer for deficiency expanded
158885 and 170680, October 2, 2009; Fort withholding tax for the taxable year 1994. It
Bonifacio Development Corporation v CIR, merely contained a tabulation of the alleged
G.R. Nos. 158885 and 170680, April 2, deficiency taxes due. Only the resulting
2009. interest, surcharge and penalty were
provided with legal basis. Is the assessment
Q. What is the value-added tax treatment of the valid?
sale or importation of livestock and poultry
feeds or ingredients? A. No. Section 228 of the Tax Code provides that
the taxpayer shall be informed in writing of
A. Only livestock and poultry feeds or the law and the facts on which the assessment
ingredients used in the manufacture of is made. Otherwise, the assessment is void.
finished feeds are exempted from VAT. The (CIR v. United Salvage and Towage (Phils.),
sale or importation of ingredients which may Inc., G.R. No. 197515, July 2, 2014)
also be used for the production of food for
human consumption shall be subject to VAT. Q. The BIR issued a Letter of Authority to
Thus, for the sale or importation of any of the examine the books of account and other
following feed ingredients: accounting records of the taxpayer for
income and withholding taxes for the period
1. Whey powder 1997 to 1999. BIR then sent a Notice of
2. Skimmed milk powder Informal Conference. Attached thereto is a
3. Lactose Summary Report containing an explanation
4. Buttermilk powder of the legal and factual bases for the
5. Whole milk powder
deficiency assessment. The taxpayer
6. Palm Olein
requested for copies of working papers
indicating how the deficiency withholding
and such other feed ingredients used in the
taxes were computed. The BIR promptly
manufacture of finished feeds which may
responded in a letter-reply. Thereafter, the
hereinafter be determined by competent
taxpayer received a PAN which contained the
authority to have possible utilization for
Page 14 of 27
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TAXATION LAW
computations of its deficiency income and three (3) years by virtue of Batas Pambansa
withholding taxes. Attached to the PAN was Blg. 700. Thus, the BIR has three (3) years
the detailed explanation of the particular from the date of actual filing of the tax return
provision of law and revenue regulation to assess a national internal revenue tax or to
violated. The taxpayer replied to the PAN. commence court proceedings for the
The BIR replied in a letter explaining the collection thereof without an assessment.
factual and legal bases of the deficiency However, when it validly issues an
assessment and denying the reply. A FAN assessment within the three (3)-year period,
and demand letter were then issued, it has another three (3) years within which to
unaccompanied by any written explanation collect the tax due by distraint, levy, or court
of the legal and factual bases of the deficiency proceeding. The assessment of the tax is
taxes assessed against the taxpayer. Is the deemed made and the three (3)-year period
assessment valid? for collection of the assessed tax begins to
run on the date the assessment notice had
A. Although the FAN and demand letter issued been released, mailed or sent to the taxpayer.
to the taxpayer were not accompanied by a In this case, the Preliminary Collection Letter
written explanation of the legal and factual was issued only on February 21, 2002,
bases of the deficiency taxes assessed against despite the fact that the FAN was issued as
the petitioner, the records showed that the early as January 9, 1996. Clearly, five (5) long
BIR in its letter responded to the taxpayer’s years had already lapsed, beyond the three
reply to the PAN, explaining at length the (3)-year prescriptive period, before collection
factual and legal bases of the deficiency tax was pursued by the BIR. (CIR v. United
assessments. Considering the foregoing Salvage and Towage (Phils.), Inc., G.R. No.
exchange of correspondence and documents 197515, July 2, 2014)
between the parties, the requirement of
Section 228 was substantially complied with. Note: It must be noted that in this case, no
The BIR had fully informed the taxpayer in evidence was formally offered to prove when
writing of the factual and legal bases of the the taxpayer filed its returns and paid the
deficiency taxes assessment, which enabled corresponding EWT for taxable year 1992.
the latter to file an "effective" protest. Further, it must be emphasized that there are
Petitioner's right to due process was thus not conflicting views on the proper prescriptive
violated. (Samar-I Electric Cooperative v. period for the collection of national internal
CIR, G.R. No. 193100, December 10, 2014) revenue taxes in case a regular return is filed.
Some hold the view that the prescriptive
Q. On January 9, 1996, the BIR issued a Final period is five (5) years while others opine that
Assessment Notice against the taxpayer for it is three (3) years.
deficiency expanded withholding tax for the
taxable year 1992, 1994, and 1998. The BIR Q. On June 16, 1989, the taxpayer received a
issued a Preliminary Collection Letter for the final assessment notice issued by the BIR,
deficiency EWT for the taxable year 1992 on finding the taxpayer liable for deficiency
February 21, 2002. The BIR argues that its documentary stamp tax for the taxable year
right to collect the EWT for taxable year 1985. The taxpayer filed a protest on June
1992 has not yet prescribed. Is the BIR 23, 1989 requesting for reinvestigation
correct? and/or reconsideration. The BIR denied the
request for reconsideration on August 4,
A. No. The statute of limitations on assessment 1998. On January 4, 1998, the taxpayer filed
and collection of national internal revenue its petition for review before the CTA. The
taxes was shortened from five (5) years to taxpayer argued that the assessment may be
Page 15 of 27
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invalidated because the statute of limitations three years from 19 April 1989, the date the
on collection had already expired. The CIR former received the assessment of the CIR, to
contended that the issue of prescription collect the tax. Within that time frame,
cannot be raised for the first time on appeal. however, neither a warrant of distraint or
Further, the CIR alleged that even assuming levy was issued, nor a collection case filed in
that the issue of prescription can be raised, court. Is the taxpayer correct?
the protest letter interrupted the prescriptive
period to collect. Is the CIR correct? A. Yes. The Bureau of Internal Revenue (BIR)
issued the assessment for deficiency DST on
A. No. If the pleadings or the evidence on 19 April 1989, when the applicable rule was
record show that the claim is barred by Section 319(c) of the National Internal
prescription, the court is mandated to Revenue Code of 1977, as amended. In that
dismiss the claim even if prescription is not provision, the time limit for the government
raised as a defense. Under the then to collect the assessed tax is set at three years,
applicable Section 319(c) [now, 222(c)] of to be reckoned from the date when the BIR
the National Internal Revenue Code (NIRC) mails/releases/sends the assessment notice
of 1977, as amended, any internal revenue to the taxpayer. Further, Section 319(c)
tax which has been assessed within the states that the assessed tax must be collected
period of limitation may be collected by by distraint or levy and/or court proceeding
distraint or levy, and/or court proceeding within the three-year period. In this case, the
within three years following the assessment records do not show when the assessment
of the tax. The assessment of the tax is notice was mailed, released or sent to the
deemed made and the three-year period for taxpayer. Nevertheless, the latest possible
collection of the assessed tax begins to run on date that the BIR could have released, mailed
the date the assessment notice had been or sent the assessment notice was on the
released, mailed or sent by the BIR to the same date that the taxpayer received it, 19
taxpayer. In this case, although there was no April 1989. Assuming therefore that 19 April
allegation as to when the assessment notice 1989 is the reckoning date, the BIR had three
had been released, mailed or sent to BPI, still, years to collect the assessed DST. However,
the latest date that the BIR could have the records show that there was neither a
released, mailed or sent the assessment warrant of distraint or levy served on the
notice was on the date BPI received the same taxpayer’s properties nor a collection case
on 16 June 1989. Counting the three- year filed in court by the BIR within the three-year
prescriptive period from 16 June 1989, the period. (China Banking Corporation v. CIR,
BIR had until 15 June 1992 to collect the G.R. No. 172509, February 4, 2015)
assessed DST. (BPI v. CIR, G.R. No.
181836, July 9, 2014) Q. Does a request for reinvestigation suspend
the running of the prescriptive period to
Q. On April 19, 1989, the BIR issued a FAN collect?
finding the taxpayer liable for deficiency DST
for the taxable years 1982 to 1986. On May A. No. A request for reinvestigation alone will
8, 1989, the taxpayer filed its protest. On not suspend the statute of limitations. Two
December 6, 2001, the BIR rendered a things must concur: there must be a request
decision denying the protest. The taxpayer for reinvestigation and the CIR must have
elevated the same to the CTA arguing that granted it. (China Banking Corporation v.
the right of the BIR to collect the assessed CIR, G.R. No. 172509, February 4, 2015)
DST is already barred by prescription. The
taxpayer contends that the government had
Page 16 of 27
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Q. In tax assessment cases, can the defense of A. RMO No. 20-90 provides the following
prescription be raised for the first time on requirements:
appeal before the Supreme Court?
(1) The waiver must be in the prescribed
A. Yes. Though the established rule in remedial form. There should be no deviation from
law that the defense of prescription must be this form. The phrase “but not after “
raised at the trial court has also been applied which indicates the expiry date of the
for tax cases, and thus,, as a rule, the failure period agreed upon to assess/collect
to raise the defense of prescription at the should be filled up;
administrative level prevents the taxpayer (2) The waiver shall be signed by the
from raising it at the appeal stage, itis not taxpayer himself or his duly authorized
absolute. When the pleadings or the evidence representative. In the case of a
on record show that the claim is barred by corporation, the waiver must be signed by
prescription, the court must dismiss the claim any of its responsible officials. In case the
even if prescription is not raised as a defense. authority is delegated by the taxpayer to a
(China Banking Corporation v. CIR, G.R. representative, such delegation should be
No. 172509, February 4, 2015) in writing and duly notarized;
(3) The waiver should be duly notarized;
Q. ABC Corporation was dissolved by (4) The waiver shall be signed by the
shortening its corporate term. As a result Commissioner of Internal Revenue or his
thereof, ABC moved out of its address in Las duly authorized representative, and the
Pinas City and transferred to Calamba date of acceptance of the BIR should be
Laguna. ABC sent a notice of dissolution to indicated;
the BIR as well as an update of information (5) Both the date of execution by the
contained in its BIR Certificate of taxpayer and the date of acceptance by
Registration. ABC was assessed for the BIR should be before the expiration
deficiency income taxes. The Final of the period of prescription or before the
Assessment Notice was sent via registered lapse of the period agreed upon in case a
mail to ABC’s former address in Las Pinas subsequent agreement is executed; and
City. Is the assessment valid? (6) The waiver must be executed in three
copies, the original copy to be attached to
A. No. The taxpayer’s right to due process is the docket of the case, the second copy
violated when there is no valid notice of for the taxpayer and the third copy for the
assessment sent to it. Here, the CIR was Office accepting the waiver. The taxpayer
aware of the new address and yet sent the must be furnished a copy of the waiver as
assessment to the taxpayer’s former address. accepted by the BIR. The fact of receipt
As a consequence thereof, the running of the by the taxpayer of his copy must be
three-year period was not suspended and had indicated in the original copy to show that
already prescribed. (Commissioner of the taxpayer was notified of the
Internal Revenue v BASF Coating + Inks acceptance of the BIR and the perfection
Phils., Inc., G.R. No. 198677, November 26, of the agreement. (CIR v. Stanley Works
2014) Sales (Phils.), Inc., G.R. No. 187589,
December 3, 2014, citing Philippine
Q. What are the requirements of a valid waiver Journalist v. CIR, G.R. No. 162852,
of defense of prescription or the statute of December 16, 2004)
limitations?
Q. What is the expenditure method in proving
tax fraud?
Page 17 of 27
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taxes that should have been paid in lieu of the

A. The expenditure method is a method of taxes paid. Determining the proper category
reconstructing a taxpayer’s income by of tax that should have been paid is not an
deducting the aggregate yearly expenditures assessment. It is an incidental matter
from the declared yearly income. The theory necessary for the resolution of the principal
of this method is that when the amount of the issue, which is whether the taxpayer is
money that a taxpayer spends during a given entitled to the refund. (SMI-ED Philippines
year exceeds his reported or declared income v. Commissioner of Internal Revenue, G.R.
and the source of such money is unexplained, No. 175410, November 12, 2014)
it may be inferred that such expenditures
represent unreported or undeclared income. Q. What are the three essential conditions for
(BIR v. Court of Appeals & Spouses Manly, the grant of a claim for refund of creditable
G.R. No. 197590, November 24, 2014) withholding income tax?
Q. Can the date of issuance of a BIR Ruling A. The three essential conditions are:
confirming the tax-exemption status of a
taxpayer be used as the reckoning point of 1. The claim is filed with the Commissioner
the prescriptive period for recovery of of Internal Revenue within the two-year
erroneously or illegally assessed or collected period from the date of payment of the
internal revenue taxes? tax;
2. It is shown on the return of the recipient
A. No. The claim for refund must be filed within that the income payment received was
two (2) years from the date of payment of the declared as part of the gross income; and
tax regardless of any supervening cause that 3. The fact of withholding is established by
may arise after payment. While the a copy of a statement duly issued by the
prescriptive period of two (2) years payor to the payee showing the amount
commences to run from the time that the paid and the amount of the tax withheld
refund is ascertained, the propriety thereof is therefrom. (CIR v. Team (Philippines)
determined by law (in this case, from the date Operations Corporation, G.R. No.
of payment of tax), and not upon the 179260, April 2, 2014)
discovery by the taxpayer of the erroneous or
excessive payment of taxes. The issuance of Q. What is the competent proof to establish the
the BIR of a Ruling declaring the tax-exempt fact that the creditable taxes were withheld?
status of a taxpayer, if at all, is merely
confirmatory in nature. Such ruling is not the A. The certificate of creditable tax withheld at
operative act from which an entitlement of source is the competent proof to establish the
refund is determined. (CIR v. Meralco, G.R. fact that taxes are withheld. It is not
No. 181459, June 9, 2014) necessary for the person who executed and
prepared the certificate of creditable tax
Q. May the Court of Tax Appeals determine, in withheld at source to be presented and to
a claim for refund of taxes allegedly testify personally to prove the authenticity of
erroneously paid, whether there are taxes the certificates. It must be noted that upon
that should have been paid in lieu of the taxes presentation of a withholding tax certificate
paid? complete in its relevant details and with a
written statement that it was made under the
A. Yes. In an action for the refund of taxes penalties of perjury, the burden of evidence
allegedly erroneously paid, the Court of Tax then shifts to the Commissioner of Internal
Appeals may determine whether there are Revenue to prove that (1) the certificate is
Page 18 of 27
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not complete; (2) it is false; or (3) it was not competent, relevant and part of the records.
issued regularly. (CIR v. PNB, G.R. No. (Winebrenner & Inigo Insurance Brokers,
180290, September 29, 2014) Inc., G.R. No. 206526, January 28, 2015)
Q. Is proof of actual remittance of the withheld The taxpayer need not submit the quarterly
taxes required before the taxpayer may claim returns to show that it did not carry-over the
for a refund of creditable withholding tax? excess withholding tax to the succeeding
quarter. When the taxpayer is able to
A. No. Proof of actual remittance of the establish prima facie its right to the refund by
withheld taxes is not required before the testimonial and object evidence, it is the BIR
taxpayer may claim for a tax refund/tax that should present rebuttal evidence to shift
credit certificates. It is not a requirement for the burden of evidence back to the taxpayer.
claiming a tax refund of creditable Indeed, the BIR ought to have its own copies
withholding taxes. (CIR v. Team of the taxpayer’s quarterly returns on file, on
(Philippines) Operations Corporation, G.R. the basis of which it could rebut the
No. 179260, April 2, 2014; CIR v. PNB, taxpayer’s claim that it did not carry over its
G.R. No. 180290, September 29, 2014) unutilized and excess creditable withholding
taxes for the immediately succeeding
Q. The BIR contends that, in a refund of excess quarters. The BIR's failure to present such
creditable withholding taxes, the taxpayer vital document during the trial in order to
must present its quarterly returns because bolster its contention against the taxpayer’s
such quarterly returns would show that it did claim for the tax refund is fatal. (CIR v. Team
not carry-over the excess withholding tax to (Philippines) Energy Corporation, G.R. No.
the succeeding quarter. Is the BIR correct? 188016, January 14, 2015)
A. No. Proving that no carry-over has been Q. Gotesco, a corporation engaged in the real
made does not absolutely require the estate business, secured a loan from PNB
presentation of the quarterly ITRs. Requiring with a six-hectare property as collateral.
that the ITR or the FAR of the succeeding Gotesco defaulted on its loan obligations.
year be presented to the BIR in requesting a Thus, PNB foreclosed the mortgaged
tax refund has no basis in law and property. A certificate of sale was issued in
jurisprudence. First, Section 76 of the Tax favor of PNB. As it prepared for the
Code does not mandate it. Second, Section 5 consolidation of its ownership over the
of RR 12-94, amending Section 10(a) of RR property, PNB withheld and remitted to the
6-85, merely provides that claims for refund BIR withholding taxes equivalent to 6% of
of income taxes deducted and withheld from the bid price. Thereafter, PNB filed an
income payments shall be given due course administrative claim for the refund of excess
only (1) when it is shown on the ITR that the withholding taxes. PNB explained that it it
income payment received is being declared should have applied the five percent (5%)
part of the taxpayer’s gross income; and (2) creditable withholding tax rate on the sale of
when the fact of withholding is established by ordinary asset, considering that Gotesco is
a copy of the withholding tax statement, duly primarily engaged in the real estate business.
issued by the payor to the payee, showing the While PNB was able to establish the fact of
amount paid and the income tax withheld tax withholding and the remittance thereof to
from that amount. Any document, other than the BIR, the CTA found that PNB failed to
quarterly ITRs may be used to establish that present evidence to prove that Gotesco did
indeed the non-carry over clause has been not utilize the withheld taxes to settle its tax
complied with, provided that such is
Page 19 of 27
NOTICE
TAXATION LAW
liabilities. On Motion for Reconsideration,

PNB eventually offered as evidence the Q. What is the irrevocability rule?
Income Tax Return of Gotesco to show that
the excess withholding tax payments were A. Once the option to carry-over and apply the
not used by Gotesco to settle its tax liabilities. excess quarterly income tax against income
The CTA denied the Motion for tax due for the taxable quarters of the
Reconsideration and insisted that, to succeeding taxable years has been made,
sufficiently prove that Gotesco did not utilize such option shall be considered irrevocable
the creditable taxes withheld, the PNB for that taxable period and no application for
should have likewise presented the cash refund or issuance of a tax credit
Certificate of Creditable Tax Withheld at certificate shall be allowed therefor. (CIR v.
Source (BIR Forms No. 2307) issued to Team (Philippines) Operations Corporation,
Gotesco in relation to the creditable taxes G.R. No. 179260, April 2, 2014, citing
withheld reported in its tax returns. Is the Section 76, Tax Code)
BIR Form 2307 necessary?
LOCAL GOVERNMENT TAXATION
A. The submission of BIR Forms 2307 is to
prove the fact of withholding of the excess Q. In 1993, the City Council of Manila enacted
creditable withholding tax being claimed for the Manila Revenue Code. Section 21(B) of
refund. This is clear in the provision of said Code imposed a local business tax on
Section 58.3, RR 2-98, as amended, and in the gross receipts of keepers of garages, cars
various rulings of the Court. In the words of for rent or hire driven by the lessee,
Section 2.58.3, RR 2-98, “That the fact of transportation contractors, persons who
withholding is established by a copy of a transport passenger or freight for hire, and
statement duly issued by the payor common carriers by land, air, or water.
(withholding agent) to the payee showing the Common carriers assailed the validity of
amount paid and the amount of tax withheld Section 21(B) of the Manila Revenue Code.
therefrom.” Is Section 21(B) valid?
Hence, the probative value of BIR Form
2307, which is basically a statement showing A. No. Section 21(B) of the Manila Revenue
the amount paid for the subject transaction Code is null and void. Although the power to
and the amount of tax withheld therefrom, is tax is inherent in the State, the same is not
to establish only the fact of withholding of the true for the LGUs to whom power must be
claimed creditable withholding tax. There is delegated by Congress and must be exercise
nothing in BIR Form No. 2307, which would within the guidelines and limitation that
establish either utilization or non-utilization, Congress may provide. And among the
as the case may be, of the creditable common limitations on the taxing power of
withholding tax. While perhaps it may be LGUs is Section 133(j) of the LGC, which
necessary to prove that the taxpayer did not clearly and unambiguously proscribes LGUs
use the claimed creditable withholding tax to from imposing a tax on the gross receipts of
pay for his/its tax liabilities, there is no basis transportation contractors and common
in law or jurisprudence to say that BIR Form carriers. The contention of the City of Manila
No. 2307 is the only evidence that may be that Section 143(h) of the LGC has
adduced to prove such non-use. (Philippine empowered it to impose local business tax on
National Bank v. CIR, G.R. No. 206019, any business subject to excise, value-added,
March 18, 2015) or percentage tax under the Tax Code), such
as common carriers, must fail. First, Section
133(j) of the LGC prevails over Section
Page 20 of 27
NOTICE
TAXATION LAW
143(h) of the LGC as the former is a specific The EPIRA also created the Power Sector
provision that explicitly limits the LGUs’ Assets and Liabilities Management
power to tax while Section 143(h) defines a Corporation (PSALM) and transferred to it
general power. Specific provisions prevail all of the NPC’s generation assets, which
over general ones. Second, such construction includes the plants in Bataan. Clearly, NPC
gives effect to both Section 133(j) and had ceased running said business. Further,
Section 143(h) of the LGC. Third, Section the EPIRA transferred all existing liabilities
5(b) of the LGC provides that any tax of NPC to PSALM, which would include its
ordinance or revenue measure shall be unpaid liabilities for local franchise tax.
strictly construed against the local Consequently, such tax is collectible from
government unit enacting it. Fourth, PSALM. (National Power Corporation v.
exemption of transportation contractors and Provincial Government of Bataan, G.R. No.
common carriers from local business tax is 180654, April 21, 2014)
consistent with the intent of our laws, which
is to prevent the duplication of the so-called Q. Must a writ of execution be issued before a
common carriers tax. (City of Manila v Hon. taxpayer may be allowed to avail of its tax
Colet and Malaysian Air System, G.R. No. refund or tax credit of local taxes as affirmed
120051, December 10, 2014) by a court judgment which has become final
and executory?
Q. The National Power Corporation (NPC)
received a notice of franchise tax delinquency A. No. It is not the intention of the law to
from the Provincial Government of Bataan. burden the taxpayer with going through the
The assessment is based on NPC’s sale of process of execution under the Rules of Civil
electricity that it generated from two power Procedure before it may be allowed to avail
plants in Bataan. The province once again its tax credit as affirmed by a court judgment.
sent notices of tax due. NPC replied that it The issuance of a Writ of Execution is
had ceased to be liable after the enactment of superfluous, because the court judgment can
Electric Power Industry Act (EPIRA), which neither be considered a judgment for a
relieved NPC of its functions of generating specific sum of money susceptible of
and supplying electricity. The province execution by levy or garnishment under
proceeded to levy on the properties that NPC Section 9, Rule 39 of the Rules of Court nor
used to own. Is NPC liable for the franchise a special judgment under Section 11, Rule 39
tax? thereof. Instead of moving for the issuance
of a writ of execution, the taxpayer should
A. No. The EPIRA transferred to the National merely request for the approval of the local
Transmission Corporation (TRANSCO) the government unit in implementing the tax
NPC’s electric transmission function. Thus, refund or tax credit, whichever is
the NPC ceased to operate said business in appropriate. The local government unit has
Bataan. Since the local franchise tax is two options: (1) to pay the taxpayer the
imposed on the privilege of operating a amount as tax refund; or (2) to issue a tax
franchise, such tax is not the liability of NPC, credit certificate in the same amount which
but instead of TRANSCO. The province may be credited by the taxpayer from its
cannot likewise levy on the transmission future tax liabilities due to the local
facilities to satisfy the assessment against government unit. (Coca-Cola Bottlers
NPC because the same is now owned by Philippines v. City of Manila, G.R. No.
TRANSCO. 197561, April 7, 2014)
Page 21 of 27
NOTICE
TAXATION LAW
Q. In the imposition of the surcharge on local which includes “real property owned by the
taxes due and unpaid, should the 25% Republic of the Philippines or any of its
surcharge be computed yearly based on the political subdivisions except when the
unpaid tax due for each particular year? beneficial use thereof has been granted, for
consideration or otherwise, to a taxable
A. No. Section 168 of the Local Government person.” The PEZA is an instrumentality of
Code categorically provides that the local the national government. Being an
government unit may impose a surcharge not instrumentality of the national government,
exceeding 25% of the amount of taxes, fees, the PEZA cannot be taxed by local
or charges not paid on time. The surcharge is government units. Further, the real
a civil penalty imposed once for late payment properties under the PEZA’s title are owned
of a Contrast this with the succeeding by the Republic of the Philippines. Properties
provisions on interest, which was imposable of public dominion, even if titled in the name
at the rate not exceeding 2% per month of the of an instrumentality as in this case, remain
unpaid taxes until fully paid. The fact that the owned by the Republic of the Philippines.
interest charge is made proportionate to the (City of Lapu-Lapu v. PEZA, G.R. No.
period of delay, whereas the surcharge is not, 184203 & 187583, November 26, 2014)
clearly reveals the legislative intent for the
different modes in their application. If the Note: Even the PEZA’s lands and buildings
legislative intent was to make the 25% whose beneficial use have been granted to
surcharge proportionate to the period of other persons may not be taxed with real
delay, the law should have provided for the property taxes. The PEZA may only lease its
same in clear terms. (NPC v. City of lands and buildings to PEZA-registered
Cabanatuan, G.R. No. 177332, October 1, economic zone enterprises and entities.
2014) These PEZA-registered enterprises and
entities, which operate within economic
REAL PROPERTY TAXATION zones, are not subject to real property taxes.
Under Section 24 of the Special Economic
Q. Is the Philippine Economic Zone Authority Zone Act of 1995, no taxes, whether local or
(PEZA) exempt from the payment of real national, shall be imposed on all business
property taxes? establishments operating within the
economic zones.
A. Yes. The PEZA is exempt from the payment
of real property taxes. The general rule is that Q. Distinguish between an illegal assessment
real properties are subject to real property and an erroneous assessment of real property
taxes. This is true especially since the Local taxes in terms of remedies to be taken?
Government Code has withdrawn
exemptions from real property taxes of all A. An erroneous assessment is different from an
persons, whether natural or juridical. illegal assessment, and the proper remedy of
Exceptions to the rule are however also a taxpayer issued an assessment depends on
provided in the Local Government Code. whether the assessment was erroneous or
Under Section 133(o), local government illegal.
units have no power to levy taxes of any kind
on the national government, its agencies and An erroneous assessment “presupposes that
instrumentalities and local government units. the taxpayer is subject to the tax but is
Specifically on real property taxes, Section disputing the correctness of the amount
234 enumerates the persons and real assessed.” With an erroneous assessment,
property exempt from real property taxes, the taxpayer claims that the local assessor
Page 22 of 27
NOTICE
TAXATION LAW
erred in determining any of the items for on certiorari under Rule 45 of the Rules of
computing the real property tax, i.e., the Court raising pure questions of law. (City of
value of the real property or the portion Lapu-Lapu v. PEZA, G.R. No. 184203 &
thereof subject to tax and the proper 187583, November 26, 2014)
assessment levels. In case of an erroneous
assessment, the taxpayer must exhaust the Q. May a municipality within the Metropolitan
administrative remedies provided under the Manila Area, a city, or a province have an
Local Government Code before resorting to additional levy on real property for the
judicial action. The taxpayer must first pay special education fund at the rate of less than
the real property tax under protest. Should 1%.?
the taxpayer find the action on the protest
unsatisfactory, the taxpayer may appeal with A. Yes. Section 235 of the Local Government
the Local Board of Assessment Appeals Code provides that “a province or city, or a
within 60 days from receipt of the decision municipality within the Metropolitan Manila
on the protest. If the taxpayer is still Area, may levy and collect an annual tax of
unsatisfied after appealing with the Local one percent (1%) on the assessed value of
Board of Assessment Appeals, the taxpayer real property which shall be in addition to the
may appeal with the Central Board of basic real property tax. The proceeds thereof
Assessment Appeals within 30 days from shall exclusively accrue to the Special
receipt of the Local Board’s decision. The Education Fund (SEF).” The operative
decision of the Central Board of Assessment phrase in Section 235’s grant to
Appeals is appealable before the Court of municipalities in Metro Manila, cities, and
Tax Appeals En Banc. The Court of Tax provinces of the power to impose an
Appeals’ decision may then be appealed additional levy for the special education fund
before the Supreme Court through a petition is prefixed with “may,” thus, “may levy and
for review on certiorari under Rule 45 of the collect an annual tax of one percent (1%).”
Rules of Court raising pure questions of law. There is no limiting qualifier to the
articulated rate of 1% which unequivocally
On the other hand, an assessment is illegal if indicates that any and all special education
it was made without authority under the law. fund collections must be at such rate. Setting
In case of an illegal assessment, the taxpayer the rate of the additional levy for the special
may directly resort to judicial action without education fund at less than 1% is within the
paying under protest the assessed tax and taxing power of local government units.
filing an appeal with the Local and Central (Demaala v. COA, G.R. No. 199752,
Board of Assessment Appeals. The taxpayer February 17, 2015)
shall file a complaint for injunction before the
Regional Trial Court to enjoin the local Q. From 1994 to 1996, a taxpayer was not able
government unit from collecting real to pay its real property taxes. As a result, a
property taxes. The party unsatisfied with the warrant was issued by the City Treasurer
decision of the Regional Trial Court shall file subjecting the property to levy. A public
an appeal, not a petition for certiorari, before auction sale was conducted. The taxpayer
the Court of Tax Appeals, the complaint now questions the validity of the auction sale
being a local tax case decided by the Regional in that it violated the procedural
Trial Court. The appeal shall be filed within requirements under the Local Government
fifteen (15) days from notice of the trial Code. The buyer argues that there is a
court’s decision. The Court of Tax Appeals’ presumption of regularity of an official act in
decision may then be appealed before the a tax delinquency sale. The taxpayer argues
Supreme Court through a petition for review that no presumption of regularity is enjoyed
Page 23 of 27
NOTICE
TAXATION LAW
by any administrative action which results in the same shall be mailed to or served upon
depriving a taxpayer of his property. Is the the delinquent owner of the real property or
taxpayer correct? person having legal interest therein, or in
case he is out of the country or cannot be
A. Yes. There is no presumption of the regularity located, the administrator or occupant of the
of any administrative action which resulted in property. At the same time, the written notice
depriving a taxpayer of his property through of the levy with the attached warrant shall be
a tax sale. This is an exception to the rule that mailed to or served upon the assessor and the
administrative proceedings are presumed to Registrar of Deeds of the province, city or
be regular. It is incumbent upon the buyer at municipality within the Metropolitan Manila
an auction sale to prove the regularity of all Area where the property is located, who shall
proceedings leading to the sale for the buyer annotate the levy on the tax declaration and
could not rely on the presumption of certificate of title of the property,
regularity accorded to ordinary respectively.
administrative proceedings.
Section 260 of the LGC also mandates that
The burden to prove compliance with the within thirty (30) days after service of the
validity of the proceedings leading up to the warrant of levy, the local treasurer shall
tax delinquency sale is incumbent upon the proceed to publicly advertise for sale or
buyer or the winning bidder. This is premised auction the property or a usable portion
on the rule that a sale of land for tax thereof as may be necessary to satisfy the tax
delinquency is in derogation of property and delinquency and expenses of sale. Such
due process rights of the registered owner. In advertisement shall be effected by posting a
order to be valid, the steps required by law notice at the main entrance of the provincial,
must be strictly followed. The burden to city or municipal building, and in a publicly
show that such steps were taken lies on the accessible and conspicuous place in the
person claiming its validity, for the Court barangay where the real property is located,
cannot allow mere presumption of regularity and by publication once a week for two (2)
to take precedence over the right of a weeks in a newspaper of general circulation
property owner to due process accorded no in the province, city or municipality where
less than by the Constitution. the property is located. (Strategies
Development Corporation & Prieto v. Agojo,
It is, thus, necessary to determine whether G.R. No. 208740, November 19, 2014)
respondent has fulfilled his burden of
proving compliance with the requirements TARIFF AND CUSTOMS TAXATION
for a valid tax delinquency sale. Under
Section 254 of the LGC, it is required that Q. Does the Commissioner of Customs have the
the notice of delinquency must be posted at power to accredit customs brokers?
the main hall and in a publicly accessible and
conspicuous place in each barangay of the A. No. The BOC Commissioner’s power under
local government unit concerned. It shall also Section 608 of the Tariff and Customs Code
be published once a week for two (2) (TCCP) is a general grant of power to
consecutive weeks, in a newspaper of general promulgate rules and regulations necessary
circulation in the province, city, or to enforce the provisions of the TCCP. Under
municipality. the rules of statutory construction, this
general rule-making power gives way to the
Section 258 of the LGC further requires that specific grant of power to promulgate rules
should the treasurer issue a warrant of levy, and regulations on the practice of customs
Page 24 of 27
NOTICE
TAXATION LAW
brokers profession to the CSC Commissioner or his agent. Failure to comply with the
under Section 3409 of the TCCP. Indeed, in foregoing procedural requirements would
the exercise of this specific power, the Board negate the propriety of having the subject
of Examiners (of which the BOC shipment of the importer seized and forfeited
Commissioner serves as ex-officio chairman) in favor of the Government in all cases.
was to perform only a recommendatory role.
With the repeal of Section 3409 of the TCCP Further, the shipment could not be deemed
by RA 9280, this specific rule-making power liable for seizure or even forfeiture on the
was transferred to the Professional ground of violation of Section 2530(f) of the
Regulatory Board for Customs Brokers TCCP, as amended, for it must be proven
(PRBCB) to complement its supervisory and first that fraud has been committed by or
regulatory powers over customs brokers. there was bad faith on the part of the
importer/consignee to evade payment of the
The similarity in the functions and concerns duties due and demandable. (COC v. New
of the BOC and the BIR does not support a Frontier Sugar Corporation, G.R. No.
grant of power to accredit customs brokers 163055, June 11, 2014)
to the BOC Commissioner. Unlike the BOC
Commissioner whose power over customs Q. Who has jurisdiction to hear and determine
brokers was – at the very least – implied and questions involving the seizure and forfeiture
indirect, the BIR Commissioner was given of dutiable goods?
express and specific powers to accredit and
register tax agents under Section 6(G) of the A. The Collector of Customs has exclusive
National Internal Revenue Code (NIRC). jurisdiction over seizure and forfeiture
(Airlift Asia Customs Brokerage, Inc. v. proceedings, and regular courts cannot
Court of Appeals, G.R. No. 183664, July 28, interfere with his exercise thereof or stifle or
2014) put it at naught. The Collector of Customs
sitting in seizure and forfeiture proceedings
Q. New Frontier Sugar Corporation imported has exclusive jurisdiction to hear and
raw cane sugar from Thailand. The Bureau determine all questions touching on the
of Customs found that there was a violation seizure and forfeiture of dutiable goods.
of Joint Order No. 1-91, in relation to Regional trial courts are devoid of any
paragraph (f), Section 2530 of the Tariff and competence to pass upon the validity or
Customs Code (TCCP) for failure to subject regularity of seizure and forfeiture
the shipment to pre-shipment inspection and proceedings conducted by the BOC and to
for lack of a Clean Report of Findings (CRF). enjoin or otherwise interfere with these
The BOC asserts that pursuant to Joint proceedings. Regional trial courts are
Order No. 1-91, the shipment shall be precluded from assuming cognizance over
subject to automatic seizure. Is the BOC such matters even through petitions for
correct? certiorari, prohibition or mandamus. (Agriex
Co. Ltd. v. Commissioner of Customs, G.R.
A. No. A Warrant of Seizure and Detention No. 158150, September 10, 2014)
(WSD) is a condition precedent, before any
seizure proceeding can be formally initiated. JUDICIAL REMEDIES
The following mandatory procedures must (COURT OF TAX APPEALS)
be observed in a seizure case: (1) that a WSD
must first be issued upon making any seizure; Q. Is an adverse ruling of the Secretary of
and (2) that a written notice of such seizure Finance in the exercise of its power of review
must be served upon the owner or importer
Page 25 of 27
NOTICE
TAXATION LAW
under Section 4 of the NIRC appealable to directors and the latter was 100% owned by
the Court of Tax Appeals? the former. The District Collector assessed
URC for taxes due on its oil imports between
A. Yes. Review by the Secretary of Finance 1991 and 1995. On November 25, 1998, the
pursuant to Section 4 of the NIRC, as Commissioner of Customs (COC) issued a
amended, of a BIR Ruling is appealable to final assessment. On December 21, 1998,
the Court of Tax Appeals. The Court opined the COC wrote URC to pay the deficiency
that Section 7(a)(1) of RA 1125, as taxes but in a reduced amount. Upon
amended by RA 9282, addresses the assumption of the new COC, another
seeming gap in the law as it vests in the demand letter was sent to URC. URC
Court of Tax Appeals, albeit impliedly, with proposed to pay a lesser amount, of which
jurisdiction over the appeal from the the initial payment was to be taken from
Secretary of Finance’s review of rulings of collectibles of Oilink from the National
the Commissioner of Internal Revenue as Power Corporation. The COC rejected the
“other matters” arising under the NIRC or same and, on July 2, 1999, made a final
other laws administered by the BIR. demand upon URC and Oilink. Oilink
(Philippine American Life and General formally protested the assessment arguing
Insurance Company v. The Secretary of that it is not a party liable for the assessed
Finance and Commissioner of Internal taxes. The COC denied the protest on July
Revenue, G.R. No. 210987, November 24, 12, 1999. On July 30, 1999, Oilink appealed
2014; Banco de Oro v. Republic, G.R. No. to the CTA, seeking nullification of the
G.R. No. 198756, January 13, 2015) assessment. The COC argues that the CTA
does not have jurisdiction as the 30-day
Q. Does the CTA have jurisdiction relative to period within which to appeal has already
matters involving the validity of a rule or lapsed. Is the COC correct?
regulation issued by the Bureau of Internal
Revenue? A. No. The reckoning date for Oilink’s appeal
was July 12, 1999, not July 2, 1999, because
A. Yes. The Court of Tax Appeals can now rule it was on the former date that the
not only on the propriety of an assessment or Commissioner of Customs denied the protest
tax treatment of a certain transaction, but of Oilink. Clearly, the filing of the petition on
also on the validity of the revenue regulation July 30, 1999 by Oilink was well within its
or revenue memorandum circular on which reglementary period to appeal. The
the assessment is based. It is now within the insistence by the Commissioner of Customs
power of the Court of Tax Appeals, through on reckoning the reglementary period to
its power of certioriari, to rule on the validity appeal from November 25, 1998, the date
of a particular administrative rule or when URC received the final demand letter,
regulation so long as it is within its appellate is unwarranted. The November 25, 1998
jurisdiction. (Philippine American Life and final demand letter of the BoC was addressed
General Insurance Company v. The to URC, not to Oilink. As such, the final
Secretary of Finance and Commissioner of demand sent to URC did not bind Oilink
Internal Revenue, G.R. No. 210987, unless the separate identities of the
November 24, 2014) corporations were disregarded in order to
consider them as one. (COC v. Oilink
Q. Union Refinery Corporation (URC) and International Corporation, G.R. No.
Oilink International Corporation (Oilink) 161759, July 2, 2014)
are engaged in the importation of oil
products. URC and Oilink had interlocking
Page 26 of 27
NOTICE
TAXATION LAW
Note: The Court also stated in the case that

the doctrine of piercing the corporate veil has
no application here because the COC did not
establish that Oilink had been set up to avoid
the payment of taxes or duties, or for
purposes that would defeat public
convenience, justify wrong, protect fraud,
defend crime, confuse legitimate legal or
judicial issues, perpetrate deception or
otherwise circumvent the law.
Q. The BIR issued several assessment notices to

the taxpayer for deficiency income tax and
VAT for the taxable years 1999 to 2002. The
taxpayer filed protests, but they were denied
by the BIR. The taxpayer then filed a Petition
for Review with the CTA in Division. The
CTA Division denied the Petition. The CTA
Division likewise denied the Motion for
Reconsideration. The taxpayer then appealed
directly to the Supreme Court. Does the
Supreme Court have jurisdiction?
A. No. The Court is without jurisdiction to

review decisions rendered by a division of the
CTA, exclusive appellate jurisdiction over
which is vested in the CTA en banc. RA
1125, as amended by RA 9282, provides that
the CTA en banc shall have exclusive
jurisdiction over appeals from the decision of
its divisions. A party adversely affected by the
resolution of the CTA division may, on
motion for reconsideration, file a petition for
review with the CTA en banc. Thereafter, the
decision or ruling of the CTA en banc may be
elevated to this Court. Simply stated, no
decision of the CTA division may be elevated
to this Court under Rule 45 of the 1997
Rules of Civil Procedure without passing
through the CTA en banc. (Duty Free
Philippines v. BIR, G.R. No. 197228,
October 8, 2014)
*** Nothing else follows ***
Page 27 of 27
NOTICE

Taxation Law Questions and Answers On Significant Supreme Court Jurisprudence and Bir Issuances For The 2015 Bar

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Taxation Law Questions and Answers On Significant Supreme Court Jurisprudence and Bir Issuances For The 2015 Bar

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TAXATION LAW

QUESTIONS AND ANSWERS ON SIGNIFICANT SUPREME COURT

substitutes, investment management well as the requirements mentioned

withholding agents. (Banco de Oro v.

taxpayer can avail of the preferential tax rates

(RMC No. 3-2014)

Taganito Mining Corporation v. CIR, G.R. No.

inventory of goods, materials and supplies, human consumption, there must be a

taxes that should have been paid in lieu of the

liabilities. On Motion for Reconsideration,

Note: The Court also stated in the case that

Q. The BIR issued several assessment notices to

A. No. The Court is without jurisdiction to

* Nothing else follows *

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