TAXATION DEFINITION
As an Implement of the Police
Taxation is a mode of raising revenue for
public purposes.
Taxation is the process inherent in every
state to exercise the power to exact enforced,
proportional contributions imposed upon
persons, properties, or rights to raise revenue in
order to defray the necessary and legitimate
expenses in the government.
PURPOSE OF TAXATION
1. Revenue-Raising
The Primary purpose of taxation is to
provide funds or property with which to promote
the general welfare and protection it its citizens.
Fees may be properly regarded as taxes
even though they also serve as an instrument of
regulation... If the purpose is primarily revenue,
or if revenue is, at least, one of the real and
substantial purposes, then the exaction is
properly called a tax. [PAL v. Edu, G.R. No. L-
41383 August 15, 1988
2. Non-Revenue / Special or Regulatory
Taxation is often employed as a device
for regulation by means of which certain effects
or conditions envisioned by governments may be
achieved. These regulatory purposes are also
known as Sumptuary. Thus taxation can be
used:
a. Reduction of Social Inequality - By
adopting the progressive system of taxation i,e.,
the tax rate increases as the tax base increases.
This aims to reduce the inequality in the
distribution of wealth by preventing its undue
concentration in the hands of a few individual.
b. Encourage the Growth of Local
Industries. - The power to tax carries with it the
power to grant tax exemptions.Tax exemptions
and tax reliefs serves as incentives to encourage
investment in our local industry and thereby
promote economic growth.
c. Protect our Local Industry Against
Unfair Competition - The Tariff and Customs
Code allows the imposition of certain taxes
(countervailing and dumping duties) upon
imported goods or articles to further protect our
local industry.
d.
Power of the State (Regulatory Measure) - The
power of tax may be used as an implement of the
police power of the State through the imposition
of taxes with the end in view of regulating a
particular activity.
THEORY AND BASIS OF TAXATION
1. Life blood theory
2. Necessity theory
3. Symbiotic relationship theory - give&take.
Taxpayers pay tax. In return Govt must
provide protection and benefits to improve
lives.
Q: Can a taxpayer refuse to pay taxes just
because there is no benefit given by the
government?
A: No. Direct benefit is not necessary. Indirect
benefit is sufficient. Dapat public as a whole ang
nakabenefit.
2 FOLD NATURE OF TAXATION
1. Inherent attribute of sovereignty - taxation
is not expressly provided for in our
Constitution. No need for expressed
provision because inherent attribute of
sovereignty. That is why the Courts cannot
just stop the collection of taxes due to life-
blood theory.
2. Legislative in character - Congress has
discretion on who to tax, what properties, etc.
Statements involving taxation
1. The power to tax involves the power to
destroy - Pertains to a valid tax law. Daghan
na na close na businesses due to amount of
tax. In ana ka powerful ang power to tax.
2. The power to tax does not involve the
power to destroy as long as this Court sits
- refers to an invalid tax law. The court shall
declare it invalid.
Q: Can we harmonise the two statements?
A: Yes. The power to tax is an inherent power of
the sovereign, which is exercised through the
legislature, to impose burdens upon subjects and
objects within its jurisdiction for the purpose of
raising revenues to carry out the legitimate
objects of government. The underlying basis for
its exercise is governmental necessity for without
it no government can exist nor endure.
Accordingly, it has the broadest scope of all
the powers of government because in the
absence of limitations, it is considered as
unlimited, plenary, comprehensive and
supreme. The two limitations on the power of
taxation are the inherent and constitutional
limitations which are intended to prevent
abuse on the exercise of the otherwise
plenary and unlimited power. It is the Court’s
role to see to it that the exercise of the power
does not transgress these limitations.
Cases:
1. Manila Memorial Park, Inc. vs Sec. of DSWD
- burial services are given 20% discount for
senior citizen. (related cases: Luzon Super Drug
Corporation & Carlos SuperDrug Corporation
case)
Gross Income - Deductions (here ang
tax deduction) = Taxable Income.
(Taxable income) x (tax rate) = income
tax due.
Income tax due - tax credits = income tax
payable. (here ang tax credit)
Petitioners said Grant of 20% discount
using tax deduction as mode of recovery is a
power of eminent domain hence should be fully
compensated. But SC held that 20% Senior
Cititzen discount is the exercise of Police
Power. Thus Taxation, can coincide with the
Police Power of the State.
2. Drugstore Association of the Philippines,
Inc vs National Council on Disability Affairs
Facts: Petitioner questioned the
discounts granted to PWD in relation to the
Magna Carta for Persons with Disability.
Violation of Equal Protection Clause because
only PWD and Senior Citizens are granted.
Held: Equal Protection Requisites - All
that is required of a valid classification is that
it be
1. reasonable, which means that the
classification should be based on substantial
distinctions which make for real differences;
2. that it must be germane to the
purpose of the law;
3. that it must not be limited to
existing conditions only; and
4.that it must apply equally to each
member of the class.
PWDs and Seniors are classified
differently. hence, no violation of equal
protection. This law is also the exercise of
Police Power. Objective is to help the
Disabled. Tax deduction method of recovering
the 20% discount is valid and is not oppressive.
CHARACTERISTICS OF TAXES (CUPS)
1. Comprehensive
2. Unlimited
3. Plenary
4. Supreme
PRINCIPLES OF A SOUND TAX SYSTEM
(FAT)
1. Fiscal Adequacy - revenues in the form of
taxes must be sufficient to expenses.
Sources of revenues must be adequate to
meet government expenditures, and other
public needs.
2. Administrative Feasibility - Tax laws must
be capable of effective and efficient
enforcement. They must not obstruct
business growth and economic development.
3. Theoretical Justice - based on one’s ability
to pay. A sound tax system must take into
consideration the taxpayers’ ability to
pay. Taxes must be reasonable, just, fair,
and conscionable. The rule of taxation must
be uniform and equitable. The State must
evolve a progressive system of taxation.
Q: Will the violation of all the Principles of a
Sound Tax System invalidate the tax imposition?
A: No. Only if theoretical justice is violated diha
ra ma invalidated ang tax imposition because
Theoretical Justice is related to due process and
equal protection (constitutional limitations). If
only Fiscal Adequacy and Administrative
Feasibility ra ma violate kay dli ma invalidate ang
tax imposition because they are mere guidelines.
CLASSIFICATION OF TAXES (BAROPS)
1) According to who bears the Burden
a. Direct Taxes – a taxpayer is directly
liable on the transaction or business. ex. Income
Tax
b. Indirect Taxes – liability falls on one
person but the burden thereof can be shifted or
passed on to another person. (VAT)\
2) According to Amount
a. Specific – based on weight or volume
capacity or any other physical unit of
measurement. - based on unit of measurement
 b. Ad Valorem – based on selling price
or other specific value of goods. ex. Income Tax.
c. Mixed
3) According to Rates
a. Proportional - fixed rate
b. Progressive – the rate increases as
the tax base increases. (income tax, donor’s tax)
c. Regressive – the rate decreases as
the tax base increases. ( ex. VAT)
4) According to Object
a. Personal – fixed amount imposed on
individuals, whether citizen or not, residing within
a specified territory, without regard to their
property or occupation (ex. Community tax) -
imposed on person. Involves Only Community
tax/Poll tax/Capitation tax
b. Property – imposed on property, real
or personal in proportion to its value. Involves
Only Real property / real estate tax - tax imposed
on the property.
c. Excise – tax on exercise of right or
privilege or performance of an act. - on rights and
privileges. Ex (e.g., income tax, value added tax,
estate tax, donor’s tax). - person’s privilege to
earn income. All other taxes are excise tax.
5) According to Purpose
a. General – imposed solely to raise
revenue for the government. ex. Income tax,
donor’s, etc.
b, Special – imposed and collected to
achieve a particular legitimate object of
government. (ex. Oil price stabilization fund.)
6) According to Scope or authority
a. National – imposed by national
government. ex. VAT, income tax
b, Local – levied and collected by the
local government (real property tax, and local
business tax., community tax) - pursuant to the
local govt. code
INHERENT LIMITATIONS OF TAXATION
(PITEN)
1. For Public Purpose
2. International Comity - sovereign equality of
the state. One state cannot impose taxes on
other states
3. Territoriality -
4. Exceptions of Government Entities
5. Non-delegation of power to tax
Cases
1. Tio v. Videogram Regulatory Board - relates
to undue delegation and due process.
Held: No violation of due process. For
public purpose. No undue delagation.
Substantial requisites complied.
2. Gomez v. Palomar
Issue: pag require ug TB stamps is a
violation of equal protection?
Held: No. TB stamps in the nature of
excise tax. Use of privilege. Mail users is a valid
classification applying the four requisites.
Administrative convenience andfinancial
capability are reasons for the choice of class to
apply tax.
Issue: not for public purpose.
Held: Public purpose for eradication of
tuberculosis. Indirect benefit.
Issue: beneficiary as private entity (phil
tuberculosis society).
Held: PTS passful entity. Eventually, ang
makabenefit kay ang people na naa tuberculosis.
3. Gerochi v. DOE
Issue: is universal charge a form of tax?
Held: Universal tax not a tax. Universal
charge is exaction in the exercise of the State’s
police power. Regulatory xa. If generation of
revenue is the primary purpose and regulation is
merely incidental, the imposition is a tax; but if
regulation is the primary purpose, the fact that
revenue is incidentally raised does not make the
imposition a tax.
DIFFERENCE between TAX EVASION (Tax
Dodging) vs TAX AVOIDANCE (Tax Planning,
Tax Minimalism)
Tax Evasion is the use of illegal means
not to pay taxes.
Tax Avoidance is the use of legal means
to minimise tax.
August 28, 2019
Continuation on INHERENT LIMITATIONS
Case: on Public Purpose
1. Pascual vs Secretary of Public Works
Even though feeder road is for the public,
incidental ra ang public. Ang primary beneficiary
kay si Zulueta, a private person.
If the main purpose is for private
purposes, even if incidentally there is a public
purpose, it will still be considered for private
purpose. On the other hand, if primary purpose
kay public, even if naa incidental private purpose,
considered gahapon na public purpose.
Inherent Limitation: TERRITORIALITY
Situs of Taxation
Real property: the situs is the location of
the property. If the property is located in the
philippines, whatever income is taxable in the
philippines.
Tangible properties - location of the
property
Intangible personal property - follows the
Principle of mobilia sequuntur Personam
(Movables follow the person). Situs:
domicile/residence of the owner.
In taxation domicile and resident means
the same. Exception:
1. Shares of stocks (situs: place of
incorporation of the corporation that issued the
shares).
2. When the law expressly provides
for the situs. (ex. sec. 104).
Inherent of Limitation: EXEMPTION OF
TAXES ON GOVERNMENT
INSTRUMENTALITIES
Local govt cannot tax govt.
instrumentalities.
Example: Govt employees are taxable
sa ila salary. Judge’s salaries are taxable. Naa
case. It would be unfair if dli sila ma subject sa
withholding tax.
Cases
1. MCIAA vs City of Lapu-lapu
Issue 1: Is MCIAA a gocc? Or gov
instrumentality?
Held: Government instrumentality. Not a
GOCC. Not a stock/non stock corp. no dividends
given to stockholders. Hence, Gov
instrumentality. Attached sa agency of a dept.
But not really under the dept. Govt
instrumentalities are exempt from tax.
Issue 2: Are the airport terminal building,
the runway, the taxi way, etc taxable by the local
government?
Held: The properties are for public use.
In fact dapat naa Actually, directly and solely
use for public purpose para ma exempt from real
property tax. (naka bold very impt. Dapat naa na
sila na words). However, if some of these
properties are leased out to private individuals,
those areas are subject to real property tax.
Inherent Limitation: Non-delegation of power
to tax
Exceptions: 1. delegation to local govt.
units, 2. delegation to the president, 3. delegation
to BIR.
Cases:
1. Abakada Guro Party List vs Eduardo Ermita
Issue: Undue delegation of power to tax
because the president shall increase the vat rate
from 10 - 12% based on 2 conditions.
Held: 2 tests for a valid delegation: (1)
completeness test (the law is complete inig abot
sa delegate in such a way na wala na lain
mabuhat ang delegate but to implement) and (2)
sufficient standard test (naa guideline into
which the law is based para ang delegate naa
basis).
Also, the use of the word “shall”. No
discretion on the part of the president. Lastly, the
recommendation of the Secretary of Finance is
not acting as an alter ego of the president but an
agent of Congress in implementing the standards
set by congress.
Q: Is it correct to say that there is no undue
delegation bec. exception man gyud ang
president’s power to tax?
A: Yes. Because wala man discretion here ang
president to increase the tax rates. Exception:
only to increase/decrease of tariff rates and
custom duties.

CONSTITUTIONAL LIMITATIONS
1. Due process and equal protection: Art III,
sec. 2. “No person shall be deprived of life,
liberty or property without due process of
law.
Cases
1. Sison vs Ancheta
Facts: Sison is the tax payer, Ancheta
BIR commissioner. 2 tax payers: purely
compensation income (0-35%) and business or
professional income (5-60%).
Issue: Why does business/prof income
have higher imposition of tax rates?
Held: There is substantial distinction:
Taxpayers who are recipients of compensation
income are set apart as a class. As there is
practically no overhead expense, these
taxpayers are not entitled to make deductions for
income tax purposes because they are in the
same situation more or less. On the other hand,
in the case of professionals in the practice of their
calling and businessmen, there is no uniformity
in the costs or expenses necessary to produce
their income. It would not be just then to
disregard the disparities by giving all of them zero
deduction and indiscriminately impose on all
alike the same tax rates on the basis of gross
income. There is ample justification then for the
Batasang Pambansa to adopt the gross system
of income taxation to compensation income,
while continuing the system of net income
taxation as regards professional and business
income.
Tax vs Toll Fees (distinctions)
Toll is a demand of proprietorship, an
amount charged for the cost and maintenance of
the property used; Tax is a demand of
sovereignty for the purpose of raising public
revenues.
Case:
1. Diaz vs Sec of Finance
Issue: Are tollway fees considered tax on
tax?
Held: No, tollway fee not a tax.
Issue 2: Is tollway fee a user’s tax?
Held: No. Because imposition is on the
sellers. But since indirect tax, burden may be
shifted to end users. That is why ang tollway
users ang nireklamo ani.
Tax vs Debt (distinctions)
Tax is generally payed in money. Debt
may be paid in cash or kind.
Are not contracts between the parties,
either express or implied; but they are positive
acts of the government through its various
agents, binding upon the inhabitants, and to the
making and enforcing of which their personal
consent individually is not required;
Taxes cannot be assigned as debts, or
be proved in bankruptcy as such; nor, if
uncollected, are the assets which can be seized
by attachment or other judicial processes, and
subjected to the payment of municipal
indebtedness;
Taxes are not the subject of set-off
wither of the state or the municipality for which
they are imposed, or of the collector, or on behalf
of the person taxed, as against such state,
municipality or collector;
Taxes do not draw interest, as do sums
of money owing upon a contract.
Case:
1. Francia v. IAC
Held: Legal compensation requirements:
due, demandable and fully liquidated. No legal
compensation because Francia and govt are not
debtors and creditors of each other. Also, the
govt cannot wait for the ruling of the court before
asking for the tax.
2. Domingo vs Garido.
Opposite of Francia case. Govt indebted
to Pryce for services rendered.
Issue: Is there legal compensation?
Held: Yes. Exception ni. The General
Rule: Tax is not subject to legal compesation.
Fully liquidated because naa na ordinance to
appropriate funds. NOTE. MAO RAGYUD NI
ANG EXCEPTION IN THE HISTORY OF PHIL
JURISPRUDENCE. GENERAL RULE GHAPON
GAMITON.
Tax vs License Fee (Distinctions)
A tax is levied in the exercise of the
taxing power; License fees emanate from the
police power of the state;
The purpose of the tax is to generate
revenues; License fees are imposed for
regulatory purposes
The amount of the exaction or charge if
it is to be a license fee must only be sufficient
amount to include expenses of issuing a license;
cost of necessary inspection or police
surveillance.
The imposition is a tax, if its primary
purpose is to generate revenue, and regulation is
merely incidental; but if regulation is the primary
purpose, the fact that incidental revenue is also
obtained does not make the imposition a tax.
Tax vs Special Assessment (distinctions)
A special assessment is in the nature of
a tax upon property levied according to benefits
conferred on the property. The whole theory of a
special assessment is based on the doctrine that
the property against which it is levied derives
some special benefit from the improvement.
A special assessment can only be levied
on land;
A special assessment cannot, as a rule,
be made a personal liability of the persons
assessed;
A special assessment is based wholly on
benefits; and
A special assessment is exceptional
both as to time and locality. The imposition of a
charge on all property, real and personal, in a
prescribed area, is a tax not an assessment,
although the purpose is to make a local
improvement on the street or a highway. A
charge imposed only on property owners
benefited is a special assessment rather than a
tax.
The power to levy such assessments is
undoubtedly an exercise of the taxing power, but
the exercise of the taxing power in imposing an
assessment a tax.
GOING BACK TO CONSTITUTIONAL
EXEMPTIONS
Q: What is the voting requirement for
constitutional exemptions?
A: Majority of all members of congress.
Take note that the power to grant
exemptions entails the power to revoke that
exemptions.
Where does the bill originate? 6 types of
bill that must originate in the House of Bills:
1. tarriff,
2. bills authorizing the increase of public
debts,
3. revenue,
4. appropriation,
5. bill on authorisation of private bills
(check nalang).
6. Bills of local application
However, the senate should be allowed
to propose or make amendments to such bill. Ex.
Sa private bill: naturalisation law.
2. Veto Power of the President: Art VI sec. 27.
Section 27. (1) Every bill passed by the
Congress shall, before it becomes a law, be
presented to the President. If he approves the
same he shall sign it; otherwise, he shall veto it
and return the same with his objections to the
House where it originated, which shall enter the
objections at large in its Journal and proceed to
reconsider it. If, after such reconsideration, two-
thirds of all the Members of such House shall
agree to pass the bill, it shall be sent, together
with the objections, to the other House by which
it shall likewise be reconsidered, and if approved
by two-thirds of all the Members of that House, it
shall become a law. In all such cases, the votes
of each House shall be determined by yeas or
nays, and the names of the Members voting for
or against shall be entered in its Journal. The
President shall communicate his veto of any bill
to the House where it originated within thirty days
after the date of receipt thereof, otherwise, it shall
become a law as if he had signed it.
(2) The President shall have the power
to veto any particular item or items in an
appropriation, revenue, or tariff bill, but the veto
shall not affect the item or items to which he does
not object. If dli I allow ang senate mu revise or etc,
same ni xa as depriving the Senate the power to
GR if the president Vetos a bill, iya na I concur amendments. What is important is that
veto tanan. Subject to override. the bill originated in the House of
Exceptions:(where pwede ma Item or Pocket Representatives. And not the necessarily the law
Veto) na gi approve na.
1. Tarriff bills
2. appropriation bills Issue 2: On violation of press and
3. revenue bills religious freedom, non-establishment clause and
free exercise on the imposition of VAT on the
Thirty (30) days if no action from sale of bibles.
president, ma considered na law. If vetoed,
transmitted back to the House where it Held: The imposition of tax is not a
originated. violation because they are doing business and
selling the printed documents.
Q: How many votes needed to override veto of
President?
A: 2/3 of the majority. 4. Uniformity: Art VI, Sec 28.

Section 28. (1) The rule of taxation shall

3. Prohibitions on the allocation of the funds be uniform and equitable. The Congress shall
for the religion: Art. VI, Sec. 29. evolve a progressive system of taxation.

Exception: When such priest, preacher, Case:

minister, or dignitary is assigned to the armed
forces, or to any penal institution, or government
orphanage or leprosarium.
Section 29. … (2) No public money or
property shall be appropriated, applied, paid, or
employed, directly or indirectly, for the use,
benefit, or support of any sect, church,
denomination, sectarian institution, or system of
religion, or of any priest, preacher, minister, other
religious teacher, or dignitary as such, except
when such priest, preacher, minister, or
dignitary is assigned to the armed forces, or
to any penal institution, or government
orphanage or leprosarium.
1. Tolentino vs Sec. of Finance
Issue: Imposition of the VAT.
Held: The constitution does not prohibit
the imposition of VAT as a regressive tax.
Progressive system of taxation means there
should be more direct taxes as compared to
indirect taxes. Ang regressive taxation is mas
daghan ang indirect tax compared to direct taxes.
Although VAT is a regressive tax, it is only 1 of
the indirect taxes.
NOTE: PLS READ THE TOLENTINO CASE.

Case:
2. Planters Products, Inc. vs. Fertiphil Corp.
1. Tolentino vs. Sec. of Finance
Held: The Court has exclusive appellate
Issue 1: On violation on the ground na jurisdiction mao dapat RTC jud magstart.
dapat muoriginate sa House fo Representatives
and ultimately ang ma approve dapat kato orig
version.

Held: It is enough that there was a blll

passed by the House of Representatives and
after transmitting such bill to the Senate, the
Senate are allowed to (1) endorse the bill
without changes; (2) to make changes in the
bill omitting or adding sections or altering its
language; (3) to make and endorse an entirely
new bill as a substitute, in which case it will
be known as a committee bill; or (4) to make
no report at all.
September 4, 2019
Continuation: CONSTITUTIONAL
EXEMPTIONS
5. Prohibition against taxation of religious,
charitable entities, and educational entities
Art VI, Sec 28(3), 1987 Constitution
Sec 28. … (3) Charitable institutions,
churches and personages or convents
appurtenant thereto, mosques, non-profit
cemeteries, and all lands, buildings, and
improvements, actually, directly, and
exclusively used for religious, charitable, or
educational purposes shall be exempt from
taxation.
Note that the tax exemption under this
constitutional provision covers property taxes
only and not other taxes (Lladoc v.
Commissioner, 14 SCRA 292 [1965]).
Also take note of actually, directly, and
exclusively used.
Cases:
1. Lung Center of the Philippines vs Quezon
City
Facts: The Lung Center has a building
used for hospitalization and lots leased for
clinics. Lung center contention: tanan exempt
from tAs. Quezon City contention: tanan dapat
taxan.
Issue: Whether the land as well as the
building would be subject to real property tax.
Held: Only those areas that are actually,
directly, and exclusively used should be taxed.
Meaning real property tax na for public use ra jud.
Wala labot ang leased.
Q: Will the lung center lose it’s character as a
charitable institution because derived its sources
of income from leased areas?
A: No. SC used the substantive test of charity.
Lung Center will not lose it’s charity character as
long as the income earned will be used back for
the operation of the hospital and shall not be
used for the benefit of the directors, etc.
6. TAX FOR SPECIAL FUND. Art VI sec 29.
Sec 29. … (3) All money collected on any
tax levied for a special purpose shall be
treated as a special fund and paid out for
such purpose only. If the purpose for which a
special fund was created has been fulfilled or
abandoned, the balance, if any, shall be
transferred to the general funds of the
Government.
Case:
1. Osmena vs Orbos
Facts: Oil deregulation to stabilize the
prices of the oil products.
Held: The Oil deregulation law is valid
and constitutional. Pwede magamit ang power of
taxation to implement Police Power.
DOUBLE TAXATION
Two (2) Kinds
1. Direct double taxation (Also called: direct
duplicate taxation, double taxation in the
obnoxious sense, etc)
Means that the same property must be
taxed twice when it should be taxed once;
Elements:
(1)both taxes must be imposed on the
same property or subject matter;
(2) for the same purpose;
(3)by the same taxing authority;
(4)within the same territory, jurisdiction
or taxing district;
(5)during the same taxing period; and
(6) of the same kind or character of tax.
2. Indirect double taxation
Happens when at least 1 element of
direct double taxation is absent.
Cases:
1. City of Manila vs coca-cola bottlers
Facts: In addition to section 14 bayad na
tax, bayad pud xa tax under section 21.
Issue: Is there double taxation?
Held: Yes there is direct double taxation.
Described as "direct duplicate taxation," the two
taxes must be imposed on the same subject
matter, for the same purpose, by the same taxing
authority, within the same jurisdiction, during the
same taxing period; and the taxes must be of the
same kind or character.
Q: Is double taxation prohibited under the 1987
constitution?
A: No. double taxation is not prohibited, no
express prohibition. However, if the double
taxation will amount to a direct double
taxation, then it shall be violative of the
constitution. It violates constitutional
mandate such as due process and equal
protection clauses. Indirect double taxation is
allowed.
Q: if you have a leased property. Subject na xa
to 4 taxes: VAT, income tax, community tax, real
property tax. 1st 2 taxed by national govt. 3 and
4 taxed by local government. Is there a violation
of direct double taxation?
A: No. Different taxing authorities.
What is international juridical double
taxation?
International juridical double taxation is
defined as the imposition of comparable taxes in
two or more states on the same taxpayer in
respect of the same subject matter and for
identical periods.
It is an indirect double taxation because
2 different taxing authorities.
Cases:
1. Commissioner vs SC Johnson
Facts: filed tax for refund kay under the
RP-US tax treaty, lower dapat ang preferred tax.
Ang SC Johnson USA ma double tax.
Held: No double taxation. (ngano gani?
Check case :-)).
Q: what are the modes of eliminating double
taxation?
A: Tax exemption, Tax Credit, Tax Treaty.
Q: what is the most favored nation clause?
A: dapat tanan countries should be treated alike.
This must involve 2 tax treaties. If mu invoke ka
ug 1 tax treaty dapat naa pud lain ma compare.
- forge a link between taxation
agreements by ensuring that the parties to one
treaty provide each other with treatment no less
favourable than the treatment they provide under
other treaties in areas covered by the clause.
2. British American Tobacco vs Camacho
Facts: Classification freeze provision
provides that those existing brands shall not be
affected by the new law. In the future pa sila
affected.
Issue: Does the provision violate equal
protection clause?
Held: No. As long as complied with the 4
requisites on equal protection. Not
discriminatory, no unfair competition because the
price is not the sole factor in buying the product.
3. DEUTSCHE BANK OF MANILA vs CIR
Facts: Bank based in Germany. They
wanted to avail of the lower preferential rate of
the tax treaty. However, RR order of BIR which
requires na before ka mu avail pursuant to a tax
treaty, dapat mu file ka ug application for this.
Deutsche bank, cannot avail daw kay wala daw
ni file ahead.
Issue: Sakto ba na need ug prior
applicaiton for tax relief?
Held: Pursuant to pacta sunt servada,
we need to follow the treaty. Since wala
requirement ang tax treaty for prior application,
hence BIR should not impose additional
requirement before maka avai. Pwede naa
application but for confirmation purposes nalang
if makaapply sa treaty.
TAX PAYER SUIT
Cases:
1. Abaya vs Andane
Facts: wala daw legal standing ang
petitioner to file the case, not party to the
contract.
Issue: Allowed ba ang tax payer suit?
Held: Tax payer suit is an exception to
the locus standi principle. The prevailing doctrine
in taxpayer’s suits is to allow taxpayers to
question contracts entered into by the national
government or government-owned or controlled
corporations allegedly in contravention of law.
 Three (3) instances wherein a taxpayer
is allowed to sue are:
1. where there is a claim that public
funds are illegally disbursed, or
2. that public money is being deflected to
any improper purpose, or
3. that there is a wastage of public funds
through the enforcement of an invalid or
unconstitutional law.
Significantly, a taxpayer need not be a
party to the contract to challenge its validity.
Q: Difference between tax payer suit and Citizen
suit and Class suit
Citizen suit - lawsuits that are brought by
individuals or nonprofit groups under the
provisions of certain environmental laws.
Taxpayer suit - dapat naa showing na
naa illegal disbursement of public funds.
Class suit - kailangan murepresent sila
ug certain class in such a number na impossible
to include all as petitioners.
- one in which a group of people
with the same or similar injuries caused by the
same product or action sue the defendant as a
group.
Q: Can a tax evader file a taxpayer suit?
A: Yes. Not literal taxpayer before maka file.
Important lang na muinvolve ug public funds para
ma invoke ang tax payer suit.
2. Gonzales vs Marcos
Held: taxpayer suit not proper because
funds used to established the cultural center of
the philippines are not public funds, but are
private funds, i.e. donations from local and
international groups. Mao wala gi allow sa SC
ang mag file sa taxpayer suit.
Q: If donation from private sources, once
donated to govt., Do you think dli ma convert to
public funds?
A: No settled jurisprudence. Ikaw na lang defend.
3. Maceda vs Macaraig
Held: In case of doubt, you must prove
that you are entitled to the exemption under the
law.
DOCTRINE OF EQUITABLE RECOUPMENT
Taxes that are illegally collected, later on
barred by statute of limitations for purposes of
refund. The new taxes must be set off by the
previously uncollected refund.
Where a claim for tax refund or credit is
filed beyond the prescriptive period it can still be
applied against other taxes that may be due.
In this doctrine you can still recover tax
refund not previously collected not based on law
but based on equity. Applies only in common law
countries. Not the philippines.
4. Vinzons-Chato vs Fortune Tobacco.
Held: Issuance of the RMC based on her
capacity of a public officer. Even if the re is later
an issuance of its invalidity, dli dapat idamay ang
public officer na ni issue if no showing of malice.
Difference between TAX AMNESTY and TAX
EXEMPTION
Tax Amnesty - giving a tax payer a fresh
start with a clean slate. I overlook ang penalties.
Tax exemption -
As to Coverage: Tax exemption covers
only civil liabilities; Tax amnesty covers civil,
criminal and administrative liabilities.
As to Application: Tax exemption has
prospective application; Tax amnesty has
retroactive application
Remember the Voting requirement for Tax
Exemption: majority of all members of Congress.
PRELIMS - start (all topics and cases) plus
Topic Outline of II (A-H), RA 10021. 3:30-
5:30pm.
Case digest no. 2 submit on sunday. ABAKADA
Guro vs Ermita
Next Wednesday assignment: II and III (a-h).
Cases 1- 7.
September 11, 2019
NIRC Code of 1997
Powers of the BIR and Powers of the
Commissioner
A. Powers and Duties of the Bureau of
Internal Revenue (Sec. 2)
The Bureau of Internal Revenue shall be
under the supervision and control of the
Department of Finance and its powers and
duties shall comprehend the assessment and
collection of all national internal revenue taxes,
fees, and charges, and the enforcement of all
forfeitures, penalties, and fines connected
therewith, including the execution of judgments
in all cases decided in its favor by the Court of
Tax Appeals and the ordinary courts. The Bureau
shall give effect to and administer the
supervisory and police powers conferred to it by
this Code or other laws.
Sections 4-6 are the Powers of the
Commissioner of Internal Revenue
Note: 4 deputy commissioners under the BIR
commissioner.
On 2009 - special deputy commissioner but
abolished na.
Framework:
BIR commissioner, below him are
4 dep comm, below them are
Assistant commissioners
At the regional level: Regional directors.
Cebu RR13 (revenue region 13) covering
Cebu and Bohol. Dumaguete, which is part
of central visayas belongs to onother RR
Below the regional offices are teh district
offices. Under RR13, 5 district offices. 4 in
cebu. Cebu city north district (revenue
district office 81, covers areas near mandaue
to guadalupe-banawa), cebu city south
district (RDO 82), mandaue (RDO 80),
Talisay (RDO 83, covers talisay to south).
And 1 RDO in bohol.
Power of the Commissioner to
Interpret Tax Laws and to Decide
Tax Cases (sec. 4)
The power to interpret the
provisions of this Code and other tax
laws shall be under the exclusive
and original jurisdiction of the
Commissioner, subject to review by
the Secretary of Finance.
The power to decide disputed
assessments, refunds of internal
revenue taxes, fees or other charges,
penalties imposed in relation
thereto, or other matters arising
under this Code or other laws or
portions thereof administered by the
Bureau of Internal Revenue is
vested in the Commissioner, subject
to the exclusive appellate
jurisdiction of the Court of Tax
Appeals.
Note: (1st pertains to the quasi-legislative
power of the Commissioner), 2nd
paragraph refers to the quasi-judicial
power of the Commissioner
Cases:
1. THE PHILIPPINE AMERICAN LIFE
AND GENERAL INSURANCE COMPANY
vs.
THE SECRETARY OF FINANCE and THE
COMMISSIONER OF INTERNAL
REVENUE (Landmark Case)
Facts
sale of shares of stocks. Ruling of BIR:
selling price below book value deemed a
donation. Appealed to secretary of Finance. Sec
of Finance confirmed BIR ruling
 Issue
Where to file appeal after sec of finance?
Held
The validity of Sec. 100 of the NIRC,
Sec. 7 (C.2.2) and RMC 25-11 is merely
questioned incidentally since it was used by the
CIR as bases for its unfavourable opinion. The
Petition involves an issue on the taxability of the
transaction rather than a direct attack on the
constitutionality of Sec. 100, Sec.7 (c.2.2.) of RR
06-08 and RMC 25-11.
Reviews by the Secretary of Finance
pursuant to Sec. 4 of the NIRC are appealable to
the CTA. Because CTA has expertise and
competence when it comes to tax disputes. Also
falls under the jurisdiction of the CTA.
2. CIR vs CTA and PETRON
Facts
Alkalyn has is tax exempt. Then CMO
issued putting excise tax on alkalyn.
Issue
Sakto ba na CTA ka muadto
Held
The CTA has no jurisdiction to
determine the validity of a ruling issued by the
CIR or COC in the exercise of their quasi-
legislative powers to interpret tax laws.
Hence, as the CIR’s interpretation of a
tax provision involves an exercise of her quasi-
legislative functions, the proper recourse against
the subject tax ruling expressed in the CMC is a
review by the Secretary of Finance and
ultimately by the regular courts.
Difference between Philamlife vs Petron:
In philamlife, Before ruling, Philamlife
already made assessment to the taxable subject.
Side issue ra ang validity. Ang ruling na ni
interpret sa section ang gi question. Not the
validity of the section itself.
In petron, no assessment. the main issue
is the consitutuonaity/validity of teh tax law.
3. British American Tobacco vs Camacho
(similar with PetroN)
Held
The jurisdiction of the CTA is defined in
RA 1125 which confers on the CTA jurisdiction
to resolve tax disputes in general. BUT does
NOT include cases where the constitutionality of
a law or rule is challenged which is a judicial
power belonging to regular courts.
SEC. 5. Power of the Commissioner to Obtain
Information, and to Summon, Examine, and
Take Testimony of Persons. - In ascertaining
the correctness of any return, or in making a
return when none has been made, or in
determining the liability of any person for any
internal revenue tax, or in collecting any such
liability, or in evaluating tax compliance, the
Commissioner is authorized:
(A) To examine any book, paper, record,
or other data which may be relevant or material
to such inquiry;
(B) To obtain on a regular basis from any
person other than the person whose internal
revenue tax liability is subject to audit or
investigation, or from any office or officer of the
national and local governments, government
agencies and instrumentalities, including the
Bangko Sentral ng Pilipinas and government-
owned or -controlled corporations, any
information such as, but not limited to, costs and
volume of production, receipts or sales and gross
incomes of taxpayers, and the names, addresses,
and financial statements of corporations, mutual
fund companies, insurance companies, regional
operating headquarters of multinational
companies, joint accounts, associations, joint
ventures of consortia and registered partnerships,
and their members;
(C) To summon the person liable for tax
or required to file a return, or any officer or
employee of such person, or any person having
possession, custody, or care of the books of
accounts and other accounting records containing
entries relating to the business of the person
liable for tax, or any other person, to appear
before the Commissioner or his duly authorized
representative at a time and place specified in the
summons and to produce such books, papers,
records, or other data, and to give testimony;
(D) To take such testimony of the person
concerned, under oath, as may be relevant or
material to such inquiry; and
(E) To cause revenue officers and
employees to make a canvass from time to time
of any revenue district or region and inquire after
and concerning all persons therein who may be
liable to pay any internal revenue tax, and all
persons owning or having the care, management
or possession of any object with respect to which
a tax is imposed.
The provisions of the foregoing
paragraphs notwithstanding, nothing in this
Section shall be construed as granting the
Commissioner the authority to inquire into bank
deposits other than as provided for in Section
6(F) of this Code.
Note: to make assessments, to issue
subpoena and subpoena testificandum, examine
books accounts and record of taxpayers, power to
conduct surveillance.
SEC. 6. Power of the Commissioner to Make
Assessments and Prescribe Additional
Requirements for Tax Administration and
Enforcement. -
(A) Examination of Return and
Determination of Tax Due. After a return
has been filed as required under the
provisions of this Code, the Commissioner or
his duly authorized representative may
authorize the examination of any taxpayer
and the assessment of the correct amount of
tax: Provided, however, That failure to file a
return shall not prevent the Commissioner
from authorizing the examination of any
taxpayer.
The tax or any deficiency tax so assessed
shall be paid upon notice and demand from
the Commissioner or from his duly
authorized representative.
Any return, statement of declaration filed in
any office authorized to receive the same
shall not be withdrawn: Provided, That within
three (3) years from the date of such filing,
the same may be modified, changed, or
amended: Provided, further, That no notice
for audit or investigation of such return,
statement or declaration has in the
meantime been actually served upon the
taxpayer.
(B) Failure to Submit Required
Returns, Statements, Reports and other
Documents. - When a report required by
law as a basis for the assessment of any
national internal revenue tax shall not be
forthcoming within the time fixed by laws or
rules and regulations or when there is
reason to believe that any such report is
false, incomplete or erroneous, the
Commissioner shall assess the proper tax
on the best evidence obtainable.
In case a person fails to file a required return
or other document at the time prescribed by
law, or willfully or otherwise files a false or
fraudulent return or other document, the
Commissioner shall make or amend the
return from his own knowledge and from
such information as he can obtain through
testimony or otherwise, which shall be prima
facie correct and sufficient for all legal
purposes.
(C) Authority to Conduct
Inventory-taking, Surveillance and to
Prescribe Presumptive Gross Sales and
Receipts. - The Commissioner may, at any
time during the taxable year, order inventory-
taking of goods of any taxpayer as a basis
for determining his internal revenue tax
liabilities, or may place the business
operations of any person, natural or juridical,
under observation or surveillance if there is
reason to believe that such person is not
declaring his correct income, sales or
receipts for internal revenue tax purposes.
The findings may be used as the basis for
assessing the taxes for the other months or
quarters of the same or different taxable
years and such assessment shall be
deemed prima facie correct.
When it is found that a person has failed to
issue receipts and invoices in violation of the
requirements of Sections 113 and 237 of this
Code, or when there is reason to believe that
the books of accounts or other records do
not correctly reflect the declarations made or
to be made in a return required to be filed
under the provisions of this Code, the
Commissioner, after taking into account the
sales, receipts, income or other taxable base
of other persons engaged in similar
businesses under similar situations or
circumstances or after considering other
relevant information may prescribe a
minimum amount of such gross receipts,
sales and taxable base, and such amount so
prescribed shall be prima facie correct for
purposes of determining the internal
revenue tax liabilities of such person.
(D) Authority to Terminate Taxable
Period. - When it shall come to the
knowledge of the Commissioner that a
taxpayer is retiring from business subject to
tax, or is intending to leave the Philippines or
to remove his property therefrom or to hide
or conceal his property, or is performing any
act tending to obstruct the proceedings for
the collection of the tax for the past or current
quarter or year or to render the same totally
or partly ineffective unless such proceedings
are begun immediately, the Commissioner
shall declare the tax period of such taxpayer
terminated at any time and shall send the
taxpayer a notice of such decision, together
with a request for the immediate payment of
the tax for the period so declared terminated
and the tax for the preceding year or quarter,
or such portion thereof as may be unpaid,
and said taxes shall be due and payable
immediately and shall be subject to all the
penalties hereafter prescribed, unless paid
within the time fixed in the demand made by
the Commissioner.
(E) Authority of the Commissioner
to Prescribe Real Property Values. - The
Commissioner is hereby authorized to divide
the Philippines into different zones or areas
and shall, upon consultation with competent
appraisers both from the private and public
sectors, determine the fair market value of
real properties located in each zone or area.
For purposes of computing any internal
revenue tax, the value of the property shall
be, whichever is the higher of:
(1) The fair market value as determined by
the Commissioner; or
(2) The fair market value as shown in the
schedule of values of the Provincial
and City Assessors.
(F) Authority of the Commissioner
to Inquire into Bank Deposit Accounts
and Other Related information held by
Financial Institutions. [4] - Notwithstanding
any contrary provision of Republic Act No.
1405, Republic Act No. 6426, otherwise
known as the Foreign Currency Deposit Act
of the Philippines, and other general or
special laws, the Commissioner is hereby
authorized to inquire into the bank deposits
and other related information held by
financial institutions of:
(1) A decedent to determine his gross estate;
and
(2) Any taxpayer who has filed an application
for compromise of his tax liability
under Section 204(A)(2) of this Code
by reason of financial incapacity to pay
his tax liability.
In case a taxpayer files an application to
compromise the payment of his tax
liabilities on his claim that his financial
position demonstrates a clear inability
to pay the tax assessed, his
application shall not be considered
unless and until he waives in writing
his privilege under Republic Act No.
1405, Republic Act No. 6426,
otherwise known as the Foreign
Currency Deposit Act of the
Philippines, or under other general or
special laws, and such waiver shall
constitute the authority of the
Commissioner to inquire into the bank
deposits of the taxpayer.
(3) A specific taxpayer or taxpayers subject
of a request for the supply of tax
information from a foreign tax
authority pursuant to an international
convention or agreement on tax
matters to which the Philippines is a
signatory or a party of: Provided, That
the information obtained from the
banks and other financial institutions
may be used by the Bureau of Internal
Revenue for tax assessment,
verification, audit and enforcement
purposes.
In case of a request from a foreign tax
authority for tax information held by
banks and financial institutions, the
 exchange of information shall be done
in a secure manner to ensure
confidentiality thereof under such
rules and regulations as may be
promulgated by the Secretary of
Finance, upon recommendation of the
Commissioner.
The Commissioner shall provide the tax
information obtained from banks and
financial institutions pursuant to a
convention or agreement upon
request of the foreign tax authority
when such requesting foreign tax
authority has provided the following
information to demonstrate the
foreseeable relevance of the
information to the request:
(a) The identity of the person under
examination or investigation;
(b) A statement of the information being
sought, including its nature and the
form in which the said foreign tax
authority prefers to receive the
information from the Commissioner;
(c) The tax purpose for which the information
is being sought;
(d) Grounds for believing that the information
requested is held in the Philippines or
is in the possession or control of a
person within the jurisdiction of the
Philippines;
(e) To the extent known, the name and
address of any person believed to be
in possession of the requested
information;
(f) A statement that the request is in
conformity with the law and
administrative practices of the said
foreign tax authority, such that if the
requested information was within the
jurisdiction of the said foreign tax
authority then it would be able to
obtain the information under its laws or
in the normal course of administrative
practice and that it is in conformity with
a convention or international
agreement; and
(g) A statement that the requesting foreign
tax authority has exhausted all means
available in its own territory to obtain
the information, except those that
would give rise to disproportionate
difficulties.
The Commissioner shall forward the
information as promptly as possible to the
requesting foreign tax authority. To ensure a
prompt response, the Commissioner shall
confirm receipt of a request in writing to the
requesting tax authority and shall notify the
latter of deficiencies in the request, if any,
within sixty (60) days from receipt of the
request.
If the Commissioner is unable to obtain and
provide the information within ninety (90)
days from receipt of the request, due to
obstacles encountered in furnishing the
information or when the bank or financial
institution refuses to furnish the information,
he shall immediately inform the requesting
tax authority of the same, explaining the
nature of the obstacles encountered or the
reasons for refusal.
The term "foreign tax authority," as used
herein, shall refer to the tax authority or tax
administration of the requesting State under
the tax treaty or convention to which the
Philippines is a signatory or a party of.
(G) Authority to Accredit and
Register Tax Agents. - The Commissioner
shall accredit and register, based on their
professional competence, integrity and
moral fitness, individuals and general
professional partnerships and their
representatives who prepare and file tax
returns, statements, reports, protests, and
other papers with or who appear before, the
Bureau for taxpayers. Within one hundred
twenty (120) days from January 1, 1998, the
Commissioner shall create national and
regional accreditation boards, the members
of which shall serve for three (3) years, and
shall designate from among the senior
officials of the Bureau, one (1) chairman and
two (2) members for each board, subject to
such rules and regulations as the Secretary
of Finance shall promulgate upon the
recommendation of the Commissioner.
Individuals and general professional
partnerships and their representatives who
are denied accreditation by the
Commissioner and/or the national and
regional accreditation boards may appeal
such denial to the Secretary of Finance, who
shall rule on the appeal within sixty (60) days
from receipt of such appeal. Failure of the
Secretary of Finance to rule on the Appeal
within the prescribed period shall be deemed
as approval of the application for
accreditation of the appellant.

(H) Authority of the Commissioner
to Prescribe Additional Procedural or
Documentary Requirements. - The
Commissioner may prescribe the manner of
compliance with any documentary or
procedural requirement in connection with
the submission or preparation of financial
statements accompanying the tax returns.
Note: There was Circular was issued
by BIR to require lessor to submit list of
tenants. Para maka investigate xa and send
letter to tenant asking the rental rate. Para
makabo xa sa monthly income sa lessor vs
the exact amount of the rentals.
- meaning the powers of the
Commissioner is so broad na pwede xa mu
obtain ug info from 3rd party sources.
DISCUSSIONS ON SECTION 6 POWERS
1. Best Evidence Obtainable Rule (Sec 6
B)
(B) Failure to Submit Required
Returns, Statements, Reports and other
Documents. - When a report required by
law as a basis for the assessment of any
national internal revenue tax shall not be
forthcoming within the time fixed by laws or
rules and regulations or when there is
reason to believe that any such report is
false, incomplete or erroneous, the
Commissioner shall assess the proper
tax on the best evidence obtainable.
In case a person fails to file a
required return or other document at the
time prescribed by law, or willfully or
otherwise files a false or fraudulent
return or other document, the
Commissioner shall make or amend the
return from his own knowledge and from
such information as he can obtain through
testimony or otherwise, which shall be prima
facie correct and sufficient for all legal
purposes.
- Meaning: wala xa ni base sa
gisubmit sa taxpayers, adto xa lain na
sources or third party sources. It is for the
tax payer to refute amount. Mapugos si tax
payer to submit necessary papers
- tinapulan ni. Cannot be used
dayon2x. Does not all the time apply. Applies
only in the following instances (sec 6 B 2nd
paragraph):
1. Taxpayer fails to file returns.
2. Filing of false or fraudulent returns.
Diff. Between best evidence rule of RoC
and Best evidence Obtainable Rule of
NIRC.
In the Best evidence rule of RoC, the
original document is the best evidence, while
in the Best Evidence obtainable rule of the
NIRC, the BIR will resolve to any available
evidence to assess the taxpayer.
2. EXCEPTIONS TO BANK SECRECY
LAW (Sec. 6 F of NIRC as amended by RA
10021), where the BIR Commissioner can
inquire/examine into bank deposits of tax
payers, starting 2010
1. A decedent to determine his gross
estate.
2. Any taxpayer who has filed an
application for compromise of his tax liability
under Sec. 204 (A)(2) reason of financial
incapacity to pay his tax liability.
3. A specific taxpayer or taxpayers
subject of a request for the supply of tax
information from a foreign tax authority
pursuant to an international convention or
agreement on tax matters to which the
Philippines is a signatory or a party of:
Provided, That the information obtained from
the banks and other financial institutions
may be used by the Bureau of Internal
Revenue for tax assessment, verification,
audit and enforcement purposes. (ex.
Japan, Canada, New Zealand)
Q: if naa suspicion of non payment of taxes,
pwede si commissioner mu inquire into the
bank deposits?
A: No. List is exclusive. suspicion of non
payment of taxes is not enough.
3. Sec 6 (E), as amended by the Train law.
Authority of the Commissioner to
Prescribe Real Property Values - The
Commissioner is hereby authorized to divide
the Philippines into different zones or
areas and shall, upon consultation with
competent appraisers both from the private
and public sectors, determine the fair market
value of real properties located in each zone
or area. For purposes of computing any
internal revenue tax, the value of the
property shall be, whichever is the higher of:
(1) The fair market value as
determined by the Commissioner; or
(2) The fair market value as shown in
the schedule of values of the
Provincial and City Assessors.
Note: Sec 6 (E) refers to Zonal Value.
Those are open to the public.
Cases:
1. COMMISSION OF INTERNAL REVENUE
vs. AQUAFRESH SEAFOODS, INC.
Issue
Whether the existing Revised Zonal
Values of Real Properties in the City of
Roxas or the fair market value as determined
by BIR will be used as basis for the capital
gains tax and documentary tax
Held
CIR, cannot unilaterally change the
zonal valuation of such properties to
“commercial” without first conducting a re-
evaluation of the zonal values as mandated
under Section 6(E) of the NIRC.
- dli maka change si CIR sa zonal
value without publication and public hearing.
4. Sec 6 (G) Authority to Accredit and
Register Tax Agents.
The Commissioner shall accredit and
register, based on their professional
competence, integrity and moral fitness,
individuals and general professional
partnerships and their representatives who
prepare and file tax returns, statements,
reports, protests, and other papers with or
who appear before, the Bureau for
taxpayers. Within one hundred twenty (120)
days from January 1, 1998, the
Commissioner shall create national and
regional accreditation boards, the members
of which shall serve for three (3) years, and
shall designate from among the senior
officials of the Bureau, one (1) chairman and
two (2) members for each board, subject to
such rules and regulations as the Secretary
of Finance shall promulgate upon the
recommendation of the Commissioner.
Individuals and general professional
partnerships and their representatives who
are denied accreditation by the
Commissioner and/or the national and
regional accreditation boards may appeal
such denial to the Secretary of Finance, who
shall rule on the appeal within sixty (60) days
from receipt of such appeal. Failure of the
Secretary of Finance to rule on the Appeal
within the prescribed period shall be deemed
as approval of the application for
accreditation of the appellant.
Note: closure of businesses with tax
violation, power to register and accredit tax
agents
NON-DELEGABLE POWERS OF THE
COMMISSIONER:
SEC. 7. Authority of the Commissioner to
Delegate Power. - The Commissioner may
delegate the powers vested in him under the
pertinent provisions of this Code to any or
such subordinate officials with the rank
equivalent to a division chief or higher,
subject to such limitations and restrictions as
may be imposed under rules and regulations
to be promulgated by the Secretary of
Finance, upon recommendation of the
Commissioner: Provided, however, That the
following powers of the Commissioner
shall not be delegated:
(a) The power to recommend the
promulgation of rules and
regulations by the Secretary of
Finance;
(b) The power to issue rulings of first
impression or to reverse, revoke or
 modify any existing ruling of the
Bureau;
(c) The power to compromise or abate,
under Sec. 204 (A) and (B) of this
Code, any tax liability: Provided,
however, That assessments issued by
the regional offices involving basic
deficiency taxes of Five hundred
thousand pesos (P500,000) or less, and
minor criminal violations, as may be
determined by rules and regulations to
be promulgated by the Secretary of
finance, upon recommendation of the
Commissioner, discovered by regional
and district officials, may be
compromised by a regional evaluation
board which shall be composed of the
Regional Director as Chairman, the
Assistant Regional Director, the heads
of the Legal, Assessment and
Collection Divisions and the Revenue
District Officer having jurisdiction
over the taxpayer, as members; and
(d) The power to assign or reassign
internal revenue officers to
establishments where articles
subject to excise tax are produced or
kept.
Q: What is a BIR Ruling.
A: less formal interpretations of the Tax
Code provisions issued by the
Commissioner of Internal Revenue pursuant
to Sec. 4 of the Tax Code. These are
interpretation of tax laws and regulations
issued by the BIR. They are usually
rendered upon the request of taxpayers to
clarify or interpret certain provision of tax law
or revenue regulations or other issuances of
the BIR.
A: very specific ang coverage and applies to
specific persons ra. Very specific to the
taxpayer.
Q: What is a BIR regulation
A: are formal interpretations of Tax Code
provisions promulgated by the Secretary of
Finance, upon the recommendation of the
Commissioner of Internal Revenue pursuant to
Sec. 244 of the Tax Code. As the regulations are
promulgated by the Secretary of Finance, there is
permanence and stability in tax laws. Regulations
cannot just be changed or amended by rulings or
other administrative issuances signed by the
Commissioner. To revoke, modify or amend
existing regulations, another regulation is
required.
A: mao ni xa ang RR (rules and regulations) on
certain provisions of the Tax Code.
Implementing rules ni xa. Covers all tax payers.
Q: is a BIR Ruling the same as a BIR
Regulation? If not, what is the difference?
A: sa BIR Ruling: Very specific to a certain
taxpayer. BIR Regulation: Covers all tax payers.
Kinds of BIR Rulings and their Distinctions
1. BIR ruling of First Impression - involves
novel issues. Cannot be delegated to any
subordinate
2. BIR Ruling with Established Precedents -
mere reiterations of rulings made by BIR. Can be
delegated to subordinate officers.
Q: What is a Revenue Memorandum Circular?
A: are issuances issued by the BIR to the
taxpayers to clarify certain matters that are not
explained by the revenue regulations.
-ex. RMC availments under senior
citizens act.
Q: What is a Revenue Memorandum Order?
A: These are directives or instructions outlining
procedures, techniques, methods, processes,
operations, activities, work flow, and the like,
which are necessary to carry out programs or to
achieve policy goals and objectives. These
issuances may be of general or of limited scope
yet in any case require definite compliance by
those concerned. They are not addressed to any
particular group of employees or offices because
they are for general information, but those
directly concerned with the compliance of these
provisions are either definitely stated, or
unmistakably implied thereat.
A: Orders addressed by the Commissioner to the
Officers concerning taxpayers. But as taxpayers,
you should still read the RMO kay concerned
mani xa sa taxpayers.
 ex. RMO issued by BIR to implement
Plan Kandado for violations of taxpayers. A
Q: Who are considered Deputies of the
Commissioners?
A: SEC. 12. Agents and Deputies for Collection
of National Internal Revenue Taxes. - The
following are hereby constituted agents of the
Commissioner:
a) The Commissioner of Customs and his
subordinates with respect to the
collection of national internal
revenue taxes on imported goods;
b) The head of the appropriate
government office and his
subordinates with respect to the
collection of energy tax; and
c) Banks duly accredited by the
Commissioner with respect to
receipt of payments internal
revenue taxes authorized to be made
thru banks.
Q: Does this mean that the Commissioner of
Customs is lower than Commissioner of BIR?
A: NO. Commissioner of Customs is an
agent/deputy to the Commissioner of BIR only
on the collection of internal revenue taxes on
imported goods. All else, ka level na sila under
the Secretary of Finance. Instead, of having an
officer of BIR within the Customs, I delegate
nalang xa to the Commissioner of Customs. The
taxes collected shall be credited to the account of
the BIR.
Note: Starting 2001, makabayad naka ug income
tax sa mga AAB (authorized agents banks).
Q: If you are an officer of the Bank, what
factors will you consider para mu apply ka
for AAB?
A: Benefits – money FLOAT, tax payments
remitted to the banks won’t be automatically
remitted by the bank. BIR will allow to use the
money as float. Naa benefit ani in real time
banking industry.
Case
1. Sec of Finance vs Oro Maura Shipping
Lines
Issue
WON the Secretary of Finance can order
a re-assessment of the vessel M/V “HARUNA.”
Held
You cannot prevent the Commissioner
from making a reassessment in order to pay the
the real amount of taxes.
2. CIR vs Hantex Trading Co.
Facts
Hantex Trading involve in trading of
plastics. CIR received confidential information
that the respondent had imported synthetic resin
amounting to P115,599,018.00 but only declared
P45,538,694.57. only photocopies of teh
documents as proof were gathered.
Issue
WON the final assessment of the
petitioner against the respondent for deficiency
income tax and sales tax for the latter’s 1987
importation of resins and calcium bicarbonate is
based on competent evidence and the law.
Held
No. Sayop ang assessment. The best
evidence obtainable under Section 16 of the
1977 NIRC, as amended, does not include
mere photocopies of records/documents. The
petitioner, in making a preliminary and final tax
deficiency assessment against a taxpayer, cannot
anchor the said assessment on mere machine
copies of records/documents. Mere photocopies
of the Consumption Entries have no probative
weight if offered as proof of the contents
thereof. The reason for this is that such copies
are mere scraps of paper and are of no
probative value as basis for any deficiency
income or business taxes against a taxpayer.
- BIR may resort to other methods but dli
apil ang photocopies.
INCOME TAX
 - characterstics: si a direct, ad valorem,
national,
- tax on income
Income - anything that flows into the taxpayer,
other than a mere return of capital.
Vs
Capital -
Requisites of Taxability of an Income:
1. There must be an income gained/profit
2. The income gained or profit must be realize
(realized means must arise from a close and
completed transaction)
3. The income gained or profit must not be
exempt under any treaty or tax law.
ex. Parcel of land, purchased on 2010 for 1m. In
2014, appraisal is 8m. In 2015, you sold the
property of 10m.
Q: is there a taxable income? No bec.
There is an income but no realised income. No
closed and completed taxation.
Sec 22 NIRC Defn of Terms
(B) The term 'corporation' shall
include partnerships, no matter how created
or organized, joint-stock companies, joint
accounts (cuentas en participacion),
association, or insurance companies, but
does not include general professional
partnerships and a joint venture or
consortium formed for the purpose of
undertaking construction projects or
engaging in petroleum, coal, geothermal
and other energy operations pursuant to
an operating consortium agreement under
a service contract with the Government.
'General professional partnerships' are
partnerships formed by persons for the sole
purpose of exercising their common
profession, no part of the income of which is
derived from engaging in any trade or
business.
- not the same as the definition under the
Corporation Code. Here more expansive.
- Exception: general profession al
partenership; joint venture or consortium.
Income Tax has only 2 types of taxpayers:
1. Individual taxpayer
2. Corporate Taxpayer
Individual Tax payer
1. RC - resident citizen. Filipino residing in the
philippines.
2. NRC - Filipino non residsec 22 (E) The term
'nonresident citizen' means;
(1) A citizen of the Philippines who
establishes to the satisfaction of the
Commissioner the fact of his physical
presence abroad with a definite
intention to reside therein.
(2) A citizen of the Philippines who leaves
the Philippines during the taxable year
to reside abroad, either as an
immigrant or for employment on a
permanent basis.
(3) A citizen of the Philippines who works
and derives income from abroad and
whose employment thereat requires
him to be physically present abroad
most of the time during the taxable
year.
(4) A citizen who has been previously
considered as nonresident citizen and
who arrives in the Philippines at any
time during the taxable year to reside
permanently in the Philippines shall
likewise be treated as a nonresident
citizen for the taxable year in which he
arrives in the Philippines with respect
to his income derived from sources
abroad until the date of his arrival in
the Philippines.
(5) The taxpayer shall submit proof to the
Commissioner to show his intention of
leaving the Philippines to reside
permanently abroad or to return to and
reside in the Philippines as the case
may be for purpose of this Section.
3. RA - resident alien. Sec 22 (F) The term
'resident alien' means an individual whose
residence is within the Philippines and who
is not a citizen thereof.
4. NRAETB - non-resident alien engage in
trade or business.
 - Sec 25(A)(1). A nonresident alien shall be treated as an overseas contract
individual engaged in trade or business in the worker;
Philippines shall be subject to an income tax in (D) An alien individual, whether a
the same manner as an individual citizen and a resident or not of the Philippines, is taxable
resident alien individual, on taxable income only on income derived from sources within
received from all sources within the Philippines.
the Philippines;
A nonresident alien individual who shall come
to the Philippines and stay therein for an (E) A domestic corporation is
aggregate period of more than one hundred taxable on all income derived from sources
eighty (180) days during any calendar year within and without the Philippines; and
shall be deemed a 'nonresident alien doing (F) A foreign corporation, whether
business in the Philippines'. Section 22 (G) of engaged or not in trade or business in the
this Code notwithstanding. Philippines, is taxable only on income
derived from sources within the Philippines.
5. NRANETB - non-resident aline not engaged
in trade or business.
Income from sources Income from
within outside/wiht
Corporate Taxpayer
1. DC -
2. RFC - Resident Foreign Corporation.
Considered as a RFC if doing business in the RC Y Y
philippines
3. NRFC
NRC Y X
“Most of the time” - under RR 2-40 means 183 RA Y X
days ka wala sa philippines.
NRAETB Y X

NRANETB Y X
SEC 23 - most imp provision of the NIRC
DC Y Y
SEC. 23. General Principles of Income
Taxation in the Philippines. - Except when
otherwise provided in this Code: RFC Y X
(A) A citizen of the Philippines
residing therein is taxable on all income NRFC Y X
derived from sources within and without the
Philippines;
(B) A nonresident citizen is taxable
only on income derived from sources within
the Philippines; Sa exam, ayaw paghimo table, I explain lang.
(C) An individual citizen of the
Philippines who is working and deriving What to determine if taxable worldwide:
income from abroad as an overseas contract NATIONALITY, RESIDENCE, SOURCE
worker is taxable only on income derived OF THE INCOME
from sources within the Philippines:
Provided, That a seaman who is a citizen of Next meeting: section 23 in correlation of
the Philippines and who receives section 42. Focus to section 42.
compensation for services rendered abroad
as a member of the complement of a vessel Read up to III - letter O.
engaged exclusively in international trade Cases: Read up to III number 14.