4) KokoBar 2019-Tax - Justice Cathy Manahan Taxation Law Presentation PDF

2019 PRE-BAR LECTURE
ON TA X AT I O N
LAW
H ON. C ATHERINE T. M ANAHAN
Associate Justice
KokoBar 2019 Taxation Law: Justice Manahan
Part I.
General Principles
Part II.
National Taxation
Part III.
Local Taxation
Part IV.
Judicial Remedies
2
GENERAL PRINCIPLES
Inherent powers of the sovereign State
• Police power
• Eminent domain
• Taxation
“The power to tax is the strongest of all the powers of the

government” (Sison v. Ancheta)
“The police power of the state can be exercised through taxation

because taxes may be levied for the promotion of the welfare of the
public.” (Lutz v. Araneta)
GENERAL PRINCIPLES
Inherent and constitutional limitations of taxation
1. Due process of law

2. Equal protection of laws
3. Uniformity and equity in taxation
4. Non-imprisonment for non-payment of poll tax
5. Non-appropriation of proceeds of taxation
6. Originating in the House of Representatives
7. Presidential Veto
8. Subject to judicial review
9. Tax exemptions
10. Non-infringement of religious freedom
11. Non-infringement of press freedom
4
GENERAL PRINCIPLES
Requisites of a valid tax
• For public purpose

• Inherently legislative
• Generally payable in cash
• Territorial
• Subject to international comity
• Exempt government agencies performing governmental, not
proprietary functions
These are also the "INHERENT LIMITATIONS” of the taxing power. TAXES ARE
ENFORCED CONTRIBUTIONS WHICH ARE PROPORTIONAL IN CHARACTER SINCE
THEY ARE BASED ON THE ABILITY TO PAY LEVIED BY AUTHORITY OF THE LAW
FOR THE SUPPORT OF GOVERNMENT AND ALL ITS PUBLIC NEEDS.
GENERAL PRINCIPLES
Tax distinguished from other exactions
• License fee
• Toll
• Special assessment or levy
• Debt
• Subsidy
• Tariff
• Customs duties
• Margin fee
6
GENERAL PRINCIPLES
Kinds of taxes
• As to who bears the burden • As to rate or graduation

• direct (non-transferable) • proportional or flat
• indirect (transferable) • progressive or graduated
• As to purpose: • regressive
• fiscal • digressive
• regulatory or sumptuary • mixed tax
• compensatory
• As to determination of amount
• ad valorem
• specific
• As to the authority collecting the
tax
• national
• local or municipal
GENERAL PRINCIPLES
Doctrines in taxation
1. Construction and Interpretation of Tax Laws

2. Prospectivity of tax laws
3. Imprescriptibility of taxes
4. Double taxation
5. Escape from taxation
6. Exemption from taxation
Deutsche Bank AG Manila Branch v. CIR

The period of application for the availment of tax treaty relief required by
an RMO should not operate to divest entitlement to the relief, as it would
constitute violation of the tax treaty. At most, the application for a tax treaty
relief from the BIR should merely confirm the entitlement of the taxpayer to
the relief.
The obligation to comply with a tax treaty must take precedence over
the objective of the RMO.
8
GENERAL PRINCIPLES
Doctrines in taxation
7. Equitable recoupment
8. Prohibition on compensation and set-off
9. Compromise
10. Tax amnesty
NATIONAL TAXATION
Taxing authority
POWERS OF THE COMMISSIONER OF INTERNAL REVENUE (CIR) -

Power to interpret tax laws, power to decide tax cases, power to obtain
information, power to make assessment, authority to compromise, abate and
refund or credit taxes, power to suspend business operations, and authority to
delegate power
WHAT POWERS CANNOT BE DELEGATED BY THE CIR –

power to recommend rules and regulations to the SoF; power to issue first
interpretation regarding rulings or to reverse, revoke, or modify any existing
ruling of the BIR; power to assign or re-assign internal revenue officers to
establishments where articles subject to excise tax are produced or kept; and
power to compromise or abate.
Exception: Assessments issued by regional offices involving basic deficiency
taxes of P500,000 or less and minor criminal violations, discovered by regional
and district officials, may be compromised by a regional evaluation board
10
NATIONAL TAXATION
Taxing authority
CRITERIA IN IMPOSING PHILIPPINE INCOME TAX – citizenship or nationality

principle; residence or domicile principle; and source of income principle.
SEC. 23, NIRC. General principles of income taxation in the Philippines

Except when otherwise provided in the NIRC,
• The following are taxable on all income derived from sources within
and without the Philippines:
1. Resident citizens
2. Domestic corporations
• The following are taxable only on income derived from sources

within the Philippines:
1. Non-resident citizens
2. Citizens who are overseas contract workers
3. Resident alien
4. Non-resident alien
5. Foreign corporations, whether engaged or not in business in the
Philippines
11
NATIONAL TAXATION
Types of Philippine Income Taxes
1. Graduated income taxes on individuals

2. 8% optional income tax on gross sales or receipts of individuals
exceeding 250K but not 3 Million per year
3. Normal corporate income tax (CIT) on corporations
4. Minimum CIT
5. Special income tax on certain corporations
6. Capital gains tax (CGT) on unlisted shares of stock
7. CGT on sale of real property located in the Philippines which is a
capital asset
8. Final withholding tax(WHT) on passive incomes
9. Final WHT on income payments to non-residents (individual or
corporation)
10. Fringe benefits tax
11. Branch profits remittance tax; and
12. Improperly accumulated earnings tax (IAET)
12
NATIONAL TAXATION
Taxable period
1. Calendar year
2. Fiscal year
13
NATIONAL TAXATION
Kinds of taxpayers
1. Individuals – resident citizen, resident alien, non-resident citizen,

non-resident alien
2. Estates and trusts
3. General professional partnerships
4. Corporations – domestic corporation, resident foreign corporation,
non-resident foreign corporation
14
NATIONAL TAXATION
Income
– in its broad sense, is all wealth which flows into the taxpayer other
than as a mere return of capital. It includes the forms of income
specifically described as gains and profits, including gains derived from
the sale or other disposition of capital assets. (RR No. 2, Sec. 36)
When is income taxable: 3 requisites –

(a) there is gain or profit;
(b) the gain or profit is received or realized; and
(c) the income is not exempt under the law or treaty
Tests whether income is earned for tax purposes: realization test,

severance test, economic benefit test
15
NATIONAL TAXATION
Classification of income
§ Compensation
§ Fringe benefits
§ Professional income
§ Business income
§ Income from dealings in property
§ Passive investment income
§ Annuities
§ Prizes and awards
§ Pensions/retirement benefit
§ Income from any source
16
NATIONAL TAXATION
Exclusions and exemptions

§ Section 32(B), NIRC
Deductions
§ Optional standard deduction (OSD) vs. Itemized Deductions (Sec.
34, NIRC)
v For individuals, it’s 40% of gross sales or receipts for OSD
v For corporations, it’s 40% of gross income for OSD
v For the itemized deductions, remember the acronym:

BRECDDPPLIT
17
NATIONAL TAXATION
Income tax on individuals
§ Compensation income earner – graduated income tax rates (0% -

35%); not more than 250k income/year is exempt
§ Purely income from business or profession – same rates but with the
8% optional income tax based on gross sales or receipts + non-
operating income; provided, the annual gross sales or receipts
exceed P250K but do not exceed P3 Million. If it exceeds P3M, then
graduated rates apply.
§ Mixed income earners – compensation income is subject to

graduated rates while the business or professional income is subject
to the 8% OPTIONAL INCOME TAX. The 250K deduction is applied
against compensation income first.
18
NATIONAL TAXATION
Income tax on corporations
§ Domestic corporations – taxed on all its income sourced from within

and without the Philippines, excluding those subject to final tax
already, i.e passive income. Tax rates: either 30% of TI or 15% of
gross income if the ratio of cost of sales to gross sales or receipts
from all sources does not exceed 55% also optional for resident
foreign corporation
§ Foreign corporations – taxed on all income derived from sources

within the Philippines, whether or not engaged in trade or business
in the Philippines
§ Resident foreign corporation – a foreign corporation engaged in
trade or business in the Philippines
§ Non-resident foreign corporation – a foreign corporation not
engaged in trade or business in the Philippines
19
NATIONAL TAXATION
Filing of return and payment
Annual income tax return –

§ For individuals- April 15 (compensation); May 15 (NC)
§ For corporations - April 15 if calendar year; 15th day of the 4th
month from the close of the fiscal year
Quarterly income tax return –

§ For individuals with non-compensation income and corporations
20
NATIONAL TAXATION
Withholding taxes
– not a tax but a system of collecting tax at source, with the withholding
tax agent deducting the appropriate rate from the income payment and
remitting the tax withheld to the BIR.
Kinds: final, creditable, withholding tax on compensation
21
NATIONAL TAXATION
Transfer taxes
Donor’s Tax Estate Tax

6% of gross value above P250,000 6% of net estate
Inter-vivos Mortis causa
Sale below fair market value
***TRAIN Law: A sale, exchange, or other

transfer of property made in the ordinary
course of business will be considered as
made for an adequate and full
consideration in money or money’s worth
Exemptions Deductions
Cumulative
File within 30 days File within 1 year
22
NATIONAL TAXATION
Value-Added Tax
1. Destination Principle
2. Cross Border Doctrine
CIR v. Toshiba Information Equipment (Phils), Inc.

The Philippine VAT system adheres to the Cross Border Doctrine, according to
which, no VAT shall be imposed to form part of the cost of goods destined for
consumption outside of the territorial border of the taxing authority. Hence, actual
export of goods and services from the Philippines to a foreign country must be
free of VAT; while, those destined for use or consumption within the Philippines
shall be imposed with VAT.
It is now a settled rule that based on the Cross Border Doctrine, PEZA-registered
enterprises, such as Toshiba, are VAT-exempt and no VAT can be passed on to
them. PEZA-registered enterprise, which would necessarily be located within
ECOZONES, are VAT-exempt entities by virtue of Section 8 of R.A. No. 7916
which establishes the fiction that ECOZONES are foreign territory.
23
NATIONAL TAXATION
SUMMARY OF JURISPRUDENCE ON PRESCRIPTIVE PERIODS

FOR CLAIMING REFUND OR CREDIT OF INPUT VAT
A. Two-Year Prescriptive Period
1. It is only the administrative claim that must be filed within the two-year
prescriptive period. (Aichi case)
2. The proper reckoning date for the two-year prescriptive period is the close
of the taxable quarter when the relevant sales were made. (San Roque
case)
3. The only other rule is the Atlas ruling, which applied only from 8 June 2007
to 12 September 2008. Atlas states that the two-year prescriptive period for
filing a claim for tax refund or credit of unutilized input VAT payments
should be counted from the date of filing of the VAT return and payment of
the tax. (San Roque case)
24
NATIONAL TAXATION

B. 120+30 Day Period (NOTE: 90* days instead of 120 days under TRAIN)
1. The taxpayer can file an appeal in one of two ways: (1) file the judicial claim
within 30 days after the Commissioner denies the claim within the 120*-day
period, or (2) file the judicial claim within 30 days from the expiration of the
120-day period if the Commissioner does not act within the 120-day period.
2. As a general rule, the 30-day period to appeal is both mandatory and

jurisdictional. (Aichi and San Roque cases)
3. As an exception to the general rule, premature filing is allowed only if filed

between 10 December 2003 and 5 October 2010, when BIR Ruling No. DA-
489-03 was still in force. (San Roque case)
4. Late filing is absolutely prohibited, even during the time when BIR Ruling
No. DA-489-03 was in force. (San Roque case)
25
NATIONAL TAXATION

The Lascona case which held that a taxpayer cannot be prejudiced if

he chooses to wait for the final decision of the CIR is inapplicable.
• The Lascona case is based on Section 228 of the 1997 NIRC, which
pertains to a tax assessment, not input VAT refund or credit claim.
26
NATIONAL TAXATION
Tax remedies under the NIRC
PERIOD OF ASSESSMENT
3 years – from the last day of the prescribed period to file return; or
3 years – from the date of actual filing of the return, if made beyond the
prescribed period
Exceptions:
1. 10 years in case of falsity, fraud, or omission – from the date of
discovery
2. Waiver of Statute of Limitations (SOL)
PERIOD OF COLLECTION
3 years – from date of FAN
5 years – in case of false or fraudulent returns, from FAN date;
in case of waiver of SOL
27
NATIONAL TAXATION
Philippine Journalists, Inc. v. CIR
A waiver is a derogation of the taxpayers’ right to security against

prolonged and unscrupulous investigations and must therefore be
carefully and strictly construed.
For the purpose of safeguarding taxpayers from any unreasonable

examination, investigation or assessment, our tax law provides a
statute of limitations in the collection of taxes. Thus, the law on
prescription should be liberally construed in order to afford such
protection. As a corollary, the exceptions to the law on prescription
should perforce be strictly construed.
In this case, the Court found the waiver invalid because:

1. It is an unlimited waiver (no period specified)
2. It failed to state the date of acceptance by the BIR
3. The petitioner was not furnished a copy of the waiver
28
NATIONAL TAXATION
CIR v. Kudos Metal Corporation
The CIR contended that taxpayers who execute waivers should be

estopped from claiming prescription – because it was them who asked
for additional time in the first place.
However, the Supreme Court held that the BIR cannot hide behind
the doctrine of estoppel to cover for its failure to comply with
RMO 20-90, which prescribes the requisites of a valid waiver.
The doctrine of estoppel should be resorted to only as a means of
preventing injustice – it cannot give validity to an act that is prohibited
by law or one that is against public policy.
29
NATIONAL TAXATION
CIR v. Next Mobile, Inc.
In this case, the waivers were executed without the authority of the
taxpayer’s representative to sign. The Court held that:
“We shall treat this case as an exception to [the] rule and find the
Waivers valid…”
1. The parties are in pari delicto. They shall have no action against
each other. However, the Court may interfere when public policy
requires its intervention, and in this case, to uphold the validity of
the Waivers is consistent with the public policy that taxes are the
lifeblood of the government
2. Parties who do not come to the court with clean hands cannot be
allowed to benefit from their own wrongdoing
3. The application of estoppel is necessary to prevent the undue
injury that the government would suffer because of the cancellation
of the assessment of tax liabilities
30
NATIONAL TAXATION
Civil penalties
Tax deficiency – amount still due and collectible from a taxpayer upon
audit or investigation
Tax delinquency – failure of the taxpayer to pay the tax due on the date
fixed by law or indicated in the assessment notice or letter of demand
31
NATIONAL TAXATION
Assessment process
1. Letter of Authority (LOA)
Medicard Philippines, Inc. v. CIR

The Court held that the assessment is void for lack of an LOA.
An LOA cannot be dispensed with just because none of the financial books or
records was examined. Section 6 of the NIRC requires authority from the CIR
or from his duly authorized representatives before an examination “of a
taxpayer” may be made, therefore it is not dependent on whether or not the
taxpayer would be required to physically open his books and financial
records.
The BIR’s RELIEF System is not an excuse to dispense with this requirement
because the rationale is the same whether the CIR conducts a physical
examination of the taxpayer’s records or not – it is is to prevent undue
harassment, and to level the playing field between the government’s vast
resources for tax assessment, collection, and enforcement, and the solitary
taxpayer.
32
NATIONAL TAXATION
Assessment process
2. Preliminary Assessment Notice (PAN)

3. Final Assessment Notice (FAN)
CIR v. Metro Star Superama, Inc.

In this case, the taxpayer failed to receive the PAN. Thus, the question is –
are the requirements of due process satisfied if only the FAN, stating the
computation of tax liabilities and a demand to pay within the prescribed
period, was sent to the taxpayer?
No. Section 228 of the Tax Code clearly requires that the taxpayer must first
be informed that he is liable for deficiency taxes through the sending of a
PAN. He must be informed of the facts and the law upon which the
assessment is made. The law imposes a substantive, not merely a formal,
requirement. To proceed heedlessly with tax collection without first
establishing a valid assessment is evidently violative of the cardinal principle
in administrative investigations – that taxpayers should be able to present
their case and adduce supporting evidence
33
NATIONAL TAXATION
Assessment process
4. Final Decision on Disputed Assessment (FDDA)
CIR v. Liquigaz
A void FDDA does not ipso facto render the assessment void. Decision and
assessment being different, the invalidity of one does not necessarily result to
the invalidity of the other. A void decision is equivalent to an inaction, which
may still be appealed before the CTA.
34
NATIONAL TAXATION
SUMMARY OF PERIODS TO BE OBSERVED

IN PROTESTING AN ASSESSMENT
1. 30 days after receipt of the FAN to file administrative protest

2. 60 days to submit complete supporting documents
3. 180 days for the BIR to act on the protest
4. 30 days from the expiry of the 180-day period, or from receipt of the
FDDA, to file a petition for review with the CTA
35
NATIONAL TAXATION
SUMMARY OF PERIODS TO BE OBSERVED

IN PROTESTING AN ASSESSMENT
[CIR v. Avon] Following the doctrine in Lascona v. CIR, a taxpayer

cannot be prejudiced if he chooses to wait for the final decision of the
CIR on the protested assessment. The law has always contemplated a
scenario where the CIR will decide on the protested assessment.
Accordingly, two options are available to the taxpayer:

1. To file a petition for review before the CTA within 30 days after the
expiration of the 180-day period, or from receipt of the FDDA
2. To await the final decision of the CIR and appeal this final decision
within 30 days from receipt of it.
These two options are mutually exclusive, and resort to one bars the
application of the other.
36
NATIONAL TAXATION
Tax collection
1. Tax Lien
2. Distraint
3. Garnishment
4. Levy
5. Forfeiture
GENERAL RULE [Sec. 218, NIRC]: No court shall have the authority to grant
an injunction to restrain the collection of any national internal revenue tax, fee,
or charge, imposed by the NIRC
• Appeal to the CTA shall not suspend the payment, levy, distraint, or sale of
any property of the taxpayer for the satisfaction of his tax liability [Sec. 11,
RA 1125, as amended]
EXCEPTION [Sec. 11, RA 1125, as amended]: When, in the opinion of the

CTA, the collection may jeopardize the interest of the government and/or
taxpayer, the Court may at any stage of the proceeding may suspend the said
collection and require the taxpayer either to deposit the amount claimed or to
file a surety bond for not more than double the amount
37
LOCAL TAXATION
Fundamental principles of local taxation
(a) Taxation shall be uniform in each local government unit;

(b) Taxes, fees, charges and other impositions shall:
1. be equitable and based as far as practicable on the taxpayer's ability to
pay;
2. be levied and collected only for public purposes;
3. not be unjust, excessive, oppressive, or confiscatory;
4. not be contrary to law, public policy, national economic policy, or in
restraint of trade;
(c) The collection of local taxes, fees, charges and other impositions shall in no
case be let to any private person;
(d) The revenue collected pursuant to the provisions of this Code shall inure
solely to the benefit of, and be subject to the disposition by, the local
government unit levying the tax, fee, charge or other imposition unless
otherwise specifically provided herein; and
(e) Each local government unit shall, as far as practicable, evolve a progressive
system of taxation.
38
LOCAL TAXATION
Specific taxing powers of LGUs

Provinces Cities Municipalities Barangays
1. Tax on transfer Taxes, fees, and 1. Tax on business 1. Tax on gross
of real property charges which the 2. Fees and sales or receipts
2. Tax on business province or charges on of small-scale
of printing and municipality may business and stores/retailers
publication impose occupation 2. Service fees on
3. Franchise tax except as use of
4. Tax on sand, reserved to the barangay-owned
gravel, and province properties
other quarry 3. Fees for sealing 3. Barangay
resources and licensing of clearance
5. Professional tax weights and 4. Other fees and
6. Amusement tax measures charges on
7. Tax for every 4. Fishery rentals, commercial
delivery truck or fees, and breeding of
van charges fighting cocks,
5. Community tax places of
recreation which
charge
admission fees,
outdoor
advertisements
39
LOCAL TAXATION
Specific taxing powers of LGUs
Provinces Cities Municipalities Barangays

Common Revenue-Raising Powers
1. Service fees and 1. Service fees and 1. Service fees and 1. Service fees and
charges charges charges charges
2. Public utility 2. Public utility 2. Public utility 2. Public utility
charges charges charges charges
3. Real property 3. Real property 3. Real property
tax tax tax (Metro
Manila
municipalities
only)
40
LOCAL TAXATION
Common limitations on taxing powers of LGUs

§ See complete list under SECTION 133, LGC. – Internal revenue
taxes (income tax, estate tax, etc.); impositions on goods carried into
or out of the territorial jurisdiction of the LGU; taxes on agricultural
and aquatic products when sold by marginal farmers or fishermen;
etc.
41
LOCAL TAXATION
Period of assessment
SEC. 194. Assessment
§ Within 5 years – from the date they become due
§ Within 3 years – from the date they become due, if accrued before
the effectivity of the LGC
§ Within 10 years, in case of fraud or intent to evade payment – from
date of discovery
No action for the collection of such taxes, fees, or charges, whether
administrative or judicial, shall be instituted after the expiration of such
period.
SEC. 194. Collection

§ Within 5 years, whether by administrative or judicial action – from the
date of assessment
§ Within 3 years – from the date of assessment, if assessed before the
effectivity of the LGC
No such action shall be instituted after the expiration of said period
42
LOCAL TAXATION
Period of assessment
The running of the periods of prescription shall be suspended for the
time during which:
1. The treasurer is legally prevented from making the assessment of

collection;
2. The taxpayer requests for a reinvestigation and executes a waiver
in writing before expiration of the period within which to assess or
collect; and
3. The taxpayer is out of the country or otherwise cannot be located.
43
LOCAL TAXATION
Taxpayer’s remedies
1. Protest of assessment
• 60 days – period to file written protest
• 60 days – period for the local treasurer to decide
• 30 days, from receipt of denial of protest or lapse of 60-day
period – period to appeal with the court of competent
jurisdiction
2. Claim for refund of tax credit for erroneously or illegally

collected taxes, fees, or charges
SEC. 196, LGC. Claim for Refund of Tax Credit. –
No case or proceeding shall be maintained in any court for the recovery of
any tax, fee, or charge erroneously or illegally collected until a written
claim for refund or credit has been filed with the local treasurer. No case or
proceeding shall be entertained in any court after the expiration of 2 years
from the date of the payment of such tax, fee, or charge, or from the date
the taxpayer is entitled to a refund or credit.
44
LOCAL TAXATION
Remedies of the LGU for collection

1. Administrative action
a) Distraint of personal property
b) Levy on real property
2. Judicial action
The local government unit concerned may enforce the collection of
delinquent taxes, fees, charges or other revenues by civil action in
any court of competent jurisdiction. The civil action shall be filed by
the local treasurer.
45
LOCAL TAXATION
Real property taxation

SEC. 198, LGC. Fundamental Principles
1. Real property shall be appraised at its current and fair market
value;
2. Real property shall be classified for assessment purposes on the
basis of its actual use;
3. Real property shall be assessed on the basis of a uniform
classification within each local government unit;
4. The appraisal, assessment, levy and collection of real property tax
shall not be let to any private person; and
5. The appraisal and assessment of real property shall be equitable.
46
LOCAL TAXATION
Exemption from real property taxes

1. Property owned by the Republic of the Philippines or any of its
political subdivisions, except when beneficial use is granted to a
taxable person
2. Charitable institutions, churches, parsonages or convents
appurtenant thereto, mosques, nonprofit or religious cemeteries
and all lands, buildings, and improvements actually, directly, and
exclusively used for religious, charitable or educational purposes
3. All machineries and equipment that are actually, directly and
exclusively used by local water districts and government-owned or -
controlled corporations engaged in the supply and distribution of
water and/or generation and transmission of electric power;
4. All real property owned by duly registered cooperatives as provided
for under R. A. No. 6938; and
5. Machinery and equipment used for pollution control and
environmental protection
47
LOCAL TAXATION
Collection of real property tax

Date of accrual of real property taxes and special levies
• The real property tax for any year shall accrue on the first day of
January and from that date it shall constitute a lien on the property
which shall be superior to any other lien, mortgage, or encumbrance
of any kind whatsoever, and shall be extinguished only upon the
payment of the delinquent tax.
Collection of taxes
• The local assessor shall prepare and submit an assessment roll to
the local treasurer on or before December 31 of each year
• The local treasurer shall post on or before January 31 the notice of
dates when the tax may be paid at a conspicuous and publicly
accessible place at the city/municipal hall. The notice shall also be
published in a newspaper of general circulation in the locality once a
week for 2 consecutive weeks.
48
LOCAL TAXATION
Collection of real property tax

Periods within which to collect
• 5 years – from the date the taxes become due
• 10 years, in case of fraud – from date of discovery
The period to collect tax shall be suspended when:

1. the local treasurer is legally prevented to collect tax
2. the property owner requests for reinvestigation and writes a waiver
before the expiration of the period to collect
3. the property owner is out of the country or cannot be located
49
LOCAL TAXATION
Contesting an assessment
1. Payment under protest

2. File protest with treasurer
• 30 days from payment of the tax with the local treasurer
• The treasurer shall decide the protest within 60 days from
receipt
3. Refunds or credits of real property taxes
• 2 years from the date the taxpayer is entitled to reduction or
adjustment
• The local treasurer shall decide the claim within 60 days from
receipt
In case the claim for tax refund or credit is denied, the taxpayer may
appeal to the LBAA, then CBAA, then CTA En Banc.
50
LOCAL TAXATION
Contesting valuation of real property
1. Appeal to the LBAA

• 60 days from the date of receipt of the written notice of
assessment by filing a petition
• The LBAA shall decide the appeal within 120 days from the date
of receipt
2. Appeal to the CBAA
• 30 days after receipt of the decision of the LBAA
• The decision of the CBAA may be appealed to the CTA through
a petition for review within 30 days from receipt of such decision
Effect of payment of tax

SEC. 231. Appeal on assessments shall not suspend the collection of
the taxes on the property involved as assessed, without prejudice to the
subsequent readjustment depending on the final outcome of the appeal
51
LOCAL TAXATION
Erroneous assessment Illegal assessment

• presupposes that the • made without authority under
taxpayer is subject to tax but the law
is disputing the correctness • the taxpayer may directly
of the amount assessed resort to judicial action
• requires that the taxpayer without paying under protest
exhaust the administrative the assessed tax and without
remedies provided under the filing an appeal with the
LGC LBAA
52
LOCAL TAXATION
Remedies of the LGU for collection

of real property taxes
1. Issuance of notice of delinquency

2. Local Government’s Lien
3. Levy
4. Sale
• Right of redemption – within 1 year from the date of sale
5. Resale
6. Further levy until full payment of amount due
53
JUDICIAL REMEDIES
Jurisdiction of the CTA

§ Exclusive original and appellate jurisdiction over civil cases
§ Exclusive original and appellate jurisdiction over criminal cases
54
JUDICIAL REMEDIES

Asiatrust Development Bank, Inc. v. CIR
Section 1, Rule 8 of the Revised Rules of the CTA states that:

In cases falling under the exclusive appellate jurisdiction of the
CTA en banc, the petition for review of a decision or resolution of
the Court in Division must be preceded by the filing of a timely
motion for reconsideration or new trial with the Division.
Failure to file a timely motion for reconsideration or new trial is a

ground for dismissal because the word “must” indicates that the filing is
mandatory. This also applies to amended decisions because an
amended decision is a different decision, and is therefore a
proper subject of a motion for reconsideration.
55
JUDICIAL REMEDIES

CIR v. Leal
Assailed in this case are rulings of the CIR implementing the Tax Code
on the taxability of pawnshops. The Court held that the jurisdiction to
review rulings of the CIR pertains to the CTA, not to the RTC.
The RTC has no jurisdiction to take cognizance of the case because

the subject matter thereof clearly falls within the scope of cases now
exclusively within the jurisdiction of the CTA under Section 7 of R.A.
No. 1125, which includes: decisions of the Commissioner of Internal
Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in relation
thereto, or other matters arising under the National Internal Revenue
Code or other law or part of law administered by the Bureau of Internal
Revenue.
56
JUDICIAL REMEDIES

Bloomberry Resorts and Hotels, Inc. v. CIR
Under R.A. No. 1125, as amended by RA No. 9282, rulings of the CIR
(including revenue memorandum circulars) are appealable to the CTA,
and not to any other courts. The CTA can rule not only on the propriety
of an assessment or tax treatment of a certain transaction, but also on
the validity of the revenue regulation or revenue memorandum circular
on which the said assessment is based.
Thus, in questioning the validity of the RMC, petitioner in this case

violated the rule on hierarchy of courts when it directly appealed to the
Supreme Court.
57
JUDICIAL REMEDIES

CIR v. Lancaster
The jurisdiction of the CTA is not limited only to cases which involve
decisions or inactions of the CIR on matters relating to assessments or
refunds, but also includes other cases arising from the NIRC or related
laws administered by the BIR. The question of whether or not to
impose a deficiency tax assessment comes within the purview of the
words "other matters" arising under the NIRC.
Likewise, the issue on whether the revenue officers who conducted the
examination on the taxpayer exceeded their authority may be
considered as covered by the terms "other matters“. The authority to
make an examination or an assessment, being a matter provided
for by the NIRC, is well within the exclusive and appellate
jurisdiction of the CTA.
58
JUDICIAL REMEDIES

CIR v. Hambrecht & Quist
In this case, the issue is whether the BIR’s right to collect taxes had
already prescribed. The CIR contends that the CTA has no jurisdiction
because the 30-day period to protest had already lapsed, therefore the
appeal should be dismissed.
The Court held that the jurisdiction of the CTA is not limited to cases
which involve decisions of the CIR on matters relating to assessments
or refunds. The second part of the provision covers other cases that
arise out of the NIRC or related laws administered by the BIR. Here,
the issue of prescription of the collection is a subject matter falling
under Section 223(c) of the 1986 NIRC, the law applicable at the time
the disputed assessment was made, therefore it is cognizable by the
CTA.
59
JUDICIAL REMEDIES

PSALM v. CIR
The DOJ is vested by law with jurisdiction over disputes between two
wholly government-owned corporations and the BIR, which is a
government office.
Presidential Decree No. 242 provides that all disputes and claims
solely between government agencies and offices, including
GOCCs, shall be administratively settled or adjudicated by the
Secretary of Justice, the Solicitor General, or the Government
Corporate Counsel, depending on the issues and government
agencies involved.
As regards cases involving only questions of law, it is the Secretary
of Justice who has jurisdiction, pursuant to Sections 1, 2, and 3 of PD
242, regardless of the issues and government agencies involved.
60
JUDICIAL REMEDIES

PSALM v. CIR
The constitutional power of control of the President cannot be diminished

by the CTA. If two executive offices or agencies cannot agree, it is only proper
and logical that the President, as the sole Executive who under the
Constitution has control over both offices or agencies in dispute, should
resolve the dispute instead of the courts. The judiciary should not intrude in
this executive function. Only after the President has decided or settled the
dispute can the courts’ jurisdiction be invoked. Moreover, under the doctrine
of exhaustion of administrative remedies, it is mandated that where a
remedy before an administrative body is provided by statute, such as PD No.
242, relief must be sought by exhausting this remedy prior to bringing an
action in court. A litigant cannot go to court without first pursuing his
administrative remedies; otherwise, his action is premature and his case is not
ripe for judicial determination.
61
JUDICIAL REMEDIES

Macario Lim Gaw v. CIR
The issue in this case is whether the civil action to question the FDDA is
deemed instituted with the criminal case for tax evasion. The Court held in the
negative.
Rule 111, Section 1 of the Rules of Court provides that what is deemed
instituted with the criminal action is only the action to recover civil liability
arising from the crime. Civil liability arising from a different obligation,
such as those created by law, is not deemed instituted with the criminal
action.
A tax evasion case has the purpose of imposing criminal liability on any
taxpayer who willfully attempts to evade or defeat tax. It is not required that a
tax deficiency assessment must first be issued for it to prosper. On the other
hand, a petition for review with respect to a deficiency assessment seeks to
question the FDDA and prevent it from becoming final. It is not deemed
instituted with the criminal case.
62
JUDICIAL REMEDIES

Macario Lim Gaw v. CIR
Basic is the rule that the payment of docket and other legal fees is both
mandatory and jurisdictional. However, mere failure to pay the same at
the time of the filing of the complaint does not necessarily cause the
dismissal of the case if:
1. the fees are paid within a reasonable period; and
2. the petitioner had no intention to defraud the government
In this case, the Supreme Court considered the fact that the taxpayer
merely relied in good faith on the pronouncements of the CTA First
Division that he is no longer required to pay the docket fees.
63
Thank you!
64

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2019 PRE-BAR LECTURE

KokoBar 2019 Taxation Law: Justice Manahan

KokoBar 2019 Taxation Law: Justice Manahan

Inherent powers of the sovereign State

“The power to tax is the strongest of all the powers of the

“The police power of the state can be exercised through taxation

KokoBar 2019 Taxation Law: Justice Manahan

Inherent and constitutional limitations of taxation

1. Due process of law

KokoBar 2019 Taxation Law: Justice Manahan

Requisites of a valid tax

• For public purpose

KokoBar 2019 Taxation Law: Justice Manahan

Tax distinguished from other exactions

KokoBar 2019 Taxation Law: Justice Manahan

• As to who bears the burden • As to rate or graduation

KokoBar 2019 Taxation Law: Justice Manahan

1. Construction and Interpretation of Tax Laws

Deutsche Bank AG Manila Branch v. CIR

KokoBar 2019 Taxation Law: Justice Manahan

KokoBar 2019 Taxation Law: Justice Manahan

POWERS OF THE COMMISSIONER OF INTERNAL REVENUE (CIR) -

WHAT POWERS CANNOT BE DELEGATED BY THE CIR –

KokoBar 2019 Taxation Law: Justice Manahan

CRITERIA IN IMPOSING PHILIPPINE INCOME TAX – citizenship or nationality

SEC. 23, NIRC. General principles of income taxation in the Philippines

• The following are taxable only on income derived from sources

Types of Philippine Income Taxes

1. Graduated income taxes on individuals

KokoBar 2019 Taxation Law: Justice Manahan

1. Individuals – resident citizen, resident alien, non-resident citizen,

KokoBar 2019 Taxation Law: Justice Manahan

When is income taxable: 3 requisites –

Tests whether income is earned for tax purposes: realization test,

KokoBar 2019 Taxation Law: Justice Manahan

KokoBar 2019 Taxation Law: Justice Manahan

Exclusions and exemptions

v For the itemized deductions, remember the acronym:

KokoBar 2019 Taxation Law: Justice Manahan

Income tax on individuals

§ Compensation income earner – graduated income tax rates (0% -

§ Mixed income earners – compensation income is subject to

KokoBar 2019 Taxation Law: Justice Manahan

Income tax on corporations

§ Domestic corporations – taxed on all its income sourced from within

§ Foreign corporations – taxed on all income derived from sources

KokoBar 2019 Taxation Law: Justice Manahan

Filing of return and payment

Annual income tax return –

Quarterly income tax return –

KokoBar 2019 Taxation Law: Justice Manahan

Kinds: final, creditable, withholding tax on compensation

KokoBar 2019 Taxation Law: Justice Manahan

Donor’s Tax Estate Tax

***TRAIN Law: A sale, exchange, or other

KokoBar 2019 Taxation Law: Justice Manahan

CIR v. Toshiba Information Equipment (Phils), Inc.

KokoBar 2019 Taxation Law: Justice Manahan

SUMMARY OF JURISPRUDENCE ON PRESCRIPTIVE PERIODS

A. Two-Year Prescriptive Period

KokoBar 2019 Taxation Law: Justice Manahan

SUMMARY OF JURISPRUDENCE ON PRESCRIPTIVE PERIODS

2. As a general rule, the 30-day period to appeal is both mandatory and