Taxation Law Pre Week 2019

Lyceum of the Philippines University College of Law
PRE-WEEK NOTES ON CIVIL LAW 1
TAXATION LAW
GENERAL PRINCIPLES
1. What are taxes?
Taxes are enforced contributions, generally payable in money, proportionate in
character, levied on persons, property or exercise of a right or privilege by the
state having jurisdiction, through its legislature for public purpose and paid at
regular periods or interval.
2. What is taxation?
Taxation is the inherent power of the State to impose burden, exercised by the
legislative as an inherent power of sovereignty upon persons, property, or other
objects within the territorial jurisdiction of the Philippines, in order to raise revenue
and defray the necessary expenses of the government, for the benefit of the
general welfare.
3. What is the nature of the power of taxation?

The power of taxation is inherent in sovereignty, a legislative function and is
subject to constitutional and inherent limitations.
4. What are the distinctions between the three inherent powers of the State?
TAXATION POLICE POWER EMINENT DOMAIN
Authority Government or its Government or its Government or public
who political subdivision political subdivision service companies
exercises and public utilities
the power
Purpose To raise revenue in Promotion of general To facilitate the
support of the welfare through taking of private
Government. regulations property for public
Regulation is merely purpose
incidental.
Persons Upon the community Upon community or On an individual as
affected or class of class of individuals the owner of a
individuals particular property
Amount of No ceiling except Limited to the cost of No imposition, the

monetary inherent limitations regulation, issuance owner is paid the fair
imposition of license or market value of his
surveillance property
Benefits Protection of a Maintenance of The person receives

received secured organized healthy economic the fair market value
society, benefits standard of society/ of the property taken
received from No direct benefit from him/ Direct
government/ No benefit results
direct benefit
Non- Tax laws generally Contracts may be Contracts may be

impairment do not impair impaired impaired
of contracts, unless:
contracts government is party
to contract granting
exemption for a
consideration
Test of Must not be contrary Must comply with the Must be for public
validity to inherent and tests on “lawful purpose and with
constitutional subjects” and “lawful payment of just
limitations means” compensation
5. What are the similarities between taxation, eminent domain and police
power?
a) They are inherent powers of the State.
b) All are necessary attributes of the sovereign.
c) They exist independently of the Constitution.
d) They constitute the three methods by which the State interferes with private
rights and property.
e) They presuppose equivalent compensation.
f) The legislature can exercise all three powers.
g) Purpose is or public welfare.
6. When is the distinction between the power of taxation, police power, and
eminent domain relevant?
The distinction is important when the one exercising it is the LGU (mere delegated
authority). Since Congress has the power to exercise the State inherent powers of
Police Power, Eminent Domain and Taxation, the distinction between police power
and the power to tax, which could be significant if the exercising authority were
mere political subdivisions (since delegation by it to such political subdivisions of
one power does not necessarily include the other), would not be of any moment
when Congress itself exercises the power. [NTC v. CA, 311 SCRA 508 (1999)]
7. What are the characteristics of taxation?

a) It is an enforced contribution.
b) It is generally payable in the form of money.
c) It is based on ability to pay.
d) It is comprehensive as it is levied on persons, property, rights, acts, privileges
or transactions.
e) It is levied by the State which has jurisdiction or control over the subject to be
taxed.
f) It is levied for public purpose.
8. What are the theories and basis of taxation?

a) Lifeblood Theory. Taxes are the lifeblood of the government and their prompt
and certain availability is an imperious need. Upon taxation depends the
government’s ability to serve the people for whose benefit taxes are collected.
b) Necessity Theory. The power of taxation proceeds upon the theory that the
existence of government is a necessity. It cannot continue without means to
pay its expenses; and that for those means it has the right to compel all citizens
and property within its limits to contribute.
c) Benefits-protection theory. It involves the power of the State to demand and
receive taxes based on the reciprocal duties of support and protection between
the State and its citizen.
d) Doctrine of Symbiotic Relationship. Taxes are what we pay for civilized
society. Without taxes, the government would be paralyzed. Hence, every
person who is able must contribute his share in the burden of running the
government. The government, for its part, is expected to respond in the form
of tangible and intangible benefits intended to improve.
e) Jurisdiction over subjects and objects. It is the country, state or sovereign
that gives protection and has the right to demand payment of taxes with which
to finance activities so it could continue to give protection. Taxation is territorial
because it is only within the confines of its territory that a country, state or
sovereign may give protection.
9. What are the canons of taxation or basic principles of sound tax system?
a) Fiscal Adequacy. The source of revenue should be sufficient to meet the
demands of public expenditure;
b) Theoretical Justice. The burden should be in proportion of the taxpayer's
ability to pay; and
c) Administrative Feasibility. Tax laws must be capable of being effectively
enforced with the least inconvenience to the taxpayer. Art. VI, Sec. 28(1), 1987
Constitution mandates that the rule on taxation must be uniform and equitable
and that the State must evolve a progressive system of taxation.
10. What are the inherent limitations of the power of taxation?

a) Territoriality. Taxation may be exercised only within the territorial
jurisdiction of the taxing authority. Within its territorial jurisdiction, the taxing
authority may determine the “place of taxation” or “tax situs”.
b) Public purpose. The proceeds of the tax must be used (a) for the support of
the State or (b) for some recognized objective of the government or directly
promote the welfare of the community.
c) International comity. This is a limitation which is founded on reciprocity
designated to maintain a harmonious and productive relationships among the
various states. Under international comity, a state must recognize the generally
accepted tenets of international law, among which are the principles of
sovereign equality among states and of their freedom from suit without their
consent, that limit the authority of a government to effectively impose taxes on

a sovereign state and its instrumentalities, as well as on its property held, and
activities undertaken in that capacity.
d) Non-delegability of the taxing power/ Inherently Legislative.
GENERAL RULE: The power of taxation, being purely legislative in character,
the Congress cannot delegate the powers to others.
EXCEPTIONS:
i. Delegation to the President (re: fixing tariff rates, import or export quotas,
tonnage and wharfage dues and other duties or imposts);
ii. Delegation to local governments (re: its own sources of revenues and levy
taxes, fees and charges);
iii. Delegation to administrative agencies (it must comply with the
completeness test and the existence of sufficiently determinate standard
test).
NOTE: The above-mentioned exceptions are subject to limitations provided for
by Congress, e.g. collection of payments of authorized agent banks and
barangay collection of poll tax.
e) Exemption of the government. To levy a tax upon public property would
render necessary new taxes on other public property for the payment of the
tax so laid and thus, the government would be taxing itself to raise money to
pay over for itself. This immunity also rests upon fundamental principles of
government, being necessary in order that the functions of government shall
not be unduly impeded.
NOTE: Properties of the national and local government are not subject to tax,
otherwise, it will result in the absurd situation of the government “taking money
from one pocket and putting it in another”.
EXCEPTION: When it chooses to tax itself. Nothing prevents Congress from
decreeing that even instrumentalities or agencies of the government
performing government functions may be subject to tax. Where it is done
precisely to fulfill a constitutional mandate and national policy, no one can
doubt its wisdom
11. What are non-delegable legislative powers?

a) Selection of subject to be taxed
b) Determination of purposes for which taxes shall be levied
c) Fixing of the rate/amount of taxation
d) Situs of tax
e) Kind of tax
12. What is the nature of the taxing power of the provinces, municipalities
and cities? How will the local government units be able to exercise their
taxing powers?
The taxing power of the provinces, municipalities and cities is directly conferred
by the Constitution by giving them the authority to create their own sources of
revenue. These local government units (LGUs) do not exercise the power to tax
as an inherent power or by a valid delegation of the power by Congress, but
pursuant to a direct authority conferred by the Constitution.
The said LGUs exercise the power to tax by levying taxes, fees, and charges
consistent with the basic policy of local autonomy, and to assess and collect all
these taxes, fees, and charges which will exclusively accrue to them. They are
authorized to pass tax ordinances (levy) and to pursue actions for assessment and
collection of the taxes imposed in said ordinances. [Sec. 129 and 132, LGC]
13. What are the constitutional limitations of power of taxation?

a) Due process of law (Art. III, Section 1);
b) Equal protection (Art. III, Section 1);
c) Uniformity and equitability (Art. VI, Sec. 28[1];
d) Progressive system of taxation (Art. VI, Sec. 28[11]);
e) Non-impairment clause (Art. III, Section 10);
f) Non-imprisonment for non-payment of poll (Art. III, Section 20);
g) Bills to originate from the House of Representatives (Art. III, Section 24);
h) Veto power of the president (Article VI, Section 27[2]);
i) President’s power to tax (Article VIII, Section 28[12]);
j) Taxation and freedom of the press (Article III, Section 4);
k) No appropriation or use of public money for religious purposes (Art. VI, Sec.
28);
l) Tax exemption of properties actually, directly, and exclusively used for
religious, charitable and education purposes (Art. VI, Sec. 28);
m) Tax exemption granted to non-stock non-profit educational institutions (Art. IX,
Sec. 4);
n) Origin of Revenue and Tariff Bills (Art. VI, Sec. 24);;
o) Majority vote of Congress for grant of tax exemption (Art. VI, Sec. 28);
p) Grant of power to the LGUs to create its own sources of revenue (Art. IX, Sec.
5);
q) Non-impairment of the Supreme Court’s jurisdiction over tax cases (Art. VI,
Sec. 30);
r) Special Fund (Art. VI, Section 29[13]);
s) Necessity of an appropriation before money may be paid out of the public
treasury;
t) Constitutional requirement on the subject and title of bills;
u) Prohibition on use of tax levied for special purpose (Art. VI, Sec. 29); and
v) Taxation and freedom of religion (Art. III, Section 5).
14. What are the stages or aspects of taxation?

a) Tax Legislation. Levy or imposition. This process involves the passage of tax
laws or ordinances through the legislature. The tax laws to be passed shall
determine those to be taxed (person, property or rights), how much is to be

collected (the rate and the base of tax), and how taxes are to be implemented
(the manner of imposing and collecting tax). It also involves the granting of tax
exemptions, tax amnesties or tax condonation.
b) Tax Administration. Assessment and collection. This process involves the act
of administration and implementation of tax laws by the executive through its
administrative agencies such as the bureau of internal revenue or bureau of
customs.
c) Payment. Compliance of taxpayer. This process involves the act of compliance
by the taxpayer in contributing his share to pay the expenses of the
government. Payment of tax also includes the options, schemes, or remedies
as may be legally open or available to the taxpayer.
d) Refund. Recovery of any tax alleged to have been erroneously or illegally
assessed or collected. A claim for refund must first be filed with the
Commissioner of Internal Revenue. A suit or proceeding may be filed within
two years from the date of payment of the tax or penalty regardless of any
supervening cause that may arise after payment. The commissioner may, even
without a written claim therefor, refund or credit any tax, where on the face of
the return, such payment appears clearly to have been erroneously paid [Sec.
229, NIRC].
15. What kind of taxes, fees, and charges are considered as National Internal
Revenue Taxes under the NIRC?
a) Income taxes;
b) Estate and donor’s taxes;
c) Value-added tax;
d) Other Percentage taxes;
e) Excise taxes;
f) Documentary stamp taxes; and
g) Such other taxes as are or hereafter may be imposed and collected by the
Bureau of Internal Revenue. [Sec. 21, NIRC of 1997]
16. What are the requisites of a valid tax?

a) It should be for a public purpose;
b) It should be uniform;
c) That either the person or property being taxed be within the jurisdiction of the
taxing authority;
d) The tax must not impinge on the inherent and constitutional limitations on the
power of taxation.
17. Tax as distinguished from other forms of exactions

TAX TARIFF/CUSTOM DUTIES
Coverage An all-embracing term to include Only a kind of tax therefore
various kinds of enforced limited coverage
contributions imposed upon

persons for the attainment of
public purpose
Object Persons, property, etc. Goods imported or exported
TAX TOLL
Definition An enforced proportional A consideration paid for the use
contribution from persons and of a road, bridge or the like, of a
property for public purpose/s public nature
Purpose For the support of the government For the use of another’s property
Authority May be imposed by the State only May be demanded by either the
government or private
individuals or entities, as an
attribute of ownership.
TAX LICENSE FEE

Purpose Imposed to raise revenue For regulation and control
Basis Collected under the power of Collected under police power
taxation
Subject Imposed on persons, property, Imposed on the exercise of a
rights or transaction right or privilege
Effects of Non-payment does not make the Non-payment makes the
Non- business illegal business illegal
Payment
Time of Normally paid after the start of Normally paid before the
Payment business commencement of the business
TAX SPECIAL ASSESSMENT

Nature An enforced proportional An enforced proportional
contribution from persons and contribution from owners of lands
property for public purpose/s especially those who are
peculiarly benefited by public
improvements
Subject Imposed on persons, property Levied only on land
rights or transactions
Person A personal liability of the taxpayer Not a personal liability of the
Liable person assessed
Purpose For the support of the government Contribution to the cost of public
improvement
Scope Regular exaction Exceptional as to time and
locality
TAX DEBT
Basis Obligation created by law Obligation based on contract,
express or implied
Assignability Not assignable Assignable
Mode of Payable in money or in kind Payable in kind or in money

Payment
Set-off Not subject to set-off Subject to set-off
Effect of May result in imprisonment No imprisonment (except when
nonpayment debt arises from crime)
Interest Bears interest only if delinquent Interest depends upon the
written stipulation of the parties
Prescription Governed by the special Governed by the ordinary
prescriptive periods provided for periods of prescription
in the NIRC
TAX PENALTY
Definition An enforced proportional Sanction imposed as a
contribution from persons and punishment for a violation of the
property for public purpose/s law or acts deemed injurious;
violation of tax laws may give
rise to imposition of penalty
Purpose To raise revenue To regulate conduct
Authority Maybe imposed by the State Maybe imposed by private

only entities
18. What are the kinds of taxes?

As to object
a) Personal/ poll or capitation tax. Imposed upon all persons, or upon all
persons of a certain class, residents within a specified territory without regard
to their property or occupation.
b) Property tax. Imposed on property whether real or personal.
c) Privilege/ Excise tax. Charge upon the performance of an act, enjoyment of
a privilege or the engaging in an occupation.
As to burden or incidence
a) Direct. One that is demanded from the person who also shoulders the burden
of tax.
b) Indirect. One which is shifted by the taxpayer to someone.
As to tax rates
a) Specific. Tax of a fixed amount imposed by the head or number, or by some
standard of weight or measurement.
b) Ad valorem. Tax based on the value of the property with respect to which the
tax is assessed.
c) Mixed
As to purposes
a) General / Fiscal Revenue. Tax imposed solely for the general purpose of the
government.
b) Special / Regulatory or Sumptuary. Tax levied for specific purpose.
As to Scope / Authority to Impose

a) National tax
b) Local or Municipal
As to Graduation
a) Progressive. Tax that increases as the tax base or bracket increases.
b) Regressive. Tax decreases as the tax base or bracket increases.
c) Proportionate. Tax of a fixed percentage of amounts of the base.
19. What are the rules in the construction and interpretation of tax laws, rules
and regulations?
CONSTRUCTION AND INTERPRETATION
Tax Laws Tax statutes must be construed strictly against the
government and liberally in favor of the taxpayer
because burdens are not to be imposed or presumed to be
imposed beyond what statutes expressly and clearly declare.
The imposition of a tax cannot be presumed.
NOTE: The rule that, in case of doubt of legislative intent,

the doubt must be liberally construed in favor of taxpayer, it
does not extend to cases involving the issue of the validity
of the tax law itself which, in every case, is presumed valid.
Tax exemption Statutes granting tax exemptions are construed in
and exclusion strictissimi juris against the taxpayers and liberally in
favor of the taxing authority.
Tax rules and The construction placed by the office charged with
regulations implementing and enforcing the provisions of a Code should
be given controlling weight unless such interpretation is
clearly erroneous.
Revenue Memorandum Circulars (RMCs) must not override,

supplant, or modify the law, but must remain consistent and
in harmony with the law they seek to apply and implement (
Penal In criminal cases, statutes of limitations are acts of grace, a
provisions of surrendering by the sovereign of its right to prosecute. They
tax laws receive strict construction in favor of the Government and
limitations in such cases will not be presumed in the absence
of clear legislation.
20. What is the rule on prospectivity of tax laws?

GENERAL RULE: Tax laws operate prospectively whether they enact, amend or
repeal.
EXCEPTION: If the law expressly provides for retroactive application. Retroactive

application of revenue laws may be allowed if it will not amount to denial of due
process. There is violation of due process when the tax law imposes harsh and
oppressive tax (J. Dimaampao, 2018).
EXCEPTION TO THE EXCEPTION:

a) If the tax law is so harsh and oppressive in its retroactive application that
it transgresses the Constitution.
b) Collection of interest on back taxes. It is not penal in nature; it is but a just
compensation to the State. The constitutional prohibition against ex post
facto laws is not applicable.
21. What is the rule on situs of taxation on intangible personal properties?

GENERAL RULE: mobilia sequuntur personam – Taxation of intangible personal
properties follows the residence or domicile of the owner thereof. Situs is the
owner’s residence or domicile. [Collector v. Fisher]
EXCEPTIONS:
a) When the property has acquired a business situs in another jurisdiction, such
that it has definite location there, accompanied by some degree of permanency;
b) When an express provision of the statute provides for another rule.
NOTE: Under Sec. 104 of the NIRC, in case of donor’s and estate tax, the following
properties are considered as situated, thus taxed, in the Philippines and the
residence of their owners are immaterial, EXCEPT where the foreign country grants
exemption or does not impose taxes on intangible properties to Filipino citizens:
a) Franchise which must be exercised in the Philippines;
b) Shares, obligations or bonds issued by any corporation or sociedad anonima;
c) Organized or constituted in the Philippines in accordance with its laws;
d) Shares, obligations or bonds by any foreign corporation 85% of its business is
located in the Philippines;
e) Shares, obligations or bonds issued by any Foreign corporation if such shares,
obligations or bonds have acquired a business situs in the Philippines;
f) Shares or rights in any partnership, business or industry established in the
Philippines.
22. Is the application of the doctrine of mobilia sequuntur personam

mandatory in all cases?
No. Such doctrine has been decreed as a mere "fiction of law having its origin in
considerations of general convenience and public policy, and cannot be applied
to limit or control the right of the State to tax property within its jurisdiction,"
and must "yield to established fact of legal ownership, actual presence and
control elsewhere, and cannot be applied if to do so would result in inescapable
and patent injustice" (Wells Fargo Bank and Union Trust v. Collector, G.R. No. L-
46720, June 28, 1940).
23. What is the Doctrine of Imprescriptibility?

Taxes are imprescriptible because they are the lifeblood of the government unless
tax statutes provide for a prescriptive period.
GENERAL RULE: Taxes are imprescriptible by reason that it is the lifeblood of the
government.
EXCEPTION: Tax laws may provide for statute of limitations. In particular, the NIRC
and LGC provide for the prescriptive periods for assessment and collection.
24. Is double taxation forbidden?

Generally, no. It is not expressly forbidden in our Constitution, but the Court has
recognized it as obnoxious “where the taxpayer is taxed twice for the benefit of the
same governmental entity or by the same jurisdiction for the same purpose.”
25. What are the kinds of double taxation?

a) DIRECT. Constitutes double taxation in the objectionable or prohibited sense.
This occurs when the same property is taxed twice when it should be taxed but
once; both taxes must be imposed on the same property or subject matter, for
the same purpose, by the same State, Government, or taxing authority, within
the same jurisdiction or taxing district, during the same taxing period, and they
must be of the same kind or character of tax.
b) INDIRECT. Is permissible double taxation. This is allowed if the taxes are of
different nature or character, imposed by different taxing authorities.
c) DOMESTIC. This arises when the taxes are imposed by the local or national
government (within the same state).
d) INTERNATIONAL. Refers to 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.
26. When an item of income is taxed in the Philippines and the same income
is taxed in another country, is there a case of double taxation?
Yes, although it is only a case of indirect duplicate taxation which is not legally
prohibited because the taxes are imposed by different taxing authorities.
27. What are the modes of eliminating double taxation?

In order to eliminate double taxation, local legislation or tax treaty may provide
for:
a) Tax credit. An amount is subtracted from taxpayer’s tax liability in order to
arrive at the net tax due.
b) Tax deduction. An amount is subtracted from the gross amount on which a
tax is calculate.
c) Tax exemption. A grant of immunity to particular persons or entities from the

obligation to pay taxes.
d) Imposition of a rate lower than the normal domestic rate.
e) Tax treaty. The purpose is to reconcile the national fiscal legislation of the
contracting parties in order to help the taxpayer avoid simultaneous taxation in
two different jurisdictions (international double taxation). This is to encourage
the free flow of goods and services and the movement of capital, technology
and persons between countries, conditions deemed vital in creating robust and
dynamic economies.
e.1. Exemption method. The income or capital which is taxable in the state
of source or situs is exempted in the state of residence, although in some
instances it may be taken into account in determining the rate of tax
applicable to the taxpayer's remaining income or capital;
e.2. Credit method. Although the income or capital which is taxed in the state
of source is still taxable in the state of residence, the tax paid in the
former is credited against the tax levied in the latter.
NOTE: The basic difference between the two methods is that in the exemption
method, the focus is on the income or capital itself, whereas the credit
method focuses upon the tax
28. What does “the power to tax involves power to destroy” mean?
It describes not the purposes for which the taxing power may be used but the
extent to which it may be employed in order to raise revenues. Thus, even if a tax
should destroy a business, such fact alone could not invalidate the tax.
29. What are the forms of escape from taxation?

The following are forms of escape:
a) Shifting. The transfer of the burden of a tax by the original payer, or the one
on whom the tax was assessed or imposed, to another;
b) Capitalization. Reduction in the price of the tax object equal to the capitalized
value of future taxes which the purchaser expects to be called upon to pay;
c) Transformation. The manufacturer or producer upon whom the tax has been
imposed, pays the tax and endeavors to recoup himself by improving his
process of production, thereby turning out his units at a lower cost;
d) Tax avoidance or Tax Minimization. Exploitation by the taxpayer of legally
permissible alternative tax rates or methods of assessing taxable property or
income, in order to avoid or reduce tax liability; (also called tax minimization)
e) Tax evasion or Tax Dodging. A scheme used outside of those lawful means
to lessen or defeat taxes, which however subjects the taxpayer to civil or
criminal liabilities; and
f) Tax exemption. Grant of immunity to particular persons or corporations or to
persons or corporations of a particular class, from a tax which persons or
corporations generally within the same state or taxing district are obliged to
pay.
30. What is the difference between tax evasion and tax avoidance?
TAX EVASION TAX AVOIDANCE
The use of legally permissible

The use of illegal or fraudulent means to alternative tax rates or methods of
escape tax. It connotes fraud and bad faith assessing property or income in order to
to defeat taxes. reduce tax liability. A tax saving device
within the means sanctioned by law.
Taxpayer is subject to civil and criminal No civil or criminal liability on the part
liabilities. of the taxpayer.
31. What constitutes tax evasion?

Tax evasion or tax dodging is the use by the taxpayer of illegal or fraudulent
means to defeat or lessen the payment of a tax. According to the Supreme Court,
tax evasion connotes the integration of three factors:
a) the end to be achieved, i.e. the payment of less than that known by the
taxpayer to be legally due, or the non-payment of tax when it is shown that
a tax is due;
b) an accompanying state of mind which is described as being evil, in bad faith,
willful, or “deliberate and not accidental; and
c) a course of action or failure of action which is unlawful.
32. What is a tax exemption?

It is the grant of immunity, express or implied, to particular persons or
corporations, from a tax upon property or an excise tax which persons or
corporations generally within the same taxing districts are obliged to pay.
33. Who exercises the power to grant tax exemptions?
It is the legislature, unless limited by a provision of the state constitution, which
has full power to exempt any person or corporation or class of property from
taxation, its power to exempt being as broad as its power to tax. Other than
Congress, the Constitution may itself provide for specific tax exemptions, or local
governments may pass ordinances on exemption only from local taxes.
34. What is the nature of tax exemptions?

a) Personal in nature and covers only taxes for which the grantee is directly liable.
It cannot be transferred or assigned by the person to whom it is given without
the consent of the State.
b) Strictly construed against the taxpayer.
c) Implies a waiver on the part of the government of its right to collect what
otherwise would be due.
d) Exemptions are not presumed. But the strict interpretation does not apply in
the case of exemptions running to the benefit of the government itself or its
agencies. The burden is upon the claimant to establish right to exemption
beyond reasonable doubt.
NOTE: Taxation is the rule and exemption is the exception. As a rule, tax
exemptions are construed strongly against the claimant. Exemptions must be
shown to exist clearly and categorically, and supported by clear legal provision
35. Are all tax refunds in the nature of tax exemptions?

No. A tax refund may only be considered as a tax exemption when it is based
either on a tax-exemption statute or a tax-refund statute. Tax refunds or tax
credits are not founded principally on legislative grace, but on the legal principle
of quasi-contracts against a person’s unjust enrichment at the expense of
another.
36. What are the kinds of tax exemptions?

As to basis:
a) Constitutional. Immunities from taxation which originate from the
Constitution.
b) Statutory. Those which emanate from legislation.
c) Contractual. Agreed to by the taxing authority in contracts lawfully entered
into by them under enabling laws.
d) Implied. When particular persons, properties or excises are deemed exempt
as they fall outside the scope of the taxing provision.
e) Treaty
f) Licensing ordinance
As to extent:
a) Total. Connotes absolute immunity
b) Partial – One where a collection of a part of the tax is dispensed with
As to object:
a) Personal – Granted directly in favor of certain persons
b) Impersonal – Granted directly in favor of a certain class of property
37. Can tax exemptions be withdrawn?

Yes. Since taxation is the rule and exemption are the exception, the exemption
may thus be withdrawn at the pleasure of the taxing authority.
38. What are the restrictions on revocation of tax exemptions?

a) Non-impairment clause.
b) A municipal franchise once granted as a contract cannot be altered or

amended except by actual consent of the parties concerned.
c) Adherence to form. If the exemption is granted by the Constitution, its
revocation may be affected through constitutional amendment only.
d) Where the tax exemption grant is in the form of a special law and not by a
general law even if the terms of the general act are broad enough to include
the codes in the general law unless there is manifest intent to repeal or alter
the special law.
39. What is the Doctrine of Equitable Recoupment?

Refers to a situation wherein the taxpayer has a claim for refund but was unable
to file a claim within the prescriptive period. The taxpayer in this case is allowed to
credit such refund to his existing tax liability. Although allowed in common law
countries, this doctrine is not applicable in the Philippines. This doctrine is NOT
followed in the Philippines because of the Lifeblood Theory.
40. Can taxes be subject to compensation or set-off?

GENERAL RULE: Internal revenue taxes cannot be the subject of set-off or
compensation:
a) The lifeblood theory requires that there should be no unnecessary impediments
to the collection of taxes to make available to the government the wherewithal
to meet its legitimate objectives; and
b) The payment of taxes is not a contractual obligation but arises out of a duty to
pay, and in respect of the positive acts of government, regarding the making
and enforcing of taxes, the personal consent of the individual taxpayer is not
required.
EXCEPTION: However, there is a possibility that set-off may arise, if the claims
against the government have been recognized and an amount has already been
appropriated for that purpose. Where both claims have already become
overdue and demandable as well as fully liquidated, compensation takes
place by operation of law under Article 1200 in relation to Articles 1279 and 1290
of the New Civil Code. [Domingo v. Garlitos, G.R. No. L-18994 (1963)]
41. Can an assessment for a local tax be the subject of set-off or

compensation against a final judgment for a sum of money obtained by
a taxpayer against the local government that made the assessment?
NO. Taxes and debts are of different nature and character. Taxes cannot be
subject to compensation for the simple reason that the Government and the
taxpayers are not creditors and debtors of each other, debts are due to the
Government in its corporate capacity, while taxes are due to the Government in
its sovereign capacity. The taxes assessed or the obligation of the taxpayer
arising from law, while the money judgment against the government is an
obligation, arising from contract, whether express or implied. Inasmuch as taxes
are not debts, it follows that the two obligations are not susceptible to set-off or
legal compensation. Hence, no set-off or compensation between the two different
classes of obligations is allowed.
42. What is compromise?

Compromise is a contract whereby the parties, by reciprocal concessions, avoid
litigation or put an end to one already commenced. It implies the mutual
agreement by the parties in regard to the thing or subject matter which is to be
compromised.
43. Is a compromise of tax obligations allowed?

Yes. Compromises are generally allowed and enforceable when the subject matter
thereof is not prohibited from being compromised and the person entering such
compromise is duly authorized to do so.
44. Who are the persons allowed to enter into compromise of tax obligations?
The law allows the following persons to do compromise in behalf of the
government:
a) BIR Commissioner, as expressly authorized by the NIRC, and subject to the
following conditions:
i) When a reasonable doubt as to validity of the claim against the taxpayer
exists; or
ii) The financial position of the taxpayer demonstrates a clear inability to
pay the assessed tax (Sec. 204[A], NIRC).
b) Collector of Customs, with respect to customs duties limited to cases where
the legitimate authority is specifically granted such as in the remission of duties
(Sec. 709, TCC).
c) Customs Commissioner, subject to the approval of the Secretary of Finance,
in cases involving the imposition of fines, surcharges, and forfeitures (Sec.
2316, TCC).
45. Distinguish a tax amnesty from a tax exemption.

TAX AMNESTY TAX EXEMPTION
The general or intentional overlooking by
the State of its authority to impose
penalties on persons otherwise guilty of A grant of immunity to particular
evasion or violation of a revenue or tax persons or corporations from the
law. It partakes of an absolute obligation to pay taxes.
forgiveness or waiver of the government
of its right to collect.
Covers past tax liability; Immunity from Covers future tax liability; Immunity
all criminal, civil and administrative from civil liability only.
liabilities arising from non-payment of
taxes.
A freedom from a charge or burden to

General pardon given to all erring
which others are subjected
taxpayers
There is no revenue loss because

There is revenue loss since there was
there was no actual taxes due as the
actually taxes due but collection was
person or transaction is protected by
waived by the government
tax exemption
Prospective application
Retroactive application
46. What is the nature of tax amnesty?

A tax amnesty, much like a tax exemption, is never favored or presumed in law.
The grant of a tax amnesty, similar to a tax exemption, must be construed
strictly against the taxpayer and liberally in favor of the taxing authority.
47. What is the Willful Blindness Doctrine?

A taxpayer can no longer raise the defense that errors on their tax returns are not
their responsibility or that it is the fault of the accountants they hired.
48. Distinguish direct taxes from indirect taxes.
DIRECT TAX INDIRECT TAX
Tax which is demanded from the person Tax wherein the incidence/liability for
who also shoulders the burden of the tax; the payment falls on one person but
taxpayer is directly or primarily liable the burden can be shifted or passed on
which he cannot shift to another. to another.
49. May an injunction be issued against the collection of taxes?

GENERAL RULE: No. Taxes, being the chief source of revenue for the Government
to keep it running, must be paid immediately and without delay.
EXCEPTION: If in the opinion of the Court of Tax Appeals, the collection would
jeopardize the interest of the Government and/or the taxpayer, it could suspend
the collection and require the taxpayer either to deposit the amount claimed or to
file a surety bond for not more than double the amount of the tax assessed.
50. May the bank deposits of an individual taxpayer be disclosed by a

commercial bank to the Commissioner of Internal Revenue, in connection
with a tax investigation being conducted by revenue officials, without
violating the relevant bank secrecy laws?
No. As a general rule, bank deposits of an individual taxpayer may not be disclosed
by a commercial bank to the Commissioner. As exceptions, the Commissioner is
authorized to inquire into the bank deposits of: a) a decedent to determine his
gross estate; b) any taxpayer who has filed an application for compromise of his
tax liability by reason of financial incapacity to pay his tax liability; and c) 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 BIR for tax assessment, verification, audit and enforcement purposes.
51. The Commissioner of the U.S. Internal Revenue Service (IRS) requested
the CIR to get the information from a bank in the Philippines, regarding
the deposits of a U.S. Citizen residing in the Philippines, pursuant to the
US-Philippine Tax Treaty and other existing laws. Should the BIR
Commissioner agree to obtain such information from the bank and
provide the same to the IRS?
Yes. The Commissioner should agree to the request pursuant to the principle of
international comity. The Commissioner of Internal Revenue has the authority to
inquire into bank deposits accounts and related information held by financial
institutions of a specific taxpayer subject of a request for the supply of tax
information from a foreign tax authority pursuant to an international convention or
agreement to which the Philippines is a signatory or party of. [Section 3, RA 10021]
JURISDICTION, POWER AND FUNCTIONS OF THE COMMISSIONER OF

INTERNAL REVENUE
52. What are the powers and duties of the Bureau of Internal Revenue?
a) Assessment and collection of all national internal revenue taxes, fees and
charges;
b) Enforcement of all forfeitures, penalties and fines;
c) Execution of judgments in all cases decided in its favor (by the CTA and regular
courts);
d) Give effect and administer the supervisory and police powers conferred to it by
the NIRC and other laws;
e) Recommend to the Secretary of Finance all needful rules and regulations for
the effective enforcement of the provision of the NIRC.
53. Is the BIR authorized to collect estate tax deficiencies by the summary
remedy of levy upon and sale of real properties of the decedent without
first securing the authority of the court sitting in probate over the
supposed will of the decedent? (1998 Bar)
Yes, the BIR is authorized to collect estate tax deficiency through the summary
remedy of levying upon and sale of real properties of a decedent without the
cognition and authority of the court sitting in probate over the supposed will of
the deceased because of the collection of estate tax is executive in character. As
such the estate tax is exempted from the application of the statute of non-claims,
and this is justified by the necessity of government funding, immortalized in the
maxim that taxes are the lifeblood of the government
54. What are the powers of the Commissioner of Internal Revenue?

a) Power to interpret tax laws and to decide cases (Sec. 4, NIRC);
b) Power to obtain information and to summon/examine and take testimony of
persons (Sec. 5, NIRC);
c) Power to make assessments and prescribe additional requirements for tax
administration and enforcement (Sec. 6, NIRC);
d) Power to assign internal revenue officers and other employees (Secs. 16 and
17, NIRC);
e) Power to suspend the business operations of a taxpayer for violations of VAT
rules (Sec. 115, NIRC).
The CIR is also authorized:

a) To terminate taxable period for reasons provided in the NIRC;
b) To make or amend return in case taxpayer fails to file a return or files a false
or fraudulent return;
c). To examine returns and determine tax due;
d). To prescribe any additional requirements for the submission or preparation of
financial statements accompanying tax returns;
e) To inquire into bank deposits of
i) Decedent to determine his gross income;
ii). A taxpayer who filed application to compromise payment of tax liability by
reason of financial incapacity;
iii) 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 BIR for tax assessment, verification, audit and
enforcement purposes;
f). To delegate powers vested upon him to subordinate officials with rank
equivalent to Division Chief or higher, subject to limitations and restrictions
imposed under the rules and regulations.
g) To prescribe real property values;
h) To take inventory of goods of any taxpayer, and place any business under
observation or surveillance IF there is reason to believe that such is not
declaring his correct income, sales or receipts for tax purposes;
i) To register tax agents.
55. Explain the powers of the Commissioner to interpret tax laws and to
decide tax cases.
The power to interpret the provisions of NIRC 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 the NIRC or other laws or portions thereof administered by the BIR is vested
in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of
Tax Appeals (Sec. 4, NIRC).
56. What is a BIR ruling?

A BIR ruling is an administrative interpretation of the Revenue Law as applied and
implemented by the Bureau. They can be relied upon by taxpayers and are valid
until otherwise determined by the courts or modified or revoked by a subsequent
ruling or opinion. They are accorded great weight and respect, but not binding on
the courts. [Commission v. Ledesma]
57. What is the rule on Non-retroactivity of Repeal?

GENERAL RULE: Any revocation, modification or reversal of any of the rules and
regulations or any of the rulings or circular promulgated by the CIR cannot be
given retroactive effect when such will be prejudicial to the taxpayer
EXCEPTIONS:
1) It may be given retroactive effect even if such would be prejudicial to the
taxpayer in the following cases:
a) Where the taxpayer deliberately misstates or omits material facts from his
return or any document required of him by the BIR;
b) Where the facts subsequently gathered by the BIR are materially different
from the facts on which the ruling is based;
c) Where the taxpayer acted in bad faith (Sec. 246, NIRC).
2) If the revocation is due to the fact that the regulation is erroneous or contrary
to law, such revocation shall have retroactive operation as to affect past
transactions, because a wrong construction of the law cannot give rise to a
vested right that can be invoked by a taxpayer.
58. Due to an uncertainty whether or not a new tax law is applicable to

printing companies, DEF Printers submitted a legal query to the BIR on
that issue. The BIR issued a ruling that printing companies are not
covered by the new law. Relying on this ruling, DEF Printers did not pay
said tax. Subsequently, however, the BIR reversed the ruling and issued
a new one stating that the tax covers printing companies. Could the BIR
now assess DEF Printers for back taxes corresponding to the years before
the new ruling? Reason briefly. (2004 Bar)
No. Reversal of a ruling shall not be given a retroactive application if said reversal
will be prejudicial to the taxpayer. Therefore, the BIR cannot assess DEF printers
for back taxes because it would be violative of the principle of non-retroactivity of
rulings and doing so would result in grave injustice to the taxpayer who relied on
the first ruling in good faith (Sec. 246, NIRC; CIR v. Burroughs, Inc., 142 SCRA
324[1986]).
RULE-MAKING AUTHORITY OF THE SECRETARY OF FINANCE

59. What is the scope of the rule-making authority of the Secretary of
Finance?
The Secretary of Finance, upon recommendation of the Commissioner, shall
promulgate all needful rules and regulations for the effective enforcement of the
provisions of NIRC (Sec. 244, NIRC).
60. What are the general principles observed on the rule-making authority of
the Secretary of Finance?
a) Rules and regulations, as well as administrative opinions and rulings, ordinarily
should deserve weight and respect by the courts.
b) All such issuances must not override, but must remain consistent and in
harmony with, the law they seek to apply and implement.
c) Administrative rules and regulations are intended to carry out, neither to
supplant nor to modify, the law
INCOME TAXATION
61. What is income taxation?
Income taxation is in the nature of an excise taxation system, or taxation on the
exercise of privilege, the privilege to earn yearly profits from various sources. It
is a system that does not provide for the taxation of property.
62. What is income tax?

Income tax is a tax on all yearly profits arising from property, profession, trade or
business, or a tax on person’s income, emoluments, profits and the like. It is
generally regarded as an excise tax. It is not levied upon persons, property, funds
or profits but on the privilege of receiving said income or profit.
63. What are the different income tax systems?

a) Global Tax System. System employed where the tax system views
indifferently the tax base and generally treats in common all categories of
taxable income of the individual.
b) Schedular Tax System. System employed where the income tax treatment
varies and is made to depend on the kind or category of taxable income of the
taxpayer.
c) Semi- schedular or semi- global tax system. All compensation income,
business or professional income, capital gain, passive income, and other income
not subject to final tax are added together to arrive at the gross income. After
deducting the allowable deductions and exemptions from the gross income, the
taxable income is subjected to one set of graduated tax rate (individual) or
normal corporate income tax rate (corporation)
64. Differentiate global tax system from schedular tax system.
GLOBAL TAX SYSTEM SCHEDULAR TAX SYSTEM
All items of deductions and

personal and additional
Income is classified into different
exemptions, if any, are
As to nature types upon which the tax rate
deducted from all items of gross
applicable is based.
income. No classification of
income.
Separate return is filed for the

As to return
One income tax return appropriate type of income
received.
As to rates One set of tax rates Graduated or flat income tax rate
As to tax Either gross income or net

Gross income
base income
65. What are the criteria in imposing Philippine income tax?

a) Citizenship or nationality principle. A citizen of the Philippines is subject to
Philippine income tax
i. On his worldwide income, if he resides in the Philippines;
ii. Only on his Philippine source income, if he qualifies as a non-resident citizen.
b) Residence or domicile principle. A resident alien is liable to pay Philippine
income tax on his income from sources within the Philippines but is exempt
from tax on his income from sources outside the Philippines.
c) Source principle. An alien is subject to Philippine income tax because he
derives income from sources within the Philippines. A non-resident alien or
nonresident foreign corporation is liable to pay Philippine income tax on income
from sources within the Philippines, despite the fact that he has not set foot in
the Philippines (Mamalateo, 2014).
66. Enumerate the types of Philippine income tax.

a) Minimum corporate income tax (MCIT)
b) Capital gains tax on sale or exchange of unlisted shares of stock of a domestic
corporation classified as a capital asset
c) Capital gains tax on sale or exchange of real property located in the Philippines
classified as capital asset
d) Final withholding tax on certain passive investment incomes
e) Final withholding tax on income payments made to non-residents (individual or
corporation) 6. Fringe benefit tax (FBIT)
f) Branch profit remittance tax
g) Improperly accumulated earnings tax (IAET)

h) Normal corporate income tax on corporations
i) Graduated income tax on individuals
j) Special income tax on certain corporation
67. Define taxable period.

Taxable period is the calendar year or the fiscal year ending during such calendar
year, upon the basis of which the net income is computed for income tax purposes.
68. What are the kinds of taxable period?

a) Calendar period. The twelve (12) consecutive months starting on January 1
and ending on December 31.
b) Fiscal period. It is a period of twelve (12) months ending on the last day of
any month other than December.
c) Short period
GENERAL RULE: The taxable period, whether it is a calendar year or fiscal year
always consists of twelve (12) months.
EXCEPTION: Instances when the taxpayer may have a taxable period of less
than twelve (12) months:
1. When the corporation is newly organized and commenced operations on any
day within the year
2. When the corporation changes its accounting period
3. When a corporation is dissolved
4. When the Commissioner of Internal Revenue, by authority, terminates the
taxable period of a taxpayer (NIRC, Sec. 6[D]).
5. In case of final return of the decedent and such period ends at the time of
his death
69. What are the instances when calendar year shall be the basis for
computing net income?
a) When the taxpayer is an individual
b) When the taxpayer does not keep books of account
c) When the taxpayer has no annual accounting period
d) When the taxpayer is an estate or a trust
NOTE: Taxpayers other than a corporation are required to use only the calendar
year.
70. Enumerate the kinds of taxpayers.

1. Individuals
a. Citizen
i. Resident Citizen (RC)
ii. Non- Resident Citizen (NRC)
b. Aliens
i. Resident Alien (RA)
ii. Non- Resident Alien (NRA)
(1) Engaged in Trade or Business (NRAETB)
(2) Not Engaged in Trade or Business (NRA- NETB)
iii. Special Aliens
c. Special class of individual employees
i. Minimum wage earner
2. Corporations
a. Domestic
b. Foreign
i. Resident foreign corporation (RFC)
ii. Non-resident foreign corporation (NRFC)
c. Joint venture and consortium
3. Partnerships
4. General Professional Partnerships
5. Estates and Trust
6. Co-ownerships
71. What is income?

Income refers to all wealth which flows into the taxpayer other than as 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.
72. Differentiate income from capital.
INCOME CAPITAL
Constitutes the investment which is the Any wealth which flows into the taxpayer
source of income other than a mere return of capital
Is the wealth Is the service of wealth
Is the tree Is the fruit
Fund Flow
Return or recovery of capital is not subject

Income is subject to income tax
to income tax
73. When is income taxable?

The following are important considerations to discover whether or not there is
income for tax purposes:
a) Existence of income.
b) Realization of income
c) Recognition of income
d) Methods of accounting
74. When are receipts not considered as income?

a) Advance payments or deposits for payments;
Advances are not revenue of the period in which they are received but as
revenue of the period or periods in which they are earned.
b) Property received as compensation but subject to forfeiture;
c) Assessments for additional corporate contributions;
d) Increments resulting from revaluation of property;
Until the revalued property is disposed of there is no income realized.
e) Parent’s share in the accumulated and current equity on subsidiaries’ net
earnings prior to distribution;
f) Money earmarked for some other persons not included in gross income;
g) Money or property borrowed;
Borrowed money has to be repaid by the debtor. On the other hand, the
creditor does not receive any income upon payment because it is merely a
return of capital.
h) Increase in net worth resulting from adjusting entries.
75. What is the Realization Principle?

Under the realization principle, revenue is generally recognized when both of the
following conditions are met:
a) The earning process is complete or virtually complete;
b) An exchange has taken place.
NOTE: Mere increase in the value of property is not considered as income since it
is an unrealized increase in capital.
76. Mr. Castillo is a resident Filipino citizen. He purchased a parcel of land in

Makati in 1970 at a consideration of P1 million. In 2011, the land had a
fair market value of P20 million. Mr. Ayala offered to buy the same for
P20 million. Is Mr. Castillo liable to pay for income tax in 2011 based on
the offer to buy by Mr. Ayala? (2011 Bar)
NO. Mr. Castillo is not liable for income tax in 2011 because no income is realized
by him during that year. Tax liability for income tax attaches only if there is a gain
realized resulting from a closed and complete transaction.
77. When is income considered received for Philippines income tax purposes?
a) If actually or physically received by taxpayer; or
b) If constructively received by taxpayer.
78. Differentiate actual vis-a-vis constructive receipt
ACTUAL RECEIPT CONSTRUCTIVE RECEIPT
Occurs when money consideration or its

equivalent is placed at the control of the
person who rendered the service without
restriction by the payor
Income may be actual receipt or physical The income is credited to the account of
receipt. the taxpayer and set apart for him which
he can withdraw at any time without
restrictions and/or conditions although not
yet actually received by him physically or
reduced to his possession is already
taxable to him.
79. What are the examples of income constructively received?

a) Deposit in banks which are made available to the seller of services without
restrictions
b) Issuance by the debtor of a notice to offset any debt or obligation and
acceptance thereof by the seller as payment for services rendered
c) Transfer of the amounts retained by the payor to the account of the contractor
d) Interest coupons that have matured and are payable but have not been
encashed
e) Undistributed share of a partner in the profits of a general partnership
80. What are the tests in determining whether income is earned for tax
purposes?
1. Realization test. There is no taxable income unless income is deemed realized.
Revenue is generally recognized when both conditions are met:
a. The earning process is complete or virtually complete; and
b. An exchange has taken place (
2. Claim of Right Doctrine / Doctrine of Ownership, Command, or Control.
A taxable gain is conditioned upon the presence of a claim of right to the alleged
gain and the absence of a definite unconditional obligation to return or repay.
3. Economic - Benefit test / Doctrine of Proprietary Interest. Taking into
consideration the pertinent provisions of law, income realized is taxable only to
the extent that the taxpayer is economically benefited.
4. Severance test. Income is recognized when there is separation of something
which is of exchangeable value
5. All Events test. Requisites:
a. Fixing of a right to income or liability to pay; and
b. Availability of the reasonable accurate determination of such income or
liability.
81. Enumerate tax-free exchanges under the NIRC?

a) A corporation which is a party to a merger or consolidation exchanges property
solely for stock in a corporation which is a party to the merger or
consolidation;
b) A shareholder exchanges stock in a corporation which is a party to the merger
or consolidation solely for the stock of another corporation, also a party to the
merger or consolidation;
c) A security holder of a corporation which is party to the merger or consolidation
exchanges his securities in such corporation solely for stock securities in
another corporation, a party to the merger or consolidation; or
d) If property is transferred to a corporation by a person in exchange for stock or
unit of participation in such a corporation, as a result of such exchange said
person gains control of said corporation, provided that stocks issued for
services shall not be considered as issued in return for property.
82. When is gain or loss not recognized in cases of transfer of shares of stock
of corporation in exchange of property?
The requisites for the non-recognition of gain or loss are as follows:
a) The transferee is a corporation;
b) The transferee exchanges its shares of stock for property/ies of the transferor;
c) The transfer is made by a person, acting alone or together with others, not
exceeding four persons; and
d) As a result of the exchange, the transferor, alone or together with others, not
exceeding four, gains control of the transferee
83. What is situs of taxation?

The source of an income is the property, activity or service that produced the
income. The test of taxability is the source and the source of an income is that
activity which produced the income.
84. What are the income from sources within the Philippines?
1. Interests derived from sources within the Philippines
2. Dividends from domestic and foreign corporations, if more than 50% of its gross
income for the three-year period ending with the close of the taxable year prior
to the declaration of dividends was derived from sources within the Philippines
3. Compensation for services performed within the Philippines
4. Rentals and royalties from properties located in the Philippines or any interest
in such property including rentals or royalties for the use of or for the privilege
of using within the Philippines intellectual property rights such as trademarks,
copyrights, patents, etc.
5. Gains on sale of real property located in the Philippines
6. Gains on sale of personal property other than shares of stock within the
Philippines
7. Gains on sale of shares of stock in a domestic corporation
85. What are the income from sources without the Philippines?
1. Interest other than those derived from sources other than those within the
Philippines
2. Dividends other than those derived from sources other than those within the
Philippines
3. Compensation for labor and personal services performed outside the Philippines
4. Rentals and royalties from properties located outside the Philippines or any
interest in such property including rentals or royalties for the use of or for the
privilege of using outside the Philippines intellectual property rights such as
trademarks, copyrights, patents, etc.
5. Gains, profits and income for the sale of real properties located without the
Philippines.
86. What are the incomes derived partly within and partly without the
Philippines?
Items of gross income not allocated to sources from within or without the
Philippines shall, unless unmistakably from a source within or source without the
Philippines, be treated as derived from sources partly within and partly without
the Philippines.
87. What is gross income?

Except when otherwise provided, gross income means all income derived from
whatever source, including but not limited to the following items:
1. Compensation for services in whatever form paid, including, but not limited to
fees, salaries, wages, commissions and similar items
2. Gross income derived from the conduct of trade or business or the exercise of
a profession
3. Gains derived from dealings in property
4. Interests
5. Rents
6. Royalties
7. Dividends
8. Annuities
9. Prizes and winnings
10. Pensions and
11. Partner’s distributive share from the net income of the general professional
partnership (NIRC, Sec. 32 [A])
88. What does “Income from whatever source” means?

It includes all income not expressly excluded or exempted from the class of taxable
income, irrespective of the voluntary or involuntary action of the taxpayer in
producing the income. Therefore, the source is immaterial – whether derived from
illegal, legal, or immoral sources, it is taxable.
89. Explain briefly whether the following items are taxable or non-taxable:
1. Income from jueteng - Taxable. The law imposes a tax on income from
whatever source. [Sec. 32(A), NIRC]
2. Gain arising from expropriation of property - Taxable. There is a material
gain, not excluded by law, realized out of a closed and completed transaction.
Gains from dealings in property are part of gross income. [Sec. 32(A)(3), NIRC]
3. Taxes paid and subsequently refunded - It depends. Taxes paid which are
allowed as deduction from gross income are taxable when subsequently
refunded but only to the extent of the income tax benefit of said deduction.
[Sec. 34(C)(1), NIRC] It follows that taxes paid which are not allowed as
deduction from gross income, i.e. income tax, donor’s tax, and estate tax, are
not taxable when refunded.
4. Recovery of bad debts previously charged off - Taxable under the TAX
BENEFIT RULE. Recovery of bad debts previously allowed as deduction in the
preceding years shall be included as part of the gross income in the year of
recovery to the extent of the income tax benefit of said deduction. [Sec.
34(E)(1), NIRC] This is sometimes referred as the RECAPTURE RULES.
5. Gain on the sale of a car used for personal purposes - Taxable. Since the
car is used for personal purposes, it is considered as a capital asset hence the
gain is considered income. [Sec. 32(A)(3) and Sec. 39(A)(1), NIRC] . (2005
Bar)
90. What is taxable income?

It refers to the pertinent items of gross income specified in the NIRC, less the
deduction and/or personal and additional exemptions, if any, authorized for such
types of income by the Code [Sec. 31, NIRC].
91. What is the scope of taxable income in the Philippines?

SOURCE OF
TAXPAYER TAX BASE
TAXABLE INCOME
Resident citizen Within and Without Net income

Non-resident citizen Within Net income
Resident alien Within Net income
Non-resident alien engaged in
trade or business in the Within Net income
Philippines
Non-resident alien not engaged in
trade or business in the Within Gross income
Philippines
NOTE: A non-resident alien individual who has stayed for an aggregate period of
more than 180 days during the calendar year is deemed to be a non-resident alien
doing business in the Philippines.
92. What are the general classifications of income for income tax purposes?
CLASSIFICATION TAX RATE/TAX BASE
Ordinary Income (Gross Income less 0%-35%

Allowable Deductions) = Taxable Taxable Income (except for
Income NRANETB – 25% of GI)
Regular PIT Rates or 8% of gross

sales/receipts in excess of P250,00
Business Income derived by Self- for Gross Receipts/Sales not
employed exceeding 3M
Regular PIT Rates for Gross
Receipts/Sales exceeding 3M
Regular PIT Rates or 8% of gross

sales/receipts in excess of P250,00
Professional Income derived by for Gross Receipts/Sales not
Professional exceeding 3M
Regular PIT Rates for Gross
Receipts/Sales exceeding 3M
FWT at Varying Rates

Passive Income derived from sources
Gross Receipts
within the Philippines
(except NRANEB – 25% of GI)
Capital Gains from Sale of Shares of

Capital Gains Tax
Stock Not Traded in the Stock Exchange
Net Capital Gains
in a Domestic Corporation
Capital Gains from Sale of Real Property

Capital Gains Tax
located in the Philippines, classified as
Presumed Gain
capital assets
93. How are individuals classified for tax purposes?

CLASSIFICATION OF
BASIC PERSONAL TAX
INDIVIDUAL TAXABLE INCOME
EXEMPTION (PE) RATES
TAXPAYER
Income from sources 0%-35% of

Resident Citizen within and outside the None Taxable
Philippines Income
Non-resident Citizen 0%-35% of

Income from sources
(including Overseas None Taxable
Contract Workers) Income
0%-35% of
Income from sources
Resident Alien None Taxable
Income
Non-resident Alien 0%-35% of

Income from sources
ENGAGED in trade or None Taxable
business Income
25% of
Gross
Non-resident Alien
Income from sources Income
NOT ENGAGED in trade Not Allowed
within the Philippines (Final
or business
Withholding
Tax)
94. What are the applicable tax rates on compensation income?

Compensation Income
RATE
(RC, NRC, and RA)
Not over P250,000 0%
Over P250,000 but not over P400,000 20% of the excess of P250,000
P30,000 plus 25% of the excess over

Over P400,000 but not over P800,000
P400,000
P130,000 plus 30% of the excess over

Over P800,000 but not over P2,000,000
P800,000
Over P2,000,000 but not over P490,000 plus 32% of the excess over
P8,000,000 P2,000,000
P2,410,000 plus 35% of the excess over

Over P8,000,000
P8,000,000
95. What is self-employment income?

It consists of the earnings derived by the individual from the practice of profession
or conduct of trade or business carried on by him as a sole proprietor or by a
partnership of which he is a member.
96. What is professional income?

It refers to the fees received by a professional from the practice of his profession,
provided that there is no employer-employee relationship between him and his
clients.
97. How do you tax purely self-employed and/or professional?

If gross sales/receipts and other non-operating income do not exceed the P3M
VAT threshold, taxpayer may opt to be taxed at:
a. 8% tax on gross sales or receipts in excess of P250,000 in lieu of the graduated
income tax rates; or
b. Graduated scale
98. What is the tax rate for mixed income earners?
TYPE OF INCOME TAX RATE
Compensation Income Regular PIT rates

Income from business or practice of
profession:
a. Gross sales/receipts not Option 1: Regular PIT rates or

exceeding P3 million Option 2: 8% of gross sales/receipts
b. Gross sales/receipts Regular PIT Rates/graduated scale

exceeding P3 million
NOTE: The taxpayer must signify his intent to elect 8% tax rate or the graduated
scale during the 1st quarter of the fiscal year.
99. What are the tax rates on certain passive income? (subject to final
withholding tax)
PASSIVE INCOME (derived RES. CIT. NRA
NONRES.
from sources within the & RES. NRAETB NET
CIT
Philippines) ALIEN B
Interests from any currency 20% 20% 20% 25%

bank deposits and yield or any
other monetary benefit from
deposit substitutes and from
trust funds and similar
arrangements
Royalties, except on books, as 20% 20% 20% 25%

well as other literary works and
musical compositions
Royalties on books as well as 10% 10% 10% 25%

other literary works and musical
compositions
Prizes, except prizes amounting 20% 20% 20% 25%

to P10,000 or less.
Other winning including PCSO 20% 20% 20% 25%

and lotto winnings exceeding
P10,000.00
Interest income from a 15% None None None

depository bank under the
Expanded Foreign Currency
Deposit System
Interest income from long-term Exempt Exempt Exempt 25%

deposit or investment in the form
of savings, common or individual
trust funds, deposit substitutes,
investment management
accounts and other investments
evidenced by certificates in such
form prescribed by BSP
In case of pre-termination of 4 to less Same as Same as

long-term deposit or investment than 5 RC RC
before the 5th year, entire years –
income shall be subject to 5%;
3 to less
than 4
years –
12%;
Less than 3
years –
20%
Cash and/or Property Dividends 10%, Same as 20% 25%

from: beginning RC
a) Domestic corporation; January
b) Joint stock company, 2000;
insurance or mutual fund 8%
companies; beginning
c) Regional operating January
headquarters of multinational 1999;
companies; 6%
beginning
d) The share of an individual in January

the distributable net income 1998
tax of a partnership (except
GPP) of which he is a partner;
e) Share in the net income after
tax of an association, joint
account, or a joint venture or
consortium taxable as a
corporation of which he is a
member or co-venturer
Capital Gains from Sale of Shares 15% Same as Same as Same

of Stocks not Traded in the Stock RC RC as RC
Exchange - Net capital gains *subject to
realized during the taxable year DST
from the sale, barter, exchange
or other disposition of shares in
a domestic corporation, except
shares sold, or disposed of
through the stock exchange
CGT from sale of shares of stock stock Same as Same as Same

of domestic corporations traded transaction RC RC as RC
in the local stock exchange tax at the
rate of 6/10
of 1%
(.6%)
* exempt
from DST
Capital gains presumed to have 6% based Same as Same as Same

been realized from the sale, on the RC RC as RC
exchange, or other disposition of gross
real property located in the selling price
Philippines, classified as capital or current
assets, including pacto de retro FMV,
sales and other forms of whichever
conditional sales (including those is higher
made by estates and trusts)
Cinematographic films and N.A. N.A. 25% 25%

similar works
100. What are the income tax rates and base for ordinary income of domestic
corporations?
TAXPAYER TAX BASE TAX RATES
Ordinary
Taxable income Effective January 1, 2009 – 30% RCIT
domestic
Gross income On the 4th year of operations – 2% MCIT
corporation
Proprietary non- GENERAL RULE: 10%
profit EXCEPTION: If gross income from unrelated
educational Taxable income trade, business or other activity exceeds 50%
institutions and - 30%, RCIT shall be imposed on the entire
hospitals taxable income.
Same rate of tax upon their taxable income as are imposed upon
GOCCs, agencies, corporations or associations engaged in a similar business,
instrumentalities industry or activity. EXEMPT: GSIS, SSS, PCSO, Philippine Health
Insurance Corp.
101. What are the income tax rates and base of domestic corporations for
certain passive income derived from sources within the Philippines?
PASSIVE INCOME TAX BASE TAX RATES
Interest on currency bank deposit and yield or any
other monetary benefit from deposit substitutes and Interest income 20%
from trust funds and similar arrangements
Interest income derived from a depositary bank under
Interest income 7.5%
the expanded foreign currency deposit system (EFCDS)
Royalties Gross Royalty 20%
Not over
P100,000 –
Capital gains from the sale, exchange or other
5%
disposition of shares of stocks in a domestic Net capital gain
Amount in
corporation.
excess –
10%
Income derived by a depositary bank under the
expanded foreign currency deposit system from foreign
currency transactions with non-residents, offshore Income EXEMPT
banking units (OBU) in the Philippines, local
commercial banks, including branches of foreign banks
Interest income from foreign currency loans granted by
such depositary banks under EFCDS to residents other Interest income 10%
than OBU or other depositary banks under EFCDS
Intercorporate dividends, i.e., dividends received by a
domestic corporation from another domestic Dividend income EXEMPT
corporation
Presumed gain
i.e., Gross Selling
Capital gains realized from the sale, exchange or
Price or Fair
disposition of lands and/or buildings treated as capital 6%
Market Value,
assets.
whichever is
higher
102. What are the income tax rates and base for resident foreign corporations
in terms of ordinary income?
TAX BASE TAX RATES
Effective
January 1,
2009 – 30%
Resident Foreign Taxable income
RCIT
Corporation Gross income
On the 4th year
of operations –
2% MCIT
International Carrier,
2 ½% as a
e.g., Air carrier and Gross Philippine Billings
general rule
shipping lines
Offshore Banking Units Income from foreign currency transactions EXEMPT
(OBU) with non-residents, other offshore banking
units, local commercial banks, including
branches of foreign banks. Final tax of
Interest income from foreign currency loans 10%
granted to residents, other than OBUS.
Other income RCIT 30%
Foreign Branch (except Taxable income 30% RCIT
those activities which are Gross income 2% MCIT
registered with PEZA) Profit remittance Branch Profits
Remittance
Tax – 15%
Regional or Area
Headquarters of
Not Applicable EXEMPT
Multinational
Companies
Regional Operating
Headquarters of
Taxable Income 10%
Multinational
Companies
103. What are the income tax rates and base of a resident foreign corporation
in certain types of income?
TAX
PASSIVE INCOME TAX BASE
RATES
Interest on currency bank deposit and yield or any other
Interest
monetary benefit from deposit substitutes and from trust funds 20%
income
and similar arrangements
Interest income derived from a depositary bank under the Interest
7.5%
expanded foreign currency deposit system (EFCDS) income
Gross
Royalties 20%
Royalty
Not
over
P100,00
Capital gains from the sale, exchange or other disposition of Net capital 0 – 5%
shares of stocks in a domestic corporation gain Amount
in
excess –
10%
Income derived by a depositary bank under the expanded foreign
currency deposit system from foreign currency transactions with
Income EXEMPT
non-residents, offshore banking units (OBU) in the Philippines,
local commercial banks, including branches of foreign banks
Interest income from foreign currency loans granted by such
Interest
depositary banks under EFCDS to residents other than OBU or 10%
income
other depositary banks under EFCDS
Intercorporate dividends, i.e., dividends received by a resident Dividend
EXEMPT
foreign corporation from another domestic corporation income
104. What are the income tax rates and bases of non-resident foreign
corporations in terms ordinary income?
TAX BASE TAX RATES
Final tax of
Non-resident foreign corporation Gross income
30%
Non-resident cinematographic film owner, Final tax of
Gross income
lessor or distributor 25%
Non-resident owner or lessor of vessels Gross rentals, lease or Final tax of
chartered by Philippine nationals charter fees 4 ½%
Non-resident owner or lessor of aircraft, Gross rentals and other Final tax of
machineries and other equipment fees 7 ½%
105. What is Improperly Accumulated Earnings Tax?

It refers to the 10% imposed tax on the profits, in excess of the 100% of authorized
capital shares and which are not earmarked, of domestic and closely-held
corporations that are permitted to accumulate instead of being distributed to its

shareholders for the purpose of avoiding the income tax with respect to its
shareholders or the shareholders of another corporation.
RATIONALE: IAET is imposed in the nature of a penalty to the corporation for the
improper accumulation of its earnings and as a form of deterrent to the avoidance
of tax upon shareholders who are supposed to pay dividends tax on the earning
distributed to them by the corporation. If the earnings and profits were distributed,
the shareholders would be liable for tax on dividends (Commissioner v. Ayala
Securities Corp., 101 SCRA 231)
106. What are the income tax exempt corporations under the Tax Code?
a) Labor, agricultural or horticultural organization not organized principally for
profit;
b) Mutual savings bank not having a capital stock represented by shares, and
cooperative bank without capital stock organized and operated for mutual
purposes and without profit;
c) A beneficiary society, order or association, operating for the exclusive benefit
of the members such as a fraternal organization operating under the lodge
system, or a mutual aid association or a non-stock corporation organized by
employees providing for the payment of life, sickness, accident, or other
benefits exclusively to the members of such society, order, or association, or
non-stock corporation or their dependents;
d) Cemetery company owned and operated exclusively for the benefit of its
members;
e) Non-stock corporation or association organized and operated exclusively for
religious, charitable, scientific, athletic, or cultural purposes, or for the
rehabilitation of veterans, no part of its net income or asset shall belong to or
inure to the benefit of any member, organizer, officer or any specific person;
f) Business league, chamber of commerce, or board of trade, not organized for
profit and no part of the net income of which inures to the benefit of any private
stockholder or individual;
g) Civic league or organization not organized for profit but operated exclusively
for the promotion of social welfare;
h) A non-stock and non-profit educational institution;
i) Government educational institution;
j) Farmers' or other mutual typhoon or fire insurance company, mutual ditch or
irrigation company, mutual or cooperative telephone company, or like
organization of a purely local character, the income of which consists solely of
assessments, dues, and fees collected from members for the sole purpose of
meeting its expenses; and
k) Farmers', fruit growers', or like association organized and operated as a sales
agent for the purpose of marketing the products of its members and turning
back to them the proceeds of sales, less the necessary selling expenses on the
basis of the quantity of produce finished by them;
l) Employee's trust [Section 60];
m) Regional or area headquarters shall not be subject to income tax [Sec. 28].
107. What is gross income?

It is all income derived from whatever source (except those excluded or exempted
by law) including, but not limited to the following:
a) Compensation;
b) Annuities;
c) Rents;
d) Gross income from profession, trade or business;
e) Dividends;
f) Royalties;
g) Interests;
h) Prizes and winnings;
i) Gains from dealings in property;
j) Pensions; and
k) Partner’s share in the net income of the general professional partnership.
108. What comprises gross income from sources with situs within the
Philippines?
a) Interests;
b) Dividends from:
i. Domestic corporation;
ii. Foreign corporation – only in an amount which bears the same ratio to
such dividends as the gross income of the corporation for such period
derived from sources within the Philippines bears to its gross income
from all sources;
c) Services (compensation for labor/ personal services);
d) Rentals and royalties from property or use of property located in the Philippines,
or interest therein;
e) Gains, profits and income from the sale of real property located in the
Philippines;
f) Gains, profits and income from the sale of personal property whereby the place
of sale is in the Philippines, although the place of purchase is abroad.
109. What are the exclusions from gross income?

a) Life insurance, unless proceeds are held by the insurer under an agreement to
pay interest thereon, the interest payments;
b) Amount received by insured as return of premium;
c) Gifts, bequests, and devises;
d) Compensation for injuries or sickness. Amounts received, through Accident or

Health Insurance or under Workmen's Compensation Act, as compensation for
personal injuries or sickness, plus the amounts of any damages received,
whether by suit or agreement, on account of such injuries or sickness;
e) Income exempt under treaty;
f) Retirement benefits, pensions, gratuities;
REQUISITES:
i. The retiring official or employee has been in the service of the same
employer for at least 10 years;
ii. He must not be less than 50 years of age at the time of his retirement;
iii. The benefits herein granted shall be availed of by an official or employee
only once; and
iv. The plan must be approved by the BIR.
g) Miscellaneous items.
i. Income derived by foreign government.
ii. Income derived by the government or its political subdivisions from any
public utility or from the exercise of any essential governmental function
accruing to the Government of the Philippines or to any political subdivision
thereof.
iii. Prizes and awards made primarily in recognition of religious, charitable,
scientific, educational, artistic, literary, or civic achievement, provided
that:
1. The recipient was selected without any action on his part to enter the
contest or proceeding; and
2. The recipient is not required to render substantial future services as a
condition to receiving the prize or award;
iv. Prizes and awards in sports competition – all prizes and awards granted to
athletes in local and international sports competitions and tournaments
whether held in the Philippines or abroad and sanctioned by their national
sports associations;
v. 13th Month Pay and other benefits received by officials and employees of
public and private entities, provided that, the total exclusion shall not
exceed P90,000;
vi. GSIS, SSS, Medicare and other contributions;
vii. Gains from the sale of bonds, debentures or other certificate of
indebtedness with a maturity of more than 5 years; and
viii. Gains from Redemption of Shares in Mutual Fund.
110. When are returns filed?

WHO FILES WHAT TO FILE WHEN TO FILE (DUE
(PERIOD) DATE FOR FILING)
Q1 return April 15 of the same

year
Individual deriving purely trade, Q2 return August 15 of the same

business, or professional income or year
mixed income
Q3 return November 15 of the
same year
Annual return April 15 of the following

year
Domestic corporation and resident Q1 return 60 days after the close

foreign corporation of each of the first 3
Q2 return
quarters of the taxable
Q3 return year
Annual Return On or before the 15th

day of the 4th month
following the taxable
year
Capital Gains Tax

a. Shares of stocks Ordinary Return 30 days after each
transaction
Final Consolidated On or before April 15 of

Return the following year
b. Real Property Ordinary Return 30 days following each

sale or other disposition
NOTE: Taxpayers other than a corporation are required to use only the calendar year.
Instances when calendar year shall be the basis for computing net income: a) When
the taxpayer is an individual; b) when the taxpayer does not keep books of account;
c) when the taxpayer has no annual accounting period; and d) when the taxpayer is
an estate or a trust.
If the fiscal year is different from the calendar period, the final adjustment return
shall be filed on or before the fifteenth (15th) day of April, or on or before the
fifteenth (15th) day of the fourth (4th) month following the close of the fiscal year,
as the case may be.
111. Is withholding tax a type of tax?

No. It is merely a manner of collecting a kind of tax (advance payment of tax due)
to provide the taxpayer a convenient manner to meet his probable income tax
liability and to minimize tax evasion, thus resulting in a more efficient tax collection
system.
112. What is a fringe benefit?

It is any good, services, or other benefit furnished or granted by an employer, in
cash or in kind, in addition to basic salaries, to an individual employee.
113. What is the tax treatment for fringe benefits?

It is subject to final tax of 35% based on the grossed up monetary value benefit.
The grossed up monetary value of benefit is determined by dividing the actual
monetary value by 65%
114. What is the tax treatment of de minimis benefits?

De minimis benefits are non-taxable fringe benefits. They are not to be reported
in the income tax return because they are tax exempt. They are also exempt from
the imposition of the fringe benefits tax.
115. What is the tax treatment of 13th month pay?

13th month pay is excluded from the gross income for income tax purposes to the
extent of P90,000. Any excess will be included in the gross income per income tax
return as part of gross compensation income.
116. What is the tax treatment of dividends received by a domestic

corporation from another domestic corporation?
Dividends received by a domestic corporation from another domestic corporation
are not subject to income tax hence, should not be declared in the income tax
return. [Sec. 27 (D)(4), NIRC]
117. What is the tax treatment of dividends received by a domestic

corporation from a foreign corporation?
Dividends received by a domestic corporation from a foreign corporation are
subject to income tax and shall form part of the gross income. There is no law
exempting this type of dividend from income tax. [Section 32 (7), NIRC]
118. Summary of tax treatment of dividend received from DOMESTIC

Corporation.
RECIPIENT TAX RATE/EXEMPT
DC / RFC Tax exempt
RC, NRC, RA 10%
NRA – ETB 20%
NRA – NETB 25%
NRFC 15% subject to allowance of tax credit
119. Are salaries of judges subject to withholding tax?

Yes. Its taxability is not contrary to Sec.10, Art. VII of the Constitution providing
for the non-diminution of the salaries of members of the judiciary during their
continuance in office. The clear intent of the Constitution is to subject their
salaries to tax as in the case of all taxpayers. The deduction of withholding tax
is not a diminution contemplated by the Constitution.
120. What is the treatment of additional income as a result of the benefits

under the Attrition Law where employees who are performing well will
receive awards?
The additional income/benefits, whether in the form of cash or reward in kind,
shall form part of the compensation income subject to withholding tax on
compensation. The FMV of the reward in kind shall be included in the taxable
compensation.
121. What is the treatment for commission given to an employee in addition

to the regular compensation received from the same employer?
The commission shall be considered as supplemental income and shall be added
to the regular compensation subject to income tax and consequently to
withholding tax using the withholding tax table on compensation. The tax
withheld shall be filed monthly and remitted using BIR Form 1601-M.
122. Is the minimum wage earner exempt from income tax?

The MWE is exempt from income tax on his basic statutory minimum wage,
overtime pay, holiday pay, night shift differential pay and hazard pay. However,
income other than those mentioned are subject to income tax.
123. What if the MWE receives service charge, will he still be exempt from
income tax?
Since the service charge is not among those in the enumeration, the MWE will
already be liable for income tax for service charge received.
124. In case of a purely self-employed/professional individual taxpayer who

opted for the 8% income tax, does he still need to file 3% percentage
tax?
No. The 8% rate is in lieu of the graduated income tax rates and the percentage
tax.
NOTE: The option to avail of the 8% income tax rate must be signified annually,
on or before May 15. Such election shall be irrevocable and no amendment of
option shall be made for the said taxable year, unless the gross sales/receipts
and other operating income exceed the VAT threshold of P3Million, in which case,
the taxpayer shall automatically be subject to the graduated income tax rate.
125. What is the income tax regime of a taxpayer who is otherwise qualified
to avail of the 8% income tax rate but failed to signify his intention?
He shall be subject to the graduated income tax rates.
126. What is the base amount of the 8% income tax rate?

The 8% income tax rate shall be based on the gross sales/receipts and other
non-operating income, net of returns and cash discounts. However, if the
individual earns purely from business or practice of a profession, he is entitled
to the reduction of P250,000.00 before computing for the 8% income tax.
127. What is capital gains tax?

Capital gains tax is a tax imposed on the gains presumed to have been realized by
the seller from the sale, exchange, or other disposition of capital assets located in
the Philippines, including pacto de retro sales and other forms of conditional sale.
128. What are capital and ordinary assets?

ORDINARY ASSETS CAPITAL ASSETS
a) Stock in trade of the taxpayer or Pertain to properties held by the
other property of a kind which taxpayer whether or not connected with
would properly be included in the his trade or business which is not
inventory of the taxpayer if on ordinary asset.
hand at the close of the taxable
year;
b) Property held by the taxpayer
primarily for sale to customers in
the ordinary course of business or
trade;
c) Other property of a kind which
would properly be included in the
inventory of the taxpayer if on
hand at the close of the taxable
year;
d) Property used in the trade or
business of a character which is
subject to the allowance of
depreciation.
129. Is actual gain required for the imposition of capital gains tax?
No. Actual gain is not required for the imposition of capital gains tax. It is imposed
on income presumed to have been realized which is the fair market value, selling
price thereof, whichever is higher. It is the gain by fiction of law which is taxable.
The rate of 6% CGT is based on the higher amount between gross selling price or
fair market value. In computing the CGT, you simply determine the higher value
of the property, and simply multiply by 6%. It would not matter how much the
seller actually earned because the tax is based on gross amount.
For sale of shares of stock of a domestic corporation held as capital asset (not
traded through the stock exchange), the tax is based on the net capital gains. This
means that the cost of the shares is deductible from the selling price in order to
arrive at the taxable gain. Rate: 15% capital gains tax of the net capital gain.
NOTE: If the FMV is higher than the selling price, the difference is deemed a
donation subject to donor’s tax.
130. What is minimum corporate income tax (MCIT)?

MCIT is a tax imposed on domestic and resident foreign corporations:
a) Whenever such corporation has zero or negative taxable income; or
b) Whenever the amount of MCIT is greater than the normal income tax due from
such corporation.
The tax rate is 2% of the gross income except income exempt from income tax
and income subject to final withholding tax.
131. When does MCIT commence?

Fourth taxable year immediately following the year the corporation commenced its
business operation. [Section 27 (E) (1) of the Tax Code]
132. What is a General Professional Partnership (GPP)?

GPP is a partnership formed by persons for the sole purpose of exercising a
common profession and no part of the income of which is derived from engaging
in any trade or business. GPPs are not subject to income tax, but are required to
file returns of their income. Each partner in a GPP are liable in their separate and
individual capacity, and are thus required to report as gross income his distributed
share actually or constructively received in the net income of the partnership.
133. Distinguish exclusions from gross income and deductions from gross
income.
EXCLUSION DEDUCTION
Refers to flow of wealth which is not

treated as part of gross income because
Refers to the amounts which the law
it is either: a) exempted by the
allows to be subtracted from gross
fundamental law; b) exempted by
income in order to arrive at net income.
statute; or c) do not come within the
definition of income.
Pertains to computation of gross income. Pertains to computation of net income.
Something received or earned by the

Something spent or paid in earning gross
taxpayer which do not form part of the
income.
gross income.
134. What is allowable deductions?

ALLOWABLE DEDUCTIONS
Generally refers to the actual expenses incurred in the pursuit

As to amount
of trade, business, or practice of profession.
As to nature Constitute business expense.
As to purpose To enable taxpayer to recoup his cost of doing business.
As to claimant Claimed by all taxpayers.
135. What is the Tax Benefit Rule?

This doctrine holds that a taxpayer is obliged to declare as taxable income any
subsequent recovery of bad debts in the year they were collected to the extent of
the tax benefit enjoyed by the taxpayer when the bad debts were written off and
claimed as deduction from gross income. This also applies to taxes previously
deducted from gross income but which were subsequently refunded or credited by
the BIR.
136. What are the kinds of deduction?

The kinds of deduction are:
a) Optional standard deduction – deduction, in lieu of the itemized deductions,
is merely a privilege that may be enjoyed by certain individual taxpayers. The
amount of such deduction is limited to 40% of the taxpayer’s gross income.
b) Itemized deductions – deductions which include:
i. Ordinary and necessary expenses;
ii. Interests;
iii. Taxes;
iv. Losses;
v. Bad debts;
vi. Depreciation of property;
vii. Depletion of oil and gas wells and mines;
viii. Charitable and other contributions;
ix. Research and development;
x. Pension trust contributions of employees; and
xi. Premium payments on health and/or hospitalization insurance.
NOTE: Unless the taxpayer signifies in his return his intention to elect the OSD, he
shall be considered as having availed himself of the itemized deductions. Such
election is irrevocable for the taxable year for which the return is made.
137. What are the requisites for valid deduction of bad debts from the gross
income?
a) Existing indebtedness due to the taxpayer which must be valid and legally
demandable;
b) Connected with the taxpayer’s trade, business or practice of profession;
c) Not be sustained in a transaction entered into between related parties
enumerated under Sec. 36(B) of the Tax Code of 1997;
d) Actually charged off the books of accounts of the taxpayer as of the end of the
taxable year; and
e) Actually ascertained to be worthless and uncollectible as of the end of the
taxable year.
Before a taxpayer may charge off and deduct a debt, he must ascertain and be
able to demonstrate with reasonable degree of certainty the uncollectibility of the
debt.
138. Are tax exemptions constitutionally granted to non-stock, non-profit

educational institutions subject to limitations imposed by law?
No. The tax exemption granted by the Constitution to non-stock, non-profit
educational institutions is conditioned only on the actual, direct and exclusive use
of their assets, revenues and income for educational purposes. [CIR v. DLSU, 2016]
139. Does the BIR require presentation of financial statements if a taxpayer

opted to use OSD instead of itemized deduction?
No. An individual who is entitled to and claimed for the optional standard deduction
shall not be required to submit with his tax return such financial statements
otherwise required under this Code: Provided, further, that except when the
Commissioner otherwise permits, the said individual shall keep such records
pertaining to his gross sales or gross receipts, or the said corporation shall keep
such records pertaining to his gross income as defined in Section 32 of this Code
during the taxable year, as may be required by the rules and regulations
promulgated by the Secretary of Finance, upon recommendation of the
Commissioner. [Sec. 34(L) NIRC]
140. What are the rules on deductibility of expenses?

As a general rule, the requisites for the deductibility of an expense are:
a) The expense must be ordinary and necessary;
b) It must have been paid or incurred during the taxable year;
c) It must have been paid or incurred during the conduct of the trade or business
of the taxpayer; and
d) It must be supported by receipts, records or other pertinent papers.
An additional requirement is that the withholding tax on the amount paid as

expense must have been withheld and remitted to the BIR.
141. What are the requisites for deductibility of casualty loss?

The Tax Code allows the deduction from gross income of casualty losses arising
from damage to or loss of property used in business, to the extent that these are
not compensated for by insurance or other forms of indemnity, and subject to
compliance with certain requirements as outlined in RMO No. 31-09, dated Oct.
16, 2009.
To be deductible, casualty losses must be incurred on properties that are actually

used in business. These properties must have been properly reported as part of
the taxpayer’s assets in the accounting records and financial statements in the year
immediately preceding the occurrence of the loss, with the cost of acquisition
clearly established and recorded. The deduction of the losses must be properly
recorded in the accounting reports, with the adjustment of the applicable accounts.
Within 45 days from the date of the event causing the loss, a sworn declaration of
loss must be filed with the nearest BIR RDO in the BIR-prescribed format, stating
the nature of the event that gave rise to the loss and time of its occurrence;
description and location of damaged properties; items needed to compute the loss
such as the cost or other basis of the properties, any depreciation allowed, value
of properties before and after the event, and cost of repair; and the amount of
insurance or other compensation received or receivable.
The sworn declaration must be accompanied by the audited financial statements

for the preceding year and copies of any insurance policies covering the concerned
properties. Failure to submit the sworn declaration within the prescribed 45-day
period may result in the disallowance of the loss claimed.
TRANSFER TAXES
142. What is an estate tax?
It is a tax levied on the transmission of properties from a decedent to his heirs. It
is the tax on the privilege to transmit property at death and on certain transfers
which are made equivalent of testamentary dispositions by the statute.
143. What are the inclusions in the gross estate?

In capsule form, the following are the inclusions in the gross estate, to wit:
a) Transfer under general power of appointment;
b) Revocable transfers;
c) Transfers in contemplation of death;
d) Proceeds of life insurance;
e) Transfers for insufficient consideration;
f) Decedent's interest at the time of his death; and
g) Prior interests.
144. For purposes of computing estate tax, how is the term “residence”
interpreted? How may one change his or her residence?
For estate and inheritance tax purposes, the term "residence" is synonymous with
the term "domicile". The two terms may be used interchangeably without
distinction (Collector v. De Lara, 102 Phil 813).
145. When does estate tax accrue?

The estate tax accrues as of the death of the decedent. Upon the death of the
decedent, succession takes place and the right of the State to tax the privilege to
transmit the estate vests instantly upon death
146. Who are the individuals liable to pay estate tax?

1. Resident decedent
a. Resident citizen
b. Non-resident citizen
c. Resident alien
2. Non-resident decedent
a. Non-resident alien
147. Are corporations, both domestic and foreign, subject to estate tax?
No. Domestic and foreign corporations are subject only to donor’s tax and not to
estate tax because it is not capable of death but may enter into a contract of
donation.
148. What is gross estate?

The total value of all property, real or personal, tangible or intangible, the actual
and beneficial ownership of which was in the decedent at the time of his death
(Sec. 85, NIRC).
149. What is net estate?

It is the value of the estate after all deductions have been made against the gross
estate; subject to 6% tax rate.
150. What is the applicable estate tax rate?

Under TRAIN Law, 6% based on the value of the nest estate, whether decedent is
resident or non-resident.
151. How is the gross estate determined?

The value of the gross estate of the decedent shall be determined by including the
value at the time of his death of all property, real or personal, tangible or
intangible, wherever situated: Provided, however, That in the case of a
nonresident decedent who at the time of his death was not a citizen of the
Philippines, only that part of the entire gross estate which is situated in the
Philippines shall be included in his taxable estate (Sec. 85, NIRC).
152. How is the net estate determined?

It refers to the value of the gross estate less the allowable deductions.
153. What are the deductions on gross estate that are applicable to resident
aliens and citizens?
a) Standard deduction equivalent to one million pesos (P5,000,000);
b) Claims against the estate;
c) Claims of deceased against insolvent persons where the value of his interest is
included in the value of his gross estate;
d) Unpaid mortgages;
e) Property previously taxed;
f) Transfers for public use;
g) Family home up to P10,000,000 FMV;
h) Amount received by heirs under RA 4917 (retirement plan); and
i) Net share of the surviving spouse in the conjugal or community property.
154. What is a vanishing deduction?

It is a deduction allowed from the gross estate for properties that were subject to
donor’s or estate taxes. The requisites for it to be allowed are as follows:
a) The present decedent died within 5 years from receipt of the property from a
prior decedent or donor;
b) The property must be located in the Philippines;
c) The property formed part of the taxable estate of the prior decedent, or of the
taxable gift of the donor;
d) The estate tax or donor’s tax on the gift must have been finally determined and
paid;
e) The property must be identified as the one received from the prior decedent,
or something acquired in exchange therefor; and
f) No vanishing deduction on the property was allowable to the estate of the prior
decedent.
155. What are the deductions from gross estate that are applicable to non-
resident aliens?
a) Standard deduction up to P500,000;
b) Claims of the deceased against insolvent persons where the value of his interest
is included in the value of his gross estate;
c) Unpaid mortgages;
d) Claims against the estate; and
d) Net share of the surviving spouse in the conjugal property.
156. What are the exclusions from the gross estate?

1. Exclusive Property (capital/paraphernal) of surviving spouse (Sec. 85 (H),
NIRC);
2. Property outside the Philippines of a non-resident alien decedent;
3. Intangible personal property in the Philippines of a non-resident alien if there is
reciprocity; and
4. Exclusions from estate under special laws:

a) Benefits received by members from the Government Service Insurance
System (PD 1146) and the Social Security System (RA 1161, as amended)
by reason of death
b) Amounts received from the Philippine and United States governments for
damages suffered during the last war (RA 227)
c) Benefits received by beneficiaries residing in the Philippines under laws
administered by the U.S. Veterans Administration (RA 360)
4. Grants and donations to the Intramuros Administration (PD 1616)
157. What are transmissions exempted from the payment of estate tax?
1. The merger of usufruct in the owner of the naked title;
2. The transmission or delivery of the inheritance or legacy by the fiduciary heir
or legatee to the fideicommissary, Provided that:
a) The substitution must not go beyond one degree from the heir originally
instituted
b) The fiduciary or the first heir must be both living at the time of death of the
testator.
3. The transmission from the first heir, legatee or donee in favor of another
beneficiary, in accordance with the desire of the predecessor;
4. All bequests, devises, legacies or transfers to social welfare, cultural and
charitable institutions. Provided:
a) no part of the net income of which inures to the benefit of any individual;
and
b) Not more than thirty percent (30%) of the said bequests, devises, legacies
or transfers shall be used by such institutions for administration purposes
(Sec. 87, NIRC).
158. Summary on the rules on life insurance proceeds.

Part of the gross estate to the extent a) The estate of the decedent, his
of the amount receivable when the executor or administrator taken out by
beneficiary in a life insurance is: the decedent upon his own life regardless
of whether the designation is revocable
or irrevocable; OR
b) A third person, other than the

decedent’s estate, executor, or
administrator provided that the
designation is not irrevocable.
NOTE: Under the Insurance Code, in the

absence of an express designation, the
presumption is that the beneficiary is
revocably designated. Notwithstanding
the foregoing, in the event the insured
does not change the beneficiary during
his lifetime, the designation shall be

deemed irrevocable (Sec. 11, R.A.
10607).
Not part of the gross estate when: a) Proceeds from a life insurance policy
is receivable by a 3rd person (NOT the
decedent’s estate, executor or
administrator) AND that the said
beneficiary is designated as irrevocable;
b) Where the life insurance was not

taken by the decedent upon his own life
even though the beneficiary is the
decedent’s estate, executor, or
administrator;
c) Accident insurance proceeds. NIRC

specifically mentions only life insurance
policies;
d) Proceeds of a group insurance policy

taken out by a company for its
employees;
e) Proceeds of insurance policies issued

by the GSIS to government officials and
employees are exempt from all taxes;
f) Benefits accruing from SSS law;
g) Proceeds of life insurance payable to

heirs of deceased members of military
personnel.
159. What is the period for filing estate tax returns?

It is filed within one year from the decedent’s death.
160. What is donor’s tax?

It is an excise tax imposed on the privilege of transferring property by way of a
gift inter vivos based on pure act of liberality without any or less than adequate
consideration and without any legal compulsion to give.
161. What are the requisites for a gift to be taxable?

1. Capacity of donor to donate;
2. Donative Intent;
3. Acceptance by the done; and
4. Actual or constructive Delivery of gift.
162. What are the transfers which may be considered as donations?

a) Transfer for less than the adequate and full consideration;
b) Condonation/remission of debt; and
c) Sale/exchange/transfer of property for insufficient consideration.
163. Differentiate gross gifts from net gifts.

Gross gifts refers to all property, real or personal, tangible or intangible, that was
given by the donor to the donee by way of gift, without the benefit of any
deduction. On the other hand, net gift is the net economic benefit from the transfer
that accrues to the donee.
164. What is the rate payable by the donor?

The rate is 6% computed on the basis of the total net gifts in excess of P250,000.
165. What are the donations exempt from payment of donor’s tax?
If gifts are made by a resident:
a) Gifts made to or for the use of the National Government or any entity created
by any of its agencies which is not conducted for profit; and
b) Gifts in favor of educational, charitable, religious, cultural or social welfare
corporation, institutions, accredited NGOs, provided that not more than 30%
of said gifts shall be used by such donee for administration purposes.
166. Are contributions for election campaign subject to payment of donor’s

tax?
No. Under Sec. 13 of RA No. 7166, political or electoral contributions are not
subject to payment of donor’s tax, provided that, the donor complies with the
requirement of filing returns of contribution with the COMELEC as required by the
Omnibus Election Code.
167. Are donations to non-stock non-profit institutions subject to payment

of donor’s tax?
No. A non-profit educational and/or charitable corporation, institution, accredited
non-government organization, trust or philanthropic organization, research
institution or organization is exempt from payment of donor’s tax provided that:
a) It is incorporated as a non-stock entity;
b) It pays no dividends;
c) Governed by trustees who receive no compensation;
d) Devotes all its income to the accomplishment and promotion of the purposes
enumerated in its Articles of Incorporation; and
e) Not more than 30% of the gifts donated to it shall be used by such done for
administration purposes.
168. Distinguish donor’s tax from estate tax.

DONOR’S TAX ESTATE TAX
Nature of Transfer
During the lifetime of the donor. After death of decedent.
May take place between natural and juridical Transfer takes place only between
persons. natural persons.
Amount Exempt
P250,000 P250,000
Rate of Tax
6% computed from net gifts 6% computed from net estate
Notice Requirement
GR: Notice of donation is not required. No notice of death required
XPNs:
a) Donations to NGO worth at least P50,
000. Provided, not more than 30% of
which will be used for administration
purposes.
b) Donation to any candidate, political
party, or coalition of parties.
Filing of Return
A transfer subject to donor’s tax. a) A transfer subject to estate tax.
b) Exempt from tax but the gross
estate exceeds P250,000.
c) Filed regardless of the gross value of
the estate where the estate consists
of registered or registrable
property.
Contents of Return
a) Each gift made during the calendar year a) Value of the gross estate;
which is to be included in computing b) Deductions under Sec. 86, NIRC;
net gifts; c) Other pertinent information;
b) The deductions claimed and allowable; d) If gross estate exceeds P5M, shall
c) Any previous net gifts made during the be supported with a statement
same calendar year; certified by a CPA as to assets,
d) The name of the donee; deductions, tax due, whether paid
e) Such further information as may be or not.
required by rules and regulations made
pursuant to law.
Time of Filing of Return
Within 30 days after donation was made. Within 1 year from death of decedent
Extension for Filing of Return

Within 30 days after donation was made.
Payment of Tax Due

Pay as you file Pay as you file
Extension of Payment
None GR: Extension of payment is not
allowed.
XPN: When it would impose undue
hardship upon the estate or any of the
heirs, extension may be allowed but
not to exceed 5 years in case of judicial
settlement or 2 years in case of extra-
judicial settlement.
XPN to XPN: When taxpayer is guilty
of:
a) Negligence;
b) Intentional disregard of rules and
regulations; or
c) Fraud.
Payment by installment – in case the

estate’s available cash is insufficient,
allowed within 2 years from the
statutory due date for its payment
without penalty and civil interest.
Requirement for grant of extension of payment
Bond not exceeding double the amount
of the tax and with such sureties as the
Commissioner deems necessary.
VALUE-ADDED TAX
169. What is Value Added Tax (VAT)?
VAT is a tax on consumption levied on the sale, barter, exchange, or lease of goods
or properties or services in the Philippines and on importation of goods into the
Philippines.
170. What is tax credit method?

This method relies on the invoices, an entity can credit against or subtract from
the VAT charged its sales or outputs the VAT paid on its purchases, inputs and
imports. Here, the input tax shifted by the seller to the buyer is credited against
the buyer's output taxes when he, in turn, sells the taxable goods, properties or
services.
171. What is Cross Boarder Doctrine or Destination Principle?

No VAT shall be imposed to form part of the goods destined for consumption
outside the territorial border of the taxing authority [CIR vs. Seagate Technology
Philippines].
172. What is the difference between output tax and input tax?
OUTPUT TAX INPUT TAX
VAT due from or paid by a VAT-registered
VAT due on the sale or lease of taxable
person in the course of his trade or
goods or properties or services by any
business on importation of goods or local
person registered or required to
purchase of goods or services, from VAT-
register under NIRC.
registered person.
173. Are services rendered abroad by a non-resident foreign corporation in

favor of a domestic corporation subject to VAT?
No. Payments for the sale or exchange of services are subject to VAT only if the
services are performed in the Philippines pursuant to Section 108(A) of the Tax
Code. Accordingly, since the services are performed by the non-resident foreign
corporation outside the Philippines, the service fees are not subject to VAT.
174. What is meant by a “zero-rated” sale?

A zero-rated sale of goods, properties and/or services (by a VAT registered person)
is a taxable transaction for VAT purposes, but shall not result in any output tax.
However, the input tax on purchases of goods, properties or services, related to
such zero-rated sale, shall be available as tax credit or refund in accordance with
existing regulations. Under this type of sale, no VAT shall be shifted or passed on
by VAT-registered sellers/suppliers from the Customs Territory on their sale, barter
or exchange of goods, properties or services to the subject registered Freeport
Zone enterprises.
175. What is meant by a “VAT-exempt” transaction?

It refers to the sale of goods, properties or services or the use or lease of properties
that is not subject to VAT (output tax) under Section 109 of the Tax Code of 1997,
and the seller/supplier is not allowed any tax credit of VAT (input tax) on purchases
related to such exempt transaction.
176. What are transactions RA 10963 included to the list of VAT exemot
transactions under Section 109 of the NIRC of 1997?
a) Sale of gold to the Bangko Sentral ng Pilipinas
b) Sale of drugs and medicines prescribed for diabetes, high cholesterol, and
hypertension, beginning January 1, 2019
c) Association dues, membership fees, and other assessments and charges
collected by homeowners’ associations and condominium corporations
d) Transfer of property in pursuance of a plan of merger or consolidation
177. What are the adjustments on the VAT-exempt threshold under RA

10963?
a) RA 10963 increases the VAT-exempt threshold from P1,919,500 to P3 million
which is adjusted to inflation not later than January 31, 2021 and every 3
years thereafter.
b) While to VAT exempt threshold on lease of residential unit with a monthly
rental of P12,800 to P15,000.
c) RA 10963 also reduces the VAT-exempt threshold from P3,199,200 to
P2,000,000 on sale of house and lot and other residential dwellings beginning
January 1, 2021.
178. Is the sale of supply by an ecozone entity subject to VAT?

While an ecozone is geographically within the Philippines, it is deemed a separate
customs territory and is regulated in laws as foreign soul. Sales by supplies outside
the borders of ecozone to this separate customs territory are deemed exports and
treated as export sales [CIR v. Seksui Jushi Phils, Inc.].
179. What are these so-called transactions “deemed sales”?

The following transactions shall be a deemed sale:
a) Transfer, use, or consumption not in the course of business of goods originally
intended for sale or for use in the course of business;
b) Distribution or transfer to:
i. Shareholders or investors as share in the profits of VAT-registered
persons; or
ii. Creditors in payment of debt;
c) Consignment of goods if actual sale is not made within 60 days following the
date such goods were consigned; and
d) Retirement from or cessation of business, with respect to inventories of taxable
goods existing as of such retirement or cessation.
180. What will be the treatment of sale, barter, exchange or lease of goods,
properties and sale or exchange of services to a registered Freeport Zone
enterprise by sellers/contractors from the Customs Territory?
If the seller is a VAT taxpayer, such sale, barter or exchange shall be subject to
VAT at zero (0%) percent. If the seller is a non-VAT taxpayer, the transaction shall
be exempt from VAT.
181. What is the tax treatment of sale, barter or exchange of goods and
properties by Freeport Zone-registered enterprises to a buyer from the
customs territory?
The sale, barter or exchange shall be treated as a technical importation made by
the buyer in the customs territory. The buyer shall be treated as the importer and
shall be imposed the corresponding import taxes and duties prior to release of the
goods or merchandise from customs custody. Any unpaid taxes thereon, aside from
being the prime liability of the buyer importer, shall constitute a lien on such goods
or merchandise imported from the Freeport Zone.
182. What is the tax treatment of a sale of service or lease of properties

(machineries and equipment) by Freeport Zone-registered enterprises to
a customer or lessee from the Customs Territory?
The sale of service shall be exempt from VAT if the service is performed or rendered
within the Freeport Zone. The lease of properties, on the other hand, shall likewise
be exempt from VAT if the property is located within the Freeport Zone. However,
if the properties (machineries and equipment) leased by the Freeport Zone
registered enterprise is located outside of the Freeport Zone, payments to such
enterprise will be considered as royalties and subject to the final withholding VAT
of 12%.
183. What is the basis of the VAT on taxable sales of real property?
The basis of the VAT on taxable sale of real property is “Gross Selling Price" which
is either the selling price stated in the sale document or the “Zonal Value,"
whichever is higher. In the absence of zonal values, the gross selling price shall
refer to the market value as shown in the latest tax declaration or the
consideration, whichever is higher.
184. When can an appeal be filed with the CTA in case of full or partial denial
of the written claim for refund or excess input tax directly attributable to
zero-rated sales, or failure on the part of the Commissioner to act on the
application within 120 days from date of submission of complete
documents?
Within 30 days from the receipt of the decision denying the claim or after the
expiration of the 120-day period.
Failure to comply with the 12-day waiting period violates a mandatory provision of
law and renders the petition premature, thus without cause of action, with the
effect of the CTA acquiring no jurisdiction over the taxpayer's petition.
185. What is the prescriptive period for claiming unutilized or excess input
taxes?
It must be claimed within two years:
a) Reckoned from the close of the taxable quarter; or
b) Reckoning frame.
SUMMARY OF NEW TAX SCHEDULE FOR PURELY SELF-EMPLOYED AND/OR

PROFESSIONALS AND MIXED INCOME EARNER
OPTIONAL STANDARD 40% OSD is still allowed. However, in the
DEDUCTION case of mixed income earners or those who
earn less than P3M, 8% on gross receipts

is likewise an option. Once the 8% rate is
elected, the 40% OSD may no longer be
availed of.
If gross sales/receipts and other non-
operating income do not exceed the P3M
VAT threshold, taxpayer may opt to be
taxed at:
PURELY SELF-EMPLOYED AND/OR a. 8% tax on gross sales or receipts

PROFESSIONALS in excess of P250,000 in lieu of the
graduated income tax rates; OR
b. Graduated scale
Quarterly filing of percentage tax returns

for those who do not meet the threshold.
a. All income from the compensation
shall be subject to graduated scale and
percentage tax
b. All income other than from
compensation:
1. If the gross sales/receipts do
not exceed P3M, graduated
scale OR 8% tax on gross
receipts
2. If total gross sales/receipts
exceed P3M – graduated scale
TP must signify his intent to elect 8% tax

rate.
MIXED INCOME EARNERS
NOTE: 8% rate option is NOT available to:

a. Purely compensation income
earners
b. VAT registered taxpayers
regardless of the amount of
gross sales or receipts and
other non-operating income
c. TP exempt from VAT whose
gross sales exceeded P3M
d. TP subject to other percentage
taxes under Title V of the NIRC
(carriers, franchises, banks,
insurance companies, etc.)
EXCEPT those who do not meet

the P3M threshold
e. Partners in GPP
f. Individuals enjoying income
tax exemption
8% option, once elected, shall be

irrevocable and no amendment of option
shall be made for the taxable year it has
been made.
186. Who can claim Optional Standard Deductions (OSD)?

As a rule, all taxpayers who are subject to tax on taxable income can claim OSD except
the following;
a. Non Resident Alien Engaged in Trade or Business
b. Taxpayers mandated to use itemized deductions( Revenue Regulation 2-2014)
a. Corporations mandated to use the itemized deductions:
i. Exempt GOCCs and Non Stock Non Profit Corporation with no
taxable income
ii. Those with income subject to special/ preferential tax rates
iii. Those with income subject to regular corporate income tax and
special/preferential tax
b. Individual Taxpayers mandated to use itemized deductions:
i. Exempt individuals under NIRC and special laws with no other
taxable income
ii. Those with income subject to special/preferential tax rates
iii. Those with income subject to regular income tax and
special/preferential income tax
c. Non Resident Alien Not Engaged in Trade or Business
NOTES: The option to elect OSD or Itemized deduction must be made in the first
quarter return. Such election when made shall be irrevocable in the year for which
the return is made. Shifting between OSD and Itemized during the taxable quarters
of the taxable year is not allowed.
Individual taxpayers opting to deduct OSD shall keep records pertaining to their
GROSS SALES or GROSS RECEIPTS, while a corporation that is opting to deduct
OSD shall keep such records pertaining to their GROSS INCOME during the taxable
year.
TAXPAYER SOURCE OF METHOD OF PERCENTAGE OF
CLASSIFICATION INCOME ACCOUNTING OSD
Individual Selling of goods Accrual 40% OF GROSS
SALES
Individual Rendering of Cash 40% OF GROSS

services RECEIPT
Individual Rendering of Accrual 40% OF GROSS
services REVENUE
Corporation Goods/Services Accrual 40% OF GROSS
INCOME
GROSS SALES/RECEIPTS/REVENUE – NO DEDUCTION AT ALL
GROSS INCOME – GROSS SALES/RECEIPT/REVENUE SUBJECT TO REGULAR CORPORATE INCOME
TAX LESS SALES RETURN, DISCOUNTS AND ALLOWANCES DIRECT COST OR COST OF SALES OR
SERVICES
TABLE OF COMPARISON ON OSD

INDIVIUAL OSD CORPORATE OSD
REPLACES REPLACES
COST OF SALES/ COST YES NO
OF SERVICES?
REGULAR ALLOWABLE YES YES
ITEMIZED DEDUCTION?
SPECIAL ALLOWABLE YES YES
ITEMIZED DEDUCTION?
NET OPERATING LOSS YES YES
CARRY OVER?
187. Can NOLCO and OSD be claimed simultaneously?

No, because NOLCO is an item of deduction while OSD is a proxy of all itemized
deductions. NOLCO is deemed included in the claimable OSD.
188. Does OSD replaces NET CAPITAL LOSS CARRY OVER?

No, because the net capital loss carry over is used in the measurement of net
capital gain which is an item of gross income. In other words, it is not an item of
deduction. Hence, a net capital loss carry over from prior year can still be deducted
against the net capital gain of the current year even if the taxpayer opted to deduct
OSD for the current year.
DOCUMENTARY STAMP TAX

189. What is a documentary stamp tax?
It is a tax on documents, instruments, loan agreements, and papers evidencing
the acceptance, assignment, sale or transfer of an obligation, right or property
incident thereto.
190. What is the nature of DST?

It is an excise tax levied on the exercise by persons of certain privileges conferred
by law for the creation, revision, or termination of specific legal relationships
through the execution of specific instruments such as leases of lands, mortgages,
pledges, and trust and conveyances of real property.
191. Who pays for the DST?

The person making, signing, issuing, accepting, or transferring the document or
facility evidencing the transaction pays for the DST.
192. What are the changes on Documentary Stamp Tax under RA 10963 of
the TRAIN Law?
RA 10963 increases the DST rates by 100% except the DST on debt instruments
(Section 179) which only increases by 50% and the DST in policies of insurance
upon property (Sec. 184), fidelity bonds and other insurance (Sec. 185),
indemnity bonds (Sec. 187, and deeds of sale, conveyances and donation pf real
property (Sec. 196) which remained unchanged.
PERCENTAGE TAX
193. What is percentage tax?
It refers specifically to the business taxes covered by Title V of the NIRC, as
amended, payable by any person or entity whose sale of goods or services is not
covered by the VAT system.
194. What is the nature of percentage tax?

It is essentially a tax on the transaction and not on the articles sold, bartered or
exchanged. It is an indirect tax which can be passed on to the buyer.
EXCISE TAX
195. What is an excise tax?
It is a tax levied on a specific article rather than one upon the performance,
carrying on, or the exercise of an activity. It refers to taxes applicable to certain
specified or selected goods or articles manufactured or produced in the Philippines
for domestic sale or consumption or any other disposition and to the things
imported into the Philippines, which tax shall be in addition to the VAT.
196. What is the nature of excise tax?

It may be considered tax on production as they are collected only from
manufacturers and producers. Basically, an indirect tax, it is directly levied upon
manufacturer or importer upon removal of the taxable goods from its place of
production or from customs custody.
197. What are the kinds of excise tax?

a) Specific tax – based on weight or volume capacity or any other physical unit
of measurement; and
b) Ad valorem – based on selling prices or other specified value of the goods.
LOCAL TAXATION
198. What are the fundamental principles governing local taxation?
Taxes:
a) Shall be uniform in each local sub-unit;
b) Shall be equitable and based as much as possible on the taxpayer’s ability to
pay;
c) Levied for public purposes;
d) Shall not be unjust, excessive, oppressive, or confiscatory;
e) Shall not be contrary to law, public policy, national economic policy, or in
restraint of trade;
f) Collection of local taxes and other impositions shall not be let to any person;
g) The revenues collected under the LGC shall inure solely to the benefit of, and
subject to disposition by the LGU levying the tax or other imposition, unless
otherwise specifically provided therein; and
h) Each LGU shall, as far as practicable, involve a progressive system of taxation.
199. How is the power of LGUs to tax vested?

The power of taxation by LGU is no longer by valid congressional delegation, but
by direct authority conferred by the Constitution. Thus, the Congress cannot
abolish such power granted by the Constitution to the LGUs. It must be noted,
however, that the imposition of tax, fee, or charge, or the generation of revenue
under the Local Government Code may only be exercised by the Sanggunian of the
LGU through an appropriate ordinance.
200. What are the common limitations on local taxing powers?

LGUs cannot levy:
a) Income tax, except on banks and other financial institutions;
b) Documentary stamp tax;
c) Estate tax, inheritance, gifts, legacies, and other acquisitions mortis causa
except as otherwise provided;
d) Customs duties, registration fees of vessels and wharfage on wharves, tonnage
dues and all other kinds of custom fees, except wharfage on wharves
constructed and maintained by the LGU concerned;
e) Taxes, fees, charges and other impositions upon goods carried into or out of,
or passing through the territorial jurisdictions of LGUs in the guise of charges
for wharfage, tolls for bridges or otherwise;
f) Taxes, fees, or charges on agricultural and aquatic products when sold by
marginal farmers and fishermen;
g) Taxes on business enterprises certified by the Board of Investments as pioneer
or non-pioneer for a period of 6 and 4 years, respectively, from the date of
registration;
h) Excise taxes on articles enumerated under the NIRC, and taxes, fees, or
charges on petroleum products;
i) Percentage or VAT on sales, barters or exchanges or similar transactions on

goods or services, except as otherwise provided;
j) Taxes on the gross receipts of transportation contractors and persons engaged
in the transportation of passengers or freight by hire and common carriers by
air, land or water, except as provided under LGC;
k) Taxes on premiums paid by way of reinsurance or retrocession;
l) Taxes, fees or charges for the registration of motor vehicles and for the
issuance of all kinds of licenses or permits for the driving thereof, except
tricycle;
m) Taxes, fees, or other charges in the Philippine products actually exported except
as otherwise provided under the LGC;
n) Taxes, fees or charges on countryside and barangay business enterprises and
duly registered cooperatives; and
o) Taxes, fees or charges of any kind on the National Government, its agencies,
instrumentalities, and LGU.
201. What are the fundamental principles governing RPT?

a) Real property shall be appraised at its current and fair market value.
b) Real property shall be classified for assessment purposes on the basis of actual
use.
c) Real property shall be assessed on the basis of uniform classification within
each LGU.
d) The appraisal, assessment, levy, or collection shall not be let to any private
person.
e) The appraisal and assessment of real property shall be equitable.
202. What are the properties exempt from real property tax under the LGC?
a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;
b) Charitable institutions, churches, parsonages or convents appurtenant thereto,
mosques, non-profit or religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for religious, charitable
or educational purposes;
c) 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;
d) All real property owned by duly registered cooperatives as provided for under
RA 6938; and
e) Machinery and equipment used for pollution control and environmental
protection.
203. The Provincial Board passed an Ordinance increasing the rate of basic
real property tax from 0.0055 to 1% of the assessed value of the
property effective February 24, 2005. Residents protested as there was
no public hearing conducted, hence, the increase is void. Is the
residents’ contention correct?
No. Public hearing is not required before the enactment of a local ordinance levying
the real property tax. [Art. 324, LGC Regulations, UP Law Complex, 2007]
204. Can a non-profit, non-stock educational institution refuse to settle the

assessment of a local government for its building permit?
No. While there is incidental revenue to the local government unit, the imposition
of a building permit partakes of a regulatory nature. The imposition of building
permit fee is an exercise of police power to ensure compliance with the standards
under the Building Code to protect the public from any danger [Angeles University
Foundation v. City of Angeles].
205. What shall be the basis of the assessment of real property?

GENERAL RULE: Real property shall be classified, valued, and assessed on the basis
of its actual use regardless of where it is located, whoever owns it, and whoever
uses it.
EXCEPTION: In cases where there are mixed land uses, the predominant use shall
be the basis.
206. Who pays for the real property tax?

Unpaid realty taxes attached to the property are chargeable against the person
who has actual or beneficial use and possession of it regardless of whether or not
he is the owner [Manila Electric Co. v. Barlis].
207. What is the prescriptive period for collection of RPT?

a) Basic RPT & any other tax – 5 years from the date they become due.
b) When there is fraud/intent to evade payment – 10 years from discovery
of fraud/such intent.
208. What are the taxing powers of the provinces?

Taxes, fees and charges which a province or a city may levy
a) Tax on transfer of real property ownership (Sec. 135, LGC)
b) Tax on business of printing and publication (Sec. 136, LGC)
c) Franchise Tax (Sec. 137, LGC)
d) Tax on sand, gravel and other quarry resources (Sec. 138, LGC)
e) Professional tax (Sec. 139, LGC)
f) Amusement tax (Sec. 140, LGC)
g) Annual fixed tax for every delivery truck or van of manufacturers or producers,
wholesalers of, dealers, or retailer in certain products (Sec. 141, LGC)
h) Annual ad valorem tax on real property such as land, building, machinery, and
other improvement not specifically exempted at the rate not exceeding 1% of
the assessed value of the real property (Sec. 232, LGC)
i) Special levies on real property
j) Toll fees or charges for the use of any public road, pier, or wharf, waterway,
bridge, ferry, or telecommunication system funded and constructed by the
provincial government (Sec. 155, LGC)
k) Reasonable fees and charges for services rendered (Sec. 153, LGC)
l) Charges for the operation of public utilities owned, operated, and maintained by
the provincial government (Sec. 154, LGC)
209. What is the scope of the taxing power of a city?

The city, may levy the taxes, fees, and charges which the province or municipality
may impose, except as otherwise provided in the LGC. Those levied and collected
by highly urbanized and independent component cities shall accrue to them and
distributed in accordance with the provisions of LGC (Sec. 151, LGC).
NOTE: The rates of taxes that the city may levy may exceed the maximum rates
allowed for the province or municipality by not more than fifty percent (50%)
except the rates of professional and amusement taxes.
210. What is the scope of the taxing power of a municipality?

Municipalities may levy taxes, fees, and charges not otherwise levied by
provinces, except as otherwise provided in the LGC (Sec. 142, LGC).
a) Tax on business (Sec. 143, LGC)
1. On Manufacturers, assemblers, repackers, processors, brewers,
distillers, rectifiers, and compounders of liquors, distilled spirits,
and wines or manufacturers of any article of commerce of
whatever kind or nature
2. On Wholesalers, distributors, or dealers in any article of commerce
of whatever kind or nature
3. On exporters, and on manufacturers, millers, producers,
wholesalers, distributors, dealers or retailers of Essential
commodities;
4. On Retailers;
5. On Contractors;
6. Banks and other financial institutions;
7. Peddlers;
8. Other business not specified which the sanggunian concerned my
deem proper to tax.
b) Fees and charges on business and occupation (Sec. 147, LGC)
c) Fees for sealing and licensing of weights and measures (Sec. 148, LGC)
d) Fishery rentals, fees and charges (Sec. 149, LGC).
211. What is the scope of the taxing power of a barangay?

a) Barangay Taxes – On stores or retailers with fixed business establishments;
b) Service Fees or charges - Services rendered in connection with the regulation
or the use of barangay-owned properties; or Service facilities such as palay,
copra, or tobacco dryers;
c) Barangay Clearance;
d) Other Fees and Charges
a. Commercial breeding of fighting cocks, cockfights and cockpits
b. Places of recreation which charge admission fees
c. Billboards, signboards, neon signs and outdoor advertisements
212. What is the procedure for approval and effectivity of tax ordinances?
1. The procedure applicable to local government ordinances in general should be
observed (Sec. 187, LGC). The following procedural details must be complied
with:
a. Necessity of a quorum
b. Submission for approval by the local chief executive
c. The matter of veto and overriding the same d. Publication and effectivity
(Secs. 54, 55, and 59, LGC).
2. Public hearings are required before any local tax ordinance is enacted (Sec.
187, LGC).
3. Within 10 days after their approval, publication in full for 3 consecutive days
in a newspaper of general circulation. In the absence of such newspaper in
the province, city or municipality, then the ordinance may be posted in at
least two conspicuous and publicly accessible places (Sec. 188 & 189, LGC).
NOTE: The requirement of publication in full for 3 consecutive days is
mandatory for a tax ordinance to be valid. The tax ordinance will be null and
void if it fails to comply with such publication requirement (Coca-Cola v. City
of Manila, G.R. No. 161893, June 27, 2006).
TARIFF AND CUSTOMS CODE

213. What is tariff?
It refers to customs duties, toll or tribute payable upon merchandise to the
Government; duties charged upon commodities on their being imported into or
exported out of a country.
214. What are the purposes of imposition of customs duties?

a) Revenue-raising;
b) Regulatory purposes; and
c) To protect local industries actually existing and producing comparable goods.
215. What are the functions of Bureau of Customs?

a) Assess and collect revenues from imported articles and all other impositions
under the tariff and customs laws;
b) Control smuggling and related frauds;
c) Supervise and control the entrance and clearance of vessels and aircraft
engaged in foreign commerce;
d) Enforce Tariff and Customs Law;
e) Supervise and control the handling of foreign mails arriving in the Philippines;
f) Supervise and control all import and export cargoes for the protection of
government revenue;
g) Exercise exclusive original jurisdiction over seizure and forfeiture cases under
the tariff and customs laws.
216. What is dutiable value?

It refers to the proper valuation of imported goods upon which the appropriate
customs duty is imposed.
217. What are de minimis importations?

These are importations with the dutiable value of which does not exceed P10,000.
218. What is the flexible tariff clause?

It provides that the President may fix tariff rates, import, and export quotas,
among others either to:
a) Increase, reduce, or remove existing protective rates of import duty;
b) To establish import quota or to ban imports of any commodity, as may be
necessary; or
c) To impose additional duty on all imports not exceeding 10% ad valorem
whenever necessary.
219. When does importation begin and end?

Importation begins from the time the carrying vessel or aircraft enters Philippine
territorial jurisdiction with the intention to unload therein and ends at the time the
goods are released or withdrawn from the customhouse upon payment of the
customs duties or with legal permit to withdraw (dutiable goods) or until they have
legally left the BOC’s jurisdiction (duty-free goods).
220. What is a drawback?

It is a device resorted to for enabling a commodity affected by taxes to be exported
and sold in foreign markets upon the same terms as if it had not been taxed at all.
[Uy Chaco Sons v. Collector of Customs]
221. What is the nature of forfeiture proceedings under the Tariff and
Customs Law?
Forfeiture proceedings are purely civil and administrative in character, the main
purpose of which is to enforce the administrative fines or forfeiture incident to
unlawful importation of goods or their deliberate possession. The penalty in seizure
cases is distinct and separate from the criminal liability that might be imposed
against the indicted importer or possessor and both kinds of penalties may be
imposed. Underdeclaration of value is a ground for forfeiture.
222. Who are returning residents?

They are nationals who have stayed in a foreign country for a period of at least six
(6) months.
223. Distinguish formal entry from informal entry.

FORMAL ENTRY INFORMAL ENTRY
As to documentary requirements
All importations entered through this
process shall be covered by a letter of
credit or any verifiable commercial
document evidencing payment or in
There is no such requirement.
cases where there is no sale for export,
by any commercial document
indicating the commercial value of the
goods.
As to application
Applies only to:
a) Goods of a commercial nature with
As a rule, all goods declaration for FOB/FCA value of less than P50,000;
consumption shall be cleared through a and
formal entry process. b) Personal or household effects or goods,
not in commercial quantity, imported in
passenger’s baggage or mail.
224. What are regular customs duties?

These are taxes imposed or assessed upon merchandise from, or exported to a
foreign country for the purpose of raising revenue. They are also protective/tariff
barriers preventing the entry of merchandise that would compete with locally
manufactured items. They are classified as either:
a) Ad valorem duty – computed based on the value of the imported article.
b) Specific duty – computed based on the dutiable weight of good.
225. What are special customs duties?

These are additional import duties imposed on specific kinds of imported articles
under certain conditions. They are classified as either:
a) Anti-dumping duty;
b) Countervailing duty;
c) Marking duty;
d) Discriminatory/retaliatory duty; or
e) Safeguard measures.
226. What does countervailing duty mean?

Countervailing duty is a special duty imposed upon imported articles which are
granted subsidy by the country of origin and that such will cause a material injury
to the domestic industry or has retarded the growth or prevents the establishment
of a domestic industry. The countervailing duty to be imposed is equivalent to the
value of the specific subsidy.
227. What does dumping mean?

It occurs when foreign producers sell their products to an importer in the domestic
market at prices lower than in their own national markets or at prices below cost
of production, the sale or importation of which injures or threatens to injure a
domestic industry producing like or comparable products or retards the
establishment of a potential industry.
228. What does anti-dumping duty mean?

Anti-dumping duty is a special duty imposed on imported items being sold below
their normal value which will cause or is threatening to cause material injury to a
domestic industry, or materially retarding the establishment of a domestic industry
producing the like product. The dumping duty imposed is the difference between
the export price to the Philippines and the normal value.
229. What is the rule on marking foreign articles?

GENERAL RULE: Foreign articles should be marked in any official language of the
Philippines and in a conspicuous place as legibly, indelibly, and permanently in such
manner as to indicate to an ultimate purchaser in the Philippines the article’s
country of origin.
EXCEPTIONS: In the following cases, the immediate container or such other
container/s of the article shall be the one subject to marking:
a) The article cannot be marked prior to importation to the Philippines except at
an expense economically prohibitive of its importation.
b) The article is incapable of being marked.
c) The article cannot be marked prior to importation to the Philippines without
injury.
d) The article is of a crude substance.
e) The marking of the container of such article will reasonably indicate the origin
of such article.
f) Such article is to be processed in the Philippines by the importer for his own
account and not for the purpose of concealing the origin of such article.
g) Such article is for the use of the importer and not intended for sale in its
imported or other form.
h) The ultimate purchaser, by the character of the article, must know the country
of origin or such article.
i) Such article cannot be marked after importation except at an expense
economically prohibitive and failure to mark the article before importation was
not due to any purpose of the importer, producer, seller, or shipper to avoid
compliance.
j) Such article was produced more than 20 years prior to its importation to the
Philippines.
230. What is discriminatory duty?

It is a duty imposed upon articles of a foreign country which discriminates against
Philippine commerce in such a manner as to place it at a disadvantage compared
with the commerce of another foreign country.
NOTE: There is discrimination when the country imposes, directly or indirectly,
upon any Philippine product unreasonable charge, exaction, regulation, or
limitation which is not equally enforced upon like articles of other foreign countries.
231. What are safeguard measures?

These are trade remedy measures adopted by the government to provide affected
domestic industries relief against imports. These are imposed to give the affected
domestic industry time to prepare itself for and adjust to increased import
competition resulting from the reduction of tariffs or the lifting of quantitative
restrictions agreed upon in multilateral trade.
232. When does abandonment of imported articles occur?

a) Through the express intent of the owner, importer, or consignee to abandon
the imported articles signified in writing to the Customs Collector;
b) Failure to file by the owner, importer, consignee or interested party after due
notice of an entry within 30 days (not extendible), from the date of discharge
of the last package from the vessel or aircraft; or
c) Failure to claim the imported articles within 15 days (not extendible) from the
date of posting of the notice to claim such imported articles.
233. What are the effects of abandonment?

a) Abandoned articles shall ipso facto be deemed the property of the Government
and shall be disposed of in accordance with the provisions of the TCCP; and
b) Owner or importer is not relieved from any criminal liability which may arise
from any violation of law committed in connection with the importation of the
abandoned articles.
234. Distinguish smuggling (outright) from technical smuggling.

Smuggling is an act of any person who shall fraudulently import or bring into the
Philippines, or assist in so doing, any article, contrary to law or shall receive,
conceal, buy, sell or in any manner facilitate the transportation, concealment, or
sale of such article after importation, knowing the same to have been imported
contrary to law. It also includes the exportation of articles in a manner contrary to
law.
Technical smuggling is an act of importing goods through fraudulent, falsified or
erroneous declarations, for the purpose of reducing or, if not, totally avoid the
payment of the prescribed taxes, duties and other government charges.
235. What are the types of technical smuggling?

a) Misdeclaration – committed when the discrepancy pertains to quantity,
quality, description, weight, or measurement of the imported goods.
b) Misclassification – exists when insufficient or wrong description of the goods
or use of wrong tariff heading was declared resulting in a discrepancy.
c) Undervaluation – committed when:
i. The declared value fails to disclose in full the price actually paid or
payable or any dutiable adjustment to the price; or
ii. An incorrect valuation method is used; or
iii. The valuation rules are not properly observed.
236. What is the evidence for conviction in smuggling cases?

Mere possession of the article in question is sufficient, unless defendant could
explain that his possession is lawful to the court’s satisfaction.
237. What are the degrees of culpability for failure to pay correct duties and
taxes on imported goods?
a) Negligence – when a deficiency results from an offender’s failure to exercise
reasonable care and competence to ensure that a statement made is correct.
b) Fraud – when the material false statement or act in connection with the
transaction was committed or omitted knowingly, voluntarily and intentionally,
as established by clear and convincing evidence.
TAX REMEDIES
238. What is the jurisdiction of the Court of Tax Appeals?
The CTA has jurisdiction over the following cases:
a) Exclusive appellate jurisdiction over decisions of the CIR 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 NIRC
or other law or part of law administered by the BIR;
b) Exclusive appellate jurisdiction on the decisions of the Commissioner of
Customs in cases involving liability for customs duties, fees or other money
charges; seizure, detention or release of property affected; fines, forfeitures or
other penalties imposed in relation thereto; or other matters arising under the
Customs Law or other law or part of law administered by the Bureau of
Customs;
c) In automatic review cases where such decisions of the Commission of Customs

favorable to the taxpayer is elevated to the Secretary of Finance;
d) Exclusive appellate jurisdiction in decisions made by the Secretary of Trade and
Industry, in the case of non-agricultural product, commodity or article, or the
Secretary of Agriculture, in the case of agricultural product, commodity or
article, in connection with the imposition of the Anti-Dumping Duty,
Countervailing and Safeguard Duty;
e) Original appellate jurisdiction for criminal cases involving violations of the
National Internal Revenue Code and the Tariff and Customs Code;
f) Original appellate jurisdiction over decisions of the RTC in local tax cases;
g) Original appellate jurisdiction on decisions of the Central Board of Assessment
Appeals (CBAA) in cases involving the assessment and taxation of real
property; and
h) Original appellate jurisdiction over collection of internal revenue taxes and
customs duties the assessment of which have already become final.
239. What are the powers of the CIR?

a) Power to accept an offer of compromise if a reasonable doubt as to the validity
of the claim against the taxpayer exists; or the financial position of the taxpayer
demonstrates a clear inability to pay the tax. Such is only possible if it is
accompanied by a waiver of the secrecy of bank deposits;
b) Credit or refund taxes erroneously or illegally received or penalties imposed
without authority;
c) Refund the value of internal revenue stamps when they are returned in good
condition by the purchaser;
d) In his discretion redeem or change unused stamps that had been rendered unfit
for use and refund their value upon proof of destruction;
e) The power to interpret the provisions of NIRC, subject to review of Secretary
of Finance;
f) The power to decide disputed assessments, refunds of internal revenue taxes,
fees or other charges, penalties imposed in relation thereto;
g) Make assessments and prescribe additional requirements for tax administration
and enforcement;
h) Authority to inquire into bank deposit accounts and other related information
held by financial institutions;
i) Authority to accredit and register tax agents; and
j) 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.
240. What are the various remedies available to taxpayers?

Remedies before Payment:
a) Administrative. Protest against assessment and enter into a compromise.
b) Judicial. Civil action including appeal to the CTA up to the SC.
c) Substantive. Questioning the constitutionality or validity of tax statutes or

regulations via petition for declaratory relief; annulment of assessment notice
for failure to inform the taxpayer in writing of the legal and factual bases of
assessment.
Remedies after Payment:
a) Tax refund (actual reimbursement of tax)
b) Tax Credit
241. What are the grounds for filing a claim for tax refund or tax credit?
The grounds are as follows:
a) Tax is collected erroneously or illegally;
b) Penalty is collected without authority; and
c) Sum collected is excessive or in any manner wrongfully collected.
242. What are the remedies of the BIR and the Bureau of Customs in
collecting taxes due to the government?
Administrative
a) Compromise;
b) Distraint;
c) Levy;
d) Tax lien;
e) Forfeiture of property;
f) Suspension of business operation in violation of VAT;
g) Giving of reward to informers who give information as to tax violations; and
h) Enforcement of administrative fines, surcharges and penalties.
Judicial
a) Civil action; and
b) Criminal action.
Substantive
a) Imposition of withholding tax on certain income payments;
b) Issuance of revenue regulations by administrative agency;
c) Failure to obey summons; and
d) Declaration under penalties of perjury.
243. When can the CIR accept an offer of compromise?

The CIR has the power to accept an offer of compromise in the following cases:
a) A reasonable doubt as to the validity of the claim against the taxpayer exists;
or
b) The financial position of the taxpayer demonstrates a clear inability to pay the
tax. Such is only possible if it is accompanied by a waiver of the secrecy of bank
deposits.
NOTE: The prescribed amount must be within that prescribed by law, that is, 10%
of the tax assessed.
244. What are the prescriptive periods for assessment and collection of
taxes?
For Assessment:
GENERAL RULE: Within 3 years from due date of filing of return if return is filed on
or before due date, or 3 years from date of actual filing if filed beyond due date.
EXCEPTIONS:
a) Failure to file a return: 10 years from the date of the discovery of the omission
to file the return.
b) False or fraudulent return with intention to evade tax: 10 years from the date
of discovery of the falsity or fraud.
c) Agreement in writing to the extension of the period to assess between the CIR
and the taxpayer before the expiration of the 3-year period.
For Collection:
a) 5 years from the date of assessment by administrative or judicial action.
b) In case of non-filing, false or fraudulent return:
i. 10 years from discovery if proceeding for collection is made without
assessment; or
ii. 5 years from date of assessment if BIR chooses to make assessment after
discovery of the non-filing, false, or fraudulent return.
c) Agreed period pursuant to agreement in writing: before the expiration of the
5-year period.
Date of filing Prescriptive Prescriptive

the return period – period –
Assessment Collection
Before due date 3 years from due date 5 years from receipt of
On due date 3 years from due date FAN by taxpayer;
Beyond due date 3 years from actual filing
Fraudulent filing 10 years from discovery NOTE: If taxpayer files
of bad faith/fraud fraudulent return or did
Non-filing 10 years from discovery not file any return, the
of non-filing BIR may collect without
assessment within 10
Waiver by taxpayer: Depends on the agreement
years of filing of
of the parties provided that the agreement to
fraudulent return or
extend is executed prior to the expiration of the
discovery of non-filing
original period of assessment
245. What is the prescriptive period for the taxpayer’s administrative claim?
The administrative claim must be filed within 2-year period, regardless of any
supervening cause. The 2-year prescriptive period will commence from the
following:
a) In overpaid quarterly income taxes, from the date the final adjustment return
is filed after the end of taxable year;
b) When the final adjustment return was actually filed before the last day
prescribed by law for filing, from the date of actual filing;
c) For taxes sought to be refunded is illegally and erroneously collected, from the
date the tax was paid;
d) When tax is paid on installments, from the date of last installment;
e) When taxpayer merely made a deposit, from the time the deposit was
converted to payment;
f) For taxes withheld from source, from the date it falls due at the end of taxable
year; and
g) In corporate dissolution, 30 days from the approval by the SEC for such
dissolution.
246. What is an assessment notice?

An assessment notice is a computation done by the BIR summarizing a taxpayer’s
alleged unpaid taxes. This includes the interest, penalties and other charges. To be
valid, it must be accompanied by a demand letter from the BIR.
247. What is a pre-assessment notice?

It is a notice served to the taxpayer when the taxpayer fails to file a return where
a return is required; files a return but fails to pay the tax; or files a return, pays
the tax but payment is insufficient because certain deductions claimed are
disallowed by BIR.
248. What is meant by best evidence obtainable?

It includes any data, records, papers, documents, or any evidence gathered by
internal revenue officers from government offices/agencies, corporations,
employees, clients, patients, tenants, lessees, vendees and from all other sources
with whom the taxpayer had previous transactions or from whom he received any
income.
249. What is the procedure in the issuance of a deficiency tax assessment?

a) Issuance of letter of authority;
b) Audit/tax investigation;
c) Determination of taxpayer’s liability for deficiency tax;
d) (In case the taxpayer is liable) Notice for informal conference;
e) Informal conference or endorsement to the Assessment Division of the Revenue
Regional Office to the CIR or duly authorized representative for review and
issuance of the assessment;
f) Issuance of preliminary assessment notice (PAN); and
g) Formal letter of demand and assessment notice.
250. Does the satisfaction of civil liability extinguish the taxpayer’s criminal
liability under the Tax Code?
No. The satisfaction of the civil liability is not one of the grounds for the extinction
of criminal action instituted against a taxpayer for violation of the Tax Code. The
payment of the tax due after apprehension shall also not constitute a valid defense
in any prosecution for violation of any provision of the Tax Code. If items were
seized from the taxpayer, such may be returned to him if he has settled the taxes
assessed against him.
251. What is Jeopardy Assessment?

It is the tax assessment made by an authorized Revenue Officer without the benefit
of complete or partial audit, in light of the Revenue Officer’s belief that the
assessment and collection of a deficiency tax will be jeopardized by delay caused
by the taxpayer’s failure to: a) comply with audit and investigation requirements
to present his books of accounts and/or pertinent records; or b) substantiate all or
any of the deduction, exemptions, or credits claimed in his return.
252. What tax liability cases may be compromised?

a) Delinquent accounts;
b) Cases under administrative protests;
c) Civil tax cases being disputed before the courts;
d) Collection cases filed in courts;
e) Criminal violations, other than those already filed in court or those involving
criminal tax fraud; and
f) Cases covered by pre-assessment notices but taxpayer is not agreeable to the
findings of the audit office as confirmed by the review office.
253. What tax liability cases may NOT be compromised?

a) Withholding tax cases, unless the taxpayer invokes provisions of law that cast
doubt on his obligation to withhold;
b) Criminal tax fraud cases;
c) Criminal violations already filed in court;
d) Delinquent accounts with duly approved schedule of installment payments;
e) Cases where final reports of reinvestigation or reconsideration have been issued
resulting to reduction in the original assessment and the taxpayer is agreeable
to such decision;
f) Cases which become final and executory after judgment of a court, where
compromise is requested on the ground of doubtful validity of the assessment;
and
g) Estate tax cases where compromise is requested on the ground of financial
incapacity of the taxpayer.
254. What is abatement?

It is when the entire tax liability of the taxpayer is cancelled based on the following
grounds:
a) The tax or any portion thereof appears to be unjustly or excessively assessed;
or
b) The administration and collection costs involved do no justify the collection of
the amount due.
255. What is the difference between deficiency tax and delinquency tax?
DEFICIENCY TAX DELINQUENCY TAX
Exists when the amount by which the

tax imposed by the CIR exceeds the Exists when the self-assessed tax per
amount shown as the tax by the return filed by the taxpayer on the
taxpayer upon his return; or when the prescribed date was not paid at all or was
amount by which the tax exceeds the only partially paid at all or was only
amounts previously assessed as a partially paid; or when the deficiency tax
deficiency, if no amount is shown as tax assessed by BIR became final and
by the taxpayer upon his return or if no executory.
return is made by the taxpayer.
256. Summary of fraudulent return, false return, and failure to file return?
FAILURE TO FILE
FRAUDULENT RETURN FALSE RETURN
RETURN
Omission to file a
It must be the product of a
Constitutes a deviation return in the date
deliberate intent to evade
from the truth due to prescribed by law.
taxes. Intentional and
mistake, carelessness, or Omission can be
deceitful with the sole aim of
ignorance. intentional or not
evading the correct tax due
Established by the:
a) Intentional and
substantial
understatement of tax
liability by the There must appear a design
taxpayer; to mislead or deceive on
b) Intentional and the part of the taxpayer, or
substantial at least culpable
overstatement of negligence.
deductions of
exemptions; and/or
c) Recurrence of the above
circumstances.
Filing a fraudulent return will The mere omission is

make the taxpayer liable for already a violation
the crime of moral turpitude regardless of the
as it entails willfulness and fraudulent intent or
Does not make the
fraudulent intent on the part willfulness of the
taxpayer criminally liable
of the individual (Republic v. individual (CIR vs.
Marcos II, G.R. Nos. 130371 Bank of Commerce,
& 130855, August 4, 2009, CTA EB Case No. 654,
595 SCRA 43). March 14, 2011).
Not subject to 50%

Subject to 50% penalty Not subject to 50% penalty
penalty surcharge
surcharge surcharge
The tax may be assessed, or a proceeding in court for the collection of such tax
may be begun without assessment, at any time within ten years after the discovery
of the falsity, fraud or omission.
257. What are the requisites of a valid protest?

a) Must be in writing;
b) Addressed to the CIR;
c) Must be accompanied by a waiver of the statute of limitations in favor of the
government;
d) Must state the facts, applicable law, rules, and regulations or jurisprudence on
which his protest is based.
258. In 2010, pursuant to a LOA issued by the Regional Director, Mr. Abcede
was assessed deficiency income taxes by the BIR for the year 2009. He
paid the deficiency. In 2011, Mr. Abcede received another LA for the
same year 2009, this time from the National Investigation Division, on
the ground that Mr. Abcede's 2009 return was fraudulent. Mr. Abcede
contested the LA on the ground that he can only be investigated once
in a taxable year. Decide. (2013 Bar)
Mr. Abcede’s contention is not correct. While the general rule is to the effect
that for income tax purposes, a taxpayer must be subject to examination and
inspection by the internal revenue officers only once in a taxable year, this will
not apply if there is fraud, irregularity or mistakes as determined by the
Commissioner. In the instant case, what triggered the second examination is
the findings by the BIR that Mr. Abcede’s 2009 return was fraudulent,
accordingly, the examination is legally justified (Sec. 235, NIRC).
259. What is San Roque Doctrine?

The 30-day period of appeal to the CTA need not necessarily fall within the two-
year prescriptive period, as long as the administrative claim before the CIR is
filed within the two-year prescriptive period. This is because Sec. 112 (D) of the
1997 NIRC mandates that a taxpayer can file the judicial claim: (1) only within
thirty days after the Commissioner partially or fully denies the claim within the
120day period, or (2) only within thirty days from the expiration of the 120-day
period if the Commissioner does not act within the 120-day period (CIR v. San
Roque Power Corporation, G.R. Nos. 187485, 196113, 197156, February 12,
2013)
NIRC REMEDIES
Assessment Process and Taxpayer’s Remedies from Tax Assessment – NIRC
Issuance of a Letter of Authority
Audit or tax investigation by the

Revenue Officer
If the Revenue Officer finds sufficient

basis to assess deficiency tax, a PAN
shall be issued, except as those
provided under Sec. 228 of the NIRC.
Taxpayer may submit a Reply to the

PAN within 15 days from the date of
receipt of PAN.
If the taxpayer’s response is If the taxpayer was not able to refute

meritorious, the assessment shall be the findings in PAN or if he is in
dismissed. default, FLD/FAN shall be issued.
Protest of FAN must be made within 30

days from the receipt of assessment.
Submission of supporting documents
If the decision is adverse to the within 60 days from filing of protest.
taxpayer or in case of inaction, he may
appeal to the CTA within 30 days from
the receipt of decision or lapse of the
If the decision made within 180 days
180-day period. Should the taxpayer
from the filing of the protest or
opt to wait for the final decision on the submission of documents is in favor of
disputed assessment beyond the 180- taxpayer, the assessment is dismissed.
day period, the taxpayer may appeal
such final decision to the CTA within 30
days from the receipt of decision. The taxpayer may opt to file a motion
for reconsideration of an unfavorable
judgment and appeal the decision to
the CTA later on, subject to the 30-day
period rule to appeal.
CTA Division decides the appeal within 30 days
Appeal to the CTA En Banc, subject to compliance with prior requirements
Appeal to Supreme Court within 15 days from the receipt of the decision of CTA En
Banc or a petition for certiorari, prohibition or mandamus in cases of grave abuse of
discretion, lack or excess of jurisdiction
PROCEDURE FOR DISTRAINT AND LEVY UNDER NIRC

Delinquent taxpayer fails to pay tax on time
If the delinquent tax is more than P1M, CIR seizes sufficient personal property to satisfy the tax, charge and
expenses of seizure. (NIRC, Sec. 207[A])
If the delinquent tax is not more than P1M, Revenue District Officer seizes sufficient personal property to satisfy
the tax, charge and expenses of seizure. (NIRC, Sec. 207[A])
The distraining officer accounts for the goods distrained. (NIRC, Sec. 208)
RDO posts notice in atleast 2 public places in the municipality/ city where the distraint is made. One place of
posting must be at the mayor’s office. Time of sale shall not be less than 20 days after the notice. (NIRC, Sec.
209)
If the bid is not equal to the amount of tax or very much less than the FMV of the goods distrained, the CIR may
purchase property in favor of the National Government. The property may be resold and the net proceeds shall
be remitted to the National Treasury as internal revenue. (NIRC, Sec. 212)
If the bid is just right, the officer sells the goods to the highest bidder for cash or with the CIR’s approval, through
commodity/ stock exchanges. (NIRC, Sec. 209)
Excess proceeds over the entire claim shall be returned to the owner. No charge shall be imposed for the services
of the officer. (NIRC, Sec. 209)
Within 2 days after sale, officer shall report to CIR (NIRC, Sec. 211). Within 5 days after the sale, distraining
officer shall enter return of proceedings in the record of Revenue, Collection Officer, RDO, and the Revenue
Regional Director. (NIRC, Sec. 213)
Real property may be levied on, before, simultaneously, or after the distraint of personal property. (NIRC,
Sec. 207[B])
Internal revenue officer, designated by the CIR, shall prepare a certificate with the force of a nationwide legal
execution. (NIRC, Sec. 207[B])
Levy shall be effected by writing upon said certificate a description of the property. Notice of the levy shall be
served upon the Register of Deeds of LGU where the property is located and upon the owner. (NIRC, Sec. 207[B])
Within 10 days after the receipt of the warrant, levying officer shall report to the CIR who shall have the authority
to lift the warrant of levy. (NIRC, Sec. 207[B])
Within 20 days after the levy, officer shall post notice at the main entrance of the municipality/ city hall and in a
public place in the barrio/ district where the real estate for at least 30 days and publish it once a week for 3 weeks.
Owner may prevent sale by paying all charge. (NIRC, Sec. 213)
If there is no bidder or the highest bid is insufficient, the If there is a bidder and the highest bid is sufficient,
officer conducting the sale shall forfeit the property to the excess of the proceeds of sale over claim and cost
government. Within 2 days, he shall make a return of the of sale shall be turned over to the owner. Within 5
forfeiture. The Registrar of Deeds shall transfer title to days after sale, levying officer shall enter return of
the government without need of a court order, upon the proceedings upon the records of the RCO,
registration or forfeiture. Within 1 year from forfeiture, RDO, RRD. (NIRC, Sec. 213)
taxpayer may redeem said property by paying full Within 1 year from sale, owner may redeem by
amount of the taxes and charges (NIRC, Sec. 215). CIR paying to RDO amount of the taxes, penalties and
may, after 20 day-notice, sell property at public auction interest from date of delinquency to the date of
or at a private sale with approval of SOF. Proceeds shall sale, and 15% per annum interest on the purchase
be deposited with the National Treasury. (NIRC, Sec. price from date of purchase to date of redemption.
216) Owner shall not be deprived of possession and
shall be entitled to the fruits until 1 year expires.
(NIRC, Sec. 214)
Levy and distraint may be repeated until the full
amount due and all expenses are collected.
(NIRC, Sec. 217)
SUMMARY OF DISTRAINT PROCEEDINGS
Commencement of Distraint Proceedings (NIRC,

Sec. 207)
Service of Warrant of Distraint (NIRC, Sec. 208)
Taxpayer must sign receipt
Posting of Notice (NIRC, Sec. 209)
Sale of Property Distrained (NIRC, Sec. 209)
SUMMARY OF LEVY PROCEEDINGS
Prepare a Certificate of Levy (NIRC, Sec. 207[B])
Service of Notice (NIRC, Sec. 207[B])
Advertisement of the time and place of sale (NIRC,

Sec. 213)
Sale of Real Property (NIRC, Sec. 213)

LGC REMEDIES
Taxpayer’s Remedies Against Collection
NIRC REMEDIESof Real Property Taxes (LGC)
Assessment NIRC REMEDIES
ES ES
LT issues notice of deadline for payment:
a) Posting at a conspicuous place at the LGU
Assessor submits assessment roll to the Local hall; OR
Treasurer (LT) b) Publication in a newspaper of general
circulation in the LGU once a week for 2
consecutive weeks.
Owner pays the tax. Written protest must be filed

Collection of tax by LT
before the LT within 30 days from payment.
Within 60 days from receipt of protest, LT decides Does LT grant the protest?
YES NO
Taxpayer may
appeal within 60
days from receipt of
Amount of tax notice (or expiration
Refund or tax credit must be claimed within 2 of 60 days) to the
protested shall be
years from the date of entitlement. Local Board of
refunded or applied
as tax credit. Assessment Appeals
(LBAA).
* same procedure if
Within 60 days LT acts on claim for refund or tax LT did not act upon
credit. protest
Does LT grant the claim? LBAA decides within 120 days from
receipt of appeal.
YES NO
Taxpayer may appeal within 60 days from receipt If LBAA rejects protest OR claim
of notice (or expiration of 60 days) to the Local for refund or tax credit, owner may
Board of Assessment Appeals. appeal to the CBAA w/in 30 days
from receipt of notice.
If Central Board of Assessment

Appeals (CBAA) rejects
protest/refund, owner may appeal
to the CTA en banc within 30 days
from receipt of decision.
Appeal to the Supreme Court

within 15 days
END
Real Property Tax Levy for Satisfying Real Property Taxes (LCC)
Delinquency
Written notice of levy is

Mailing or serving of mailed/served upon the
LT issues warrant of levy warrant to the Assessor and the
delinquent owner Registrar of Deeds of the
LGU.
Within 30 days from

service of warrant, LT
advertises the sale of
property:
Venue of sale: a) posting of notice at
Before the date of the
a) at the LGU main the main entrance of
sale, the owner may
entrance/building; OR LGU hall/building & in
stay the proceedings
b) on the property to be a conspicuous place in
through payment of the
sold; OR the barangay where
delinquent tax, interest,
c) at any other place the property is
and expenses of sale.
specified in the notice. located; OR
b) publication once a
week for two
LT purchases the
Is there a bidder? consecutive weeks (3
property in LGU’s behalf
weeks in case of levy
for other unpaid local
RD transfers the title of taxes).
YES NONE the forfeited property to
LGU.
Within 1 year from If no redemption was

forfeiture, the owner made, the ownership
Bidder pays
may redeem the shall be vested on the
property. LGU.
Sanggunian may, by
The price paid and the
LT reports the sale to the ordinance, sell and
2% interest per month
Sanggunian 30 days dispose of the real
are returned to the
after the sale. property acquired
buyer.
through public auction.
If no redemption was Levy may be repeated

LT delivers the certificate made, LT executes a until the full amount
of sale to the buyer. deed of conveyance to due, including all
the buyer. expenses, is collected.
The proceeds of the sale

in excess of the
delinquent tax, interest,
END
and expenses of the sale
are remitted to the
owner.
TCC REMEDIES
NIRC REMEDIES
ES

Taxation Law Pre Week 2019

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Taxation Law Pre Week 2019

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Lyceum of the Philippines University College of Law

PRE-WEEK NOTES ON CIVIL LAW 1

3. What is the nature of the power of taxation?

Amount of No ceiling except Limited to the cost of No imposition, the

Benefits Protection of a Maintenance of The person receives

Non- Tax laws generally Contracts may be Contracts may be

7. What are the characteristics of taxation?

8. What are the theories and basis of taxation?

10. What are the inherent limitations of the power of taxation?

consent, that limit the authority of a government to effectively impose taxes on

11. What are non-delegable legislative powers?

13. What are the constitutional limitations of power of taxation?

14. What are the stages or aspects of taxation?

determine those to be taxed (person, property or rights), how much is to be

16. What are the requisites of a valid tax?

17. Tax as distinguished from other forms of exactions

contributions imposed upon

TAX LICENSE FEE

TAX SPECIAL ASSESSMENT

Mode of Payable in money or in kind Payable in kind or in money

Authority Maybe imposed by the State Maybe imposed by private

18. What are the kinds of taxes?

As to Scope / Authority to Impose

NOTE: The rule that, in case of doubt of legislative intent,

Revenue Memorandum Circulars (RMCs) must not override,

20. What is the rule on prospectivity of tax laws?

EXCEPTION: If the law expressly provides for retroactive application. Retroactive

EXCEPTION TO THE EXCEPTION:

21. What is the rule on situs of taxation on intangible personal properties?

22. Is the application of the doctrine of mobilia sequuntur personam

23. What is the Doctrine of Imprescriptibility?

24. Is double taxation forbidden?

25. What are the kinds of double taxation?

27. What are the modes of eliminating double taxation?

c) Tax exemption. A grant of immunity to particular persons or entities from the

29. What are the forms of escape from taxation?

TAX EVASION TAX AVOIDANCE

The use of legally permissible

31. What constitutes tax evasion?

32. What is a tax exemption?

34. What is the nature of tax exemptions?

35. Are all tax refunds in the nature of tax exemptions?

36. What are the kinds of tax exemptions?

37. Can tax exemptions be withdrawn?

38. What are the restrictions on revocation of tax exemptions?

b) A municipal franchise once granted as a contract cannot be altered or

39. What is the Doctrine of Equitable Recoupment?

40. Can taxes be subject to compensation or set-off?

41. Can an assessment for a local tax be the subject of set-off or

42. What is compromise?

43. Is a compromise of tax obligations allowed?

45. Distinguish a tax amnesty from a tax exemption.

A freedom from a charge or burden to

There is no revenue loss because

46. What is the nature of tax amnesty?

47. What is the Willful Blindness Doctrine?

48. Distinguish direct taxes from indirect taxes.

DIRECT TAX INDIRECT TAX

49. May an injunction be issued against the collection of taxes?

50. May the bank deposits of an individual taxpayer be disclosed by a

a foreign tax authority pursuant to an international convention or agreement on

JURISDICTION, POWER AND FUNCTIONS OF THE COMMISSIONER OF

54. What are the powers of the Commissioner of Internal Revenue?