LUMBERA NOTES SUPPLEMENT
income within
INCOME TAX
Situs of Income:
1. Compensation – Where the service is rendered
regardless where it was paid
2. Real Property, Tangible Personal Property – Where the
property is located
3. Royalties and Rentals – Where the property is located
4. Interest on Bank Deposits- Where the bank issued the
bank deposit is located
5. Interest on loan:
a. If the debtor is RC, income is within regardless
where the debtor is
b. If the debtor is NRC interest income is without
c. If the creditor is RC or DC, even if Debtor is
NR, it is still income within.
d. If debtor is RA it is within
e. If debtor is RFC it is within
6. Dividends:
a. If Corporation that issued the dividend is DC,
all dividends issued is within
b. If the Corporation is FC:
Gr: All dividends ithin
XPN: if less than 50% of the gross
income of the FC is derived from
sources within for a period of 3 year
before the release of such dividend.
Only such income shall be considered
within based on the ratio of the gross
 Special Persons: Aliens employed in off shore banking
units, multi-national companies and oil petroleum
service contractors, they are considered NRANETB
even if they are in the PH.
Income Tax on Individuals
(REFER TO TABLE of LUMBERA)
(A) Catch all Proviso
 Kung wala sa B, C, D nasa A yan.
 (GI-AD) = TNI x % = Tax Due
 NIT is = use schedular table
 Compensation Income Earner= NIT Payable
 In case of SEP/SEI whose income does not exceed 3M,
he has a choice of NIT or 8% of GR/GS in excess of
250k. In it exceeds 3M then use NIT.
 Mixed Income Earner:
o For Compensation, use NIT
o For Profession or Sales, use the rule for SEI/SEP
(B) Passive Income:
 Should be from sources within the PH, if not then it is
not under (B) but under (A).
 Passive income from outside the Phils. - all PI received
by a non- resident citizen from outside of the
Philippines are EXEMPT FROM TAX;
A. Royalties derived from PH sources
 B. Interest on Bank Deposit issued by a bank
in PH
Xpn: interest income on long term deposit
or investment shall be exempt from tax
provided that the holder of the certificate
does not pre-terminate the deposit or
investment before the 5th year.
C. Prizes and Winning from PH (less than 10k,
not taxable)
D. Dividends issued by domestic corp (FWT
10%)
(C) Sale of shares of stock of a PH Corp
 Capital Gains Tax of 15% FWT
 For it to fall under C, the share of stock must be sold
untraded.
 If traded in a local stock exchange, income tax will not
apply, instead apply Sec 125, tax is percentage tax at
the rate of 0.6 of 1% of gross selling price.
(D) Sale of real property situated in the PH
 CPT of 6% FWT
 Based on 1. FMV, 2. Gross selling price, 3. Assessed
value based on Tax Declaration and 4. Zonal Valuation
based on Tax Declaration, whichever is higher.
 Binenta ng lugi or may tubo, both may CGT
 So malalaman mo kung may tubo ka or lugi based on
the FMV at the time of sale
 Elements:
a. Sold
b. Real prop
c. Located in PH
d. Capital Asset
 Ordinary Assets under Sec 39: (key word: used in trade
or business)
a. Stocks in trade (Raw Materials)
b. Goods sold
c. Inventory Subject to depreciation
d. Real Prop used in trade or business
 All other assets are Capital Assets.
 Nag benta ka ng lugi, means namigay ka ng libre, thus
liable to donor’s tax, this applies both to sale of Capital
Assets or Ordinary Assets.
 If you sell your property to the Government, you can
choose the imposable tax between CGT of 6% or NIT
under (A) (Involuntary sale)
 In case of Foreclosure proceedings, there is CGT only
upon the expiration of period of redemption and the
title of the property is consolidated to the purchaser.
 Exemption from CGT for sale of real property:
Requisites [Sec 24 (D)(2), NIRC]:
a. The real property must be the actual principal
residence of the taxpayer/seller;
b. Seller must inform the BIR of his intention to avail of
the exemption (within 30 days from sale);
 c. Seller must build or purchase another principal
residence within 18 months from sale;
d. Proceeds from the sale should be used in
building/purchasing new principal residence
e. 6% CGT will be applied proportionately to proceeds
not used for new principal residence.
 Above exception is applicable to Non-Resident
Citizen.
 As well as the rules on expropriation, involuntary
sale and Foreclosure proceedings, provided that the
property subject to tax is within the PH
 In case the seller builds or purchase another
principal residence using the proceeds, if there is
excess, such will be subjected to Income Tax. If no
excess, no tax.
2. RA and NRC
 They are taxed the same way
 NRC and RA not taxed from sources without
 Rules on D still applicable to RA like NRC
3. NRAETB
 Taxed the same ways as above, except one
 In case of dividends issued by Domestic Corp under
(B), RC, NRC and RA are all taxed at the rate of FWT of
10%, but if NRAETB the rate is increased to 20%
4. NRANETB
 (A) and (B) shall now be subjected to Gross Income Tax
of 25% (withheld)
 (C) and (D) is the same as above
 XPN to CGT is also applicable
 As a rule, aliens are not allowed to own real property
in the PH, except:
a. By way of succession or inheritance
b. Condominium unit in a Condo Corp
c. If a former resident citizen
 These xpn specifically applies to special persons
(offshore banking units and etc), so if they own Condo,
the xpn of CGT 6% may be applicable to them
 The preferential tax system for Special Unit is now
vetoed by the President, thus they are now subjected to
NIT(A), this is to prevent any inequality in the
application of compensation income for RC which are
also employed under the same company which are
offshore banking unit, multinational corporations, and
oil petroleum service contractors, vs aliens employed
under the same company.
Income Tax on Corporation
 Remember on Corporate Taxpayers, their income is
always based on trade or business. We call that
ordinary income
1. Domestic Corporation
 Income within and without
(A) Catch all Proviso

 Under column A, they are taxed a fixed rate of 30%
NIT
(B) Passive Income:
 They also have passive income but only Interest on
bank deposit and Royalties , wala yung Royalties as to
literary or musical compositions. Wala din silang
passive income on Prizes and winnings
 Wala ding dividends, because that is what we call
Intercorporate Dividends Tax (ICDT) which is in case
that a dividend is issued by a DC, received by another
DC, that is exempt.
 Remember the xpn that interest income on long term
deposit or investment shall be exempt from tax
provided that the holder of the certificate does not pre-
terminate the deposit or investment within 5 years.
This is not applicable on DC.
(C) and (D)
 (C) and (D) of individuals shall be applicable to DC as
well, but the XPN to CGT of 6% does not apply to a
Corporate Taxpayer.
 Aside from ABCD and ICDT there is also Minimum
Corporate Income Tax (MCIT) and Improperly
Accumulated Earnings Tax (IAET)
 For MCIT, the rate for DC is 2% on the Gross Income.
 For IAET, the rate for DC is 10% based on the
Improperly Accumulated Earning.
 So what are the rule on this additional taxes?
o First, MCIT is applied in lieu of (A)
o IAET is in addition to ABCD kung meron kang
Improperly Accumulated Earnings
o Let’s discuss
MCIT
 A DC shall be subject to MCIT of 2% of the GI
beginning the 4th year following the commencement of
its operation provided that the 2% on the GI is higher
than the NIT of 30%
IAET
 Rate is 10% upon IAE
 These are earning of corporate taxpayers retained
beyond the reasonable business needs.
 This is related to dividends
 Diba ang corporation pag kumita, yung kita niya ay
inaappropriate para sa kanyang business operations
tsaka expansion so pwede niyang iretain
 Yung hindi nya gagamitin sa kanyang business
operation at expansion, ang tawag don
unappropriated. And accg to Corpo Code, yung hindi
mo gagamitin hindi mo pwede iretain 100% kailangan
mong ipamigay sa SH via dividends.
 Kung hindi mo ipamigay, yan ang Improperly
Accumulated Earning
 This is the system of tax that we know of as bawi bawi,
hindi pwedeng libre
2. Resident Foreign Corporation
 NIT under (A). Ang gusto natin, as much as possible
(A) Catch all Proviso yung kita wag iremit dun sa US main branch, kasi
 Same with DC kapag yung kita niya ininverse(?) nya ulit sa pilipinas
it will generate income, then it will generate another
(B) Passive Income: tax.
 Same with DC  E hindi naman pwedeng iprohibit yung branch na
 As to dividend (ICDT), if magremit sa head branch, so para madiscourage,
o D to D = Exempt kapag niremit, we can tax that as BPRT
o D to RFC = Exempt pa din  Gusto ng gobyerno yan kasi kapag di niremit sa US,
(C) Sale of shares of stock of a PH Corp the income will stay here gagamiting reinvestment a
 Same with Individual operations and will generate more income and
therefore mas madami kikitain ng PH.
(D) Sale of real property situated in the PH  So beneficial sa PH pag niretain, pero beneficial pa din
 Not allowed since foreign corp are not allowed to own kahit iremit kasi kikita sila sa BPRT
real property
MCIT
 Is applicable 3. Non-Resident Foreign Corporation

IAET (A) And (B)

 Not applicable, because this is just a branch here in the  The tax is Gross Income Tax at the rate of 30%
PH
(C) Sale of shares of stock of a PH Corp
There is a new tax applicable to RFC, the Branch Profit  Same with Individual
Remittance Tax (BPRT)
 At the rate of 15%based on the amount applied for (D) Sale of real property situated in the PH
remittance regardless of the amount actually remitted.  Not allowed since foreign corp are not allowed to own
 Only applicable to RFC real property
 Kunyari may US Corp may branch sya sa PH, yung ICDT
branch sa PH ang tawag natin RFC. Pag kumita yung  D to NRFC is taxable already
branch sa PH, yung kita nya dito ang tax nya is 30%  FWT at the rate of 15%

MCIT
 Not applicable
IAET
 Not applicable
Constitutional Provision on the Exemption of various
Organizations and of the Government in relation to Income
Tax table of Lumbera (Sec. 30)
 Ano yung nature nung 11 organization under Sec.
30? Non-stock, non-profit organization
 Sabi sa batas any Income “As Such” shall be
exempt from income under this title.
 So anong klaseng tax sila exempted? Pag binasa
nyo yung sec. 30, ang ibig sabihin nyan, 11 na
corporasyon, anong income, income as such, shall
be exempted from Income tax of 30% NIT (A).
Because yung non-stock non-profit, these are all
DC.
 Ano yung ibig sabihin nung “As such, ang ibig
sabihin nyan, income, derived by the 11
corporation pursuant to the primary purpose for
which each one of them is created.
 Now, there is a last paragraph under Section 30,
ang naka sulat, subject to limitations
notwithstanding the provisions of the preceding
paragraph, income of whatever character from
Real or Personal Property or from an activity
conducted for profit, regardless of disposition shall
be subject to tax. Anong tax, yung 30% NIT and
any other applicable tax under the Income tax.
 Regardless of disposition = kahit saan ginastos
yung income
 So kahit na ginamit yung income from an activity
conducted for profit sa repair kunyari ng church,
taxable pa din because the law provides that it is
subject to tax regardless of disposition.
 Icorrelate natin yung sabi ng constitution.
1. Charitable/Religious Institution (CRI)
 Charitable institution includes both charitable and
religious
 The constitution provides that all charitable
institutions, churches, convents, mosques, non-
profit cemetery, parsonages, including all lands,
buildings and improvements actually, directly and
exclusively (ADE) used for charitable, religious or
educational purpose shall be exempt from tax. Yan
ang sabi ng consti.
 So anong klaseng tax exempted? RPT lang ang
coverage ng consti.
 Pag ang asset is principally but not entirely, hindi
kailangan entirely ah, in other words there may be
incidental use.
 Take note the ff questions:
1. is consti applicable = exempt from RPT
2. is it exempt from income tax or is it subject to
the exeption under last par = exempt from NIT
30, if falls under last par, taxable, what income?
ABCD. If passive income FWT 20%
3. is it gifts, bequests and devices (not taxable
income but subject to donors tax if intervivos,
and estate tax if mortis causa)
a. Rule under tax code, if the gift shall not
be subject to donors’ tax or estate tax
provided not more than 30% of the gift
is used by the charitable institution for
administration purposes. (Sec 87 for
Donors Tax, Sec 101 for Estate Tax)
b. Is the donation deductible to the gross
income of the donor. Eto ang sagot (Sec
34H):
i. kung si donor ay tao at purely
compensation income earner, no
he cannot claim it as deduction.
ii. If donor is SEP/SEI or MEI, he
can claim as deduction but only
as to the extent of 10% of his
taxable income prior to this
deduction.
iii. If Donor is corporate taxpayer, it
can claim up to 5% of his taxable
income prior to this deduction.
2. Non-Stock, Non-Profit Educational Institution
(NSNPEI)
 Constitutional limitation – All revenues and assets
as well as all lands, buildings and improvement of
a NSNPEI actually, directly and exclusively (ADE)
used for educational purpose shall be exempt from
taxes and duties. (Consti and LGC 1991)
 As you can see, sa charitable institutions, ang
exempted lang is land, buildings and assets, dito
revenues kasama, kita. Sa exemption, same ADE
used. Pero the exemption is much broader than
CRI, because the exemption here include RPT and
all Internal Revenue Taxes meaning income tax,
donors tax, yung lahat enumerated sa tax code, so
mas malawak yung exception.
 Under the consti, kapag yung revenue (kita)
gamitin (ADE) sa educational purpose libre sa
income tax
 Sabi naman sa Sec 30, income as such ng skwelahan
from the primary purpose such as tuition fee, no
tax.
 But there is a big difference between the 2, sa
consti, para ma libre sa buwis, kailangan mong
gamitin (ADE use) for educational purpose, sabi
naman ni sec 30, hindi gamit ang usapan kundi if
the income is as such like tuition fee, it is the source
of the income, regardless of use, that determines
the exemption.
 That conflict has long been in existence, but BIR has
always used sec 30 as basis for the interpretation.
 Until such time that the La Salle University case
came out and was decided by the SC, landmark
case yan, so sinabi dun sa CIR vs DLSU case that
sec.30 insofar as NSNPEI is concerned is
unconstitutional because it runs contrary to the
express provision of the constitution, and because it
is unconstitutional the effect is we use the
constitution, meaning as long as the tuition fee,
maipakita mon a gagamitin ADE for educational
purpose libre sa income tax.
 What is the other consequence of that ruling in the
case of De La Salle University, because of that case,
sa halip na 11na corporasyon ngayon ang covered
ng sec.30 minus 1, nagging sampu nalang. So by
reason of the case, sec30 has no effect at all insofar
as NSNPEI is concerned.
 How do you prove the use? You have to prove in
your audited financial statement that the amount
was ADE devoted for educational purpose.
 So even for kunyari, rentals, sa sec.30 pasok sya sa
last paragraph, so dapat taxable sya. But for the
reason of the ruling of the case, we disregard sec30
and use the constitutional limitation. So dapat lang
iprove na yung revenue from rentals is ADE used
for EP.
 Pano kung nilagay sa bangko? yung interest
earning may be exempt from income tax following
the constitutional limitation. (proof of ADE use)
 What if you donate? Follow the rule on CRI
3. Proprietary Educational Institution (PEI)
 Anong sabi sa Constitution? May karugtong yan sa
constitutional limitation for NSNPEI, sabi sa
second paragraph ng constitution “subject to the
limitations provided for by law, PEI may likewise
be exempt from similar taxes and duties.”
 What is the basis of exemption of let’s say, RPT,
walang constitution, LGC of 1991 ang basis mo.
Same reasons as for NSNPEI but different basis
because the consti does not cover the exception.
 Okay, let’s go back to tuition fee, ano iaapply natin?
We apply sec.27(b), ang tawag sa kita sa tuition fee
kapag PEI is related trade or activity (RTA), ang
tawag naman sa rentals, kunyari, is unrelated trade
or activity (UTA).
 Anong sabi sa sec.27(b)? If the income from
unrelated trade or activity does not exceed 50% of
its total income, then the preferential tax rate of
NIT 10% instead of NIT 30% shall be applied.
4. Government Educational Institution (GEI)
 UP does not fall within the purview of GEI kasi it
has a separate charter.
 Bali baliktarin nyo man ang consti, walang sinabi
dito na exempt from income tax ang GEI.
 Under the tax code, section 30, you will find a
specific provision dealing with GEI. So ang
nakasulat dun, “for GEI, they are exempt from
income tax for income as such, but income from
whatever character from real or personal property,
 or from activity conducted for profit by GEI,
regardless of disposition, shall be subject to tax.”
 So, for NSNPEI, the constitution applies, for PEI
there is no specific provision but we apply
LG1991 and the tax code, for GEI, we apply sec. 30
of the tax code, walang constitution
 The GEI may still be exempted from RPT by virtue
of Sec. 234 of LGC 1991 which states that, “the ff
real properties shall not be subject to RPT”, number
1 on the list real properties owned by the
government of the Republic of the PH or any of its
instrumentalities except when the beneficial use
pertains to a non-exempt entity for a consideration.
Tandaan, walang constitutional provision but sec.
234 of LGC 1991 shall be applied.
 So how do we answer, the properties are exempt
from RPT not because of ADE but simply put a real
property owned by the government of the RP and
the beneficial use does not pertain to a non-exempt
entity.
 So, the rented portion, is not exempt because the
beneficial use pertains to a non-exempt entity for a
consideration. What is the consideration? The
rentals.
 Let’s go to tuition fees. Ano ang basehan sec.30 ng
tax code. Is it income, yes, is it taxable, no because
it is income as such. How about rentals, is it
income, yes, is it subject to tax, sabi sa last
paragraph ng sec30, subject to tax, why? Because it
is income of whatever kind and character from real
or personal property or from an activity conducted
for profit regardless of disposition shall no longer
be exempt from tax.
 If you donate in favor of the gov, is it income, yes,
is it taxable, no because it is an item of exclusion. Is
it subject to DT/ET, the answer is simply no
without the 30% restriction. Because you donate in
favor of the govt, then the entire gift shall not be
subject to DT/ET.
 Can the donor claim it as a deduction from gross
income, the rules are the ff.
 kung si donor ay tao at purely
compensation income earner, no he
cannot claim it as deduction.
 If donor is SEP/SEI or MEI or
Corporate taxpayer, yes, he can
claim as deduction in full, if priority
project of the government. As long
as naka declare as priority project ng
govt yung GEI or yung pagaaral sa
public then it will be allowed as a
deduction in full.
 Assuming it is not declared priority
project of the govt, then we apply
the restriction of 10% or 5% under
34(H) of the Tax Code.
5. Government of the Philippines
 Nothing in the consti, states na exempted and
gobyerno sa tax.
 So okay, same scenario as GEI. Is the govt
exempted from RPT, sabi sa sec 234 ng LG1991, not
subject to RPT because owned by the government
or any of its instrumentality and the beneficial use
does not pertain to a 3rd person. E yung portion na
to (portion leased to mcdo, Jollibee and etc) yes,
kasi beneficial use pertains to non-exempt entity.
Basis sec.234. Walang constitution na
pinaguusapan.
 Next, let’s say nagcoconduct and DSWD ng
training, may mga nagbabayad, kumita ng 10M,
income? Ggamitin ba natin ang sec 30? Wala
naman sya dun sa 11. Meron bas a consti? Wala
din. Is it taxable income? No, pero anong basehan?
Makikita ang sagot sa sec 32 par.B number 7,
andun sa miscellaneous items. Ano nakasulat dun,
income of the government from exercise of
governmental function such as the income of
DSWD from trainings conducted, that is a
performance of governmental function and
therefore exempted from income tax.
 What about the rentals? Is it income? Yes, is it
taxable income? It’s the same provision, sec 32
par.b, the item of exclusion from the computation
of gross income is income of the govt from the
performance of its govt functions and conversely
therefore income of the government from the
performance of the proprietary function such as
rental income, because it is in the nature of
proprietary function of the government therefore it
is not exempt from payment of tax.
 So it is not correct to say that the govt is exempt
from payment of tax, that is not an umbrella
statement, hindi sya encompassing.
 What kind of tax? E di look at the table, the govt is
considered as DC for tax purposes, then the rental
income shall be subject to 30% NIT under (A)
 How about interest earning (passive income)?
Income? Yes, Taxable? Yes, pero anong basehan?
Because it is in the nature of proprietary function
the same is taxable under (B) FWT 20%.
 What if you donate in favor of the government?
o Is it income? Yes, is it taxable income? The
answer is no, why because gifts, bequest
and devices are items of exclusions from the
computation of the gross income.
o Is it subject to DT/ET? the answer is no,
period. Fully not subject to DT/ET, there is
no restriction of 30% for administration
purposes.
o Can the donor claim the same as deduction?
 If CIE, No.
 If donor is SEP/SEI or MEI or
Corporate taxpayer, yes, he can
claim as deduction in full, if priority
project of the government. As long
as naka declare as priority project ng
govt yung GEI or yung pagaaral sa
 public then it will be allowed as a
deduction in full.
 Assuming it is not declared priority
project of the govt, then we apply
the restriction of 10% or 5% under
34(H) of the Tax Code.
The easier way to study this is, dahil mahirap syang
imemorize, gumawa kayo ng sariling table. Para di mo sya
makakalimutan. And you use the same series of questions.
Laging may tanong dito sa Bar, lalo na dahil sa landmark case
of Dela Salle University at tsaka yung St. Lukes Medical
Center Case.
6. Charitable Hospital and Proprietary Hospital (CH
and PH)
 Meron pa, yung case ng charitable hospitals vs
proprietary hospitals, you just have to apply yung
rules ng PEI at charitable institutions, pareho lang rules
nun. When we talk about charitable hospital you apply
strictly the rules nung charitable institutions, when we
talk about proprietary hospitals, kasi walo yan talaga e,
you apply the same rule as PEI, yun lang.
 Recap lang nung walo, 1) CI, 2) RI, 3) NSNPEI, 4) PEI,
5) GEI, 6) Govt itself, 7) CH, 8) PH.
ITEMS OF INCLUSIONS/EXCLUSIONS IN THE
COMPUTATION OF THE GROSS INCOME OF THE
TAXPAYER
 What constitutes gross income of the taxpayer, you’ll
find the provision in sec.32 of NIRC par.A.
 Sec.32 is divided into 2 portions. 32(A) which pertains
to items of inclusions and 32(B) which pertains to items
of exclusions.
32(A) – Inclusions
 What is the effect if the income is included? Taxable.
 Ang code ko dito CG(2)DIR(2)AP(3), pronounced
sijidirap.
 Do you have to memorize this portion? Because of the
rule that all income unless excluded is included. Kung
hindi excluded, siguradong included.
 Gross income = All income from whatever source
derived such as but not limited to the ff:
1. Compensation for services rendered including fees,
commission and other similar items (NIT and no
VAT)
2. Gross income from exercise of profession or trade
or business
 if the GR does not exceed 3M,
o tax consequence: choice of 8% plus
no VAT and No % tax,
o if he chooses NIT, no VAT, but
there is %tax
 if the GR exceed 3M,
o Automatically, 12% VAT will be
imposed on your sale of service but
no %tax.

3. Gains derived from dealings in property
4. Dividends
5. Interests, may refer to either interest on bank
deposit and deposit substitute or investment or
interest on loans
6. Rentals
7. Royalties
8. Annuities
9. Prizes and winnings
10. Pensions
11. Partner’s distributive share in the GPP
 Basta ang tatandaan ninyo, kahit saan nanggaling,
ninakaw, pinulot, lahat ng yan form in part ng inyong
gross income.
32(B) – Exclusions
 What is the effect if the income is excluded? Not
subject to tax, I will not use the word exempt.
 Lahat ng wala dito sa list, taxable.
 So sabi natin, dalawang bagay ang hindi tinatax, kung
ito ay exempted or kung ang income ay excluded.
 Naaral na natin so far ang income exempted, anoa no
yung income exempted? Just by looking at the table.
1. Income from sale of actual principal residence
2. PCSO and Lotto winnings not exceeding 10k.
3. Interest on long term deposits which you do not
preterminate for a period of 5 years, with respect to
individual tax payer
4. Dividends issued by a domestic corporation in
favor of another DC
5. Dividends issued by DC in favor if RFC
 So, these are examples of the items that we have
discussed that are exempted. We now go to the items
which are excluded. I will never use the word
exempted when we discuss sec.32.
 If you are faced with a question tapos di mo sigurado
kung ang item is excluded or exempted, wag mo ng
ipagpilitang gamiting sabihin mo nalang based on the
tax code, that particular income is not subject to tax.
 Magkaiba kasi meaning nung exempted sa excluded
baka mapagpalit nyo.
 So let us enumerate.
1. Proceeds of life insurance policy received by the
insured or his heirs in case of his death
 Provided that if there is payment of interest
on the proceeds of the life insurance, then
the interest shall be subject to tax.
 So let’s say in a case, X is insured by a life
insurance policy, the proceeds amounting to
1M, return of premium of 500K, and interest
earning of the proceeds of 10%. When he
died the same was transferred to
beneficiaries. Are the amount income?
  As to the proceeds, yes, ROP is not income,
interest income is income.
 Next question, alin diyan ang taxable, una
yung proceeds excluded, yung ROP is also
excluded because that is no.2 on the list.
Yung 10% interest is taxable income. Anong
klaseng tax ang babayaran? E di (A), wala
yan sa (B), wala sa (C) at wala sa (D) e di
nasa (A)
 Kapag may nakita kayong problem na may
namatay automatic may tanong sa kabilang
side, Estate Tax. So were talking about the
same amount, 2 topics.
 The rule if the same would form part of his
gross estate is it would depend on his
designated beneficiary.
 So if his beneficiary is himself, his estate,
his executor or administrator, whether the
designation is revocable or irrevocable,
include in the GE therefore taxable.
 If the designated beneficiary is any person
other than above, if designation is revocable
then include, if irrevocable exclude from
computation of GE.
 Above rules are under section 86.
2. Return of Premium
 This is just a return of capital
 But if the return of capital may nakalagay
na provision stipulating that it will realize
income or interest, then of course, naturally
the interest income of ROP shall be included
to the computation of income tax.
3. Gift, Bequest and Devises
 Intervivos or Mortis Causa covered.
 Kaninong point of view ang tinetake? Recipient’s
point of view.
 But if the GBD realizes income, such income shall
be subject to income tax.
 Ang excluded lang yung property mismo na
binigay sayo, so kunyari yung binigay sayo is
apartment, tapos meron rentals. Yung property
lang yung excluded from tax, but yung rentals
subject na sya to tax.
 Let’s summarize the rules.
 Pag ang binigyan mo ay bf or gf mo or friend, dahil
ngayon wala ng strangers sa income tax. So
dalawang tax ang titingnan natin, Income tax at
Donor/Estate tax. So sa income tax, excluded.
Dahil excluded sa income tax, ang tanong subject
ba sya ng DT/ET, papaya ba ang batas na libre ka?
Tandaan ninyo, bawi bawi system, babawian ka ng
gobyerno. Kung libre ka sa IT, aba may DT/ET
yan.
 Next, kapag binigyan mo charitable Institution,
Religious Institution, NSNPEI, excluded pa din. Sa
DT/ET, no tax but subject to the 30% restriction,
that not more than 30% of the gift is devoted for
administrative purpose.
 Pag nagbigay ka sa govt, no income tax, no DT/ET
din, wala din restriction.
 For election contribution, not subject to both IT and
DT, provided the ff requisites:
1. That it is given for campaign purposes
2. That it is fully utilized authorized campaign
expenditure as provided by the Comelec
rules
3. That Statement of Contribution and
Expenditure (SOCE) is filed by both the
winning or losing candidate
4. That the creditable withholding tax of 5%
was withheld and remitted to BIR
4. Income exempted under a Treaty
 It’s very simple, treaty for part of the law of
the land, therefore if a particular is entered
into by the PH and another country which
expressly provide for the exclusion of any
income then it will be not subject to tax.
5. Damages
 Compensation for sickness and death
 Let us summarize the rules, work related
and not work related. Napakadali ng rules,
the keyword here is reparation of damage.
 If work related at ikaw ay nireimburse dahil
ikaw ay nagkasakit o namatay, lahat ng yan
excluded.
 Kung not work related sa ka kukuha ng
reimbursement, e di kung meron kang
accident insurance coverage, or health card
at ikaw ay nireimburse sa ginastos mo sa
pagkakasakit mo then the same shall be
excluded as well.
 Yung property insurance, building
insurance, Fire insurance, CMVLI, isama na
natin to kahit di compensation for sickness
and death, In other words if there is
insurance coverage, and you are reimbursed
for all the damages that you sustained, not
subject to tax yan.
 This is easy, again, the key word is
reparation for damage, whenever you
receive amount for reparation for damage
then the same shall be excluded from tax.
6. Retirement Benefits
 Let’s start with private sector:
o With private retirement plan
 Must be 50 years old
 10 years of continuous
service
 The plan is approved by the
BIR
 No part of the fund is used
for any purpose other than
for the benefit of the
employees
  The (4) must be complied, for
the same to be excluded.
o Without private retirement plan
 Must be 60 years old
 20 years of service
 The (2) must be complied, for
the same to be excluded.
 Let’s start with government sector:
o All retirement benefits, no tax.
Including conversion of leave credits
into cash, lahat ng yan wala. That’s
the benefit you get when you get
employed by the govt.
 Since nandito na tayo sa RB, meron lang
akong ididiscuss about employment. Usong
uso ito ngayong Covid 19:
o Retrenchment, redundancy,
installation of labor-saving device,
business losses, automation of
business process, these are some of
the grounds for the termination of
services of employees and these are
considered valid or legitimate cause
(just cause) on the part of the
employers.
o If you are removed from
employment by reason of the
abovementioned, you are receiving
separation pay, is the SP subject to
tax? Not subject to tax. Because these
are for causes beyond the control of
the employee.
o In addition, if an employee dies, any
retirement benefits received by the
employee by the reason of his death
and received by the heirs shall not
be subject to tax, because again this
is for a cause beyond the control of
the employee.
o If you are dismissed for cause, e di
wala kang matatanggap. What if
binigyan ka ng financial assistance,
natural it shall be taxable ang
financial assistance, because you’re
not supposed to receive anything.
o If you’re dismissed without cause,
and the final judgement when you
filed the case is reinstatement plus
payment of damages, moral and
exemplary damages, Attorney’s fees
and cost of suit, alin diyan ang
taxable?
 Reinstatement = if reinstated
you will receive your same
pay, therefore taxable
 M and E Damage = subject to
tax
 AF and Cost of suit = only in
excess of actual expense shall
be subject to tax. But if you
 are just reimbursed for actual
expense, no tax.
o What if the judgement was in lieu of
reinstatement, plus payment of
moral and exemplary damages,
Attorney’s fees and cost of suit, alin
diyan ang taxable?
 The separation pay shall not
be subject to tax because that
is due to a cause beyond the
control of the employee.
 M and E Damage = subject to
tax
 AF and Cost of suit = only in
excess of actual expense shall
be subject to tax. But if you
are just reimbursed for actual
expense, no tax.
7. Miscellaneous Items
A. Prizes and Winnings
 Ano difference nya sa passive income na
prizes and winnings? Sa passive income, it
pertains to games of chance. But this one,
pertains to sports competition sanctioned by
National Sports Commission (NSC).
 So yung professional boxers, di sila covered
by this exclusion, tulad nila many pacquiao,
dahil yun ay kanilang kanilang kita in the
exercise of their profession (SEP)
 Professional Basketball players SEP din yan.
 So what are the prizes and winnings that
are excluded:
1. Again, prizes and winnings to sports
competition sanctioned by National
Sports Commission (NSC)
2. Prizes and winnings in recognition
of various purposes, charitable,
religious, scientific, education,
literary, civic achievement and
_________. Provided that the winner
did not actively participate to join
the contest and the winner is not
required to render future services.
So pano napprevent yun? Ang
ginagawa diyan is kunyari yung 10
outstanding men, ang ginagawa
diyan ninonominate para hindi sya
actively participated to join the
contest. The joining of the contest is
by way of nomination to avoid the
payment of tax.
B. 13th Month Pay and Other Benefits
 Magkano ang limit ng 13th month pay and
other benefits ngayon? 90K.
 C. Income of the Government in the exercise
of its governmental function
D. Income of Foreign Govt from investment
in the PH
 Example nito yung mga utang ng PH sa
ibang bansa, it is in the form of investment.
 Any interest income payment made by the
PH to the creditor, that is considered
income of the foreign govt from its
investment here in the PH, that is not
subject to tax.
So take note of these (7), kasi kung wala sa list manahimik ka,
at yan ay taxable. So kung hindi exempted at hindi excluded, e
di include yan. So pag included yan, balik kayo sa table, at
hanapin ninyo kung saan box magpupunta.
Fringe Benefit, De minimis Benefit, Basic Compensation
DE MINIMIS BENEFIT
 Eto yung mga add ons other than the sweldo. So how
do we treat the add ons?
 Remember yung DMB natin may limit yan. So
kailangan alam nyo yung limitasyon ng batas:
 Monetized Vacation Leave
 not exceeding 10 days in the private
sector
 Sick Leave Benefit
 walang SL na DMB, so taxable. Pero
sa private sector. Sa govt walang
limit ang SL at VL, kahit anong klase
ng leave credit na kinonvert sa cash
pag part ng govt sector, lahat ng yon
DMB, so hindi subject sa tax.
 Medical Allowance to dependents of
Employee
 to the extent not exceeding Php 1500
per semester (6 mos)
 Rice Subsidy = 2k pesos per month
 Uniform or Clothing Allowance
 6k pesos per year
 Actual Medical Assistance
 not exceeding 10k per year
 Achievement Awards in the form of
Tangible Personal Property other than
cash or Gift certificate
 not exceeding 10k per year
 Gifts given during Xmas or Major
Anniversary Celebration
 5k per year
 Daily Meal Allowance
 25% of the basic minimum
 Benefits received by the Employee
pursuant to a CBA
 not exceeding 10K
 So what happens to the excess of the limit? Eto yung
rule, yung sobra lumilipat, pupunta sya as other
benefits, and itong other benefits may limit din sya.
Which is 90k.
 In income taxation, tatlo lang ang klase ng employees
and how are they subjected to tax:
o Managerial and Supervisory
 We call his basic pay, compensation and
the tax due is NIT (A)
 DMB within the limit is exempted
 If Other benefits exceeds 90k the same
shall be included in the compensation
thus taxable under NIT (A) UNLESS the
benefit is considered as Fringe Benefit in
which case shall be subject to FBT 35%
based on the Grossed Up Monetary
Value.
o Rank and File
 Meron din yang basic pay, we call it
compensation as well, and tax due is
NIT(A)
 DMB within limit is exempted
 If Other benefits (along with the excess
of DMB) does not exceed 90k exempted,
if it exceeds, the excess shall be included
in the compensation thus taxable under
NIT (A)
 rate is 35% FBT based on the grossed up monetary
o Minimum Wage Earner
 Pag MWE, we call your basic pay as
statutory minimum wage (SMW), and
the same is exempt from the payment of
income tax
 Kailangan alamin nyo yung SMW in
metro manila and outside metro manila.
 DMB within limit is exempted
 If Other benefits (Along with the excess
of the DMB) does not exceed 90k
exempted, if it exceeds, the excess shall
be included in the compensation thus
taxable under NIT (A)
 Remember this, if the ff instances are present do not
apply the rules on DMB/FBT:
1. If such benefits were furnished by employer
for the convenience of the employer, or
2. The benefit is necessary in the trade or
business of the employer
 Whatever amount from the (2) instance is not
considered income and therefore not subject to tax.
FRINGE BENEFIT TAX
 What are Fringe Benefits? These are benefits extended
by an employer to an employee on top of the basic pay
and other benefits. These are normally given to
Managerial and Supervisory Employees and the tax
value and withheld by the employer. So this is in the
nature of a withholding tax.
  What are usually Fringe Benefits? Eto yung mga
Housing Privileges, Motor Vehicle, Equipment,
Personnel assigned to you, Exclusive Membership
Clubs, Plane Tickets, and all other benefits extended by
the employer to the employee other than DMB, 13th
month pay and “Other Benefits”
 Under the present law, yung Special units subject na
din sya to FBT 35%
 Remember this, if the ff instances are present do not
apply the rules on DMB/FBT:
3. If such benefits were furnished by employer
for the convenience of the employer, or
4. The benefit is necessary in the trade or
business of the employer
 Ang explanation diyan is if you binigyan ka ng benefit
ng employer mo pero yun will benefit the employer,
it’s as if you received nothing for your personal
advancement
DEDUCTIONS
 Medyo mahirap ito ah.
o NRC
 Number one concept in deduction is “only income
subject to NIT is allowed to claim the deduction”
o RA
 So let’s say in column A, pag yung SEP/SEI pinili nya
yung 8% hindi sya subject to deduction.
o NRAETB
 So here is he summary, First we answer who is entiled
for deductions?.
o NRANETB
o RC
 Only under column A, if he chooses 8%,
not subject
 If CIE, no deduction allowed, the train
law removed already personal
exception, additional exemption
 If SEP/SEI, if GR/GS not exceed 3M at
pinili nya yung 8% hindi sya subject to
deduction. But kung pinili nya is NIT(A)
then may deduction sya. He has the
option to choose (option of the taxpayer)
kung OSD or Itemized Deduction under
sec. 34
 Kapag naman nagexceed ng 3M
automatic may deduction kasi NIT(A)
na yun. He has the option to choose
(option of the taxpayer) kung OSD or
Itemized Deduction under sec. 34
 Kapag MIE, we apply the same rules. So
no deduction as to the Compensation
income, and the rules on the SEI/SEP
will apply to the trade or business or
exercise of profession part.
 Same rule as RC, income within
 Same rule as RC, income within
 Same rule as RC, income within
 Not subject, because it is taxable on the
basis of Gross Income
 o DC o No documentation needed
 Only under column A, if he chooses 8%,  Itemized deduction naman, Eto code ko diyan
not subject EITLBD(2)CPR
 For Corporate Taxpayer, it has the  Expenses
option to choose between OSD and  Interest
Itemized Deduction  Taxes
o RFC  Losses
 Same rule as DC, income within  Bad Debt
o NRFC  Depreciation
 Not subject, because it is taxable on the  Depletion
basis of Gross Income  Charitable contribution
 So pag ikaw ay CIE, eto lang ang dinededuct sayo na  Pensions
walang tax:  Research and Development
o Pagibig, Philhealth, SSS, GSIS, Union dues, 13th o You need supporting documents for Itemized
month pay and other benefits not exceeding deduction to prove the expense. Eg. Resibo
90k. But this are not considered as actual o All the itemized deductions must be necessary
deductions from your income. Kasi this are for the trade and business of the tax payer
legitimate remittances to government. o Actually paid or incurred on the by the tax
 Now what are the kinds of deductions? payer for the year for which you are computing
 Optional Standard Deduction at Itemized Deduction your tax due.
lang yan. If you can see, only those engaged in T/B or o Reasonable in amount
in the exercise of profession are entitled to deduction,
pati DC at RFC.  So, the choice is upon the tax payer, but when do you
 So Optional Standard Deduction make the choice? Under the TRAIN law, the tax payer
o It is 40% of Gross Income or Gross Reciepts or is required to choose at the start of the taxable period,
Gross Sales. how? When? Pag nag file ka ng first quarterly return
o Then after deduction, the difference will be the mo, nakasulat na dun kung anong inaavail mong
one used to be multiplied to the rates now. deduction.
o Meaning the remaining 60% of his income will  By default, if you did not choose, the itemized
now be subjected to tax. deductions will be applied.
 The choice is irrevocable until the end of the year.
 If you can see, all of these deductions they have
something in common between them – they are all
business-related expenditure. Meaning the expense is
related to the kind of business you are engaged.
 How do we compare items of exclusions vs items of
deductions?
o Yung items of exclusions, these are items of
income but the law specifically provides that
they should not be considered in computing for
the gross income and therefore the effect is no
tax due.
o Items of deduction, itemized deduction in
particular under sec.34, these are items of
expenditures, gastos.
 Since both of them have the effect of reducing your tax
due, and because of that both of them are treated as
items of exemptions and must be strictly construed
against the taxpayer.
 Basic rule: if a taxpayer who is engaged in trade or
business acquires assets used in his T/B, the asset
acquired is in the nature of ordinary asset, the purchase
price that he spent for the purchase of the property will
never be allowed as a business expense deduction
because the taxpayer acquires ownership of the
property, we call it capital expenditure.
 Take note, capital expenditure is not allowed as a
deduction, in lieu thereof the person who claims for
deduction can claim depreciation expense of the asset
as the allowable deduction.
 So how can he claim under depreciation expense, there
are (2) ways:
o Straight Line Method
 Usually used in the PH
o Diminishing Method
 What is the acceptable depreciation period? For RP =
between 15 to 25 years, for TPP = 5 years
 So if X buys a motorcycle worth 1M, he cannot claim it
as a business expenditure but he can claim for
depreciation expense. So that 200K deduction for 5
years.
 So the rule, if you apply expense, you cant apply
depreciation expense, but if you don’t apply expense,
you apply depreciation. Di pwedeng sabay.
 Bad Debt vs Interest Expense
o Bad Debt = Kapag di nabayaran yung utang
o Pag Bad debt ang mag cclaim ng deductions si
Creditor, kapag Interest expense naman si
Debtor.
o Kapag bad debt, ang macclaim ni credito ay
buong utang kasama interest, while sa IE, ang
macclaim lang ni debtor ay Interest.
o What is the effect of the subsequent recovery of
the bad debt (kapag seubsequently binayaran
nu debtor yun utang), on the point of view of
creditor? We have this rule, the Tax Benefit
Rule
o Tax Benefit Rule = When BD is previously
claimed as a deduction on the part of the
creditor, and subsequently it was paid by the
 debtor after claiming its deduction, then the
creditor shall consider the amount paid or the
indebtedness as form in part of his gross
income in the year of recovery.
o On the part of the debtor, when he paid the
amount, what is the effect on him? On the day it
became due, and it was not paid, the debtor
cannot claim any interest expense, but when he
paid it subsequently, then he can the IE on the
year that it was it was paid.
 On Interest, we are aware of the concept of Tax
Arbitrage. Ano ibig saibihin nito? The concept of Tax
Arbitrage applies only on interest on loans. Diba sabi
natin the interest on loans, incurred in the in
connection of trade/business may be claimed by the
debtor who paid the interest. In tax arbitrage, ang
sinasabi ng batas ay the amount of interest expense
allowed as a deduction shall be further reduced by 33%
of any interest income subjected to FWT. When you
look at sec.34 di nyo mahahanap yung tax arbitrage
diyan, ang hanapin nyo is yung sec.34(B) on interest
expense, pag nakita nya no yung sec34(B) may
makikita kayong 33%, yan ang tax arbitrage.
o Ang ibig sabihin ng tax arbitrage, yung interest
expense that could be claimed by debtor as
interest expense deduction, pwede pang
mareduce ng 33%ng any interest income (so
under (B) sya kasi passive income subject to
FWT) subjected to FWT.
 Okay next, Taxes. Kunyari nagbayad ng business tax sa
LGU, nagbayad din ng tariff and custom duties nung
nagimport sya ng kawali, can the taxpayer claim both
as deduction? The answer is yes. As long as he is not
CIE (again, CEI is not allowed to claim for deductions).
Provided further that the taxes paid are in connection
with his
o What if the taxpayer claimed for a refund,
approved ang refund. So nagbayad, clinaim as
deduction, 2 years after nirefund ng govt yung
tax. What is the effect of the subsequent refund
of the taxes previously paid and claimed as
deduction? The answer again is the Tax Benefit
Rule.
o What happens if the same scenario is asked but
now the taxpayer is CIE? No effect. Because he
just claimed his tax paid. Unlike if taxpayer is
SEP/SEI or MEI, wherethe same claims it as
deduction
 Next, Losses. Let’s talk specifically of Casualty Loss
arising from theft, robbery, embezzlement, or fire,
storm or shipwreck or any natural calamity. Provided
that the loss is sustained in connection with T/B. That
the same is completely not recovered, not compensated
for by insurance.
o In case of casualty loss, we must remember the
rules on depreciation of TPP for the
determination of the actual value of the TPP.
o So kung ninakaw yung stove at motor ni
taxpayer, he can claim the total value of the
 same (subject to depreciation) as casualty loss
expense deduction.
o So what if after 2 year, binalik ni magnanakaw
yung stove at motor, by then the value of the
properties were further depreciated. So what is
the effect of the subsequent recovery of the
property which was the subject matter of the
CL as a form of dedcuction? We again apply the
Tax Benefit Rule.
 So in summary, ano yung mga subject ng Tax Benefit
Rule (CBT)
1. Casualty Loss, claimed as deduction and
subsequently recovered
2. Bad Debt, claimed as deduction subsequently
recovered.
3. Taxes, claimed as deduction subsequently refunded
 Next, Charitable and other contributions. Correlate
with what was discussed in in the exempt institutions.
 Pensions, it was also discussed under retirement
benefits on exclusions.
 Research and Development, eto yung mga legal fees
that you pay for let’s say nag pa feasibility study ka.
VALUE – ADDED TAX
 In the nature of tax on business.
 Kung ikaw ay CIE, may VAT ka ba? Wala kasi wala
kang business. Kung ikaw ay SEP/SEI, meron kang
VAT. MEI, dahil meron kang component na engaged in
T/B, may VAT ka.
 Corporation, like I said before corporation is always
engaged in T/B so may VAT ka sigurado.
 Nag aapply ang VAT sa lahat ng income earners but
only on income derived from PH sources (income
within). Kasi kahit taxable yung sources without ng
RC, di naman tayo pwede mag VAT dun dahil beyond
jurisdiction e.
 Pinakamadali ito pero pinakatechnical ang wordings
nito.
 So ang VAT, (3) transactions lang pinaguusapan:
o Sale of good in the course of T/B
o Sale of service in the course of T/B
o Importation of Goods, w/n such importation is
in connection of T/B
 Basta dumating ang goods sa PH, dun sa warehouse
ng BOC, automatic yan ang iiimpose ng govt tariff and
custom duties, regular and special (if applicable ang
special), excise tax (kung applicable) and VAT.
 Pag ibinenta mo subsequently, meron nanaman yang
VAT.
 Because yung VAT is in a form of indirect tax = passed
on and on. So bawat ibinibenta mo at may bumibili,
every sale transaction, may VAT. (Sale transactions
only)
 So in VAT, there are 2 personalities, the buy and the
seller.
o Seller
  Kung ikaw ay seller, ikaw ay income
taxpayer kasi kumite ka, tama?
 So kung may S of G or S of S the govt
imposes 12% VAT based on Gross
Selling Price/Gross Reciepts. So 12% is
added to the value of the goods.
 Ang tawag ni seller sa 12% ay output.
 Output is the VAT on sales
o Buyer
 Ano tawag mo sa binili mo? Diba gastos
yun?
 Kung ikaw naman ay bumili sa seller,
pag ibinenta ni seller sayo, si seller,
nagpatong ng 12%, ang tawag mo sa
12% na patong ay input (take note, same
12% as that of the seller)
 Input is the VAT on purchase.
 When the buyer buys, and pays the input of 12%,
anong gagaawin nya sa goods na binili? The buyer will
sell also, so if the buyer sells ano ang kanyang
binebenta? There are only (3) possibilities:
1. Bumili ka ng raw mats,
ginawa mo to create product
2. Bumili ka ng produkto,
inenhance mo, binenta mo
ang enhanced na produkto
3. Bumili ka ng produkto, wala
kang ginawa sa produkto,
binenta mo ang produkto
(buy and sell)
 So si buyer nagiging seller. At pag binenta nya ang
produkto si buyer (na ngayon si seller na) ay
magiimpose ng 12% VAT, ang tawag ni Buyer (new
seller) this time dito ay output kasi sya na ang
nagbebenta. At ang tawag ni new buyer sa 12% na
binili nya ay input.
 Ang formula natin is: output less input = vat payable.
o So if you have more sales, than purchases then
it will result to VAT payable.
o If you have more purchases than sales, then the
result is excess input vat. In which case you can
refund the same, or you can carry it over,
meaning credit for the following quarters. Ang
tawag don crediting.
o So to be precise: output less input = vat
payable only if there is excess output.
 Importante ang resibo, because you cannot claim
input over your output kung walang resibo.
 So sa deductions, only on the expenditures ang
may vat, yung iba walang VAT.
 In every transaction, involving income tax relating
to exercise of trade or business lagging may tax
consequence na at least dalawa, IT at VAT. So
habang tumatakbo ang computation mo ng IT, that
is the same basis for the computation ng VAT.
o So kung ikaw ay lugi sa income tax side,
malamang excess input vat ka,
 o Kung ikaw ay tubo sa income tax side,
malamang excess output vat ka, vat payable
yan.
o So if you are IT payable, you are VAT
Payable.
0% and Exempt Transactions
 Zero Rated Transactions
o These are transactions which are not subject to
VAT at all stages.
o The Input Vat is allowed to be credited against
output VAT
o There is no zero rated transaction in
importation of goods
 Exempt Transactions
o Are transactions which are not subject to VAT
at a particular stage.
o The Input VAT, is not allowed to be credited
against output VAT.
 Pag kinompare mo naman yung dalawa sa 12%
napakasimple. Yung 12% nagpapatong ka ng 12%sa
bawat bentam yung 0% at exempt walang kang
ipapatong na 12%, but merong tax effect kung zero
rated or exempt transaction.
 So why is it then that if it is import purchase, we
impose tax, and if there is export sale it is zero rated?
o Simply put, pag nagiimport ka kasi, that is
prejudicial to the government and to the
economy, kasi pag nagiimport
nagcocompete sa locally manufactured goods
yung inimport mo.
o E hindi naman natin pwedeng ipagbawal yung
importation, so bayad nalang kayo ng tax.
o Pero kung exportation naman palabas ng PH,
because pag inexport mo ang goods at ibinenta
mo, we are promoting locally manufactured
products, so in return, the incentive is we will
impose 0% VAT, from the time of production
upto the actual export of the goods.
o Ano pa ang benefits ng exportation? Ang
ibabayad sayo is foreign currency, pag ikaw ay
nagiimport, palabas naman ang foreign
currency.
 So sabi natin sa exempted transaction, that the same
will not be subject to tax at a particular stage. Makikita
mo yan sa Sec. 109 mula (A) hanggang (BB). Ang
tanong, memeoryahin? Hindi. Tingnan nyo lang yung
mga importante diyan kung ano ang exempt
transactions.
o So ang perfect na example ko lagi diyan is yung
sale of goods in the original state.
Manngingisda nakahuli ng bangus, ibinenta
sayo, VATable? Hindi.
o Yung bangus nilangay mo sa banyera, dinala sa
palengke, nagtinda ka sa palengke, may bumili
sayo ng isang kilong bangus, Vatable? Hindi,
bakit? In the original state.
ka o Yung ibang bangus ginawa mong tinapa,
ibinilad mo sa araw, yung iba naman hiniwa
 mo, nilagyan ng bawang sibuyas suka at to VAT. It’s the same 3M that we are talking
paminta, ginawa mong daing na bangus, about in Income Tax dun sa SEP/SEI/MEI.
binenta mo ngayon si daing na bangus na
timplado at si tinapang bangus, pag nagbenta
ka, iyan ba ay Vatable? Hindi pa rin, because DONOR’S TAX
simple procedures for preservation is not  Eto ang keywords na dapat tandan:
considered as a Vatable transaction. o Una ang donor ay pwedeng tao o corp
o So si buyer, bumili ka ng daing na bangus, o Intervivos ang mode of transfer
tinapang bangus, may resto ka, niluto mo o Basis of DT is FMV at the time of gift. Meaning
ngayon si bangus, ginawa mong sinigang na
you’ll have to compare:
bangus, bangsilog at tinapsilog. So (3) ngayon
 the FMV as stated in the tax dec
ang produkto, tapos ikaw bumili ka ng finished
 the Assessed value as stated in tax dec
product, no longer in the original state, Vatable.
and
o Makikita nyo rin diyan sa 109, ano pa ba yung
 the Zonal valuation as provided by the
mga exempt? Compensation pursuant to Er-Ee BIR.
relationship. o Kung ano ang pinakamataas sa 3 yun ang
o Rentals, 15k is the threshold. Tingnan nyo yung
ginagawang basehan ng DT.
mga threshold. So you have to be conscious o The rate has been fixed, wala na ngayong
about the threshold, ano ba yung mga stages
distinction sa donor, dati kasi if the donor is a
kung saan di sya vatable, after that stage,
stranger the DT is fixed.
vatable na sya.
o Formula: Donations – AD = TNG (in excess of
o And yung most important provision sa 109 is
250k) x 6% = Tax Due, less tax credit if any
yung par.(BB) makikita nyo diyan si 3M, if in
o Remember to deduct Tax Net Gains the 250K.
one taxable period the GS/GR of a taxpayer
 Who are donors? How are they classified?
exceeds 3M pesos then the transactions will no
o RC
longer be exempted from VAT.
 Taxable within or without
o Sa madali’t sabi, kahit ano ang ibinebenta mo,
o NRC
as long as the GS/GR in one taxable year
 Taxable within or without
exceed 3M threshold, your sales shall be subject
o RA
 Taxable within or without
 o NRA
 Taxable within or only
 For IT purpose, the taxability is based on the source of
the income, for DT the taxability is dependent on the
location of the property. Location determines w/n the
gift is taxable within the PH. So within or without ulit.
 Among all kinds of donors, you will be surprised that
it is only the NRA which is not taxed to gifts derived
outside the PH, This is the rule under Sec.86
 When we talk about DT, walang serbisyo diyan, lahat
yan assets, anong kinds ng assets? RP,TPP, IPP
 As to RP or TPP, gamitin ang mata, malalaman nyo
agad kung nasa PH o wala yang properties na yan.
 But in the case of IPP, how do we determine the situs
of the property for purposes of tax. Here is the rule,
look at sec. 104 of the code.
o Ang sabi, as a GR, the IPP of a NRA shall be
considered as within the PH, ano yun? Eto yun
(4):
1. Shares, obligation and bonds issued
by a domestic corporation
2. Shares, obligation and bonds issued
by a foreign corporation, 85% of the
business of which is located in the PH
3. Franchises exercised in the PH
4. IPP that has acquired PH situs.
o Yang apat na yan pag owned ng NRA at dinonate
nila, considered yan as located within and subject
to DT here in the PH
o There is an xpn to the rule, you have to memorize
this rule, that is the reciprocity rule, provided
however that if the country where the NRA is a
citizen of does not impose donor’s tax on Filipino
who donate similar properties (yung apat na
abovementioned), we will not also impose donors
tax.
o So dapat alam ninyo ang rules kung ang subject
property ay IPP at ang nagdonate ay NRA.
 For DT, aalamin nyo lang yung total gifts sa isang taon.
But here is the clincher:
o DT is the only tax where the rate is imposed
per transaction basis within the period of
Jan to Dec every year.
o In other words, the computation is, per
trasnsaction per gift, pero nagcocompute ka
cumulatively from Jan to Dec.
o So yung per transaction, bayaran as BIR 30
days from gift.
o So if after 2 months nag gift ka sa iba, the
law provides that magcocompute ka
cumulatively, then you add the previous
gifts. So as of the second gift, the Gross Gifts
should be the total of the gifts plus prior
gifts.
o So the third time na magdonate ka, ang
computation na is to include the (2) prior
donations. Consistent nay an all the way
hanggang December.
  Ano ang mga deductions? Napakadali. Dalawa nalang
ang deductions:
o Transfers for public use in favor of the
government
o Transfers for public use in favor of NSNP Orgs.
 Pwede ka bang mag gift ng walang tax? Oo, pano tayo
makakaavoid ng DT? So kung may 500k donation ka at
gusto mong makaavoid ng bayad? Hatiin mo. Isang
Dec31 na 250k at pagdating ng January 1 na 250K
pareho yang walang tax. Basta yung 250K sa isang taon
lang syung limit na walang buwis.
ESTATE TAX
 Tao lang involved
 Donations mortis causa
 Basis is the FMV at the time of death, what FMV are we
talking about?:
o the FMV as stated in the tax dec
o the Assessed value as stated in tax dec
o the Zonal valuation as provided by BIR
 The rate is fixed at 6% of the Taxable Net Estate.
 Formula: GE-AD=TNE(less 250k) x 6% = Estate Tax
due less tax credit, if any.
 Same yan sa DT na less tax credit. So pano nagkakaron
ng tax credit, meron kasing mga properties na nasa
labas ng bans ana subject sa donors tax sa ibang bansa,
ganon din sa ET, may mga properties na nasa labas ng
bansa na pag namatay ka will be subjected to ET in the
country where they are located. So because of that, it
creates double taxation in the broad sense and to
reduce that Double taxation in the broad sense, we
have tax credit.
 Now, similar to DT, these are the kinds of decedent
estate.
o RC
o NRC
o RA
o NRA
 Same with DT, the taxability is dependent on the
location of the property. And same with DT, NRA is
only taxed from sources within.
 Gross estate is defined as the value of the properties
whether real or persona, tangible or intangible at the
time of death wherever situated provided in the case of
NRA, the properties situated within shall be taxed.
 How do we determine the situs or the location? Same
with DT. If RP, or TPP gamitin ang mata, if IPP use sec
104 subject to reciprocity rule.
 What are the items of inclusions? If you cannot
memorize them here is the rule of thumb, for the
purposes of ET, sa oras ng kamatayan, kung meron
kang degree ng control, interest no matter how small
then sigurado kasama sa GE.
o In particular ang importanteng items: Proceeds
of life insurance policy at yung transfer for
insufficient consideration.
 Allowable deductions, this is just a matter of tingnan
mo lang kung ano yung available. So what are the
deductions:
o Tanggalin nyo sa isipan nyo si
 1. Funeral expense be in proportion to the value of the estate
2. Judicial expense located in the PH, so not all are deductible.
3. Medical expense o For claims against insolvent person, it is the
o Yang tatlong yan tinanggal na yan ng creditor who died na hindi nabayaran ng buhay
TRAIN na may utang.
o So ano na ang mga deduction ngayon?  For NRA, also in proportion but there is
1. Claims against the estate (debtor an additional requirement.
dead)  Because it is the creditor who died and
2. Claims against insolvent person the creditor is the one who holds the
(creditor dead) credit, you add first the credit to the
3. Unpaid mortgage gross estate before deducting.
4. Unpaid taxes  Kasi if the decedent holds a credit, it is
5. Casualty loss in form of IPP.
6. Standard deduction o Unpaid Mortgage. Si decedent ang may utang
7. Family home and he owns the property subject to mortgage.
8. Retirement benefits At the time of death the mortgage loan was not
9. Transfer for public use paid but with security of property.
10. Conjugal share of the surivivng o So it should be added sa GE muna
spouse before deducting.
11. Property previously taxed o So ano yung idadagdag sa GE? Yung
o Eto ang mga aalamin nyo pag deduction FMV ng property used as security for
1. Sino ang namatay the mortgage, value at the time of death.
2. Kalian namatay o And then idededuct mo yung value ng
3. Ano ang properties sa oras ng utang na hindi nya nabayaran
kamatayan o Same rule for NRA
4. Magkano ang value sa oras ng o Unpaid Taxes. Pag namatay ang tao, there are
kamatayan obligations that survive. One of them is taxes.
o For claims against the estate, the deductibility Lahat ng taxes na utang nyo sa govt will be
of the claims as far as NRA is concerned shall allowed as a deduction
 o Deductible whether related to trade or
business
o Same rule for NRA
o Casualty Loss. It’s the same casualty loss we
have for the deductions under Income Tax.
o Casualty loss arising from
embezzlement, fire, storm, shipwreck,
and any other natural calamities not
compensated for by insurance.
o So ano difference nya dun sa deductions
sa IT? Yung casualty loss sa IT, ay the
loss is sustained in relation to T/B.
Yung casualty loss naman sa ET need
not be related to T/B, provided
however that if the same is allowed as
a deduction from Gross Income, you
can no longer have it deducted under
ET. So if a property which is the subject
matter of the casualty loss you can only
claim it once, either as deduction on IT
or ET, not both.
o Same rule for NRA.
o Standard Deduction. Under the TRAIN law this
has been increased to 5M. Upto 5M ito ah.
Hindi ito 5M na buo ah. If your GE is less than
5M you cannot claim 5M as SD.
o Now the TRAIN law included the NRA
Estate to the coverage of SD upto 500k.
o Family Home. It used to be 1M, not it is
increased upto 10M.
o But a NRA is not entitled to this, bakit?
Kasi nonresident sya so malamang wala
syang FH.
o If your FH is less than 10M, you cannot
claim 10M, it is upto 10M on the
assumption that the value of the FH is
more than 10M.
o Retirement Benefit. This is the 3rd deduction
that requires the amount to be credited first to
the GE before deducting.
o Does not apply to NRA.
o Transfer for Public Use. Pag nagbigay ka sa
gobyerno, in full deductible. And it even
applies to NRA. Natural, foreigner tapos
nagbigay pa sa gobyerno, maawa naman kayo
ilibre na natin sa buwis.
o Conjugal Share of the Surviving Spouse. All are
entitled but for limited only to properties
located in the PH.
o When it comes to nonresident alien the
conjugal share of the surviving spouse is
computed based on properties located
in the PH.
o Properties Previously Taxed. Sometime this is
what we refer to as “Vanishing Deduction”.
This is very simple, explain ko ah. Although
mahirap basahin, pag binasa nyo sa libro
mahirap intindihin.
o Exmaple, lumbera natigok, napunta
yung property sa anak ko, subject to
 estate tax. Yung anak ko natigok,
napunta sa apo ko yung property.
Subject ulit sa estate tax yun.. Take note
this involves the same property. So sa
paglipat ng property may sobrang
impact yung ET, alam natin yan.
o So the law recognizes the impact, in
order to reduce the impact of double
taxationin the broad sense as far as
estate tax is concerned, one of the
remedies na provided by law yung
Vanishin deduction.
o So bakit naman vanishing deduction
ang tawag?
1. If the period of time when the
death of the prior decedent
(lumbera) is from 0 to 1 year the
deduction is at 100%
2. From 1 to 2 years 80%
3. From 2-3 60%
4. From 3-4 40%
5. From 4-5 20%
o So pag lagpas ng 5 years the deduction
is completely vanished. Meaning the
estate of my child, which was
previously taxed, will not be entitled to
the deduction when the period of her
death and my death is beyond 5 years.
o Di nyo kailangan may compute for the
purposes of the Bar, it’s the concept that
you have to understand.
1. Prior decedent and present
decedent
2. Involving the same property
3. Provided that the estate tax for
the prior decedent was paid
4. The present decedent can now
claim deduction the vanishing
deduction
5. Depending on the period of time
between the death of the prior
and the death of the present
o Applies to all.
So putting all of the revenue taxes side by side, we are creating
double taxation in the broad sense. What are the instances?
o Kitang kita natin sa estate tax, for properties
located outside the PH is subjected to tax here,
they are also subjected to tax outside the
countries where they are all located.
o Same rules come to DT
o Same rules come to IT, specifically when it
comes to NRC and aliens. Because the income
from within the PH is subject to income tax in
the PH and they are also subject to IT in the
country where they are residing or they are
citizens of.
So kitang kita natin yung double taxation in the broad sense.  Ang pinaguusapan lang naman sa remedies is
The law provides for remedies for the Double taxation in the collection, so anong taxes ang kinokolekta?
broad sense. o Income Tax
 In Income Tax, there are 2: o VAT or %Tax
 Tax Credit o Donors Tax
 Reciprocity rule o Estate Tax
o In Donor’s Tax o Excise Tax
 Tax Credit o DST
 Reciprocity Rule  So pano ba ito kinocollect? Tandan nyo na ang
o Estate Tax nangongolektang administrative agency ng govt is
 Tax Credit the BIR. Iconnect natin to sa general principle ng
 Reciprocity Rule non-delegability ng taxing power.
 Vanishing Deduction o Dun sa non-delegability of taxing power, one of
So sa lahat ng Tax sa revenue code, tatandaan nyo lang yung the inherent limitations niyan, there are (2)
formula. So why is the formula important to me, the formula aspects of taxation: the act of levy and the act of
give you the idea on how to segmentize the topic collection.
o Yung act of levy hindi yan talaga pwedeng
idelegate. Because we say that the power of
taxation is exercised by the legislature and it
cannot be delegated.
o Yung second act is the act of collection, and this
act of collection may be delegated, of course
alam natin to sa Admin law, the delegation is in
favor of BIR who has the right to collect all of
the internal revenue taxes.
REMEDIES UNDER THE NIRC
 Most of the time, the materials that you read A. PROTEST CASES
discusses the remedies of the government separately ADMINISTRATIVE PROCEEDINGS
discussed from remedies of taxpayer.

Alamin nyo lang yung What, when where and how para naka
outline na agad sa utak niyo.
So protest cases starts from taxpayers and the returns, lahat ng
revenue taxes merong returns. This is the difference from
National Taxes and Local. Unlike local tax na walang return,
because all local tax due is on January 1. Because it is
automatic, all local taxes accrue on Jan 1, tapos all local taxes
are due on or before Jan 20. Sa NIRC, iba iba ang due date.
Pero ang common sa revenue taxes is that meron returns
dapat. Which leads us to the second distinction, yung revenue
taxes self-assessed yan. Unlike sa local taxes.
So ilagay nyo sa utak nyo, ang revenue taxes ay (1) self-
assessed taxes and (2) covered by returns.
WHAT
What is a return? It is a verified statement, prepared by the
taxpayer submitted to the BIR, and providing for all the
materials relevant to the kind of tax that you are filing for.
Remember yung formula na for all the other taxes, yan din
yung laman ng returns. Sa returns ang pinakaimportante is
yung TIN mo, because it is unique to every taxpayer.
So kunyari I am the taxpayer, I prepared the returns, these are
downloadable forms, so the return is presumed to have been
filed by the taxpayer in good faith.
So meron original return, meron ding amended return, pag
sinabi nating amended return you are referring to the original
return, because of certain instances you are amending the data
that you originally included in the original return.
So what is the effect of filing of an amended return? So the AR
when filed, will be consolidated to the return filed.
When can a taxpayer amend?
 So a taxpayer may amend the return filed within 3
years from the date the original return is amended.
Provided that no notice of investigation has yet been
received by the tax payer.
 So kahit nakapagissue na ang BIR ng letter of authority
to investigate which is in the nature of notice to
investige, basta hindi pa natatanggap ng ng taxpayer
yung notice na yan and still within the 3-year period,
the taxpayer may still amend the return.
 What is the reason why the taxpayer is prohibited from
amending the return originally filed if the notice of
investigation is already received by the taxpayer?
 o Napakasimple ng sagot, if you will be allowed
to do such, sigurado tayo na magaamend ka to
suit the subject matter of the notice of
investigation. Babaguhin mo yung return mo
kasi iniimbestigahan ka.
 Why is it 3 years? Kasi the prescriptive period by the
assessment of the BIR is 3 years, so dapat bago mag
expire yung period, pwede ka mag amend.
 What do you file? Lahat taxes fifilean mo ng return
WHEN
When do you file the return?
If Calendar Year is used
 If taxpayer is CIE = the due date for the filing of return
is on or 15 April.
o There is substituted filing when it comes to
compensation income earner, it is your
employer who would file the return for you on
your behalf.
o It is allowed only if (1) CIE, (2) no other source
of income other than compensation paid
pursuant to E-E relationship and (3) you only
have one employer for the year.
o Pag (2) ang employer mo ng isang taon di ka
pwedeng mag avail ng substituted filing.
 If taxpayer is SEP/SEI or MEI
o You are required to file (3) quarterly returns:
 May 15
 August 15
 Nov 15
 Yung final return (4th return) is April 15
of the ff year.
 If taxpayer is corporate taxpayer
o Sa corporate taxpayers, (4) din ang return,
bakit? Engaged in T/B
o You are required to file (3) quarterly return
which is 60 days from the close of the quarter.
o For the final return, if calendar year dapat
bayaran mo ng 15 April.
If Fiscal Year is used
o Kung fiscal year ginagamit mo, it should be 15th
day of the 4th month following the close of the
fiscal year.
o Para mas madali, hanapin nyo yung end ng FY,
if you start on Feb 1 then the end is jan 3. So feb,
march, April, may. Yung sa pang apat na
buwan, 15 days so May 15. Para di mahirapan.
o If the taxpayer choses 8%, then follow the rule
on SEP/SEI.
o In case of VAT = 4Qs din.
o Donor’s tax = 30 days from gift
o Estate Tax = 1yr from death
o What will be the consequence kung hindi ka
nagbayad on due date?
 Meron kang penalty, ang penalty mo is
25%, pero ang interest mo ngayon is
instead of 20 nagiging 12% nalang or
double the bsp rate.
  So under the TRAIN law may pernalty
kang 25% plus the interest of double the
bsp rate (12% per annum), and you also
have the surcharge of 50% in case of bad
faith or fraud.
 So automatic yan, pag lumagpas ka ng
isang araw, magcocompute agad ang
system, meron kang penalty of 25% and
interest of 12% per annum, computed
daily.
WHERE
So san ka nagbabayad ng tax?
Kung CEI ka
 Edi dun sa pinagttrabahuan mo, the regional branch of
BIR which has jurisdiction over your place of business.
Kung SEP/SEI/MEI
 e di the place where your business is located.
E kung corporate taxpayer ka?
 The principal place of business
DT = place of the donor, because it is the donor who pays for
it.
ET= the place where the decedent died
What is the effect kung mali ang venue mo? It is as if you did
not file any return at. And remember we have self-assessed
taxes, and pay as you file system. So once you file the return
you pay the tax due that you computed, you assess for your
self
So kung nagbayad ka sa maling venue, at tinaggap ng BIR it is
as if you did not file a return and did not pay the tax kahit pa
tinanggap ang bayad. Why? Because in tax, estoppel does not
apply to the govt.
HOW?
Dadalhin mo yung lahat ng relevant documents, and you will
be required to pay the tax due to the accredited banks of the
BIR. Of course, there are already instances where if you are a
large taxpayer mas facilitated ang online payment
But here under regular circumstances, there are authorized
banks of the BIR and you will receive an order of payment
when you go to the bank to file the return, tatatakan yan. So
you don’t pay to the BIR. And these are listed in the website.
Ang di lang nag cocompute diyan is yung estate tax kasi patay
na sya, ang nagcocompute nun is si EXECAD.
So ngayon nung nagbayad ka, the ball game is na kanino? So
nag file ka ng return we go to BIR na. sinong BIR, the BIR
which has jurisdiction over the taxpayer.
BALL GAME TO THE BIR
Anong gagawin ni BIR? Sa returns na finile ninyo?
  Aaralin ng BIR yung finile ninyo.
o If the return was filed within the due dates,
Proper venue or kung kumpleto yung
dokumento
o filed it in Good faith = aaralin ng BIR
o Falsified/fraudulent = Aaralin ng BIR
o Non-filing = BIR could file a return on your
behalf.
 Ano ang ginagamit ng BIR na proseso para aralin yung
return mo? Meron tayong tinatawag sa tax code, sec. 3
to 15.
 Pwedeng gamitin yan ng BIR in the course of its
assessment for the returns that you filed or even
without returns. Kung di ka naman nagfile ng return,
may option ang BIR not to file a return but to continue
with the assessment.
Ang consequence after aralin is Assesment. Una diyan Letter
of Authority, tapos PAN then FAN.
 Letter of authority to investigate (LA)
o Within 15 days you will be required to
answer
 Preliminary Assessment Notice
o W/N you reply to the LA, BIR may issue
PAN
 Final Assessment Notice
o W/N you reply to the PAN, the BIR may
issue FAN within 15 days.
o Is a notice from BIR providing for the
amount of tax that is required of you to pay.
o So kung nagbayad ka naman ng tax, ano
ngayon yung sinisingil ng govt sayo? Yung
kakulangan. Kaya ang tawag diyan
deficiency assessment.
Dapat yung LA, PAN and FAN dapat in proper order. Kung
hindi yan sundin ng BIR, that is a denial of due process, and
you can argue that the assessment notice is not a valid one
because of the failure to the govt to comply with the requisites
of procedural due process.
What are the requisites of FAN, pakilista ito, there are (8):
1. In writing. saan nakasulat? Sa papel. It has to be in
writing. Ano ang dapat nakasulat?
o Na that is a Final Assessment Notice
2. Addressed to the taxpayer. So sa sulat may
addressee, si tax payer who filed the return. Saang
address? When you register to the BIR, you indicate
an address and that address remains forever as your
address unless you amend it.
o So if there is a change in your address and
there is no proof that the BIR received a
notice as to you change in address and the
same was for the assessment, you cannot
invoke improper address or business
address.
o Ang technique lang naman diyan is kung
ikaw ay maglilipat ng business pati yung
registration mo pinalilipat mo.
 o Kaya di mo dapat ifault ang BIR, ediba nga
ikaw ang nagbigay ng address?
3. Providing for the basis of tax in fact or in law for
the computation of the tax. Ibig sabihin nakasulat
mismo sa FAN kung ano ang ta na sinisingil, anong
period covered, anong specific provisions in the
Tax code are used by the BIR in arriving at the
FAN.
4. Amount Due. Nakasulat din dun broken down into
specific amount, interest, penalty and surcharge in
any.
o Kapag nakita nyo na may surcharge sa
problem, ibig sabihin the BIR found that
you committed fraud. So surcharge is equal
to fraud.
o Kung di naka breakdown hindi din valid
kasi requirement yan.
5. Demand to Pay. Ibig sabihin nito nakasulat don na
para kayong sinisingil ng utang ninyo that you have to
pay the amount due on or before the specified date.
o Hindi ka dito pagbibilangin ng BIR, like in
remedial yung tipong paid within 15 days,
in tax nakasulat mismo dun kung kelan mo
sya kailangan bayaran.
o Pano kung dumating yung date tapos hindi
ka nakapagbayad sa due date? Ano ang
effect sayo?
o Ay papatawan ka ngayon ng bagong
penalty.
o Pero bawal na ngayon under the
TRAIN law na pagsabayin ng govt
na singilin yung deficiency penalty
and itong kind ng penalty.
6. Signed by the duly authorized BIR Representative
7. Issued within the Prescriptive Period. All final
assessment notices must be issued by the government
within the prescriptive period of assessment. What are
the prescriptive periods of assessment?
o If you filed the return in good faith, the
prescriptive period is (3) years. From when?
o If the return is filed before due date,
then 3 years from due date
o If filed exactly on due date, then 3 years
from due date
o If filed beyond due date, then 3 years
from actual filing
o If you filed the return in bad faith/fraudulent
return/falsified return, the prescriptive period
is 10 years from the discovery of fraud return or
falsified return. (same rule applies if the same
was filed before, on the date, and after the due
date)
o If in case of non-filing, 10 years from the
discovery of non-filing
o If the taxpayer is SEP/SEI/MEI, yung return na
pinaguusapan dito is yung Final (4 th and
consolidated) return. Diba naalala nyo pag
SEP/SEI/MEI required na mag file ng 3
quarterlu returns plus one final. So ito yung sa
final return. Kasi ganito yan if you file Q1
return kasama yan yung transactions for Q1,
then sa Q2 return kasama yung transaction both
ng Q1 at Q2 then so on and so forth, parang
nagaaccumulate. And then yung final
consolidated return all the adjustments can be
done for the computation of the final return, so
ang pinaguusapan dito is yung final return.
o There is another period, ang tawag dito yung
waiver. Meaning the govt and the BIR will enter
into an agreement to extend any of the
prescriptive period and that should be covered
by a valid waiver.
o Who files a waiver? The taxpayer, and
he applies for it.
o What are the requirements for a valid
waiver?
1. Executed before the expiration of
the original period
2. Signed by taxpayer and BIR
3. Date of signing and acceptance
should be indicated
4. (3) original copies: isa sa BIR, isa
sa records ng kaso, at isa sa
taxpayer.
8. Due date
Let’s put it in a scenario:
RVL is a SEP, the BIR gave due date of filing FR on 15 April
2020 for my income for the year 2019. So, I should have filed
the same on or before 15 April 2020.
So, let’s say I filed in good faith:
1. If I filed early, 14 Feb 2020, FAN can be filed on 15
April 2023 (3 years from due date)
2. If I filed on the date of DD, FAN can be filed up to 15
April 2023 (3 years from due date)
3. If filed late, 28 Sept 2020, FAN can be filed up to 28
Sept 2023 (3 years from the actual filing)
Let’s say I filed in bad faith or fraudulent/falsified return, and
the fraud was discovered only on 2025, then the FAN can be
filed up to 2035.
How about if you did not file (non-filing), and the fact of non-
filing was only discovered on 2025, then the FAN can be filed
up to 2035.
So you can see the date there, both in good faith and bad faith,
what if those dates are about to expire and the govt has yet to
issue the FAN, the BIR and the taxpayer MAY execute a valid
waiver. Which should be done before said periods expire.
Meron bang limit sa extension? Wala. Follow mo lang yung
requisites. Then the period shall be valid.

So pag nagissue ng FAN lilipat ang ball game ngayon sa
taxpayer
BALL GAME BACK TO THE TAXPAYER
Nakatanggap ka ngayon ng FAN, we’ll talk now about the
remedies of the taxpayer. This is the protest.
Venue? The BIR, walang korteng pinaguusapan dito. Ang
nagaaway lang ay yung BIR at yung taxpayer sa opisina ng
BIR.
What is a protest?
o It is in writing questioning or assailing the validity or
the substance of the FAN.
o Sa tagalog, hindi ka nagaagree sa sinasabi ng
gobyerno, kasi sabi mo mali ang gobyerno.
o So kailangan in writing and signed by the taxpayer
Where do you file?
o To the Revenue District Office (RDO) who filed the
FAN
When do you file?
o Within a non-extendible period of 30 days, regardless
of any supervening event
o The only time na maeextend yan ay kung pumatak ang
sabado, holiday or fortuitous event pero dapat
declared na sinuspend ang workday.
o 30 days from what? From the taxpayer’s receipt of the
FAN. Parang decision ng korte.
Ano ang gagawin ng BIR sa protesta mo?
o The BIR may grant your protest, taxpayer happy
o The BIR may deny your protest, taxpayer sad.
o The BIR may partly grant or deny your protest,
taxpayer half happy half sad.
o The BIR may sit on your protest within 180 days from
the submission of your complete documents.
Pano bilibilang yung 180 days of inaction? Upon the period of
actual filing then 30 days after such is the period to file before
the CTA. So based on the rules bilang taxpayer may (2) option
ka.
1. To appeal to CTA within the 30 day period after the
lapse of 180 days
2. Or to wait for the BIR to actually decide on the
FDDA even after the lapse of 180 days.
But remember such remedies are mutually exclusive.
Meron cases where the protest is incomplete. So Dito nagtatapos ang venue ng BIR. It ends the administrative
nagpproptesta ka meaning kinukwestion mo si assessment, in proceedings. Kung granted ka, manahimik ka na.
doing so, meron kang mga supporting documents to support
your argument. So yung protest is in the nature of 1) Motion Kung denied, partly denied at not acted upon by the BIR
for Reconsideration and 2) motion for reinvestigation, dati within 180 days means you have an immediate remedy of
meron yang pangatlong MR, yung motion for recomputation appeal. Tatawid naman tayo ngayon sa judicial proceedings.
pero wala na yan ngayon. This is the time the taxpayer goes to CTA kaya tumatawid ng
judicial.
So dahil nga it’s in the nature of Motion for Recon and Motion
for reinvestigation, kailangan may supporting documents
diyan. There are instances where you have not submitted the JUDICIAL PROCEEDINGS
complete documents, supportive of your protest. So you will
be given by the BIR ample time to complete the documents
within a period not exceeding 60 days from the order
requiring you to submit.

Ang tanong, sasabihin ba sayo ng BIR na isubmit mo nga ang

mga documenting ito, 1, 2, 3, 4, hindi. Hindi ka ididirect ng
BIR na magsubmit ng documents. Unang una, di ba ikaw
yung nagaargue against the BIR? So you should know which
documents are relevant against BIR.
So how do we count the 180 days if you are required to submit
additional documents? It is the time the BIR actually receives
the additional documents that you start the counting of the 180
days. So, if despite the lapse of 180 days, the BIR did not
decide on your protest then the 30-day period will now
commence for filing of an appeal to CTA.
Again, the ordinary courts does not have jurisdiction over
protest cases. It is only the CTA that has jurisdiction over
protest cases. And what is the mode of going up to the CTA,
by mode of appeal to CTA division.
When? Within 30 days from the receipt of the final decision of
disputed assessment (FDDA) of the BIR.
Ang magkalaban dito is BIR and taxpayer pero in the CTA.
And it is only the taxpayer who appeal up to the CTA. because
hindi naman magaapela ang BIR e, sya nga nagdesisyon tapos Eto ang tandan nyo regarding sa CA, regardless if civil or
sya magaapela? Hindi pwede. criminal, the CA will not have any jurisdiction over any tax
issue, matter or concern. Kahit pa local tax, wala na sya.
The CTA division may:
o Grant
o Deny
o Partly Grant/Deny B. COLLECTION OF THE GOVERNMENT

Wala ditong non action, bakit? E korte. Wala namang ganun sa

You must understand that when the BIR issues the
korte.
assessment, is yung process ng LA, PAN at FAN, this is the
stage na nangongolekta yung gobyerno. This is the
So whoever loses before the CTA division may file a Motion
administrative means of collection ng govt.
for Reconsideration within 15 days from the time you
received the prejudicial decision, filed before the CTA division
Ang tanong natin ay when the FAN is issued by the BIR and
who issued the decision. Take note that the MR on the decision
parties undergo the procedure discussed above, both admin
of the CTA division is a sine qua non requirement before any
and judicial proceedings, can the BIR collect? Eto yung
prejudiced party may go up to the CTA Enbanc.
pinakaimportanteng tanong. Habang kinukwestion mo ang
final assessment notice na inissue ng BIR by way of protest
Kung sino matalo sa MR, pupunta sa CTA En Banc, ilang
until you reach the SC, can you collect? The answer is yes.
araw? 15 days lang ulit, from the receipt of order denying the
Because the rule is no injunction against tax collection.
MR.

What is the basis of this rule? Lifeblood doctrine. So meaning,

Pwede ka pa bang magfile ng MR? no prohibition, because the
hindi mo pwede iprevent ang government mangolekta EVEN
ROC are applied in suppletory character with the rules and
IF may pending protest ka. At pwede yang pagsabayin.
regulations on CTA.

CIVIL CASE (COLLECTION)

Kung sino matalo sa CTA EB, punta naman kayo sa SC, ilang
araw? 15 days. May MR ba? Apply the rules of courts.
BIR is the plaintiff, then taxpayer is the defendant. So ganito
ang proseso.
The BIR files a tax case of collection, saan finifile ng BIR?
Syempre ordinary courts. Anong ordinary court? Aba e di first Now, I mentioned before that aside from the appellate
level courts, RTC and CTA. jurisdiction of the CTA, The CTA has an exclusive and original
jurisdiction of cases amounting to 1M and above principal
So sinong court ang may jurisdiction at how do we determine exclusive of the surcharge, interest and penalties. So dapat
the jurisdiction. gagawin mo both yung protest at collection para di kayo
COURT OUTSIDE WITHIN MM matalo ng mabilis.
First level courts 300k and below 400k and below
RTC Above 300k Above 400k CRIMINAL CASE (COLLECTION)
CTA (exclusive 1M and above exclusive of penalties,
original surcharge, interest. Tandaan nyo yung rule, the issuance of FAN is NOT required
jurisdiction) in the filing of the Criminal Case. Why? Because you are being
charged with violation of the penal provisions of the tax code.
Remember in determining the jurisdiction we will just So the issuance of a FAN is not a requirement.
consider the principal amount.
There are (2) types of criminal cases under the Tax code.
So pag nagfile ka sa MTC, kung sino matalo, punta ka ng RTC, 1. Criminal case involving an offense that does not result
kung sino ulit matalo punta ng CTA. But take note, if the court in tax deficiency
of origin is the MTC then the decision appealed from to the  Example, failure to obey subpoena is a criminal
CTA is in exercise of its appellate jurisdiction (ng RTC) so ang offense under the tax code, pero wala yang tax
pupuntahan mong korte is CTA en banc. deficiency.
2. Criminal case involving an offense that results in tax
MTC -> RTC (appellate jurisdiction) -> CTA En banc (30 days) deficiency
-> SC (15 days)  Example, failure to issue a receipt, this is a criminal
offense and the same results in tax deficiency kasi
If the RTC is the court of origin, the appeal should be to CTA hindi mo nadeclare yung binenta mo.
Division.
Jurisdiciton? Same sa civil case. First level courts, RTC, e yung
RTC -> CTA Div (30 days) -> MR/MNT (15 days) -> CTA EB CTA? Eto yung sagot.
(15 days) -> SC (15 days)
  If the offense does not result in any tax deficiency, the
jurisdiction of CTA in Crim case is purely appellate.
 IF the offense results in tax deficiency the CTA has
exclusive original jurisdiction.
COURT Penalty
First level courts 6 years and below
RTC Above 6 years
CTA (exclusive If offense results in tax deficiency
original specifically if the principal amount of
jurisdiction) tax due is 1M and above exclusive of
interest, penalties and surcharge
To summarize both the civil and criminal case, the only time
the CTA will have an exclusive original jurisdiction is when
the amount of principal tax due is 1M and above exclusive of
interest, penalties and surcharges. Conversely, if the offense
does not result in tax deficiency then the jurisdiction of the
CTA is purely appellate.
C. REFUND CASES
Pag sinabi nating refund cases, sobra ang binayad ninyo.
(2) types of refund under the Tax Code:
1. Refund of excess input VAT In zero rated transaction
 If you can remember in our discussions in VAT, we
said that in zero rated transaction, the input VAT in all
of your purchases, is allowed to be credited against
output VAT.
 In regular VATable transactions, kung may excess
input ka, ang remedy mo is credit. Iccredit mo sa mga
susunod na quarter ng output VAT.
 You have to file the administrative claim for refund
within (2) years from the quarter that you incurred the
excess input VAT in 0% transaction.
 Dati meron yang rule on non action. Wherein 120 days
upon filing, pag di umaction ang BIR, must go up
within 30 days to CTA. This rule is no longer applied.
2:120:30
 Ang rule na ngayon eto, 2:90:30, but yung 90 days
proactive na sabi ni TRAIN law, from the time the
taxpayer filed the claims for refund within (2) years
from the end of the quarter, from the close of the
quarter when you had the excess input VAT on zero
rated transaction, the BIR is REQUIRED to decide
within 90 days. Once the BIR decides the case, that is
when you go up to CTA Division within 30 days from
the receipt of the decision. Anong procedure sa CTA?
Follow procedure sa Protest Cases upto SC.
 In other words, now there will always be a decision
issued by the BIR on your claim for refund.
 How will this be operationalized by the BIR, the BIR
stated that if the BIR personnel does not act within the
90 day period, he will be administratively charged.
 Remember in refund cases, lagging mauuna ang
administrative case within (2) years kesa sa judicial
proceedings to be filed within (30) days. Pwede lang
dumirecho ng judicial pag gobyerno at if it involves
collection case whether civil or criminal.

2. Ordinary Claim for Refund (Section 226)
 Apat lang ang grounds niyan
1. Illegally Assessed
2. Illegally Collected
3. Erroneously Assessed
4. Erroneously Collected
 And this applies to all revenue taxes.
 Dito, as you can observe, merong element of illegality.
Doon sa number 1 walang element of illegality.
 So kelan mo pwede ifile yung administrative case of
complaint mo? Within (2) years from the date of
payment. What about the judicial claim of refund? The
judicial claim for refund must be filed on the SAME (2)
year period.
 Walang requirement for the BIR to decide sa refund
mo. So maghihintay ka ngayon. Ganito ang
mangyayari, kung natanggap mo yung decision let’s
say 5 days before mag expire yung (2) years, meron ka
bang 25 days pa after the lapse to file an appeal? (25
days plus 5 days = 30 days) wala na. 5 days nalang ang
meron ka kas inga the judicial claim must be filed on
the same (2) year period.
 Kung last day na at wala ka padin natatanggap? E di
mag file ka na agad on that day.
 Kapag nakatanggap ka 20 days before expiration,
meron ka bang 10 days pa na extension after the lapse
of (2) years? Wala na, you must file within the
remaining 20 days.
 Pero ito, pag nakatanggap ka ng desisyon na MORE
THAN 30 days ang natitira sa period, you MUST
COMPLY the 30 day period to appeal to CTA div,
because the said 30 days period is within the (2) years.
That’s the difference ordinary refund and refund of
zero-rated transactions.
LOCAL GOVERNMENT TAXATION
N.B: This is from Ingles’ book. This is not of Atty. Lumbera’s
lecture.
Each LGU has the power to:
1. Create its own sources of revenue
2. Levy taxes, fees, and charges
These powers shall accrue exclusively to the LGU, thus in one.
case where the law redirects the amusement tax collection to
the movie producers makes the said provision void and
unconstitutional.
Fundamental principles that shall govern the exercise of taxing
and revenue-raising powers of the LGU:
1. Uniformity in each LGU
2. The taxes, fees, charges and other imposition shall:
a. Be equitable and based on the taxpayer’s ability
to pay
b. Be levied and collected only for public purpose
c. Not unjust, excessive, oppressive or
confiscatory
 d. Not be contrary to law, public policy, national
economic policy, or restraint of trade.
3. Collection not be let to any private person
4. Revenue collected shall inure solely to the benefit of
the LGU levying the tax unless otherwise provided by
the LGC.
5. Each LGU shall evolve a progressive system of taxation
The power to exercise to tax in the LGU is vested in and
exercise by the Sanggunian. Every tax imposed must be levied
pursuant to a valid ordinance. This ordinance is the ultimate
reference for local taxation.
Limitations on the LGU’s power to tax
 Those already subject to tax under the NIRC or other
applicable laws cannot be taxed again
o Hence the province may not ordinarily impose
taxes on stone, sand, gravel from private land
since the same is already taxed by NIRC.
o Same with PBA. The PBA is liable to pay
Amusement tax to the National Govt. It is
important to note that Amusement Tax on
professional basketball games remains a
national tax under the NIRC.
o Of course there are other instance where the
province can levy for amusement tax, but
professional basketball games is not one of
them. This is an example of exclusionary rules
under the local taxation.
 Local taxes shall not be unjust, excessive, confiscatory
or contrary to national policy
 No ordinance can be enacted without any prior public
hearing conducted for that purpose, since local taxes
must be levied pursuant to a valid ordinance.
Sec. 133 provides for specific taxes which the LGU cannot
tax:
1. Income tax
 Except when levied on banks and other
financial institutions;
 Bar Q:
ABC Corp, a holding company, was taxed
by City of Manila as a contractor or one that
sells service for a fee.
The City of Manila is wrong. ABC Corp is
not a bank or financial institution thus it cannot
be assessed for income.
2. Documentary stamp tax; 
3. Taxes on estates, inheritance, gifts, legacies and other
acquisitions mortis causa
 Except as otherwise provided herein; 
4. Customs duties, registration fees of vessel and
wharfage on wharves, tonnage dues, and all other
kinds of customs fees, charges and dues
  Except wharfage on wharves constructed and 9. Percentage or value-added tax (VAT) on sales, barters
maintained by the local government unit or exchanges or similar transactions on goods or
concerned; services
5. Taxes, fees, and charges and other impositions upon  Except as otherwise provided herein; 
goods carried into or out of, or passing through, the 10. Taxes on the gross receipts of transportation
territorial jurisdictions of local government units in the contractors and persons engaged in the transportation
guise of charges for wharfage, tolls for bridges or of passengers or freight by hire and common carriers
otherwise, or other taxes, fees, or charges in any form by air, land or water, except as provided in this Code; 
whatsoever upon such goods or merchandise;   The grantee of a pipeline concession is a
 It is irrelevant if the fees imposed are actually common carrier thus exempt from business tax
for police surveillance, because any other form imposed by the LGU.
of imposition of goods passing through the  The purpose of this exception is because there is
territorial jurisdiction of the LGU is clearly already a “common carriers’ tax” found in the
prohibited. NIRC.
 Thus, what the law prohibits is any absolute  Bar Q:
imposition on goods passing thru territories. XYZ Shipping Corp is a branch for international
6. Taxes, fees or charges on agricultural and aquatic shipping line with voyages bet. Manila and
products when sold by marginal farmers or fishermen;  West Coast of US. The City Manila levied a tax
7. Taxes on business enterprises certified to by the Board of 2% on GS of the shipping lines in using the
of Investments as pioneer or non-pioneer for a period port of Manila.
of six (6) and four (4) years, respectively from the date
of registration;  City of Manila is wrong. LGC prohibits the
8. Excise taxes on articles enumerated under the national imposition of local tax on common carrier.
Internal Revenue Code, as amended, and taxes, fees or 11. Taxes on premiums paid by way or reinsurance or
charges on petroleum products; retrocession; 
 Since the law does not distinguish, the LGU are 12. Taxes, fees or charges for the registration of motor
prohibited from imposing not only excise tax on vehicles and for the issuance of all kinds of licenses or
petroleum products but also all taxes, fee, and permits for the driving thereof,
charges.  Except tricycles; 
 13. Taxes, fees, or other charges on Philippine products
actually exported,
 Except as otherwise provided herein;
14. Taxes, fees, or charges, on Countryside and Barangay
Business Enterprises and cooperatives duly registered
under R.A. No. 6810 and Republic Act Numbered
Sixty-nine hundred thirty-eight (R.A. No. 6938)
otherwise known as the "Cooperative Code of the
Philippines" respectively; and  holding of public
15. Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities, and
local government units.
 Is this rule absolute? No, when the beneficial
use of its RP is given to a taxable entity.
Taxing Powers of LGUs
 Only cities and municipalities can impose
business tax
Province
The province is authorized by law to impose tax on the ff:
1. Tax on Transfer of Real Property Ownership
 Note that this is not a tax on the income, but a
tax on the transfer of real property.
2. Tax on Business of Printing and Publication
3. Franchise Tax
4. Tax on Sand, Gravel, and other Quarry Resources
 Provincial govt can levy excise tax on quarry
resources from the public lands independently
from the national government.
5. Professional Tax
 As for professions, even if you pay tax in
Batanes, you can still practice your profession
in Manila, or anywhere in the PH.
6. Amusement Tax
 The common typifying characteristics of those
subject to amusement tax is that such venues
are primarily for the staging of spectacles or the
shows, exhibitions,
performance. Accordingly, “other places of
amusement” must be interpreted in this light.
 Thus, resorts, swimming pools, bath houses,
hot springs, and tourist spots are not within the
phrase “other places of amusement” as
provided by law which the province can tax.
 Golf courses are not included as well, people
don’t go to golf course to watch a performance.
7. Fixed Tax for every Delivery Truck or Van of
Manufacturers or Producers, Wholesalers of, Dealers,
or Retailers in, Certain Products.
Municipalities and Cities
Municipalities may levy taxes, fees, and charges not otherwise
levied by the Province.
Cities, on the other hand, may levy taxes, fees, and charges
which the Province and Municipalities may impose.
 The rate may exceed the maximum rates provided for
the Province and Municipality by not more than 50%.
 o XPN: rates of professional and amusement tax
Municipalities may impose tax on the ff:
1. Tax on Business (Based on Gross Receipts):
a. 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.
b.  On wholesalers, distributors, or dealers in any
article of commerce of whatever kind or nature
c. On exporters, and on manufacturers , millers,
producers, wholesalers, distributors, dealers or
retailers of essential commodities enumerated
hereunder
d. On retailers.
e. On contractors and independent contractors
f. On banks and other financial institutions, at a
rate not exceeding fifty percent (50%) of one
percent (1%) on the gross receipts of the
preceding calendar year derived from interest,
commissions and discounts from lending
activities, income from financial leasing,
dividends, rentals on property and profit from
exchange or sale of property, insurance
premium.
g. On peddlers engaged in the sale of any
merchandise or article of commerce, at a rate
not exceeding Fifty pesos (P50.00) per peddler
annually.
h. On any business, not otherwise specified in the
preceding paragraphs, which the sanggunian
concerned may deem proper to tax: Provided,
That on any business subject to the excise,
value-added or percentage tax under the
National Internal Revenue Code, as amended,
the rate of tax shall not exceed two percent (2%)
of gross sales or receipts of the preceding
calendar year.
 Note: Tax on business should be based on gross
receipt, so if the city assessed the taxpayer’s local
business based on gross revenues. Then such
assessment is improper.
 Condo corp are usually exempted from local business
under the LGC. They are prohibited from doing
activities for profit under the Condominium Code,
hence, they are “not business” under the LGC.
 When the Municipality or City already imposed a
business tax under A-G of Sec. 143 of the LGC. The
municipality or city may no be allowed to impose
business tax the same taxpayer based on H of Sec. 143.
This constitutes direct double taxation.
2. Fees and Charges
o On the business and occupation and practice of
any profession or calling before any person may
be allowed to engage in such business or
occupation or practice of profession.
3. Fees for Sealing and Licensing of Weights and
Measures.
4. Fishery Rentals, Fees and Charges
o The municipality hast the exclusive authority to
grant fishery privileges in the municipal waters
and impose rentals, fees, or charges.
5. Community Tax
o Individuals who are 18 years old and above
who is:
(1) regularly employed for at least
30 consecutive days, or
(2) engaged in business or
occupation, or
(3) owns real property worth more
than P1000 (assessed value)
(4) required to file and income tax
return
o Corporations
o Who are exempt from Community tax?
Absolutely
1. Diplomats
2. Consular Representatives
Exempt for the rest of the current taxable year
1. Transient visitors who stay not more
than (3) months
2. Persons who come to reside in the
PH on or after July 1
3. Persons who become 18 years old on
or after July 1
4. Corporations established and
organized on or after July 1
o Time of filing: Before Feb. 1 of each year
 Municipalities and Cities may impose and collect such
reasonable fees and charges on business and
occupation. XPN is professional tax which is reserved
to the Province.
Barangay
1. Taxes
o On store or retailers with fixed business
establishment with GS/GR of the preceding
calendar year of 50K or less (in case of cities) or
30k (in case of municipalities) at a rate of 1% of
such GS/GR.
2. Service and Fees Charges
o In connection with the regulation or the use of
barangay-owned properties or service facilities.
3. Barangay Clearance
4. Other Fees and Charges
o Tax on Commercial breeding and fighting cock,
cockfights, and cockpits
o Tax on places of recreation which charge
admission fees
o Tax on billboard, sign boards, neon signs , and
outdoor events.
Common revenue raising power between the different LGUs
1. Reasonable fees and charges for services rendered
 2. Public utility
o For operations maintained by them within their
jurisdiction.
3. Toll fees or charges
o Take note: The fees shall be for any public road,
pier, wharf, waterway, bridge, ferry or
telecommunication system actually FUNDED
and CONSTRUCTED by the taxing LGU.
o XPN: No taxes collected against:
1. Officers enlisted men of the AFP and members
of PNP on a mission
2. Post office personnel delivering mail
3. Physically-handicapped and disabled citizens
4. Citizens who are 65 years or older.
Situs of Local Taxation
Here are the rules on the situs of Local Taxation
1. When the sale was made in a certain municipality or
city
a. If there is a branch (or sales office or
warehouse) where the same was made, the sale
shall be recorded in the said branch and the tax
shall accrue and be paid to the municipality
where the branch is located.
b. If there is no branch (or sales office or
warehouse), the sale shall be recorded in the
principal place of business and taxes shall
accrue there, and taxes shall be paid on the
municipality of said place.
2. If there is no branch, and the company has factory,
plant, plantation, project office
a. 30% of sales – taxable where the principal is
located
b. 70% of sales – taxable where the F,P,P,PO is
located
3. Sales allocation in case factories and plantations
located in difference places
a. 30% - taxable where the principal is located
b. 70% distributed as follows:
o 60% taxable where the factory is
located
o 40% taxable where the factory is
located
4. In case there are two or more factories and plantations
located in different localities
a. Prorate the 70% according to the volume of
production
b. 30% taxable where the principal is located
5. In case of route sale
a. Made in a locality where manufacturer,
producer, wholesaler, retailer or dealer has a
branch (including sales office and warehouse)
and tax due thereon shall be paid to the LGU
where such branch is located.
b. Made in a locality where a manufacturer, P, W,
R or D has no branch (including SO and W), the
sales shall be recorded in the branch (including
SO and W) from where the route trucks
withdraw the products for sale.

Remember that as long as there is a branch, the sale will be
recorded there. The above rules on allocation shall only apply
in absence of the branch. Sale allocation (in absence of branch)
shall be applied irrespective of w/n sales are made in the
locality where the factory, project office, plant, or plantation is
located.
In one case, the city can validly tax the sales of the matches to
customers outside of the city as long as the orders were
booked and paid for in the company’s branch office in the city.
In one of the Bar Qs, the principal office, along with (2) other
branches were subjected to tax for sales within its respective
cities. The principal was included notwithstanding the
existence of branches because the principal is also a sales
office. Remember branch includes sales office and warehouse.
Collection of Local Taxes
All local taxes, fees, and charges accrue on January 1 and must
be paid by January 30, or of each subsequent quarter.
Surcharge: 25% of the amount of taxes, fees or charge NOT
paid on time.
o Subject to interest of 2% PER MONTH on the
amount including the surcharges.
o BUT in no case shall the total interest on the
unpaid amount or portion exceed 36 months.
o Surcharge shall not be applied in a yearly
accrual bases, the same would be
unconscionable.
Retirement of Business
A retiring business shall submit a sworn statement of GS/GR
of the current year. The business should be subject to tax prior
to retirement.
If the tax paid during the year is less than the tax due on said
GR/GS:
o The same shall be paid before the business is
considered officially retired.
What if the tax paid is more than the tax due on the said
GR/GS?
o In one case, since the basis for the tax due is the GR/GS
of the previous year, then if the GR/GS of the
taxpayers is actually lower then it necessary follows
that the tax he paid is more than the tax due, then he is
entitled for a refund/credit.
o So the situation would be, you are taxed already for the
privilege of carrying a business prior to closing of
business, this is based on the estimate from last year.
Now upon manifestation of retirement, you will be
assessed again if the prior payment is equal to the tax
due. Kung sakto binayad mo noong nagbayad ka ng
tax, then wala ka ng problema.
Remedies for Collection of Local Taxes

Local taxes and other fees shall constitute lien, superior to all
liens in favor of any person, enforceable by appropriate
administrative or judicial action.
o Such lien may only be extinguished upon full payment
Civil Remedies
A. Administrative Action
1. Distraint of Personal Property
o The local treasurer or his deputy may, upon
written notice, seize or confiscate any personal
property belonging to the taxpayer.
o The officer making the distraint shall make an
account of the distrained goods.
o There shall be publication in not less than 3
conspicuous places of the govt where the
distraint is made.
o The time of sale shall not be less than 20 days
from the notice.
o If the property is not sold within 120 days from
the date of distraint, the same shall be
considered sold in favor of the LGU
o If the amount of the proceeds is insufficient to
cover the tax due, other properties may be
distrained.
2. Levy on Real Property
o RP may be levied before, simultaneously or
after the distraint of the personal property.
o Notice shall be given to the Register of Deeds
where the property is located who shall
annotate the levy on the tax declaration
B. Judicial Action
o Either of these remedies or all may be pursued
concurrently or simultaneously at the discretion
of the LGU.
Local treasurer who fails to issue or execute levy or warrant of
distraint after the expiration of time or who is guilty of
abusing the exercise competent authority shall be
automatically dismissed from office, without prejudice to
criminal prosecution under RPC.
Within 1 year from the date of sale, the delinquent tax payer
may exercise his right to redeem the property upon payment
to the local treasurer of the total amount of taxes, fees, or
charges, and related surcharges, interest of not more than 2%
per month. Failure to redeem the property will warrant the
local treasurer to execute a deed conveying to the purchaser
the property.
In case of want of bidders, the LGU may purchase the
property. The sangguanian, upon an ordinance, may resale the
same and the proceeds will go to the general fund of the LGU.
o Take note that the LGU is authorized only to
purchase in case of want of bidder. Disqualified
bidder is not among the authorized ground.
Personal Properties exempt from Distraint or Levy
 (a) Tools and implements necessarily used by the LGU may exercise power to levy taxes, fees, or charges on any
delinquent taxpayer in his trade or employment; base or subject not otherwise specifically enumerated therein
or taxed under the provisions of the NIRC. Provided that the
(b) One (1) horse, cow, carabao, or other beast of taxes, charges or fees are not:
burden, such as the delinquent taxpayer may select,
and necessarily used by him in his ordinary 1. Unjust
occupation;  2. Oppressive
3. Confiscatory
(c) His necessary clothing, and that of all his family;  4. Contrary to declared national policy.

(d) Household furniture and utensils necessary for Note: the ordinance levying such taxes, fees, or charges shall
housekeeping and used for that purpose by the not be enacted without prior public hearing conducted for
delinquent taxpayer, such as he may select, of a value such purpose.
not exceeding Ten thousand pesos (P10,000.00); 
Such ordinance may be appealed within 30 days from its
(e) Provisions, including crops, actually provided for effectivity to the Secretary of Justice who shall render a
individual or family use sufficient for four (4) months;  decision within 60 days from the days of receipt of the appeal.

(f) The professional libraries of doctors, Remember, the appeal does not in effect suspend the
engineers, lawyers and judges;  effectivity of the ordinance
Within 30 days from the receipt of the decision of the SOJ or
(g) One fishing boat and net, not exceeding the the lapse of the 60 days without the SOJ acting on appeal, the
total value of Ten thousand pesos (P10,000.00), taxpayer may file appropriate proceedings with a court of
by the lawful use of which a fisherman earns competent jurisdiction.
his livelihood; and 

(h) Any material or article forming part of a Exemption from Tax

house or improvement of any real property.
LGU has the power to grant tax incentives through ordinances

Local Tax vs RPT in case of power to grant exemptions:

Power to levy other taxes
o In RPT, LGUs cannot add on to the exemptions
stated in the LGC
 o In Local Tax, the LGUs are free to grant
exemptions.
Sanggunians have the power to grant tax exemptions, tax
incentives, and tax reliefs. These however does not cover
regulatory fees collected by the LGU.
For Tax Exemptions:
o The tax exemptions should be conferred via tax
exemption certificate
o The tax exemption and reliefs must be through an
ordinance.
o They may be granted in cases of natural calamities,
civil disturbances, general failure of crops, or adverse
economic conditions
o Any exemption or relief granted in to a type or kind of
business shall apply to business similarly situated.
o XPN shall only last for a period not exceeding 12
months.
For Tax Incentives:
o Incentives shall be granted only to new investments on
the locality and the ordinance shall prescribe the terms
and conditions therefore.
o This grant of the incentives shall be for a definite
period not exceeding 1 calendar year.
o The grant of tax incentives shall be by ordinance
passed prior to the 1st days of any year; and
o Any tax incentive granted to a type or kind of business
shall apply to all businesses similarly situated.
Withdrawal of Tax Exemptions Privileges
The LGC (1991) withdrew all tax exemptions or incentives
granted to, or presently enjoyed by all persons, whether
natural or juridical, including GOCCs. Except:
o Local Water Districts
o Cooperatives duly registered under RA 6938
o NSNP hosp and educational institutions
o Unless provided by in the code.
Although the GR is that the LGU cannot impose taxes on the
National Government, this rule now admits an exception
which is when a specific provision of the LGC authorizes the
LGU to impose tax on the national govt then it can.
How about if exemption granted after the LGC was enacted?
o Congress has the power to grant tax exemptions over
and above of the local government’s delegated power
to tax.
o However, the grant of congress must be unequivocal
Prescriptive Periods and Taxpayer’s Remedies in Local
Taxation
Prescriptive Periods for Assessment and Collection
For Assessment:
o Within 5 years from the date they become due
o In case of fraud, or if there is intent to evade the
payment of taxes, 10 years from the time of discovery.
For Collection:
o Within 5 years from the date of assessment by
administrative or judicial action.

The prescriptive period will be suspended in case of: (PRO)
1. When the local treasurer is legally prevented from
making assessment or collection of the tax.
2. When the taxpayer requests for reinvestigation and
executes a waiver in writing before the expiration of
the period.
3. The taxpayer is out of the country or otherwise cannot
be located.
Tax Remedies of the Taxpayer
1. To question the newly enacted ordinance
o Prior to the enactment of ordinances, you need:
 Public hearings
 Publication in full for 3 consecutive days
o Any question on the constitutionality and
legality of tax ordinance may be appealed
within 30 days from its effectivity to SOJ
o SOJ must decide within 60 days from receipt
o After the lapse of 60 days if there is non-action
or within 30 days from the decision of the SOJ,
the aggrieved party may go to court.
 If the party did not appeal to SOJ, the
courts will dismiss the case. Appeal to
SOJ is MANDATORY
 If the case involves pure questions of
law, the party may go straight to the
courts.
o SOJ may only review the constitutionality or
legality of the tax ordinance, and if warranted,
to revoke it.
 He cannot replace it with his own
version.
 He has no right to determine or declare
that the ordinance is unjust, excessive,
oppressive, or confiscatory.
o When assailing the ordinance, there is no need
for a written protest to be made. Protest is only
needed if assailing the validity of the
assessment.
2. Protest against the assessment
o Treasurer issues the assessment
o Taxpayer will file a written protest with the
local treasurer within 60 days from the receipt
of the notice of assessment, otherwise the same
shall be final and executory.
o Treasurer shall decide within 60 days. He can
cancel the assessment or deny the protest.
o The taxpayer has 30 days from receipt of denial
or the lapse of 60 days in case of non-action
within which to appeal the case.
o Aggrieved party may then appeal to CTA,
within 30 days, via:
 Petition for review to CTA Division
under Rule 42 (if the RTC acted in
original jurisdiction)
 Petition for review to CTA En Banc
under Rule 43 (if from the RTC acting
under appellate jurisdiction)
o Written protest is mandatory when protesting
an assessment. The taxpayer cannot go straight
to the court.
o Unlike RPT, no need for payment under
protest.
 However some LGUs require payment
under protest
 o The LGC does not specifically prohibit
injunction to enjoin the collection of taxes.
 Unlike in case of the National taxes,
where the laws expressly prohibits the
courts from enjoining the collection of
taxes, with the SOLE EXCEPTION of
CTA.
3. Claim for refund or tax credit
o Requirements
 Written claim file with the local
treasurer
 Filed within 2 years from
a) Date of payment
b) Date when the taxpayer is
entitled to a refund or credit.
o As compared to refund in National Taxes, in
local taxes, supervening causes are allowed as
reckoning points for the prescriptive period
purposes.
o If a taxpayer wins a case against the LGU
regarding local taxes already paid, should move
for the issuance of writ of execution to get his
money back?
 No, the taxpayer should just request
from the LGU the implementation of the
tax refund or credit.
REAL PROPERTY TAX
RPT shall be:
1. Appraised at its current and FMV
2. Classified for assessment purposes on the basis of its
actual use
3. Assessed on the basis of a uniform classification within
each LGU.
The appraisal, assessment, levy and collection shall:
1. Not be let to nay private person
2. Be equitable
Only the following LGU can impose RPT:
1. Province (enactment and collection)
2. Cities (enactment and collection)
3. Municipalities within Metro Manila (collection only)
o Includes those converted into cities
Real Property and Machinery
For taxation purposes, real property consists of the ff:
1. List of immovable in Art. 415 of the Civil Code
2. Definition of machinery under Section 199(0) clarified
by the DOF Local Finance Circular 001-2002
For reference:
Article 415. The following are immovable property: 
(1) Land, buildings, roads and constructions of all
kinds adhered to the soil; 
(2) Trees, plants, and growing fruits, while they are
attached to the land or form an integral part of an
immovable; 
(3) Everything attached to an immovable in a fixed
manner, in such a way that it cannot be separated
therefrom without breaking the material or
deterioration of the object; 
(4) Statues, reliefs, paintings or other objects for use or
ornamentation, placed in buildings or on lands by the
 owner of the immovable in such a manner that it permanently attached to the real property which are actually,
reveals the intention to attach them permanently to the directly, and exclusively used to meet the needs of the
tenements;  particular industry, business or activity and which by their
(5) Machinery, receptacles, instruments or implements very nature and purpose are designed for, or necessary to its
intended by the owner of the tenement for an industry manufacturing, mining, logging, commercial, industrial or
or works which may be carried on in a building or on a agricultural purposes;
piece of land, and which tend directly to meet the
needs of the said industry or works;  DOF Local Finance Circular 001-2002
(6) Animal houses, pigeon-houses, beehives, fish ponds
or breeding places of similar nature, in case their Summary of the rules
owner has placed them or preserves them with the
intention to have them permanently attached to the 1. Machinery that is permanently attached to land
land, and forming a permanent part of it; the animals and buildings is subject to the real property tax,
in these places are included;  even though this is actually, directly and
(7) Fertilizer actually used on a piece of land;  exclusively (ADE) used for religious, charitable or
(8) Mines, quarries, and slag dumps, while the matter educational purposes.
thereof forms part of the bed, and waters either 2. Machinery that is not permanently attached
running or stagnant; 
(9) Docks and structures which, though floating, are a. Subject to the real property tax if it is an
intended by their nature and object to remain at a fixed essential and principal element of an
place on a river, lake, or coast;  industry, work or activity without which
(10) Contracts for public works, and servitudes and such industry, work or activity cannot
other real rights over immovable property. (334a) function; and

As for Machinery b. Not subject to the real property tax if it is

not an essential and principal element of an
industry, work or activity.
LGC Sec 199(o):
3. Notwithstanding rules 1 and 2, machinery of non-
"Machinery" embraces machines, equipment, mechanical stock, non-profit educational institutions used
contrivances, instruments, appliances or apparatus which may actually, directly, and exclusively for educational
or may not be attached, permanently or temporarily, to the purposes is not subject to real property tax.
real property. It includes the physical facilities for production,
the installations and appurtenant service facilities, those which
are mobile, self-powered or self-propelled, and those not
Under Sec.199 (o), the machinery which are ADE used to meet
the standards of the particular industry are liable for RPT.
 Hence if the machinery is only for general purpose, it is
not a real property.
Rules on Machinery:
 As long as attached to land and buildings: the same is
subject to RPT
 If not permanently attached:
o If essential to the principal element of industry,
work or activity without which the same cannot
function – subject to RPT
o If not essential and principal element of an
industry – not subject RPT
 But machinery of NSNPEI used ADE for educational
purpose – not subject to RPT
As between the Civil Code and LGC, the latter must prevail
since the same is special law. Hence in determining w/n the
property is subject to RPT, the definition and requirements of
the LGC is controlling over the civil code.
In the case of Board of Assessment vs Manila Electric Co:
 Meralco insisted that their transformers, electric posts,
transmission lines, insulators and electric meters were
not immovable under Art 415 of the Civil Code
because 415(5) imposed additional requirements for
machinery to be considered as real property being: 1)
the machinery being placed in the tenement by the
owner of such tenement and 2) destined for use in the
industry or work in the tenement.
 SC said that following that argument would mean
imposing additional requirement for classifying
machinery as real property not provided by LGC.
 Using the LGC definition, the SC stated that even if the
same is not permanently attached, they are real
property if the property is ADE used to meet the ends
of the particular and by their very nature and purpose
necessary for the business purpose.
Gasoline station equipment and machineries are permanent
fixtures for purposes of realty taxation, even if they are on
leased land.
The storage tanks of Meralco are classified as real property
and subject to tax since they are machinery or improvement.
 While the tanks are not embedded in the land, it is
undeniable that such tanks have been installed with
some degree of permanence as receptacles for the
considerable quantities of oil needed by Meralco for its
operations.
Appraisal and Assessment
 For real property
o All real prop shall be appraised at the current
and fair market value prevailing at the locality
where the property is situated.
o This implies that LGUs may only collect RPT to
properties falling within its territorial
jurisdiction
o Hence, a boundary dispute is a prejudicial
question that must be resolved first before
determining the RPT liability of the property.
 For Machinery
o For FMV of Machineries, the basis shall be the
acquisition cost
 o In all other cases, the basis will be the book
value, depreciation having been taken into
account.
o If the machinery is imported, the acquisition
cost will include all the charges necessary to
bring the thing into the Ph.
o Specific to Machinery, only a 5% depreciation
rate can be used.
 However, as long as the machinery is
useful and in operation, the value will
not be less than 20% of its original price.
It can never be zero.
For Assessment Purposes
 Actual use is the basis, regardless of who owns the
property.
 The same is for assessment purposes only.
 Unpaid real estate tax attach to the property and is
chargeable against the taxable person who had actual
and beneficial use and possession of it, regardless w/n
he is the owner.
o So the estate should not be liable for the RPT for
the periods when it did not have beneficial use
of the property.
o Contractual assumption to pay RPT, by itself, is
not sufficient to make one legally compellable
by the govt to pay the taxes due. The person
liable must also use and possess the property.
Classes of Real Property
1. Residential
2. Agricultural
3. Commercial
4. Industrial
5. Mineral
6. Timberland
7. Special, which are:
 Land, buildings, and other improvements ADE
used for hospital, cultural, or scientific purpose
 Those which are owned by local water districts
and GOCCs rendering essential public services
in the supply and distribution of water and
electricity.
A hospital which was previously considered as special cannot
be reclassified to “commercial” simply because it charges
rental for the use of its offices by accredited physicians.
 A facility which is incidental and reasonably
necessary for the operations of a hospital
should likewise be classified as special.
A special classification prescribes a lower assessment than
commercial classification.
The SC held that income generating facility which is incidental
and reasonably necessary for the operations of a hospital, such
as offices held out for lease to accredited doctors, does not
justify the change in the class of real property from special to
commercial.
Declaration by owner or by the assessor; listing of real
property in the assessment rolls
o All persons, natural or juridical, owning or
administering real property to prepare and file with
the provincial, city or municipal assessor, as sworn
statement declaring the true value of their property.
 This includes the persons acquiring the
property or making improvement thereon,
within 60 days from acquisition or from the
time the improvement is made.
o The declaration shall be filed with the assessor
concerned once every (3) years during the period of
January 1st to June 30th.
o If such person mentioned above refuses to prepare
such declaration, the assessor shall himself declare the
property in the name of the name of the defaulting
owner, and shall assess the property for taxation.
o There shall be prepared and maintained by the
provincial, city or municipal assessor an assessment
roll wherein shall be listed all real property, whether
taxable or exempt, located within the territorial
jurisdiction of the local government unit concerned.
Real property shall be listed, valued and assessed in
the name of the owner or administrator, or anyone
having legal interest in the property.
o Any person who claims tax exemption shall file
evidence in support of such claim.
o In case of transfer of the property, transferor shall
notify the assessor of the LGU concerned within 60
days from the transfer.
Imposition of Real Property Tax and Special Levy
Power to Levy RPT
The ff may levy real property tax:
1. A Province
2. A city, and
3. A municipality within Metro Manila area.
 Municipalities outside Metro Manila cannot
levy real property taxes.
 They can however impose special levies
Rates of Levy
 Province can impose RPT not exceeding 1% of the
assessed value of the property
 City or Municipality within Metro Manila area, not
exceeding 2% of the assessed value.
Special Education Fund (SEF)
 On top of the RPT rate, the province, city or
municipality in MM, may levy annual tax of 1% of the
assessed value for the SEF.
 This is in addition of the RPT
 The LGU can impose less than 1%, the law does not
specify that the tax be exactly 1%.
Tax on Idle Land
Idle Lands are:
 If Agricultural – more than one hectare in area and
suitable for cultivation, dairying, inland fishery and
other agricultural uses and ½ of which is uncultivated
or unimproved.
  If other than Agricultural – more than 1k sqm, and ½ of
which is uncultivated or unimproved.

Idle lands are taxed at a rate not exceeding 5%, in addition to
the basic real property tax.
So, the SEF and Tax on Idle Land may be imposed in addition
of the RPT.
However, idle lands may be exempt from tax, because of:
 Force Majure, or
 Civil Disturbance, or
 Natural Calamity, or
 Any cause which physically or legally prevents the
owner of the property or person having legal interest
from improving, utilizing, or cultivating the same.
Special Levy
Special Levies are imposed when lands are benefited by
public works projects or improvements funded by the LGU
concerned.
 HOWEVER, no special levy shall be imposed:
o On lands exempt from RPT
o Remainders of land portions of which are
donated to LGUs for the projects.
Special Levy by province, city or municipality (in MM) should
not exceed 60% of the total code of the government
improvements
Note on the ordinance for Special Levy
 Public Hearing
 Notification
 Opportunity of the owner to object
Exemption from RPT
Upon the enactment of the LGC, any exemption from RPT
given to all persons whether natural or juridical, including
GOCCs were withdrawn
 However, the Congress has the power to grant
exemptions over the power of LGU to impose taxes.
 In one case, the reenactment of franchise law after the
LGC in favor of Bayantel was said to revive its
exception
The list is an exclusive one and the LGU cannot add on to the
exception.
o The exception includes exception from special
assessments
Properties exempt from RPT
1. Real property owned by the Government or any of its
political subdivision
o XPN when the beneficial use thereof has been
granted, for consideration, to a taxable.
o XPN to XPN when the national government, its
agencies and instrumentalities are subject to
any kinds of tax by local government
o Who pays then? The taxable entity having
beneficial use of the property is liable
o Political subdivision to mean government
instrumentalities vested with corporate powers
or government corporate entities. (LLDA, UP,
MIAA, PNR, PPA)
  An instrumentality is neither stock or
non-stock corp and it performs
governmental or public functions.
 Hence, GOCC is liable for RPT.
 In summary, Government Corporate
Entity (GCE) is exempt while GOCC is
not exempt.
o Reclaimed land is a part of public domain
2. 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
o Note that improvements does not include
machineries.
o Thus the general rule is that machines that are
permanently attached to land and buildings is
subject to RPT, even though this is ADE used
for religious, charitable or educational purpose
 Improvements, on the other hand, are
exempt.
o But in the case of NSNPEI, machineries used
ADE for educational purposes is not subject to
RPT.
o “ADE use” of the property for charitable
purposes means the direct and immediate and
actual application of the property itself to the
purposes for which the charitable institution sis
organized.
 It is not the use of income derived from
the property but the use of the property
which is determinative of whether the
property is used for tax-exempt
purposes.
 If some portion are leased for activities
which are not for charitable , religious or
educational purposes, then those
portions will be subject to RPT.
o A charitable institution does not lose its
character as such and its exemption from taxes
simply because it derives its income from
paying patients.
o So long as the money received is devoted or
used altogether to the charitable object which is
intended to achieve and no money inures to the
private benefit of the persons managing or
operating the institution.
3. All machineries and equipment that are actually,
directly and exclusively used by local water districts
and government owned or controlled corporations
engaged in the supply and distribution of water
and/or generation and transmission of electric power
o Take note that only the machineries and
equipment are exempt from the RPT, not the
lands or buildings
o 2 elements must be complied:
 First, that the machineries and
equipment are actually, directly and
exclusively used by local water districts
and GOCCs.
 Second, that the local water district and
GOCC must be engaged in the supply
and distribution of water and/or
generation and transmission of electric
power.
o What if the GOCC which supplies electric
power, entered into an agreement with a
taxable entity for the lease of the former’s
 equipment - and the agreement states that the
GOCC will be liable for the RPT, will the
exemption extend to the taxable entity?
 No, in one case, the SC states that the
agreement is between the two and does
not bind third person not privy thereto.
 In short, tax assumption clause is
binding only between the 2 parties, and
not to the government and LGU.
4. All real property owned by duly registered
cooperatives.
o The exemption applies even if the land
owned by the cooperative is leased to a
taxable entity.
o The law does not care if the property owned
by the cooperation is used by the
cooperative or not.
5. Machinery and equipment used for pollution control
and environmental protection.
o The exemption now includes infrastructure
and improvement.
In one Bar qs, a group of Tibetan monks offered to lease a
certain property as a venue for their Buddhist ritual and
ceremonies. The owner accepted rentals of 1M for the whole
year. The suggested answer states that the assessor is wrong in
assessing the property. The use in this case is ADE used for
religious purposes, which is exempted from RPT under the
LGC.
The burden of proving exemption from local taxation is upon
whom the subject real property is declared.
Collection of RPT
RPT for the year shall accrue on the 1 st day of January and
from that date it shall constitute a lien on the property which
shall be superior to any other lien, mortgage or encumbrance.
The city or municipal treasurer shall be in charge of the
collection of RPT.
 The city or municipal treasurer may deputize the
barangay treasurer to collect all the real taxes in the
barangay.
 Provided that the barangay treasurer is properly
bonded, the premiums on such bonds shall be
furnished by the city or municipal treasurer.
 The taxpayer may pay the basic RPT and SEF in
installment basis in (4) equal installment:
o 1st installment – on or before 31 March
o 2nd installment – on or before 30 June
o 3rd installment – on or before 30 September
o 4th installment – on or before 31 December
o As for the Special Levy, the same shall be
governed by the ordinance.
 The Sangguinian my grant tax discount not exceeding
20% of the annual tax due in case the basic RPT and
additional tax accruing to the SEF are paid in
ADVANCE.
 Unpaid real property shall subject the taxpayer to the
payment of interest at the rate of 2% per month on the
 unpaid amount or a fraction thereof, until the
delinquent tax is paid.
o In no case shall the total interest on the unpaid
tax or portion thereof exceed 36 months.
LGU Remedies for collection
LGU concerned may avail of:
1. Administrative action through levy on RP
 RP may be levied under the issuance of a warrant on or
before, or simultaneously with, the institution of the
civil action for the collection of the delinquent tax.
 Only the registered owner of the property is deemed
the taxpayer who is entitled to a notice of delinquency
and other proceedings relative to tax sale.
 The warrant shall operate with the force of a legal
execution throughout the province, city or a municipal
within the MM.
 Any local treasurer or his deputy who fails to issue or
execute the warrant of levy within 1 year from the time
the tax becomes delinquent or within 30 days from the
date of the issuance thereof, who is found abusing the
exercise of his administrative or judicial proceeding
shall be dismissed from service.
 30 days from the service of warrant, the local treasurer
shall proceed to publicly advertise the sale and auction
of the property.
 Within 30 days after the sale, the LT shall report about
the sale to the Sanggunian concerned.
 In case the proceeds of the sale is in excess of the tax
due, the expenses of the sale shall be remitted to the
owner of the property.
 Within 1 year from the date of sale, the delinquent tax
payer may exercise his right to redeem the property
upon payment to the local treasurer of the total amount
of taxes, fees, or charges, and related surcharges,
interest of not more than 2% per month. Failure to
redeem the property will warrant the local treasurer to
execute a deed conveying to the purchaser the
property.
 The owner of the delinquent RP or the person having
legal authority or interest therein, or his representative
has the right to redeem the property within 1 yr.
 However when the ordinance states
that RoR starts from date of
annotation, such will be followed
since it is more favorable to the
original owner or redemptioner.
 No court shall entertain any action
assailing the sale at public auction of
real property until taxpayer shall have
deposited with the court the amount
for which the property was sold with
2% interest per month.
2. Judicial action
 LGUs may enforce the collection of the RPT by civil
action in any court of competent jurisdiction
In case of want of bidders, the LGU may purchase the
property. The sangguanian, upon an ordinance, may resale the
same and the proceeds will go to the general fund of the LGU.
o Take note that the LGU is authorized only to
purchase in case of want of bidder. Disqualified
bidder is not among the authorized ground.
In case of an action involving ownership or possession of, or
succession to, the real property, the court may, motu proprio
or upon representation of the LGU, award the ownership or
possession, or succession to any party to the action UPON
PAYMENT OF THE TAXES.
Prescriptive Period to Collect
Based on the ff periods:
o Within 5 years from the date of assessment by
administrative or judicial action.
o In case of fraud, or if there is intent to evade the
payment of taxes, 10 years from the time of discovery.
The prescriptive period will be suspended in case of: (PRO)
1. When the local treasurer is legally prevented from
making assessment or collection of the tax.
2. When the taxpayer requests for reinvestigation
and executes a waiver in writing before the
expiration of the period.
3. The taxpayer is out of the country or otherwise
cannot be located.
Condonation or Reduction of the RPT and Interest
1. In case of general failure of crops or substantial
decrease in the price or agricultural or agribased
products, or
2. Calamity in any province, city, municipality in MM.
The sanggunian concerned may, by ordinance, by
recommendation of Local Disaster Coordinating Council,
condone or reduce, wholly or partially, taxes and interest due
for the succeeding years or years in the city or municipality
affected.
Taxpayer’s Remedies
Taxpayer has the ff remedies in RPT:
1. Protest against newly enacted ordinance or revenue
measure
 Same sa Local Tax
 For reference:
o Prior to the enactment of ordinances,
you need:
 Public hearings
 Publication in full for 3
consecutive days
o Any question on the
constitutionality and legality of tax
ordinance may be appealed within
30 days from its effectivity to SOJ
o SOJ must decide within 60 days
from receipt
o After the lapse of 60 days if there is
non-action or within 30 days from
the decision of the SOJ, the
aggrieved party may go to court.
 If the party did not appeal to
SOJ, the courts will dismiss
 the case. Appeal to SOJ is
MANDATORY
 If the case involves pure
questions of law, the party
may go straight to the courts.
o SOJ may only review the
constitutionality or legality of the tax
ordinance, and if warranted, to
revoke it.
 He cannot replace it with his
own version.
 He has no right to determine
or declare that the ordinance
is unjust, excessive,
oppressive, or confiscatory.
o When assailing the ordinance, there
is no need for a written protest to be
made. Protest is only needed if
assailing the validity of the
assessment.
2. Remedy against assessment
 You resort to this when you want to question an
act of the assessor, like when the assessor makes an
appraisal on the real property
 So the taxpayer must appeal the assessment to the
Local Board of Assessment Appeal (LBAA) within
60 days from the date of receipt of the written
notice of assessment
 The LBAA has 120 days from receipt of the appeal
to decide.
 If still unsatisfied, the taxpayer may appeal to the
Central Board of Assessment Appeals (CBAA)
within 30 days after receipt of the decision of the
LBAA
 If still unsatisfied, he may appeal to CTA en banc
within 30 days.
o Why enbanc? Remember that the
decisions of the CBAA and the RTC in
the exercise of appellate jurisdiction are
appealable to CTA via Rule 43.
 Taxpayer’s failure to appeal the same to LBAA
renders the assessment final, executory and
demandable.
 The taxpayer protesting must have a legal capacity
 Appeals on the assessment shall in NO CASE
SUSPEND the collection of the RPT
3. Payment under protest and tax refund or credit
 You resort to this when the taxpayer questions the
excessiveness of the amount imposed on him.
o A claim for exemption, whether full or
partial, raises a question on correctness.
Hence, payment under protest is required.
o However, when the taxpayer questions the
legality or validity of an assessment – a
question of law – direct recourse to the local
courts is allowed.
 The procedure is as follows:
1. Pay first and cause annotation to the local
treasurer “paid under protest”
2. Protest in writing within 30 days from payment
with the local treasurer.
3. Treasurer has 60 days to resolve it
4. In case of denial or lapse of 60days, follow the
procedure in questioning an assessment;
i. Appeal to LBAA within 60 days
ii. Appeal to CBAA within 30 days
iii. Appeal to CTA EB within 30 days
  Posting of surety bond before filing an appeal of
the assessment with the LBAA is a substantial
compliance of the requirement of payment under
protest.
4. Claim a refund
 Like local taxes, refunds must be claimed within 2
years from the date the taxpayer is entitled
 It must filed with the treasurer who must decide
within 60 days
o If the treasurer denies the claim, follow the
procedure in questioning an assessment
 Appeal to LBAA within 60 days
 Appeal to CBAA within 30 days
 Appeal to CTA EB within 30 days