2016 Tax II 3rd Exam

TAXATION II TRANSCRIPT OF STENOGRAPHIC NOTES
Based on the Lectures of Atty.Donalvo (2nd Semester of S.Y. 2016-2017)
PRE FINALS COVERAGE 3. Execution of judgments
March 2, 2017 (1st Hour)

(By: Algene Cutamora) “Execution of judgments in all cases decided in
its favor by the Court of Tax Appeals and the ordinary
Let us just first have a run through about the courts”This time, there is already a judgment from the CTA
powers and functions of the BIR. or the RTC.
BIR has enforcement powers. It enforces the

SEC. 2. Powers and Duties of the Bureau of Internal
NIRC. It pertains to the assessment and collection of taxes.
Revenue. - The Bureau of Internal Revenue shall be
Take note also of the functions of the Department of
under the supervision and control of the Department of
Finance. It supervises and controls the BIR. Hence, the
Finance and its powers and duties shall comprehend
BIR is supervised by the DOF.
the assessment and collection of all national internal
revenue taxes, fees, and charges, and the enforcement This control and supervision actually, if you really
of all forfeitures, penalties, and fines connected read the NIRC, is made in the provisions. (?)
therewith, including the execution of judgments in all
cases decided in its favor by the Court of Tax Appeals For example, we have Section 4.
and the ordinary courts. The Bureau shall give effect to
and administer the supervisory and police powers SEC. 4. Power of the Commissioner to Interpret Tax
conferred to it by this Code or other laws. Laws and to Decide Tax Cases. - The power to interpret
the provisions of this Code and other tax laws shall be
under the exclusive and original jurisdiction of the
The BIR is actually of part of the operations of Commissioner, subject to review by the Secretary of
the Department of Finance. BIR is actually is one of the Finance.
income generating agencies of the government. The power to decide disputed assessments,
refunds of internal revenue taxes, fees or other
As you can see, under the National Internal charges, penalties imposed in relation thereto, or other
Revenue Code, the BIR is actually under the control and matters arising under this Code or other laws or
supervision of the Department of Finance. If you go deeper portions thereof administered by the Bureau of Internal
about it, it is actually the Department of Finance which has Revenue is vested in the Commissioner, subject to the
the power to implement or enforce the NIRC. Diba? Kung exclusive appellate jurisdiction of the Court of Tax
iisipin niyo. Appeals.
Now, what are the powers and duties of the BIR
in general? There are three main powers:
It is provided there that the power to interpret the
1. Assessment and Collection NIRC and the tax laws by the BIR is subject to the review
od the Secretary of Finance. So yung decision ni Dulay,
ireview pa rin ni Secretary of Finance.
So “assessment and collection of all national
internal revenue taxes fees, and charges”. Take note {Talks about Dulay and Henares}
that the agency that enforces the NIRC is the BIR.
The NIRC says that the power to promulgate
Yan ang in-enforce niya. Not all tax laws.
rules and regulations rests with the Secretary of Finance.
2. Enforcement Therefore, it is actually the DOF that implements the NIRC
and existing revenue regulations. What is the power of the
“Enforcement of all forfeitures, penalties, BIR in the promulgation of these rules? It is only a
and fines connected therewith, including the execution recommendatory body. So, the final say is with the
of judgments in all cases decided in its favor by the Secretary of Finance whether or not to promulgate or
Court of Tax Appeals.” amend the rules.
Who are the BIR officers in general? We have

Section 3.
If the taxpayer does not pay the taxes or if he is
paying late, then there will be penalties and surcharges. SEC. 3. Chief Officials of the Bureau of Internal
Who is going to collect that? The BIR. Revenue. - The Bureau of Internal Revenue shall have
Alparaque_Cutamora_Domingo_Jala_Laguialam_Lomondot_Lumapas_Noble_Reyes_Ruyeras_Uy_Vega
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a chief to be known as Commissioner of Internal It shall be the duty of every Revenue District
Revenue, hereinafter referred to as the Commissioner Officer to examine the efficiency of all officers and
and four (4) assistant chiefs to be known as Deputy employees of the Bureau of Internal Revenue under his
Commissioners. supervision, and to report in writing to the
Commissioner, through the Regional Director, any
neglect of duty, incompetency, delinquency, or
All the offices of the Commissioners are in malfeasance in office of any internal revenue officer of
Manila. It is a policy that they are based there. CIR is which he may obtain knowledge, with a statement of all
actually a Presidential appointee. the facts and any evidence sustaining each case.
You also have the Revenue Regional Director

under Section 10. Now, the powers of the CIR… Of all the officers,
the most important person there is the Commissioner.
SEC. 10. Revenue Regional Director. - Under rules and Ultimately, it is the CIR who decides how to run the BIR,
regulations, policies and standards formulated by the etc. The main power is with the CIR. Those that are under
Commissioner, with the approval of the Secretary of the Revenue Regional Directors, Revenue District Officers
Finance, the Revenue Regional director shall, within and Other Internal Revenue Officers are merely delegated
the region and district offices under his jurisdiction, powers.
among others:
(a) Implement laws, policies, plans, programs, Now, let’s go back to Section 4.
rules and regulations of the department or agencies in
the regional area; SEC. 4. Power of the Commissioner to Interpret Tax
(b) Administer and enforce internal revenue Laws and to Decide Tax Cases. - The power to interpret
laws, and rules and regulations, including the the provisions of this Code and other tax laws shall be
assessment and collection of all internal revenue under the exclusive and original jurisdiction of the
taxes, charges and fees. Commissioner, subject to review by the Secretary of
(c) Issue Letters of authority for the Finance.
examination of taxpayers within the region; The power to decide disputed assessments,
(d) Provide economical, efficient and effective refunds of internal revenue taxes, fees or other
service to the people in the area; charges, penalties imposed in relation thereto, or other
(e) Coordinate with regional offices or other matters arising under this Code or other laws or
departments, bureaus and agencies in the area; portions thereof administered by the Bureau of Internal
(f) Coordinate with local government units in Revenue is vested in the Commissioner, subject to the
the area; exclusive appellate jurisdiction of the Court of Tax
(g) Exercise control and supervision over the Appeals.
officers and employees within the region; and
(h) Perform such other functions as may be
provided by law and as may be delegated by the Under this Section, you have the two main powers of
Commissioner. the CIR:
1. To interpret tax laws

What are the functions? It is also in Section 10. 2. To decide tax cases.
Just read it. If you come to it, it is like a mini-CIR who
operates only within his territorial jurisdiction.
How does the BIR interpret the tax laws? One mode
You also have Other Revenue District Officers of interpreting is a tax ruling. Tax rulings are the official
and Other Internal Revenue Officers. positions of the BIR of inquiries of the taxpayers who
request clarifications of certain provisions of NIRC, tax laws
SEC. 11. Duties of Revenue District Officers and Other or other revenue regulations mainly for the purpose of
Internal Revenue Officers. - It shall be the duty of every seeking tax exemptions.
Revenue District Officer or other internal revenue
officers and employees to ensure that all laws, and So there will be a taxpayer who will ask “what is the
rules and regulations affecting national internal particular tax treatment of this business or this
revenue are faithfully executed and complied with, and transaction?”. It will write to the BIR. When BIR issues an
to aid in the prevention, detection and punishment of opinion, it is a tax ruling. The tax ruling will provide whether
frauds of delinquencies in connection therewith. the transaction is tax-exempt or not, or if there are
surcharges or penalties.
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The BIR also issues BIR Rulings to answer written 2. BIR Rulings have the force and effect of law.
questions of individuals and juridical entities regarding their They are not laws themselves but they have the
status as taxpayers and the effects of their transactions for force and effect of law. Basic man ito.
tax purposes.
3. Can BIR Rulings be cited as precedent for other
One prime example is way back in Tax I. Na- taxpayers? Is it like an SC decision? No. Kasi
remember niyo yung discussion natin about a corporation nga it pertains to a particular taxpayer and set of
na meron silang employado but the employees were facts. It applies only to the taxpayer who asked
assigned outside. What is the status of the employees for that BIR ruling.
working outside? Are they considered as nonresident
citizen? Are those individuals supposed to be taxed on 4. Is the CIR bound by the ruling by his
their income only in the Philippines? predecessors? No. The case in point here is:
MISAMIS ORIENTAL ASSOCIATION vs. DEPARTMENT

What are the two kinds of BIR Rulings?
OF FINANCE (1994)
1. BIR of first impressions
This is about copra. Is the copra an agri-food product or a
nonfood product for purposes of the payment of VAT Law?
It’s the first time. These are rulings based on There was already a Memorandum Circular which
facts and circumstances, without precedents. classified copra as an agricultural food product, therefor it
is already exempt from VAT.
Subsequently, there was a Circular from a Commissioner
classifying the copra as a non-agricultural food product.
It may also be called “first impression” if it This was questioned on the ground na meron ng previous
involves modification, reversal or revocation of ruling about it so it cannot be disturbed anymore. Can the
existing rulings, pretty much like what we discussed CIR do that? Of course. The CIR is not bound by the
on Tax I regarding the classification of certain rulings of the predecessors. Take note that the CIR has the
individuals who are employed by a domestic power to interpret tax laws.
corporation but are assigned outside the Philippines. “In the case at bar, we find no reason for holding that
respondent Commissioner erred in not considering copra
as an "agricultural food product" within the meaning of §
103(b) of the NIRC. As the Solicitor General contends,
Take note also that under the existing rules "copra per se is not food, that is, it is not intended for
and regulations, rulings of first impressions shall not human consumption. Simply stated, nobody eats copra for
be valid unless reviewed and approved by the food." That previous Commissioners considered it so, is not
Secretary of Finance. Who issues the rulings of first reason for holding that the present interpretation is wrong.
impressions? The Commissioners. All the other The Commissioner of Internal Revenue is not bound by the
officers are not allowed to make rulings of first ruling of his predecessors. To the contrary, the overruling
impressions. of decisions is inherent in the interpretation of laws.”
2. Not discussed by Sir. Just check 2015 TSN. 5. While the interpretation of the BIR officials are
entitled to great respect, the courts are not bound
to follow the interpretation given by the BIR
What are the principles that you need to remember
officials especially if it is inconsistent with the
when it comes to BIR Rulings?
NIRC. This principle is more of related to revenue
1. The interpretations of officers are entitled to great regulations. Who issues the revenue regulations?
respect. In other words, there is presumption of The Secretary of Finance upon the
legality on its favor. Why? Because the people recommendation of the CIR. Take note that if
from BIR are considered as experts in the field of there is a conflict between the basic law and the
taxation, particularly which involve the NIRC and revenue regulation, the basic law will always
its taxation laws. Sila man ang experts, so sa ila prevail.
ta maminaw.
Remember the FORTUNE TOBACCO
case in Tax I? The one where the Revenue
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Regulation issued by the BIR imposed a ceiling There are several powers enumerated under Section 5.
floor on the value of the excise tax to be paid by
the tobacco manufacturers, producers and SEC. 5. Power of the Commissioner to Obtain
company owners? In this case, the BIR set a Information, and to Summon, Examine, and Take
ceiling floor which is not provided by the NIRC or Testimony of Persons. - In ascertaining the
any of its implementing rules. Therefore, the correctness of any return, or in making a return when
Revenue Regulation failed to comply with the none has been made, or in determining the liability of
requirements. any person for any internal revenue tax, or in
collecting any such liability, or in evaluating tax
Let’s now proceed to non-retroactivity of compliance, the Commissioner is authorized:
rulings. (A) To examine any book, paper, record, or
other data which may be relevant or material to such
Can BIR rulings and regulations be given inquiry;
retroactive effect? It’s answered in Section 246 of the (B) To obtain on a regular basis from any
NIRC. person other than the person whose internal revenue
tax liability is subject to audit or investigation, or from
SEC. 246. Non-Retroactivity of Rulings. - Any any office or officer of the national and local
revocation, modification or reversal of any of the rules governments, government agencies and
and regulations promulgated in accordance with the instrumentalities, including the Bangko Sentral ng
preceding Sections or any of the rulings or circulars Pilipinas and government-owned or -controlled
promulgated by the Commissioner shall not be given corporations, any information such as, but not limited
retroactive application if the revocation, modification to, costs and volume of production, receipts or sales
or reversal will be prejudicial to the taxpayers, except and gross incomes of taxpayers, and the names,
in the following cases: addresses, and financial statements of corporations,
(a) Where the taxpayer deliberately misstates mutual fund companies, insurance companies,
or omits material facts from his return or any regional operating headquarters of multinational
document required of him by the Bureau of Internal companies, joint accounts, associations, joint ventures
Revenue; of consortia and registered partnerships, and their
(b) Where the facts subsequently gathered by members;
the Bureau of Internal Revenue are materially different (C) To summon the person liable for tax or
from the facts on which the ruling is based; or required to file a return, or any officer or employee of
(c) Where the taxpayer acted in bad faith. such person, or any person having possession,
custody, or care of the books of accounts and other
accounting records containing entries relating to the
General rule: No retroactive effect if the revocation, business of the person liable for tax, or any other
modification or reversal will be prejudicial to the taxpayers. person, to appear before the Commissioner or his duly
authorized representative at a time and place specified
in the summons and to produce such books, papers,
In other words, the laws allow retroactive records, or other data, and to give testimony;
application basta hindi lang siya prejudicial to the taxpayer. (D) To take such testimony of the person
Yung hindi maapektuhan ang substantive rights ng concerned, under oath, as may be relevant or material
taxpayer. But there are exceptions wherein even if the to such inquiry; and
medication, revocation or reversal is not prejudicial to the (E) To cause revenue officers and employees
taxpayer but retroactive application cannot be applied. to make a canvass from time to time of any revenue
These are the exceptions: district or region and inquire after and concerning all
persons therein who may be liable to pay any internal
(a) Where the taxpayer deliberately misstates or revenue tax, and all persons owning or having the
omits material facts from his return or any document care, management or possession of any object with
required of him by the Bureau of Internal Revenue; respect to which a tax is imposed. The provisions of
the foregoing paragraphs notwithstanding, nothing in
(b) Where the facts subsequently gathered by the this Section shall be construed as granting the
Bureau of Internal Revenue are materially different from Commissioner the authority to inquire into bank
the facts on which the ruling is based; or deposits other than as provided for in Section 6(F) of
this Code.
(c) Where the taxpayer acted in bad faith.
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The first is “To examine any book, paper, record, What if the informant has no proof? Like magsabi
or other data which may be relevant or material to such lang siya “this information is not paying the correct taxes.”
inquiry.” Meaning, the CIR has the power to examine book, What is his proof? Tapos sasabihin niya na “I have receipts
papers, records and other data relevant to a particular tax from the corporation. Ninakaw ko.” Oh diba? That is
assessment or tax liability of a taxpayer. actually a case. The case here is merong CPA, kinuha niya
ang accounting records ng corporation. Nagalit kasi siya sa
Is the examination limited only to the books, employer niya. Para makabawi siya, pumunta siya sa BIR.
papers and records of the taxpayer? Kasi marami yan eh. Because of that, the BIR made an assessment and
Can the BIR conduct examination on the books and required the payment of the tax liability against the
records of third parties? Yes. It is specifically provided corporation.
under the NIRC. It is provided under Section 2(b): “To
obtain on a regular basis from any person other than the So syempre, ang sabi ng corporation “gikawat
person whose internal revenue tax liability is subject to man na, it was illegally taken from us.” But the SC said that
audit or investigation, or from any office or officer of the the petitioner’s lack of consent does not mean that the BIR
national and local governments, government agencies and obtained the information was obtained illegally or the
instrumentalities, including the Bangko Sentral ng Pilipinas information received was malicious and false, nor does the
and government-owned or -controlled corporations.” lack of consent preclude the BIR from assessing the taxes
based on the document.
For example, may mga goods ako na gipurchase
ko tapos ibenta ko ulit. So purchases yun ng ibang party. Section 5 allows the BIR to obtain information
Now, can the BIR examine the records of the other party from third parties. In effect, parang sinasabi ng SC na “We
para icheck if tama ba ang gideclare ko na purchases and don’t care if the information was taken illegally. As long as
sales? Yes. it will show that the taxpayer is not paying the correct
taxes, then they can use it to determine the amount of
The BIR also has the power “To summon person taxes that should have been paid.
xxx to appear before the Commissioner or his duly
authorized representative at a time and place specified in
the summons and to produce such books, papers, records, Now, we also have the power of assessment.
or other data, and to give testimony”. Meaning, the BIR can This is Section 6.
issue subpoenas – testificandum and duces tecum.
SEC. 6. Power of the Commissioner to Make
Let’s go to the case of: assessments and Prescribe additional Requirements
for Tax Administration and Enforcement. –
CIR vs. GONZALES (A) Examination of Returns and Determination
of Tax Due.
Is it necessary for the BIR to inform first the taxpayer para (B) Failure to Submit Required Returns,
iinspect ang books and records? In this case, what Statements, Reports and other Documents.
happened is really simple. There is a BIR. The BIR (C) Authority to Conduct Inventory-taking,
conducted an audit of a corporation. As per information of surveillance and to Prescribe Presumptive Gross Sales
the informant, this corporation is not paying correct taxes. and Receipts.
Syempre the BIR issued subpoena duces tecum. (D) Authority to Terminate Taxable Period.
(E) Authority of the Commissioner to
The corporation did not comply so the BIR filed a case for Prescribe Real Property Values.
tax evasion against the corporation. The prosecution (F) Authority of the Commissioner to inquire
dismissed the case. The case was appealed. This into Bank Deposit Accounts.
eventually went to the SC. One of the arguments here of (G) Authority to Accredit and Register Tax
the corporation is that the informant’s information cannot Agents.
be used against them because it was not shown that the
informant was not qualified.
After a return has been filed as required under the
The SC said that the lack of consent of the taxpayer under provisions of this Code, the Commissioner or his duly
investigation that the information obtained from a third authorized representative may authorize the examination of
party was illegal or false and malicious. The BIR can obtain any taxpayer and the assessment of the correct amount of
from third persons in order to determine whether or not the tax:
taxpayer has declared the correct information on the return
and has paid the correct taxes. Provided, however; That failure to file a
return shall not prevent the Commissioner from
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authorizing the examination of any taxpayer. Any shall not be forthcoming within the time fixed by
return, statement of declaration filed in any office laws or rules and regulations or
authorized to receive the same shall not be 2. When there is reason to believe that any such
withdrawn: report is false, incomplete or erroneous.
Provided, That within three (3) years

from the date of such filing, the same may be In fact, the absence of accounting records does not
modified, changed, or amended: Provided, preclude the BIR from assessing taxes against the
further, That no notice for audit or investigation of taxpayer. In other words, the BIR can estimate the taxes
such return, statement or declaration has in the that should have been paid by the taxpayer.
meantime been actually served upon the
taxpayer.
The case in point here is:
If you remember, way back Tax I, the Philippines
applies the self-assessment method in the payment of BIR vs. HANTEX
taxes. Meaning, it is the taxpayer who determines how he
is going to pay with the BIR and file the return. What’s the story here? It’s engage in the sale of plastics
and other chemicals. The BIR received a confidential
The assessment does not stop there. Apart from information that HANTEX is under-declaring its
the taxpayer to determine the amount of taxes, the CIR is importation. So BIR made an assessment. Of course,
not precluded in determining whether the taxpayer has paid Hantex questioned this. Sabi nila that the BIR failed to
the correct taxes. Kaya nga sinasabi natin before the produce the duly original copies of the records for
merong two kinds of assessments: importations made. Sabi nila na photocopies lang daw ang
pinodruce ng BIR. Saan ang original copy?
1. Figures – as determined by the taxpayer himself
2. Document – there is a written assessment from Well, sabi ng BIR na it is the best evidence obtainable.
the BIR (like sasabihin ng BIR na kulang ang They don’t need any originals in the first place. The law
gibayaran ng taxpayer.) allows BIR to use the best evidence obtainable so they can
use the photocopies. The BIR resorted to the photocopies
kasi Hantex was not cooperating with them. So why
Now, what if the taxpayer does not file his compel them to produce the original when they don’t have
income tax return? It does not matter. It does not take it on the first place?
away the power of the BIR to assess the taxpayer if that
taxpayer will not file his return. What was the ruling of the SC here?
1. The law allows the BIR access to all
If there is no tax return filed or even if there is a relevant or material records and data in
tax return filed but you know the information stated there the person of the taxpayer.
are false or deliberately misstated, or wala siyang 2. It places no limit or condition on the
accounting records, can the BIR still compute taxes? Of type or form of the medium by which
course. It doesn’t matter. The BIR may resort to the best the record subject to the order of the
evidence obtainable. It’s in Section 6 (b). BIR is kept. Any forms of records may
be used to determine whether or not
Failure to Submit Required Returns, Statements,
the taxpayer has correctly paid the
Reports and other Documents. - When a report
taxes.
required by law as a basis for the assessment of
3. The CIR has the duty to investigate any
any national internal revenue tax shall not be
circumstance which led it to believe
forthcoming within the time fixed by laws or rules
and regulations or when there is reason to that the taxpayer has a larger income
that what is declared on the return.
believe that any such report is false, incomplete
This means that the investigation may
or erroneous, the Commissioner shall assess the
go beyond the accounting records of
proper tax on the best evidence obtainable.
the taxpayer concerned.
Now, when can the CIR assess the tax on the basis of 4. The best evidence obtainable may
the best evidence obtainable? There are two instances: consist of hearsay evidence. Like
what? Testimony of third persons.
1. When a report required by law as a basis for the 5. What about the photocopied
assessment of any national internal revenue tax documents? The BIR, to begin with, is
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not bound by the technical rules of therefrom or to hide or conceal his property, or is
evidence when it comes to their performing any act tending to obstruct the proceedings for
investigative powers. The SC said here the collection of the tax for the past or current quarter or
that the best evidence obtainable here year or to render the same totally or partly ineffective
does not include mere photocopies that unless such proceedings are begun immediately, the
have no probative value. Commissioner shall declare the tax period of such taxpayer
terminated at any time and shall send the taxpayer a notice
Saan nagkamali ang BIR?Diba inconsistent man? Sabi na of such decision, together with a request for the immediate
the best evidence obtainable may consist of hearsay payment of the tax for the period so declared terminated
evidence. But why did the court disallowed the and the tax for the preceding year or quarter, or such
photocopies? Diba meron tayong best evidence rule? Are portion thereof as may be unpaid, and said taxes shall be
you allowed to produce a photocopy? General rule: no. due and payable immediately and shall be subject to all the
What are the requirements why you are allowed to produce penalties hereafter prescribed, unless paid within the time
secondary documents? This is weird for me. Nagkamali fixed in the demand made by the Commissioner.
siguro ang BIR dito ba. If I were the BIR, I would file a
Motion for the production of the original documents. Since
the documents are related to importation, then maybe I can This means that when the BIR will terminate the tax
go to the Customs and ask from them or seek the help of period of a particular taxpayer, it means that the BIR can
the court to get the documents. immediately demand the payment of the taxes of that
particular taxpayer. Diba? When it comes to income tax
payments, our tax period is supposed to be annual,
Lastly, pwede ang income estimation and although some corporation or individuals are also required
approximation. The rule does not apply when the estimate to pay their taxes quarterly. But generally, annual sya. But
is arrived at capriciously or maliciously. How is the BIR there are instances where kahit di pa tapos ang taxable
able to estimate income? Usually, “trending.” Kung year, the CIR can immediately terminate the tax period and
paakyat, then tignan nila ilan ang percentage ng increase therefore, demand the tax payable of the taxpayer.
per year. Example 5% ang increase from income tapos
biglang nagchange, so there must be something wrong. What are these instances?
Another way to determine is to look at the net worth of the
taxpayer. It’s Assets minus Liabilities. Magkano ba net a. The taxpayer is retiring from business subject to
worth last year sa this year? Makita mo if may discrepancy. tax;
Okay lang ang estimate for the taxes or assessment is with b. If the taxpayer is about to leave the Philippines;
factual basis or reasonable. c. The taxpayer is removing his properties or
performing any act tending to obstruct the
proceedings for collection of the taxes for the
past quarter or year. In other words, there is also
fraud or intent to avoid payment of taxes on the
taxpayer’s part.
March 2, 2017 (2nd Hour)
• The Power to Inquire into Bank Deposits
By: Alona Suzell B. Ruyeras
Let’s continue. Assessments and Prescribe Additional Requirements
for Tax Administration and Enforcement. -
• The Power to Terminate Tax Period
XXX
Assessments and Prescribe Additional Requirements
for Tax Administration and Enforcement. - (F) Authority of the Commissioner to Inquire into Bank
Deposit Accounts and Other Related information held
by Financial Institutions. [4] - Notwithstanding any
XXX
contrary provision of Republic Act No. 1405, Republic Act
No. 6426, otherwise known as the Foreign Currency
(D) Authority to Terminate Taxable Period. - When it Deposit Act of the Philippines, and other general or special
shall come to the knowledge of the Commissioner that a laws, the Commissioner is hereby authorized to inquire into
taxpayer is retiring from business subject to tax, or is the bank deposits and other related information held by
intending to leave the Philippines or to remove his property
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financial institutions of: including its nature and the form in which the said
foreign tax authority prefers to receive the
(1) A decedent to determine his gross estate; and information from the Commissioner;
(2) Any taxpayer who has filed an application for (c) The tax purpose for which the information is
compromise of his tax liability under Section being sought;
204(A)(2) of this Code by reason of financial
incapacity to pay his tax liability. (d) Grounds for believing that the information
requested is held in the Philippines or is in the
In case a taxpayer files an application to possession or control of a person within the
compromise the payment of his tax liabilities on his jurisdiction of the Philippines;
claim that his financial position demonstrates a
clear inability to pay the tax assessed, his (e) To the extent known, the name and address of
application shall not be considered unless and until any person believed to be in possession of the
he waives in writing his privilege under Republic requested information;
Act No. 1405, Republic Act No. 6426, otherwise
known as the Foreign Currency Deposit Act of the (f) A statement that the request is in conformity with
Philippines, or under other general or special laws, the law and administrative practices of the said
and such waiver shall constitute the authority of the foreign tax authority, such that if the requested
Commissioner to inquire into the bank deposits of information was within the jurisdiction of the said
the taxpayer. foreign tax authority then it would be able to obtain
the information under its laws or in the normal
(3) A specific taxpayer or taxpayers subject of a course of administrative practice and that it is in
request for the supply of tax information from a conformity with a convention or international
foreign tax authority pursuant to an international agreement; and
convention or agreement on tax matters to which
the Philippines is a signatory or a party of: (g) A statement that the requesting foreign tax
Provided, That the information obtained from the authority has exhausted all means available in its
banks and other financial institutions may be used own territory to obtain the information, except those
by the Bureau of Internal Revenue for tax that would give rise to disproportionate difficulties.
assessment, verification, audit and enforcement
purposes. The Commissioner shall forward the information as
promptly as possible to the requesting foreign tax authority.
In case of a request from a foreign tax authority for To ensure a prompt response, the Commissioner shall
tax information held by banks and financial confirm receipt of a request in writing to the requesting tax
institutions, the exchange of information shall be authority and shall notify the latter of deficiencies in the
done in a secure manner to ensure confidentiality request, if any, within sixty (60) days from receipt of the
thereof under such rules and regulations as may be request.
promulgated by the Secretary of Finance, upon
recommendation of the Commissioner.
If the Commissioner is unable to obtain and provide the
information within ninety (90) days from receipt of the
The Commissioner shall provide the tax information request, due to obstacles encountered in furnishing the
obtained from banks and financial institutions information or when the bank or financial institution refuses
pursuant to a convention or agreement upon to furnish the information, he shall immediately inform the
request of the foreign tax authority when such requesting tax authority of the same, explaining the nature
requesting foreign tax authority has provided the of the obstacles encountered or the reasons for refusal.
following information to demonstrate the
foreseeable relevance of the information to the
The term "foreign tax authority," as used herein, shall
request:
refer to the tax authority or tax administration of the
requesting State under the tax treaty or convention to
(a) The identity of the person under examination or which the Philippines is a signatory or a party of.
investigation;
(b) A statement of the information being sought,
8|P age
General Rule: The BIR Commissioner has no power What do we mean by Tax Remedies?
to inquire into the bank deposits of a particular taxpayer.
Tax Remedies are the procedural steps that may
Exceptions: be undertaken by the taxpayer or the government for the
execution of the rules with regard to levy, imposition,
a. When it comes to decedents, to determine the collection, refund, etc. of taxes.
gross estate;
b. Any taxpayer who has filed an application for the So when we talk about tax remedies, we talk
compromise of his tax liability on the ground of about the remedies available, not only to the taxpayer, but
financial incapacity to pay his income tax also to the government. It works both-ways.
liabilities;
c. A specific taxpayer or taxpayers subject to a tax Why is it important to know these Tax Remedies?
inquiry or investigation of a foreign tax authority
of a foreign country subject of an international On the taxpayer’s side, it is a form of protection -
agreements or treaties on tax matters to which protection from the government from arbitrary collection of
Philippines is a signatory. taxes especially if the same is unwarranted or improper.
For now, NIRC na muna tayo. Later on, you will realize that
Can the CIR delegate his powers? there are tax remedies found in several laws (e.g. LGC).
General Rule: Yes. The CIR can delegate his Classification of Remedies
powers to other revenue officers.
As to whose remedy:
Exceptions:
a. Remedy of the Taxpayer
a. The power to recommend revenue regulations. b. Remedy of the Government
The recommendatory power when it comes to
revenue regulations is vested solely on the CIR; As to the type of remedy:
b. The power to issue rulings of first impressions, or
revise or revoke the ruling of the BIR. a. Administrative Remedies – on the BIR level
c. The power to assign or reassign internal revenue b. Judicial Remedies – we already avail of the
officers in establishments where the articles services of the court
subject to excise tax are being kept;
OVERVIEW
d. The power to compromise or to abate.
Take note that the power to compromise is different

from the power to abate. Let’s have a brief overview of what goes along.
Of course, pay-as-you-file system tayo diba? And we also
Power to Compromise Power to Abate use a self-assessment system. So what will happen is that
It means a reduction of the It means the total the taxpayer will have to submit his tax returm. Let’s say,
tax liability. abrogation of the tax liability for instance, income tax return. Thereafter, there will be a
of the taxpayer. period for the BIR to audit on whether the information filed
GR: Vested only on the It is only the CIR who can by the income taxpayer is correct or not. So what will
CIR. abate the tax liability of a happen if the BIR will not be able to audit within that
taxpayer. This rule is particular period? The period to assess will prescribe and
Exceptions: absolute and admits of no the government will lose its revenues. But what if the BIR
a. Assessments exceptions. will audit? The BIR will issue a Letter of Authority (LOA)
issued by the showing the authority to audit the taxpayer within a specific
Regional Office period of time and then, the BIR will now inspect the books
involving of the taxpayer.
deficiency taxes
Upon inspection, what will happen next? Usually,
of P500,000 or
the BIR will always find something wrong (Yan tayo e,
less;
palaging may maling nakikita e. Lol). There will always be a
b. Minor criminal
discrepancy between the declared income of the taxpayer
violations.
and the total amount that should have been declared by
the taxpayer. So meron nang tax deficiencies. The BIR will
inform the taxpayer. Two things may happen:
TAX REMEDIES PROPER
9|P age
a. The taxpayer will agree and just pay; executory judgment. It all boils down to an assessment
b. The taxpayer will not agree and say that the made against the taxpayer.
assessment is wrong.
What is an Assessment?
The BIR personnel will now go to his superior
and the superior will now determine whether the Generally, it is a statement from the BIR that the
assessment was indeed correct. If it is correct, the BIR will account due therein is due as a tax payable. Another
then send a Preliminary Assessment Notice (PAN) to the definition is that it is a finding of the tax authority that the
taxpayer. After this, three things may happen: taxpayer has not paid the correct taxes or has not paid any
taxes at all.
a. The taxpayer will pay the tax;
b. The taxpayer will respond to the PAN; What are the different Kinds of Assessment?
c. The taxpayer will not do anything at all.
1. Self-Assessment – the taxpayer himself
We have no problem if the taxpayer will pay the determines the amount of his tax payable;
tax. Case is closed. But what if the taxpayer will challenge 2. Deficiency Assessment – the assessment of
the PAN or the taxpayer will ignore the PAN? (*Trancriber’s the tax authority wherein the correct amount of
Note: I think Sir Percy forgot to give an overview of a tax, after investigation has been conducted, is
“Reply”. Please see the succeeding TSNs and just know different from that reported by the taxpayer. In
that it fits in this part of the process. ☺). short, there is a deficiency tax;
3. Jeopardy Assessment – the assessment made
The BIR will now issue the Final Assessment Notice by a BIR officer without the benefit of a complete
(FAN). This time, the taxpayer cannot just ignore the FAN or partial audit due to the fact that the BIR officer
because once the FAN will become final and executory and believes that the collection of tax will be
the taxpayer will not avail of the remedies under the law, jeopardized by the delay caused by the
then the assessment will also become final and executor taxpayer’s failure to comply with disclosure
and the government can start availing of its remedies to requirements of his book of accounts, records or
enforce the collection powers of the government. to substantiate any or all of the deductions,
exemptions or credits claimed in his return. It is
What if the taxpayer challenges the FAN? It may file a normally issued when the prescriptive period
Protest. There are two modes of protesting: for the assessment is about to lapse due to
the taxpayer’s fault. Here, the taxpayer fails to
1. Reinvestigation cooperate. Parang “Ayaw mo mag cooperate?
2. Reconsideration We will have a jeopardy assessment!” This is
different from
Either way, the BIR is required to decide on the 4. Naked Assessment – this is actually an illegal
protest. assessment. It does not have any factual or legal
basis at all. It will be struck down by the court.
If the BIR will agree with the arguments of the
Unlike sa Jeopardy Assessment, meron ka
taxpayer, then case is closed. But what if the BIR will not
somehow basis but the taxpayer just fails to
agree with the arguments of the taxpayer? The BIR will
comply or delays in his compliance.
pursue with the case. It will deny the protest.
What is the Purpose of an Assessment?
The taxpayer’s remedy now will then be to go up to
the Court of Tax Appeals (CTA) in Division. Suppose the Basically, it is to comply with the due process
CTA in Division is still in favour of the BIR, the next step is requirement. To notify the taxpayer that he has not paid the
the CTA En Banc. If there is still an adverse decision correct taxes and to notify him of the amount of taxes that
against the taxpayer, he can now proceed to the Supreme he is still being made liable to the government.
Court. After that, the taxpayer may now begin to cry (Lol).
What are the Requisites of a Valid Assessment?
TAXPAYER’S REMEDIES
A valid assessment must conform to the following
requirements:
Unahin muna natin ang taxpayer. Bakit ko gusto
unahin ang taxpayer? Because the government’s remedies 1. It must be issued within the three-year
will only come into play if there is already a final and prescriptive period to assess;
10 | P a g e
2. It may only be served after a PAN is served to after the last day prescribed by law for the filing of the
the taxpayer, as a general rule. Take note, if a return, and no proceeding in court without assessment for
FAN is immediately issued, that is not legally the collection of such taxes shall be begun after the
possible. You can contest that; expiration of such period: Provided, That in a case where a
3. The assessment must state the facts and the law return is filed beyond the period prescribed by law, the
on which it is based. Parang decision ng court; three (3)-year period shall be counted from the day the
4. The taxpayer must have received the return was filed. For purposes of this Section, a return filed
assessment. before the last day prescribed by law for the filing thereof
shall be considered as filed on such last day.
Who should prove that the assessment was received
by the taxpayer?
*Chikka about ano ang mas masarap, Milo or Ovaltine?
When an assessment is made, it has the Milo Sir! Haha. And kung existent pa ba ang Ovaltinees.
presumption of regularity. Existent pa Sir! ☺”
CIR vs. G.J.M. Philippines Manufacturing Going back, when do we reckon the three-year
(G.R. No. 202695, February 29, 2016) period to assess? It shall be reckoned from the date of
filing of the return or the date of deadline of the filing
FACTS: of the return, whichever comes later.
The BIR assessed the corporation of deficiency taxes What are the benefits of the prescriptive period?
which was challenged by the taxpayer saying na “Wala It benefits both the taxpayers and the government. It is
kaming natanggap. Since wala kaming natanggap, the beneficial to the government because they will be obliged
period to assess taxes have already prescribed.” But the to act promptly and be able to collect the taxes. It is
BIR said, “No! Actually we have sent the assessment beneficial to the taxpayers because it secures them from
through registered mail. If the deadline was April 15, we unreasonable examinations and assessments. So there
mailed it on April 14.” (Aynakooo BIR. Bad ) should be an end.
ISSUE: How do we interpret provisions on the

Who bears the burden of proof now? prescriptive period of the assessment of taxes? According
to jurisprudence, the statute of limitations as to the
RULING: collection of taxes is for the protection of taxpayers.
The Supreme Court said that the general rule is Hence, it should be construed in the taxpayer’s favour
presumption of regularity. If there was an assessment, it and strictly against the government.
was also properly served to the taxpayer. But, once the
taxpayer has denied the receipt of the assessment, the How do we compute the three years? According
burden of proof already transfers on the part of the BIR to a BPI case, the three years is equal to 1,095 days. This
to show to the Court that indeed it has sent the is in relation to the Civil Code because according to the
assessment and the fact that the assessment was same, one year daw is equal to 365 days regardless of the
received by the taxpayer. leap year involved. This emphasizes the fact that Tax Laws
are actually Civil Laws.
Who issues the Assessment? Can the Taxpayer Amend his Tax Return?
It is the CIR or his duly authorized representative. Section 6(A):

So this is a power that may be delegated.
When can an Assessment be made? Assessments and Prescribe Additional Requirements
for Tax Administration and Enforcement. -
Another way of asking this is, “What is the (A) Examination of Return and Determination of Tax
prescriptive period for assessment?” Due. After a return has been filed as required under the
provisions of this Code, the Commissioner or his duly
General Rule: Section 203 of the NIRC. Three (3) years. authorized representative may authorize the examination of
any taxpayer and the assessment of the correct amount of
SEC. 203. Period of Limitation Upon Assessment and tax: Provided, however, That failure to file a return shall not
Collection. - Except as provided in Section 222, internal prevent the Commissioner from authorizing the
revenue taxes shall be assessed within three (3) years examination of any taxpayer.
11 | P a g e
The tax or any deficiency tax so assessed shall be paid 1. We discussed the types of assessments
upon notice and demand from the Commissioner or from 2. The purpose of assessments
his duly authorized representative. 3. Requirements of valid assessment
Any return, statement of declaration filed in any office 4. Person authorized to issue an assessment
authorized to receive the same shall not be withdrawn:
Provided, That within three (3) years from the date of such PRESCRIPTION PERIOD
filing, the same may be modified, changed, or amended:
Provided, further, That no notice for audit or investigation of Q: When should an assessment be made?
such return, statement or declaration has in the meantime A: An assessment will only be made when there is a tax
been actually served upon the taxpayer. deficiency finding on the taxpayer. When there is no tax
deficiency, there is no assessment to be done by the
government.
The taxpayer is actually allowed to amend his tax
return. When should the amendment be made? Within But when you talk about the time period you are
three (3) years from the date of its filing. specifically talking about the prescriptive period for
assessment. There are 2 prescriptive period, 1 for
Is there an instance where the taxpayer is not assessment, 1 for collection.
anymore allowed to amend his tax return? YES. Even if it is
still within the three-year period but the BIR already sent a Section 203. Period of Limitation Upon Assessment
notice of investigation or audit, the taxpayer can no longer and Collection. - Except as provided in Section 222,
amend his tax return. internal revenue taxes shall be assessed within three
(3) years after the last day prescribed by law for the
The three-year period for the amendment is filing of the return, and no proceeding in court without
dependent on whether the amendment is a substantial assessment for the collection of such taxes shall be
amendment or a minimal amendment. begun after the expiration of such period: Provided,
That in a case where a return is filed beyond the period
When is it a substantial amendment? Under the
prescribed by law, the three (3)-year period shall be
rules and regulations, an amendment is substantial if it:
counted from the day the return was filed. For
a. Inreases the losses; purposes of this Section, a return filed before the last
b. Reduces the income; day prescribed by law for the filing thereof shall be
c. Increases the items of deductions claimed. considered as filed on such last day.
In other words, if the amendment will ultimately reduce

the tax payable, it is a substantial amendment. Otherwise, General rule: BIR has 3 years to assess a national internal
it will just be minimal. If the amendment is substantial in revenue tax, and begin the proceeding for collection within
nature, then the three (3) year period will be reckoned 3 years from the date of filing of the return or from the date
from the time the substantial amendment was made. If of deadline of filing the return, whichever comes later.
the amendment is just minimal, the reckoning point
will still be the date of filing or the date of deadline Reason: if there is no law providing for prescription, the
whichever comes earlier. government has no prescriptive period to collect the taxes.
Also, for the protection on the part of the taxpayer and
protection on the part of the government. It will benefit the
government because it will compel officials to work hard to
March 7, 2017 collect the taxes due. Prescriptive period benefits
(By: Peter Quiel E. Vega) taxpayers because it protects them from unreasonable tax
assessment done by BIR.
CASES:
Philippine journalist v. CIR Gr 162852, December 16, Q: How should we interpret the provisions on
2004 prescriptive period on assessment also with respect to
CIR v. Next Mobile Inc. GR 212825, December 7, 2015 the collection of taxes?
A: Statute of limitations of assessment and collection of
Last 2 cases under taxpayers administrative remedies taxes is for the protection of the taxpayers, therefore, it is
1. CIR v. Liquigaz GR 215534 strictly construed against the government and liberally in
2. PAGCOR v. CIR GR 208731 Jan 27, 2016 favor of the taxpayer.
Review: Q: How do we compute the 3 year period?
12 | P a g e
A: In one revenue memorandum circular, 3 years is assessed within the period agreed upon. The
equivalent to 1,095 days because we have to follow the period so agreed upon may be extended by
new civil code. Tax laws are civil in nature. subsequent written agreement made before
the expiration of the period previously agreed
AMENDMENTS upon.
Q: Can you amend your tax return? (c) Any internal revenue tax which has been
A: Yes, taxpayers are allowed to amend their tax return. assessed within the period of limitation as
Provided that the amendment was made within 3 years prescribed in paragraph (a) hereof may be
from the date of filing of such tax return. collected by distraint or levy or by a
proceeding in court within five (5) years
Q: What is the exception, that the taxpayer can no following the assessment of the tax.
longer amend his tax return?
A: The taxpayer is absolutely prohibited from amending his
(d) Any internal revenue tax, which has been
tax return when the BIR had already served the notice of
assessed within the period agreed upon as
assessment on the part of the taxpayer.
provided in paragraph (b) hereinabove, may
be collected by distraint or levy or by a
Q: If there is an amendment to the tax return, when do
proceeding in court within the period agreed
you recon the 3 year prescriptive period?
upon in writing before the expiration of the
A: You have to distinguish whether the amendment is a
five (5) -year period. The period so agreed
substantial amendment or minor amendment. It is a
upon may be extended by subsequent written
substantial amendment if it will necessarily reduce the
agreements made before the expiration of the
income or reduce the tax base and ultimately result to
period previously agreed upon.
reduction of tax liabilities. Other than that, the amendment
is just minor.
(e) Provided, however, That nothing in the
If the amendment is substantial in nature, the 3 immediately preceding and paragraph (a)
year period is reckoned from the time the amended tax hereof shall be construed to authorize the
return has been filed in the BIR. Otherwise, the 3 year examination and investigation or inquiry into
period is reckoned from the time of the original filing of the any tax return filed in accordance with the
tax return involved. provisions of any tax amnesty law or decree.
Q: The general rule is 3 years, what is the exception? General rule is 3 years, Exception is 10 years. What are
A: these 4 instances?
Section 222. Exceptions as to Period of Limitation of 1. In case a false return has been filed or
Assessment and Collection of Taxes. 2. in case the tax return filed is a fraudulent return
or
3. there is a complete failure to file a tax return or
(a) In the case of a false or fraudulent return
4. in cases of extended assessment.
with intent to evade tax or of failure to file a
return, the tax may be assessed, or a
False Return
preceeding in court for the collection of such
Q: When is it considered as a false return? If there is a
tax may be filed without assessment, at any
mathematical error in the computation of tax, is it
time within ten (10) years after the discovery
considered as a false return?
of the falsity, fraud or omission: Provided,
A: It is false when the entries made therein is not true.
That in a fraud assessment which has
There must be a design to mislead the government. Tax
become final and executory, the fact of fraud
return is considered false when there is misrepresentation
shall be judicially taken cognizance of in the
in the tax return and there is an intention to mislead or
civil or criminal action for the collection
defraud the government when it comes to the payment of
thereof.
correct taxes.
(b) If before the expiration of the time Fraudulent return

prescribed in Section 203 for the assessment Fraud is a state of mind. You have to prove it by
of the tax, both the Commissioner and the overt acts. In civil procedure, it is not enough to have a
taxpayer have agreed in writing to its general allegation of fraud, there must be a particular
assessment after such time, the tax may be allegation. Fraud, as to definition, comprises anything
13 | P a g e
involving the deceit, all acts and omission or concealment 1. It must be in writing. without such writing, no extended
involving breach of trust and confidence. In tax parlance, it assessment to speak of.
is an act or omission which amounts to intentional wrong 2. It must be signed by both the taxpayer and
doing to avoid payment of tax either partially or wholly. commissioner.
3. It must be entered before the expiration of the 3year
Q: What is the degree of proof so that you will be able prescriptive period
to prove fraud? Supposing it is a civil case? 4. Waiver must be for a definite period
A: there must be a clear and convincing evidence showing
that the tax payer really intended to defraud the (last year TSN includes: )
government in paying the taxes. This is because of the 5. Taxpayer must be furnished of a copy of such waiver
presumption of good faith. 6. The waiver must be able to conform to the form as
provided in the revenue regulations
Q: When is there a prima facie evidence of fraud?
A: There are 2 instances: Q: Supposing that the taxpayer and the BIR had made
1. There is substantial under declaration of an extension for the period of assessment, can it be
taxable sales, receipts or income extended again?
2. There is an overstatement of deduction. A: YES. Provided that the 4 requirements are complied
with, and an additional requirement:
Q: when do we say it is substantial? What is the 5. The extension must be made and agreed upon
gauge? and executed before the expiration of the
A: we have the 30% rule. The under declaration is extended period.
considered substantial if there is a failure to report such
sales or receipts in an amount exceeding 30% from that CASES:
amount reported in the tax return. For instances, when RCBC v. CIR
there is a claim of deduction exceeding 30% of the actual RCBC received a letter of authority from the CIR. RCBC on
deduction claimed in the tax return. the other hand to avoid a jeopardy assessment, it signs
and executed 2 waivers of the defense of prescription for
Q: What will happen if there is a prima facie financial the years 1994 and 1995. The waiver basically gives the
presumption of fraud? BIR the power to assess the taxes of RCBC until
A: In this case, if the taxpayer will exceed the 30% December 31, 2000. Because of this extension, the BIR
benchmark, the presumption of good faith will not apply. All issued an assessment which was duly received by the
that the BIR has to prove is that it exceeded the 30% RCBC. When RCBC received these assessments, RCBC
benchmark. Baliktad ang presumption. Pag na prove ng claimed only a part of the assessment, the rest were
BIR ang mere excess, it is for the taxpayer to prove good already protested by the RCBC.
faith.
RCBC claimed that the waiver is void. You cannot use that
EXTENDED ASSESSMENT (important daw) against me because it lacks the essential requirement of
Q: Can the period of assessment be extended? the validity of such extension because it was not signed of
A: Section 222 conformed by the CIR. Because if you will read RMO 20-
(b) If before the expiration of the time 99, there must be a signature or confirmation by the CIR or
prescribed in Section 203 for the assessment authorized representatives.
of the tax, both the Commissioner and the
taxpayer have agreed in writing to its Issues:
assessment after such time, the tax may be 1. Is the waiver valid?
assessed within the period agreed upon. The The waiver is not valid because it was not signed by the
period so agreed upon may be extended by CIR or its authorized representative.
subsequent written agreement made before
the expiration of the period previously agreed 2. Should RCBC be made liable to pay the tax deficiency?
upon. Yes because it was held to be in estoppel. In the end the
So it can be extended through an agreement between the RCBC paid the taxes and that’s the reason why they RCBC
taxpayer and the BIR. was considered to be in estoppel. Even if the waiver is
valid, the RCBC cannot deny anymore the validity of such
Q: What are the requirement for the validity of such assessment because it has already paid the taxes based
extension? on such assessment.
A: RMO 20-99 amended by RMO 14-2016 because of the
new jurisprudence, BIR v. SOI(?). To quote the supreme court:
14 | P a g e
“Estoppel is merely applicable to this case at bench. RCBC The acceptance date of the RDO are not indicated (c)
through its partial payment of the revised assessment irregularities is the waiver documents and (d) even if we
issued within the extended period has provided for in consider the validity, there is no estoppels on the part of
questioned waivers in primarily admitted the validity of the taxpayer, because the taxpayer did not paid any taxes.
those waivers. Had the petitioner truly believe that the If we go back sa RCBC Case, nag bayad siya.
waiver were not valid under the assessment issued beyond
the prescriptive period it should not have paid the reduced The SC said that it doesn’t really matter if the waivers are
amount of taxes in the revised assessment.” defective to begin with. In short liable parin ang taxpayer.
But why? There is an invalid waiver but the taxpayer is
(From last year’s TSN) Let’s compare this with the case of made liable? What is rare in this case is that both the BIR
CIR vs standard chartered bank the issue whether CIR’s and the corporation is at fault. What is the fault of the
right to assess standard charter has already prescribed for corporation? The fault of the corporation is that it allowed a
the year 1998 and assuming that the right of CIR has person who is not specifically authorized by the board of
prescribed whether standard chartered is already stopped directors to sign the waivers for and on behalf of the
from questioning the validity of the waiver executed by corporation and the corporation knows. On the part of the
chartered bank. The waiver was invalid because they did BIR, the BIR itself issued the revenue regulations but it did
not comply with the formal requirements and then the BIR not follow the rules. It allowed someone to sign the waivers
said that standard chartered is estopped from questioning without asking proof of authority like secretary certificate
the validty of the waiver because standard chartered made authorizing or at least a board resolution authorizing. If they
partial payments if deficiency taxes. But the SC said that will not produce it, the BIR can issue a jeopardy
the doctrine of estoppels does not apply. What makes it assessment because it is considered as not compliance
different from RCBC? It is because when standard charted with the requirements. Second, the BIR officer who signed
paid its deficiency assessments BIR accepted the the waiver has not authority to do so in behalf of the CIR.
payments without any opposition which extinguished their Yes it is possible that the waiver may be signed by a
obligation to pay. When did the BIR raised the issue of representative of the CIR but he must also be armed with
estoppel? This is different from the RCBC case because authority coming from the BIR itself. Third, it accepted the
both of them partially paid their deficiency taxes but waiver which was not notarized.
standard chartered is different because right from the start
they already challenged the waiver. And second, the BIR So what is the rule if both parties are at fault? In pari
only raised the defense of estoppels only when it filed its delicto. What is the effect? They cannot have any action
motion for reconsideration before the CTA. So that’s why against each other. So balik tayo sa status quo. What is the
standard chartered is different because right from the start status quo? The BIR can collect the taxes. We have (1) life
chinallenge na niya ang waiver nagbayad lang siya but that blood theory, (2) one must come to court with clean hands,
was it. the corporation cannot have the defense of irregularity, (3)
estoppels on the part of taxpayer, not with respect to the
Okay na sana yun na rule that if you will not follow the
payment but to the fact that they executed multiple waivers
requisites, it is void, that is the general rule, but there was
this case CIR v. Next Mobile, their was a letter of authority knowing that the waivers are defective, they know that the
for the year 2001. The corporation executed 5 waivers, person who signed the waivers were not authorized by the
march, june, 2 sa September, then October, all in 2005. corporation.
The second September waiver was actually without any
(So this case is weird for me because it defies a usual
date of execution. So you really cannot determine saan
mag start ang waiver and saan siya mag end. There was a jurisprudence na pag palpak, construe it strictly against the
tax payer and liberally to the taxpayer. I don’t know if this is
final letter of demand sent by the BIR by virtue of those
the standing decision right now but this is the latest
extended assessment and then the corporation protested.
Sabi invalid ang waivers due to irregularities therefore it decision that I could find. It is clear that it is in pari delicto,
but our rule is construction of waiver is that it is construed
cannot be used against us. Court of tax appeals agreed
with the taxpayer, you did not follow the rules on validity of in favor of the taxpayer. How are you suppose to answer
this in the bar? You look at the facts. If not the same, go
waivers.
back to the general rule, strictly against the government,
Issue: 1. Is the waiver valid; 2. Is corporation liable for the and in favor of the taxpayer.)
tax assessed against it?
Ruling: Medjo weird kasi sa CTA, the reasons why the SUSPENSION OF PRESCRIPTIVE PERIOD
waivers were invalid are (a) no written authorization on the
part of the corporation or any authority from the BOD (b) This is different from a waiver. In waiver, there is a mutual
agreement between the taxpayer and the government. In
15 | P a g e
suspension of prescriptive period, this refers to act of the appearing on the face of the return; or
taxpayer. There are 5 instances under Section 223.
(b) When a discrepancy has been determined between
Section 223. Suspension of Running of Statute of the tax withheld and the amount actually remitted by
Limitations. - The running of the Statute of Limitations the withholding agent; or
provided in Sections 203 and 222 on the making of
assessment and the beginning of distraint or levy a (c) When a taxpayer who opted to claim a refund or tax
proceeding in court for collection, in respect of any credit of excess creditable withholding tax for a
deficiency, shall be suspended for the period during taxable period was determined to have carried over
which the Commissioner is prohibited from making the and automatically applied the same amount claimed
assessment or beginning distraint or levy or a against the estimated tax liabilities for the taxable
proceeding in court and for sixty (60) days thereafter; quarter or quarters of the succeeding taxable year; or
when the taxpayer requests for a reinvestigation which
is granted by the Commissioner; when the taxpayer (d) When the excise tax due on exciseable articles has
cannot be located in the address given by him in the not been paid; or
return filed upon which a tax is being assessed or
collected: Provided, that, if the taxpayer informs the (e) When the article locally purchased or imported by
Commissioner of any change in address, the running an exempt person, such as, but not limited to, vehicles,
of the Statute of Limitations will not be suspended; capital equipment, machineries and spare parts, has
when the warrant of distraint or levy is duly served been sold, traded or transferred to non-exempt
upon the taxpayer, his authorized representative, or a persons.
member of his household with sufficient discretion,
and no property could be located; and when the The taxpayers shall be informed in writing of the law
taxpayer is out of the Philippines. and the facts on which the assessment is made;
otherwise, the assessment shall be void.
1. Commissioner is prohibited from making the
assessment or beginning distraint or levy or a Within a period to be prescribed by implementing rules
proceeding in court and for sixty (60) days and regulations, the taxpayer shall be required to
thereafter; respond to said notice. If the taxpayer fails to respond,
2. When the taxpayer requests for a reinvestigation the Commissioner or his duly authorized
which is granted by the Commissioner; representative shall issue an assessment based on his
3. When the taxpayer cannot be located in the findings.
address given by him in the return filed upon
which a tax is being assessed or collected: Such assessment may be protested administratively
Provided, that, if the taxpayer informs the by filing a request for reconsideration or
Commissioner of any change in address, the reinvestigation within thirty (30) days from receipt of
running of the Statute of Limitations will not be the assessment in such form and manner as may be
suspended; prescribed by implementing rules and regulations.
4. When the warrant of distraint or levy is duly
served upon the taxpayer, his authorized Within sixty (60) days from filing of the protest, all
representative, or a member of his household relevant supporting documents shall have been
with sufficient discretion, and no property could submitted; otherwise, the assessment shall become
be located; and final.
5. When the taxpayer is out of the Philippines.
If the protest is denied in whole or in part, or is not
ASSESSMENT PROCESS acted upon within one hundred eighty (180) days from
submission of documents, the taxpayer adversely
Section 228. Protesting of Assessment. - When the affected by the decision or inaction may appeal to the
Commissioner or his duly authorized representative Court of Tax Appeals within thirty (30) days from
finds that proper taxes should be assessed, he shall receipt of the said decision, or from the lapse of one
first notify the taxpayer of his findings: provided, hundred eighty (180)-day period; otherwise, the
however, That a preassessment notice shall not be decision shall become final, executory and
required in the following cases: demandable.
(a) When the finding for any deficiency tax is the result The codal is not detailed, it provides that it must be filled in
of mathematical error in the computation of the tax as by appropriate implementing rules and regulation and that
16 | P a g e
is RR 18-2013 amending RR 12-99, also read RMC 11- specify the particular year to which the audit will be
2014 (service of notices). conducted. The assessment is likewise void because the
LA is void to begin with. If there is any investigator, this LA
Letter of Authority is actually very important because if it is void it will not toll
the prescriptive period for the assessment of tax. Diba may
It all starts with a Letter of Authority (LA). The 3-year period tayo for assessment.
assessment does not end upon the filing of tax return
because the BIR is not precluded from assessing whether Q: Who issues the LA?
or not the declarations made on the tax return are right. A: It is issued by the Commissioner of Internal Revenue or
How will the BIR do it? first, there is a letter of Authority, it authorized representative, for audit of taxpayers under
this is considered as a tax audit. the jurisdiction of the National Office. And you also have
the Regional Director for the Regional Offices. They are the
Q: What is a letter of Authority? officers who are allowed to issue a letter of authority.
A: Is the authority given to the appropriate revenue officer
aside from performances of function to examine the Q: When do you serve the letter of authority?
accounting books and records of the taxpayer of the A: LA must be served within 30 days from the date of its
correct amount of taxes. So basically this is an authority issuance.
given to a revenue district officer to inspect accounting
books and records of a taxpayer. Without this letter of Q: What happens if the LA was served to you and it is
authority, you as tax payer can say that you are not already beyond the 30 days for issuance? For example
allowed to enter my premises. The basis is Section 6, the LA is dated January 5, 2017 then it was served around
NIRC, under this Section, the Commissioner has the power March.
to examine the taxpayer, the wealth of the taxpayer, and at A: The LA is no longer valid. It is null and void. But the BIR
the same time the Commissioner can also delegate this officer can always revalidate this, so okay lang. (from last
power to an authorized representative. year: For the LA’s issued by the National Office, it may be
revalidated twice. If it is issued by the Regional Office it can
In CIR vs. Sony, the Supreme Court said that there must only be revalidated once. )
be a grant of authority before any Revenue Officer can
conduct an examination or assessment. Without such Q: Are there instances where the BIR can investigate
authority, the examination or assessment is a nullity. That’s without LA?
why it’s the first thing you have to look into if the BIR officer A: There are two cases:
or any of the BIR officers would come to your office and try 1. Under existing Revenue Regulations, you have
to harass you. tax fraud cases. If it involves tax fraud you don’t
need any LA.
In CIR vs. Sony, the CIR issued a letter of assessment to 2. When it involves policy cases under audit by
Sony for assessment of several internal revenue taxes. special teams, under the National Office.
Anong context ng LA? Ang sabi n LA is “we will inspect
your corporate books from 1997 and unverified prior Q: How often should the BIR investigate the taxpayer?
years.” When the preliminary assessment and the final A: Section 235.
assessment came, what happened was that the
assessment was based on the 1998 records. Sony Section 235. Preservation of Books and Accounts and
protested. What did the Supreme Court say? Other Accounting Records. - All the books of accounts,
including the subsidiary books and other accounting
That is not legally possible. BIR cannot do that. The BIR records of corporations, partnerships, or persons,
cannot make an assessment of the year 1997 using the shall be preserved by them for a period beginning from
1998 records of the taxpayer. So 1 LA for a particular the last entry in each book until the last day prescribed
period. The authority given to the BIR is to examine only by Section 203 within which the Commissioner is
the 1997 records and also the previous accounting records authorized to make an assessment. The said books
of the taxpayer. If the BIR actually intended the 1998 and records shall be subject to examination and
records, probably what the BIR could have done is to inspection by internal revenue officers: Provided, That
include it in the LA or probably the BIR could issue another for income tax purposes, such examination and
LA for that matter. inspection shall be made only once in a taxable year,
except in the following cases:
In this case was the LA valid to begin with? It is invalid
because the LA is issued in violation of the rules. There is (a) Fraud, irregularity or mistakes, as determined by
a certain Revenue Regulation that says the LA must the Commissioner;
17 | P a g e
within ten (10) days from the date of retirement or within

(b) The taxpayer requests reinvestigation; such period of time as may be allowed by the
Commissioner in special cases, submit their books of
(c) Verification of compliance with withholding tax laws accounts, including the subsidiary books and other
and regulations; accounting records to the Commissioner or any of his
deputies for examination, after which they shall be
(d) Verification of capital gains tax liabilities; and returned. Corporations and partnerships contemplating
dissolution must notify the Commissioner and shall not be
(e) In the exercise of the Commissioner's power under dissolved until cleared of any tax liability.
Section 5(B) to obtain information from other persons
in which case, another or separate examination and Q: What about tax-exempt persons? Are they required
inspection may be made. Examination and inspection to keep their accounting books?
of books of accounts and other accounting records A: Tax exempt persons are not exempt from BIR audit. But
shall be done in the taxpayer's office or place of this is more of a compliance audit. To determine whether
business or in the office of the Bureau of Internal these tax exempt persons comply with the tax exemption
Revenue. All corporations, partnerships or persons laws. Hindi pwedeng you’re exempt from tax, you’re
that retire from business shall, within ten (10) days already exempted from keeping records.
from the date of retirement or within such period of
time as may be allowed by the Commissioner in Q: After BIR conducts an audit, 2 things might
special cases, submit their books of accounts, happen?
including the subsidiary books and other accounting A: 1. No tax deficiency findings, 2. There will be tax
records to the Commissioner or any of his deputies for deficiency. Kung walang tax deficiency, no need for
examination, after which they shall be returned. assessment. what if there is tax deficiency? The revenue
Corporations and partnerships contemplating officer will first inform the taxpayer. If the taxpayer agrees
dissolution must notify the Commissioner and shall to the report, the taxpayer will pay the tax. But if the
not be dissolved until cleared of any tax liability. taxpayer disagrees, what will happen? The BIR Officer will
then go back to his office, will submit his report to the CIR
Any provision of existing general or special law to the or the Regional Office as the case may be. And then what
contrary notwithstanding, the books of accounts and will happen next is the BIR or the CIR or the Regional
other pertinent records of tax-exempt organizations or Office will review the findings of this Revenue Officer.
grantees of tax incentives shall be subject to
examination by the Bureau of Internal Revenue for If the CIR determines that there is no legal or factual basis
purposes of ascertaining compliance with the on the report, then the case is dismissed. If the CIR finds
conditions under which they have been granted tax that there is a legal basis or a factual basis of the audit
exemptions or tax incentives, and their tax liability, if report, then the BIR now will issue the Preliminary
any. Assessment Notice or what you call as PAN.
General rule: For income tax purposes, such examination (last year’s TSN) Before that, dati kasi, under the LA, the
and inspection shall be made only once in a taxable year. BIR guy reports to the taxpayer, the taxpayer will not
Take note, it is for income tax purposes. For other taxes, agree, meron pang informal conference. But such informal
pwede ulit ulitin. conference is no longer applicable because of a Revenue
Exceptions: Regulation. Informal conference is like mediation. But right
(a) Fraud, irregularity or mistakes, as determined by the now tinanggal na siya, diretso na tayo sa issuance of PAN.
Commissioner; Or if you will follow the codal it’s pre-assessment notice.
(b) The taxpayer requests reinvestigation;
(c) Verification of compliance with withholding tax laws and Q: What is a PAN?
regulations; A: It’s a communication issued by the BIR informing the
(d) Verification of capital gains tax liabilities; and taxpayer who had been audited of the findings of the
(e) In the exercise of the Commissioner's power under Revenue Officers, following the review and evaluation of
Section 5(B) to obtain information from other persons in these findings. It is in writing and shows the facts, laws,
which case, another or separate examination and rules, regulations and jurisprudence on which the proposed
inspection may be made. Examination and inspection of assessment is based. Simply speaking, it is like an FYI.
books of accounts and other accounting records shall be
done in the taxpayer's office or place of business or in the Q: Is PAN mandatory?
office of the Bureau of Internal Revenue. All corporations, A: General rule, PAN is Mandatory because this is part of
partnerships or persons that retire from business shall, the due process requirement of assessment. if there is no
18 | P a g e
PAN, the assessment is null and void. But there are Q: What should the FAN contain?
exceptions, we will discuss it later. A: The FAN essentially contains two things:
1. The demand for payment of taxes
Q: How do you serve it? 2. It shall state the facts, the law, the rules and regulations
A: According to the new Revenue Regulation, the PAN or jurisprudence on which the assessment is based,
must be served at the taxpayer’s registered address. After otherwise the assessment is void.
serving the taxpayer at the registered address, the BIR can
also serve it to the known address of the taxpayer or Q: How do you serve the FAN?
alternatively, there can be simultaneous service of the A: It’s pretty much like the PAN: the registered address or
notice. Posible ba yan? Of course. Known address niya is the known address, or the BIR can serve it simultaneously
residential address. Registered address niya is business on both addresses. If the FAN is duly served then it enjoys
address. So posible yan. the prima facie presumption of correctness. In other words,
the taxpayer has the burden of proving that the FAN is
Q: What are the instances where PAN is not required? wrong. All presumptions are in favor of the correctness of
A: the tax assessment unless proven otherwise.
1. When the finding of a deficiency tax is the result of a
mathematical error on the face of the return. CIR vs. Pastor ALT (from last year’s tsn)
2. When there is a discrepancy between the tax withheld What happened here is that a criminal complaint was filed
and the tax remitted by the taxpayer or remitted by the against the corporation and officers. Nung nagfile sila sa
withholding agent. DOJ, these corporations, sabi nila, they filed an urgent
3. When the taxpayer opted to claim a refund of a tax credit request for reconsideration and or reinvestigation with the
for a taxable period and who was determined to have been BIR. Of course the BIR denied this. Wala pa ganing
carried over and actually applied the same amount against assessment bakit kayo nagarequest for reconsideration. So
tax liabilities for the taxable quarter denied.
4. Excise tax
5. When an article purchased or imported by an exempt When the case went to the Court of Tax appeals, it said,
person has been sold or transferred to nonexempt persons. BIR, you are wrong, because the criminal complaint is
already an assessment in itself. It has a computation of tax,
(from last year’s TSN) and of course the fact that you have filed a criminal
What should the taxpayer do when he sees the PAN? complaint, it means you are demanding payment from the
1. The taxpayer may agree. taxpayers. Of course the BIR went to the Supreme Court,
2. The taxpayer may disagree. How does the taxpayer raising this issue.
disagree on the findings? The taxpayer must make a reply.
Kelan niya gawin reply niya? He must make such reply The Supreme Court said that not all documents coming
within 15 days from the receipt of the PAN. What if he from the BIR containing a computation of tax liability can be
belatedly filed his reply? Does he need to worry? No he deemed assessments. An assessment contains not only a
need not worry because he will only be considered in computation of tax liabilities but also a demand for payment
default. Default means you have not filed your reply on within a prescribed period. So dalawa: it’s a demand for
time. payment, and a computation of taxes. With respect to
3. The taxpayer may not even do anything about it. Ah, criminal actions, or affidavit or complaint, macomply ba
PAN pa lang man yan wala pa akong pakialam diyan. Still, yung requirements? Ano man ang complaint affidavit
if the taxpayer will not do anything, he will still be natin? Diba it’s a recital of facts constituting the crime. It
considered in default. may convey the computation of the tax liability but it does
not contain a demand for payment. Anyway, that’s about it.
Now, I said earlier that when the taxpayer is in default, the The Supreme Court said that an affidavit which was
taxpayer need not worry. What will happen now is that if executed by Revenue Officers with the tax liability of a
the taxpayer makes the reply, and the CIR or his taxpayer and attached to a criminal complaint for tax
authorized representative does not agree, or probably the evasion cannot be deemed an assessment that can be
taxpayer is already in default, what will happen now is that questioned before the Court of Tax Appeals.
the CIR will issue the Final Assessment Notice or the
FAN, and formal letter of demand. CIR vs. Caltex
The general rule is that tax assessments are presumed
Q: Who issues the FAN? correct and made in good faith, but this prima facie
A: The FAN is issued either by the CIR or the duly presumption does not apply if the tax assessment is utterly
authorized representative of the CIR. without proof or without any basis, otherwise known as a
naked assessment.
19 | P a g e
Protest is the act of the taxpayer questioning the

Now sabi natin kanina, FAN, the taxpayer must do validity of the imposition of the corresponding delinquency
something about this otherwise the FAN will become final increments as shown in the FAN or FLD(Formal Letter of
and executory. When the FAN becomes final and Demand). This is an administrative way of challenging the
executory, the BIR may now avail of its own remedies to
collect the tax either administratively or judicially. FAN issued by the BIR.
When should the protest be made?

2 things will possibly happen:
1. The taxpayer will pay.
The protest should be made within 30 days from
2. Taxpayer will disagree.
the receipt of the FAN or FLD.
Q: Can the tax payer ignore?
A: yes. But this time FAN will become final and executor What will happen if you will not protest?
and the government can now avail its tax remedies to
collect the taxes due from the taxpayer. that is why the The FAN or FLD will become final and executory
taxpayer should not ignore the FAN. and the BIR will now collect the taxes from you.
Q: If the taxpayer would like to challenge the FAN, What are the types of Protest? (remember the difference
what must the taxpayer do? between the two because it always comes out in the BAR
A: the taxpayer must protest. exams)
1. Reconsideration
March 11, 2017 (1st Hour)
(By: Earvin Alparaque) 2. Reinvestigation
REVIEW:
What is Reconsideration?
Last meeting we discussed about FAN(Final
Assessment Notice). Remember it all begins with the Letter It refers to the reevaluation of the assessment on
of Authority (The Letter of Authority is an official document the basis of the existing records without the need of
that empowers a Revenue Officer to examine and additional evidence. Basically, it is presumed that the
scrutinize a Taxpayer’s books of accounts and other taxpayer has already submitted everything to the BIR and
accounting records, in order to determine the Taxpayer’s the taxpayer is only asking a second review of the records
correct internal revenue tax liabilities), then there will be a hoping that the BIR was wrong in its assessment.
PAN(Preliminary Assessment Notice) and thereafter the
BIR will send a FAN to the taxpayer. We also discussed What is Reinvestigation?
that the taxpayer cannot anymore ignore the FAN because
It refers to the reevaluation of the assessment on
if he/she ignores it, the tax assessment will become final
the basis of newly discovered evidence or additional
and executory.
evidence intended to be presented by the taxpayer. Upon
filing of the protest by way of reinvestigation, the taxpayer
So what is the remedy then of the taxpayer?
has 60 days to submit relevant supporting documents to
One of the remedies is compromise but we will the BIR. The 60 day period is reckoned from the filing of
focus for now on the remedy of challenging the FAN by the protest.
way of protest.
Supposing that the taxpayer opted to file a protest by way
ADMINISTRATIVE REMEDIES of reinvestigation but failed to submit relevant supporting
documents, what will happen to the protest?
PROTEST
It is as if there was no protest to begin with and
Define protest under the context of the National Internal the FAN will become final and executory.
Revenue Code.
What does relevant supporting documents mean?
20 | P a g e
It means the documents necessary to support the to submit

legal and factual bases in disputing the taxpayer's tax Appeal to the The reckoning The reckoning
assessment. (e.g. revenue regulations, official receipts, CTA (In case point of the 180 point of the 180
statements, etc.) of inaction on day period is from day period is from
the part of the the filing of the the submission of
Who determines the relevance of the documents? The CIR, the reconsideration. the relevant
taxpayer can documents.
taxpayer or the BIR? ANS: taxpayer
appeal to the
CTA within 30
This is answered in the case of CIR vs First
days from the
Express Pawnshop (GR NO. 172045-46, June 16 2009). expiration of
the 180 day
CIR vs First Express Pawnshop period to
decide)
In this case, the BIR assessed the pawnshop of VAT. The
pawnshop filed a protest but the BIR did not decide within
the 180 day period. The pawnshop was then constrained to Where do you file a protest?
appeal the protest to the Court of Tax Appeals. First
Express is questioning the imposition of VAT by the BIR. 1. Commissioner of Internal Revenue
One of the issues raised here by the CIR is the finality of
the assessment. According to the CIR, the pawnshop failed 2. Regional District Officer or a duly authorized
to submit supporting documents within 60 days from the
representative
filing of the protest as required by the Code. Upon appeal,
the pawnshop submitted its legal bases. The BIR on its
Content of the Protest
part required the pawnshop to submit certain documents
which the latter cannot submit to begin with.
1. Nature of the protest
What did the SC say here? The BIR cannot compel or
Nakakita na ba kayo ng protest? Parang letter
dictate to the taxpayer on what type of supporting
documents should be submitted. The SC said the lang daw yan siya with supporting documents proving the
pawnshop already complied with the requirements because legal and factual basis. You have to indicate the
it submitted documents together with its protest. Secondly, protest(whether reconsideration or reinvestigation)
the SC said that the CIR cannot insist on the submission of because of the implications we have discussed.
additional documents which does not exist to begin with.
According to the SC, the term "relevant supporting 2. Date of Assessment Notice
documents" should be understood as those documents
necessary to support the legal bases disputing the 3. Law, rules and regulations and jurisprudence
assessment as determined by the taxpayer. in which the protest was based
The function then of the BIR is to require the submission of Under the law, you have to follow these
additional evidence but it cannot dictate to the taxpayer on
requirements, otherwise the protest will be null and void
what type of supporting documents should be submitted.
Otherwise, the taxpayer will always be at the mercy of the and the FAN will become final and executory.
BIR .
What if the FAN involves different kinds of taxes or
issues?
Distinguish: Reconsideration and Reinvestigation
The protest must be able to address all of these
Reconsideration Reinvestigation issues. Tamaan mo lahat, hindi pwede ung general lang.
As to the Does not toll the Tolls the running Otherwise, the issues or taxes which are not challenged or
suspension of running of the of the prescriptive discussed in the protest will become final and executory.
the prescriptive prescriptive period period to collect The taxpayer will then be compelled to pay those taxes
period to collect
which are unchallenged in the protest.
Additional Not required Required
Evidence After filing the protest, what happens next?
60 day period Not applicable Applicable
21 | P a g e
The CIR now has 180 days to decide the protest. The existing rules does not allow it. So do not file
If it is a reconsideration, the 180 day period will start from a motion for reconsideration, you immediately go to the
the date of filing of the recon, whereas if it is Court of Tax Appeals within 30 days from the receipt of the
reinvestigation, it will start from the date of submission of decision.
the relevant supporting documents.
What will happen if the taxpayer will file a motion for
Thereafter, the CIR will either agree with the reconsideration?
protest and waive the taxes of the taxpayer or render an
adverse decision. It will never toll the prescriptive period or
reglementary period within which to appeal to the Court of
What if the taxpayer would still want to challenge the Tax Appeals.
decision of the BIR?
2. Protest filed before the CIR
Sabi natin kanina, it may be filed before the CIR
or RDO and its duly authorized representative. The taxpayer must appeal to the Court of Tax
Appeals within 30 days from the receipt of the adverse
1. Protest filed before the RDO or authorized decision. If there is an inaction, there are two choices
representative again- (a) either appeal to the CTA within 30 days from the
lapse of the 180 day period for the CIR to decide or (b) the
If the protest was filed before the authorized taxpayer can wait for the decision of the CIR and then
representative and the taxpayer received an adverse appeal the adverse decision to the CTA within 30 days
decision, the taxpayer has two choices- (a) directly file an from the receipt of the decision.
appeal to the Court of Tax Appeals within 30 days from the
receipt of the decision or (b) file an administrative If the taxpayer would opt to wait for the decision of the
appeal(request for reconsideration) before the CIR. Pwede CIR and did not appeal within 30 days after the lapse of
pa ba mag reinvestigation dito? NO, the only remedy the 180 day period, will it render the FAN final and
remaining when you talk about administrative appeal is a executory?
request for reconsideration.
This is answered in the case of LASCONA Land
We also discussed that the CIR or a duly vs CIR (No citation given)
authorized representative has 180 days to decide on the
taxpayer's protest. It is possible that within the 180 day LASCONA Land vs CIR
period, the CIR or representative will not be able to decide
Issue: If the taxpayer does not appeal within 30 days after
or will not do anything.
the lapse of the 180 day period for the CIR to decide on the
protest and there was still no decision rendered, does the
What happens now if the representative does not do
FAN become final and executory? - NO
anything within the 180 day period?
Ruling: Under NIRC, the taxpayer is always given two
The taxpayer may either (a) appeal to the Court remedies which are mutually exclusive- (a) to file an appeal
of Tax Appeals within 30 days from the lapse of the 180 with CTA within 30 days from the lapse of the 180 day
day period without waiting for the decision anymore or (b) period or (b) wait for the CIR's decision. It is the duty of the
the taxpayer may opt to wait for the decision of the CIR to render a decision on a protest filed by a taxpayer.
Regional Office and from the receipt of the decision, the Summary:
taxpayer may make an administrative appeal to CIR within
RDO or Adverse decision Inaction
30 days from the receipt of the decision. If adverse parin,
authorized
then the taxpayer may appeal to the CTA within 30 days representative
from the receipt of the CIR's decision. 1. Directly file an 1. File an
appeal to the CTA appeal with the
What if the CIR renders an adverse decision, can the within 30 days CTA within 30
taxpayer still file a motion for reconsideration? from the receipt of days from the
the decision lapse of the 180
22 | P a g e
day period. Under the rules you call it the Final Decision on
2. File an the Disputed Assessment(FDDA). Now, kapag natanggap
administrative 2. Wait for the ito ng taxpayer it means that the protest is already decided.
appeal (motion for decision, file an It signifies the time that the taxpayer must now appeal to
reconsideration) administrative
within 30 days appeal to the the CTA in case he wants to challenge the BIR.
from the receipt of CIR within 30
the decision with days from the Does the taxpayer need to pay the assessment under
the CIR. If still receipt of the protest pending appeal?
unfavorable, file decision and
an appeal with the then file an General Rule: There is no prior payment of the
CTA within 30 appeal to the assessment while it is in appeal.
days from the CTA within 30
receipt of the days from the Exceptions:
CIR's decision. receipt of CIR's
decision. 1. If there are several issues and the taxpayer
But let's go back to the PAGCOR case (PAGCOR vs BIR only challenged some of the issues involved. Meaning the
under Period to act upon a protest in the syllabus ata. Sir taxpayer must pay the taxes which were unchallenged.
did not mention the full citation) which I discussed last time-
2. There are several issues and the taxpayer
PAGCOR vs BIR failed to support by facts and by law the other issues
surrounding the protest.
In this case, walang ginawa ang BIR. there was inaction on
their part. Since there was inaction, ang ginawa ng There is one case also that I found, CIR vs Liquigaz (G.R.
PAGCOR within 30 days from the lapse of the 180 day No. 215534, April 18, 2016)
period to decide, nag MR sila sa CIR. Thereafter umakyat
sila sa CTA, then to the CTA En Banc and finally sa SC. In CIR vs Liquigaz
all these proceedings, talo ang PAGCOR. What did the SC
say here? Did PAGCOR pick the correct remedy? The question here is if the Final Decision on Disputed
Assessment (FDDA) is void, what is the effect with respect
The SC said that PAGCOR picked the incorrect remedy. to the assessment? Will a void FDDA render the
Under the rules, if there is an inaction you only have two assessment also void?- NO
choices- (a) you wait for the decision or (b) immediately go
to the CTA. In effect, the SC said that PAGCOR made its The SC said NO because assessments are different from
own rules. The SC said that you have to follow the rules the FDDA. It does not necessarily mean that if the FDDA is
otherwise you won't have any remedies left. void, automatically the assessment is also void. Read this
case because this is a good case.
Sir Percy's dissenting opinion:
But I have a problem with respect to the rules and the SC's
decision in that PAGCOR case because if you look at the
JUDICIAL REMEDIES (This will be discussed further
jurisdiction of the CTA, the CTA has jurisdiction over the
decisions or inactions of the CIR. My question is, is the under the jurisdiction of the CTA)
decision of the RDO a decision of the CIR? Gets niyo ang
point ko? RDO is an authorized representative of the CIR, The taxpayer should first appeal to the CTA
and therefore it is as if it is already the CIR who is making division. The appeal must be filed within 30 days from the
the decision but then again, why is administrative appeal receipt of the decision of the CIR or duly authorized
allowed in the first place? But we cannot do anything representative or after the lapse of the 180 day period if the
because that is the decision of the SC. So you have to CIR or representative will not do anything. If the taxpayer
follow the rules. If the RDO will not act on the protest, there does not appeal, the assessment will become final and
are only two choices- (a) appeal directly to the CTA or (b)
executory. If the CTA division would still render an adverse
wait for the decision.
What do you call the decision rendered by the CIR decision, the taxpayer can file a motion for reconsideration
when it comes to protest? within 15 days from the receipt of the decision. If the
decision is still adverse, the taxpayer can now file a petition
for review with the CTA En Banc. Finally if there is still an
23 | P a g e
adverse decision from the CTA, the taxpayer can now go to within the period agreed upon as provided in
the SC via Rule 45 (Petition for Review on Certiorari). paragraph (b) hereinabove, may be collected by
distraint or levy or by a proceeding in court within the
If the SC denies the decision and the assessment becomes period agreed upon in writing before the expiration of
final and executory, the State now can avail of its remedies the five (5) -year period. The period so agreed upon
may be extended by subsequent written agreements
to collect the taxes.
made before the expiration of the period previously
agreed upon.
REMEDIES OF THE STATE IN COLLECTING THE
TAXES (e) Provided, however, That nothing in the immediately
preceding and paragraph (a) hereof shall be construed to
Once the assessment becomes final and authorize the examination and investigation or inquiry into
executory, the BIR may now avail of its own remedies. This any tax return filed in accordance with the provisions of any
time the tax or taxpayer is already considered delinquent. A tax amnesty law or decree.
tax is delinquent when the assessment for deficiency tax What is the rationale behind this? If you read section 203,
has become final and executory and the taxpayer has not ang nakalagay doon within the 3-year period for
paid it within the time given in the notice of assessment. assessment man siya diba? Read the provisions of the
NIRC, kung basahin mo siya the 3-year period only refers
What is the prescriptive period for collection? to the period of assessment. It has nothing to do with
collection.
Under the NIRC now, it is somehow confusing
already because there are two theories propounded by SEC. 203. Period of Limitation Upon Assessment and
several authorities for this. Collection. - Except as provided in Section 222, internal
revenue taxes shall be assessed within three (3) years
1. 5-year period theory as provided under after the last day prescribed by law for the filing of the
section 222 return, and no proceeding in court without assessment for
the collection of such taxes shall be begun after the
SEC. 222. Exceptions as to Period of Limitation of expiration of such period: Provided, That in a case where a
Assessment and Collection of Taxes. - return is filed beyond the period prescribed by law, the
three (3)-year period shall be counted from the day the
(a) In the case of a false or fraudulent return with intent to return was filed. For purposes of this Section, a return filed
evade tax or of failure to file a return, the tax may be before the last day prescribed by law for the filing thereof
assessed, or a proceeding in court for the collection of shall be considered as filed on such last day.
such tax may be filed without assessment, at any time
within ten (10) years after the discovery of the falsity, fraud
or omission: Provided, That in a fraud assessment which 2. The 2nd theory is that the period for collection
has become final and executory, the fact of fraud shall be prescribes in 3 years for ordinary circumstances and 5
judicially taken cognizance of in the civil or criminal action years when you talk about the extraordinary
for the collection thereof. circumstances (e.g. false returns, fraudulent returns
(b) If before the expiration of the time prescribed in Section and failure to file a tax return).
203 for the assessment of the tax, both the Commissioner
and the taxpayer have agreed in writing to its assessment Which is which? Ano ang sundin natin dito? According
after such time, the tax may be assessed within the period kay Dean follow Mamalateo. (5-year period theory) But
agreed upon. The period so agreed upon may be extended for me, I prefer the 2nd theory. What is the legal basis for
by subsequent written agreement made before the that? How do you construe provisions pertaining to
expiration of the period previously agreed upon. prescription of assessment and collection of taxes? It must
be construed strictly against the State and liberally in favor
(c) Any internal revenue tax which has been assessed
of the taxpayer. So if in favor siya of the taxpayer why
within the period of limitation as prescribed in paragraph (a)
hereof may be collected by distraint or levy or by a would you provide a 5-year prescriptive period for the
proceeding in court within five (5) years following the collection? It adds further burden to the taxpayer. Under
assessment of the tax. section 222 of NIRC, it is stated there na 5-year period ang
collection pero under section 203, there is nothing really
(d) Any internal revenue tax, which has been assessed
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there when it comes to collection of taxes. Pero gamahan 2) When the taxpayer requests for a reinvestigation. In the
man si Dean, we follow his teachings because he is wiser. case of BIR vs. CIR (GR 189736), the reinvestigation must
be granted by the CIR. How do you know if the
reinvestigation is granted? When the protest result to a
change in the amount – a revision of the original
assessment. The burden is on the part of the BIR that the
March 11, 2017 (2nd Hour)
reinvestigation is granted.
(By: Cham Jala)
3) When the taxpayer cannot be located in the address
When do you begin the counting of the prescriptive period?
given by him in the return.
Sec 222 xxx
4) When the warrant of distraint or levy is duly served upon
(c) Any internal revenue tax which has been
the taxpayer, his authorized representative, or a member of
assessed within the period of limitation as
his household with sufficient discretion, and no property
prescribed in paragraph (a) hereof may be
could be located. The requirement here is the service of
collected by distraint or levy or by a proceeding in
Warrant of distraint or Levy.
court within five (5) years following the
assessment of the tax.
Supposing the Warrant of Distraint was served and during
the auction the properties were not enough to cover the tax
There will only be an assessment only if the taxpayer has
liabilities and it is already beyond the prescriptive period.
actually received the assessment. In other words, on the
date of the service of the FAN. Situation (extracted from 2016 TSN):
Supposing a warrant of distraint and levy was given and
What if there is no prior assessment made? As a rule the my properties were sold at public auction but the proceeds
proceeding shall begin within 3 years of the filing of the
of the sale was not enough to cover my tax liabilities.
return or the date of deadline of the filing of the return
Kasikulang the BIR can serve another warrant of distraint
whichever comes later but only by judicial proceeding.
and levy but this time it is already beyond the prescriptive
period. Can I raise the defense of prescription? According
What are the instances where the period is interrupted? to the BPI case earlier that I mentioned the SC said that it
Section 223. Suspension of Running of Statute of is not essential that the warrant of distraint or levy be fully
Limitations. - The running of the Statute of Limitations executed so it can suspend the prescriptive period for tax
provided in Sections 203 and 222 on the making of collection there’s a big difference between the service of
assessment and the beginning of distraint or levy a the warrant of distraint or levy from the execution itself.
proceeding in court for collection, in respect of any
deficiency, shall be suspended for the period during which 5) When the taxpayer is out of the Philippines.
the Commissioner is prohibited from making the
assessment or beginning distraint or levy or a proceeding Take note that this suspension of the prescriptive period
in court and for sixty (60) days thereafter; when the applies to both ordinary and extraordinary cases of the
taxpayer requests for a reinvestigation which is granted by collection of taxes.
the Commissioner; when the taxpayer cannot be located in
the address given by him in the return filed upon which a The No Injunction Rule
tax is being assessed or collected: Provided, that, if the
taxpayer informs the Commissioner of any change in Section 218. Injunction not Available to Restrain Collection
address, the running of the Statute of Limitations will not be
of Tax. - No court shall have the authority to grant an
suspended; when the warrant of distraint or levy is duly
injunction to restrain the collection of any national internal
served upon the taxpayer, his authorized representative, or
revenue tax, fee or charge imposed by this Code.
a member of his household with sufficient discretion, and
no property could be located; and when the taxpayer is out
Let us specify –
of the Philippines.
1) No injunction Rule - No court can enjoin the BIR in the
Let us dissect: collection of taxes of the the National Revenue Code.
Exception: The court of tax appeals: The CTA
1) The CIR is prohibited from making the assessment or
has the authority to grant injunction to restraint in the ____
beginning distraint or levy or a proceeding in court and for (RA 1135 as amemnded by RA 9282).
sixty (60) days thereafter.
Requisites for injunction:
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1) it must be from an appeal.Dapatnaka appeal 3) Civil Action: &

kasa CTA 4) Criminal Action
2) In the opinion of the CTA the collection
mayjeopardizethe interests of the government and/or the I) Distraint of personal property.
taxpayer. So either of the conditions are looked into by the In Distraint, the personal property of the taxpayer
court of tax appeals. Like any other orders of the court for is taken by the government in order for it to be sold in a
injunction, this is discretionary______ public auction.
3) the tax payer may be required to deposit an
amount or pay the surety bond double the amount by the 2 kinds of distraint
court. It is pretty much likely your provisional remedies. 1) Constructive Distraint or Preventive Embargo
Pag mag file ng____ there is supposed to be a bond filed Section 206. Constructive Distraint of the
by the applicant before the writ of injunction is issued by Property of A Taxpayer. - To safeguard the
court. interest of the Government, the Commissioner
may place under constructive distraint the
Tax Collection property of a delinquent taxpayer or any
taxpayer who, in his opinion, is retiring from any
Sec. 205 provides for the civil remedies for the collection of business subject to tax, or is intending to leave
taxes. the Philippines or to remove his property
therefrom or to hide or conceal his property or
Section 205. Remedies for the Collection of Delinquent to perform any act tending to obstruct the
Taxes. - The civil remedies for the collection of internal proceedings for collecting the tax due or which
revenue taxes, fees or charges, and any increment thereto may be due from him.
resulting from delinquency shall be:
(a) By distraint of goods, chattels, or effects, and The constructive distraint of personal property
other personal property of whatever character, shall be affected by requiring the taxpayer or
including stocks and other securities, debts, any person having possession or control of
credits, bank accounts and interest in and rights such property to sign a receipt covering the
to personal property, and by levy upon real property distrained and obligate himself to
property and interest in rights to real property; preserve the same intact and unaltered and not
and to dispose of the same ;in any manner
(b) By civil or criminal action. whatever, without the express authority of the
Either of these remedies or both simultaneously may be Commissioner.
pursued in the discretion of the authorities charged with the
collection of such taxes: Provided, however, That the In case the taxpayer or the person having the
remedies of distraint and levy shall not be availed of where possession and control of the property sought
the amount of tax involve is not more than One hundred to be placed under constructive distraint refuses
pesos (P100). or fails to sign the receipt herein referred to, the
The judgment in the criminal case shall not only impose the revenue officer effecting the constructive
penalty but shall also order payment of the taxes subject of distraint shall proceed to prepare a list of such
the criminal case as finally decided by the Commissioner. property and, in the presence of two (2)
The Bureau of Internal Revenue shall advance the witnessed, leave a copy thereof in the premises
amounts needed to defray costs of collection by means of where the property distrained is located, after
civil or criminal action, including the preservation or which the said property shall be deemed to
transportation of personal property distrained and the have been placed under constructive distraint.
advertisement and sale thereof, as well as of real property
and improvements thereon. Constructive distraint is just notifying the
taxpayer. The BIR will notify the taxpayer that he
When it comes to the collection of tax, the remaining tax is could no longer dispose his property unless and
considered delinquent until the last day prescribed by law. until he pays his tax deficiencies.
When the taxpayer does not pay, the government may now
impose its power to collect the tax. In constructive distraint, there is no actual taking
of property, but still it is bound to the government
If you notice under Sec 205, there are 4 civil remedies and the taxpayer is not allowed to dispose it.
involved here.
1) Distraint; If the taxpayer will dispose the property under
2) Levy; constructive distraint, it will form part of the___.
26 | P a g e
The BIR can look after the property and that will said property shall be deemed to have been
serve as a notice to the buyer that the property is placed under constructive distraint.
reserved for government in case the taxpayer
will not pay his taxes. With this procedure, the property is considered
as under constructive distraint
Grounds for Constructive distraint:
a) the Commissioner may place under 2) Actual Distraint
constructive distraint the property of a
delinquent taxpayer or any taxpayer This time, there will be an actual taking of the
who, in his opinion, is retiring from any property. This is not merely to protect the interest of the
business subject to tax government pertaining to that property for the effect of
b)or is intending to leave the payment of taxes. This is really an actual enforcement
Philippines of the BIR to collect the taxes. This is a Collection
c) or to remove his property therefrom Procedure.
d) or to hide or conceal his property
e)or to perform any act tending to What is Garnishment?
obstruct the proceedings for collecting
the tax due or which may be due from Garnishment is a form of actual distraint. This
him. involves intangible property
So if there is a fraudulent intention on Section 207. Summary Remedies. -

the part of the taxpayer, the BIR can immediately (A) Distraint of Personal Property. - Upon the
exercise this constructive distraint. After all, there failure of the person owing any delinquent tax
is no actual taking of the property. This is more in or delinquent revenue to pay the same at the
the protection on the part of the government so time required, the Commissioner or his duly
that the property will be reserved for the payment authorized representative, if the amount
of taxes. involved is in excess of One million pesos
(P1,000,000), or the Revenue District Officer, if
How is it effected? (2nd paragraph) the amount involved is One million pesos
(P1,000,000) or less, shall seize and distraint
The constructive distraint of personal property any goods, chattels or effects, and the personal
shall be affected by requiring the taxpayer or any property, including stocks and other securities,
person having possession or control of such debts, credits, bank accounts, and interests in
property to sign a receipt covering the property and rights to personal property of such persons
distrained and obligate himself to preserve the ;in sufficient quantity to satisfy the tax, or
same intact and unaltered and not to dispose of charge, together with any increment thereto
the same ;in any manner whatever, without the incident to delinquency, and the expenses of
express authority of the Commissioner. the distraint and the cost of the subsequent
sale.
The BIR will just notify the tax payer and ask the
person to sign receipt covering the property. On A report on the distraint shall, within ten (10)
that paper, the taxpayer is also obliged to days from receipt of the warrant, be submitted
preserve the property and not to dispose the by the distraining officer to the Revenue District
same. Officer, and to the Revenue Regional Director:
Provided, That the Commissioner or his duly
What if magminaroang taxpayer? authorized representative shall, subject to rules
and regulations promulgated by the Secretary
In case the taxpayer or the person having the of Finance, upon recommendation of the
possession and control of the property sought to Commissioner, have the power to lift such order
be placed under constructive distraint refuses or of distraint: Provided, further, That a
fails to sign the receipt herein referred to, the consolidated report by the Revenue Regional
revenue officer effecting the constructive distraint Director may be required by the Commissioner
shall proceed to prepare a list of such property as often as necessary.
and, in the presence of two (2) witnessed, leave
a copy thereof in the premises where the (B) Levy on Real Property. - After the expiration
property distrained is located, after which the of the time required to pay the delinquent tax or
27 | P a g e
delinquent revenue as prescribed in this How is it done? There will be an actual seizure.
Section, real property may be levied upon, There will be a reporting by the RDO.
before simultaneously or after the distraint of
personal property belonging to the delinquent. The taxpayer may also avail of an order that the
To this end, any internal revenue officer distraint be lifted. He can ask the CIR and the
designated by the Commissioner or his duly CIR, in its discretion, lift the order of distraint and
authorized representative shall prepare a duly the taxpayer may be required to post a bond
authenticated certificate showing the name of equivalent to the taxes involved
the taxpayer and the amounts of the tax and
penalty due from him. Said certificate shall Procedure:
operate with the force of a legal execution
throughout the Philippines. Section 208. Procedure for Distraint and
Garnishment. - The officer serving the warrant of
Levy shall be affected by writing upon said distraint shall make or cause to be made an
certificate a description of the property upon account of the goods, chattels, effects or other
which levy is made. At the same time, written personal property distrained, a copy of which,
notice of the levy shall be mailed to or served signed by himself, shall be left either with the
upon the Register of Deeds for the province or owner or person from whose possession such
city where the property is located and upon the goods, chattels, or effects or other personal
delinquent taxpayer, or if he be absent from the property were taken, or at the dwelling or place of
Philippines, to his agent or the manager of the business of such person and with someone of
business in respect to which the liability arose, suitable age and discretion, to which list shall be
or if there be none, to the occupant of the added a statement of the sum demanded and
property in question. note of the time and place of sale.
In case the warrant of levy on real property is Stocks and other securities shall be distrained by
not issued before or simultaneously with the serving a copy of the warrant of distraint upon the
warrant of distraint on personal property, and taxpayer and upon the president, manager,
the personal property of the taxpayer is not treasurer or other responsible officer of the
sufficient to satisfy his tax delinquency, the corporation, company or association, which
Commissioner or his duly authorized issued the said stocks or securities.
representative shall, within thirty (30) days after
execution of the distraint, proceed with the levy Debts and credits shall be distrained by leaving
on the taxpayer's real property. with the person owing the debts or having in his
possession or under his control such credits, or
Within ten (10) days after receipt of the warrant, with his agent, a copy of the warrant of distraint.
a report on any levy shall be submitted by the The warrant of distraint shall be sufficient
levying officer to the Commissioner or his duly authority to the person owning the debts or
authorized representative: Provided, however, having in his possession or under his control any
That a consolidated report by the Revenue credits belonging to the taxpayer to pay to the
Regional Director may be required by the Commissioner the amount of such debts or
Commissioner as often as necessary: Provided, credits.
further, That the Commissioner or his duly
authorized representative, subject to rules and Bank accounts shall be garnished by serving a
regulations promulgated by the Secretary of warrant of garnishment upon the taxpayer and
Finance, upon recommendation of the upon the president, manager, treasurer or other
Commissioner, shall have the authority to lift responsible officer of the bank. Upon receipt of
warrants of levy issued in accordance with the the warrant of garnishment, the bank shall tun
provisions hereof. over to the Commissioner so much of the bank
accounts as may be sufficient to satisfy the claim
Who exercises the Distraint? It is the CIR or the of the Government.
Authorized representative if the amount exceeds
1 million. If the amount does not exceed 1 million, The first 2 paragraph refers to distraint of
the Revenue District Officer may exercise personal properties and the last 2 paragraph
distraint. pertains to garnishment
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Under this provision, there are 4 types of places in the municipality or city where the distraint is
properties: made, specifying; the time and place of sale and the
1) Personal properties in general/ chattels; articles distrained. The time of sale shall not be less than
2) Stocks and securities; twenty (20) days after notice. One place for the posting of
3) Debts and credits; and such notice shall be at the Office of the Mayor of the city or
4) Bank accounts municipality in which the property is distrained.
In distraint of personal properties, a warrant of At the time and place fixed in such notice, the said revenue
distraint will be issued by the BIR. This is referred to as officer shall sell the goods, chattels, or effects, or other
Warrant of Distraint and levy. This will be given to the personal property, including stocks and other securities so
seizure agent (SA) who will execute the warrant of seizure. distrained, at public auction, to the highest bidder for cash,
Kumbagasiyaang sheriff. or with the approval of the Commissioner, through duly
licensed commodity or stock exchanges.
The seizure agent will serve the warrant of
distraint then he will make a list of all the properties to be In the case of Stocks and other securities, the officer
taken by the government. The SA will sign the receipt, then making the sale shall execute a bill of sale which he shall
he will leave a copy thereof to the taxpayer or to the person deliver to the buyer, and a copy thereof furnished the
in possession of the property. corporation, company or association which issued the
stocks or other securities. Upon receipt of the copy of the
The SA may also leave the list or the notice at the bill of sale, the corporation, company or association shall
residence or at the business place of the taxpayer or make the corresponding entry in its books, transfer the
someone living of suitable age or discretion. stocks or other securities sold in the name of the buyer,
and issue, if required to do so, the corresponding
The list contains: 1) the list of the properties to be taken; 2) certificates of stock or other securities.
the sum demanded – the taxes, penalties, etc.; and 3) the
time and place of sale. Hindi ito embargo nakunin lang. Any residue over and above what is required to pay the
The government will get these properties and later on sell it entire claim, including expenses, shall be returned to the
in a public auction. owner of the property sold. The expenses chargeable upon
each seizure and sale shall embrace only the actual
Stocks and Securities. For stocks and securities, the expenses of seizure and preservation of the property
warrant should be served to: 1) the taxpayer; or 2) pending ;the sale, and no charge shall be imposed for the
president, manager, treasurer or other responsible officer services of the local internal revenue officer or his deputy.
of the corporation, company or association, which issued
the said stocks or securities; What is the first thing that the government will do? There
will be posting of notices. It is a due process requirement.
Debts or Credits. The warrant is served person owing the Absence such notice, the whole proceeding shall be void. -
debts or having in his possession or under his control such --- will be sanctioned accordingly.
credits or debts, or with his agent. Effect: it is enough
authority for such person holding the debt or the credit Where should they do the posting? The places for posting
belonging to the taxpayer to turn it over to the CIR. The must not be less than two places and it is mandatory that
same with the banks: the taxpayer will be notified, give the one of which is the Office of the Mayor of the city or
notice to the responsible officer of the bank (usually the municipality in which the property is distrained.
bank manager) and this is sufficient authority on the part of
the bank to turn over the money to the BIR. What are the contents of the notice? Time and place of the
sale and the articles distraint.
After distraint of personal properties, tangible personal
properties, it has to be sold at a public auction following When should the sale be? The sale should not be less than
section 209. 20 days after notice. There must be posting first and the
state must wait for 20 days before the auction sale will
Section 209. Sale of Property Distrained and Disposition of begin,
Proceeds. - The Revenue District Officer or his duly
authorized representative, other than the officer referred to Can the properties subject to sale be release even prior to
in Section 208 of this Code shall, according to rules and the sale? Yes
regulations prescribed by the Secretary of Finance, upon
recommendation of the Commissioner, forthwith cause a Section 210. Release of Distrained Property Upon
notification to be exhibited in not less than two (2) public Payment Prior to Sale. - If at any time prior to the
29 | P a g e
consummation of the sale all proper charges are paid to Sec 207 - (B) Levy on Real Property. - After the expiration
the officer conducting the sale, the goods or effects of the time required to pay the delinquent tax or delinquent
distrained shall be restored to the owner. revenue as prescribed in this Section, real property may be
levied upon, before simultaneously or after the distraint of
Pay all the taxpayer’s taxes, the expenses in relation to the personal property belonging to the delinquent. To this end,
public notice and other necessary expenses. any internal revenue officer designated by the
Commissioner or his duly authorized representative shall
For stocks and securities, pagnabentanasya, the selling prepare a duly authenticated certificate showing the name
officer shall execute a deed of sale which he shall deliver to of the taxpayer and the amounts of the tax and penalty due
the buyer. The proceeds of the sale of these properties will from him. Said certificate shall operate with the force of a
be applied to the tax liabilities of the taxpayer, including legal execution throughout the Philippines.
penalties and liabilities and also the expenses for the public
auction. What happens in the levy? How is a property Levied?
Can the BIR charge something for this? The law is specific. The BIR will just issue an authenticated certificate.
Nothing shall be charged for the services of the BIR
officers. What does that certificate contain? 1) the name of the
taxpayer; 2) the amount of the tax; 3) the description of the
Supposing there are no bidders. property sought to be levied.
Section 212. Purchase by Government at Sale Upon What is the extent of the efficacy of this certificate? It has
Distraint. - When the amount bid for the property under the force and effect throughout the Philippines. Anywhere
distraint is not equal to the amount of the tax or is very from Apari to Jolo .
much less than the actual market value of the articles
offered for sale, the Commissioner or his deputy may How is the Levy effected? It is not enough that the
purchase the same in behalf of the national Government certificate is issued. The BIR must issue the certificate to
for the amount of taxes, penalties and costs due thereon. two persons – 1) to the ROD where the property is located;
and 2) the taxpayer must also be served of the certificate.
Property so purchased may be resold by the Commissioner
or his deputy, subject to the rules and regulations What happens if there is an invalid service of the
prescribed by the Secretary of Finance, the net proceeds certificate? The entire proceeding for levy is null and void.
therefrom shall be remitted to the National Treasury and
accounted for as internal revenue. What if the taxpayer is absent or he has already
absconded? It may be served to his agent, to the manager
This is forfeiture of personal properties which are unsold. of his business or if there is none, to the occupant of the
When will this happen? property.
1) When the amount bid for the property under
distraint is not equal to the amount of the tax If the Levy is issued after the noticedistraint and the
2) orthe amount of bid is very much less than the proceeds of the distraint is not enough, the CIR shall
actual market value of the articles offered for sale proceed with its execution of the distraint and proceed with
the levy.. (inaudible but refer to 207 paragraph 5)
If that happens the BIR may consider the personal property
garnished or distraint as sold in favor of the government, Sabihinnatin there is simultaneous, -----, the first auction
the consideration is the amount of taxes. The government sale that will happen is for the personal property.
has the option to resell these properties. Unahinang personal property bagoang real property.
As to the advertisement..
II) Levy
Section 213. Advertisement and Sale. - Within twenty (20)
Levy is an act of collecting the tax by means of seizing real days after levy, the officer conducting the proceedings shall
properties in order to be sold at a public auction and the proceed to advertise the property or a usable portion
proceeds shall be used to satisfy a tax delinquency. thereof as may be necessary to satisfy the claim and cost
of sale; and such advertisement shall cover a period of a
The remedy of distraint and levy can be availed either least thirty (30) days. It shall be effectuated by posting a
successively or simultaneously. There is no hierarchy of notice at the main entrance of the municipal building or city
remedies. hall and in public and conspicuous place in the barrio or
district in which the real estate lies and ;by publication once
30 | P a g e
a week for three (3) weeks in a newspaper of general 2) Publication- Publication once a week for three
circulation in the municipality or city where the property is (3) weeks in a newspaper of general circulation in the
located. The advertisement shall contain a statement of the municipality or city where the property is located.
amount of taxes and penalties so due and the time and
place of sale, the name of the taxpayer against whom How will the advertisement go?
taxes are levied, and a short description of the property to It will run for a period of at least 30 days.
be sold. At any time before the day fixed for the sale, the
taxpayer may discontinue all proceedings by paying the What are the contents of this ad?
taxes, penalties and interest. If he does not do so, the sale 1. a statement of the amount of taxes and penalties so
shall proceed and shall be held either at the main entrance due;
of the municipal building or city hall, or on the premises to 2. the time and place of sale;
be sold, as the officer conducting the proceedings shall 3. the name of the taxpayer against whom taxes are
determine and as the notice of sale shall specify. levied; and
4. a short description of the property to be sold.
Within five (5) days after the sale, a return by the
distraining or levying officer of the proceedings shall be Even if there is already a posting or publication, the
entered upon the records of the Revenue Collection taxpayer may stop the proceedings for levy or the public
Officer, the Revenue District officer and the Revenue auction. The taxpayer will have to pay the taxes, interests
Regional Director. The Revenue Collection Officer, in and the cost of the sale. This is “the taxpayer’s right of
consultation with the Revenue district Officer, shall then preemption”.
make out and deliver to the purchaser a certificate from his
records, showing the proceedings of the sale, describing Supposing the taxpayer does not exercise his right of
the property sold stating the name of the purchaser and preemption, the sale will now proceed. It shall be held
setting out the exact amount of all taxes, penalties and either at the main entrance of the municipal or the city hall,
interest: Provided, however, That in case the proceeds of oron the premises to be sold, as the officer conducting the
the sale exceeds the claim and cost of sale, the excess proceedings shall determine and as the notice of sale shall
shall be turned over to the owner of the property. specify.
The Revenue Collection Officer, upon approval by the The place of sale must always be indicated to that the
Revenue District Officer may, out of his collection, advance taxpayer will know when/where the sale will occur. This is
an amount sufficient to defray the costs of collection by an important aspect of the due process because even the
means of the summary remedies provided for in this Code, taxpayer may become the prospective bidder of the
including ;the preservation or transportation in case of property.
personal property, and the advertisement and subsequent
sale, both in cases of personal and real property including After the sale there will be a return…
improvements found on the latter. In his monthly collection
reports, such advances shall be reflected and supported by Within five (5) days after the sale, a return by the
receipts. distraining or levying officer of the proceedings shall be
entered upon the records of the Revenue Collection
This one is the major distinguishing factor between the levy Officer, the Revenue District officer and the Revenue
and distraint. In levy, there will be an advertisement of sale. Regional Director. The Revenue Collection Officer, in
When it comes to distraint, it is posting of notices. consultation with the Revenue district Officer, shall then
make out and deliver to the purchaser a certificate from his
When will the ad for sale happen? records, showing the proceedings of the sale, describing
the property sold stating the name of the purchaser and
This will happen 20 days after the levy. The advertisement setting out the exact amount of all taxes, penalties and
will be for the entire property or a portion thereof that will interest: Provided, however, That in case the proceeds of
satisfy the claim for the unpaid taxes, together with all the the sale exceeds the claim and cost of sale, the excess
penalties and all the expenses of the sale. shall be turned over to the owner of the property.
How will the ad of the sale be effected? If you have any excess on the proceeds of the auction sale,
1) it shall be posted - Posting a notice at the main the excess shall be turned over to the taxpayer.
entrance of the municipal building or city hall and in public
and conspicuous place in the barrio or district in which the What is the remedy of the taxpayer in case hindisyamaka
real estate lies; and exercise ng right of preemption and the property is
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eventually sold to the purchaser? The remedy of the declare the property forfeited to the Government in
taxpayer here is his right of redemption. satisfaction of the claim in question and within two (2) days
thereafter, shall make a return of his proceedings and the
Section 214. Redemption of Property Sold. - Within one forfeiture which shall be spread upon the records of his
(1) year from the date of sale, the delinquent taxpayer, or office. It shall be the duty of the Register of Deeds
any one for him, shall have the right of paying to the concerned, upon registration with his office of any such
Revenue District Officer the amount of the public taxes, declaration of forfeiture, to transfer the title of the property
penalties, and interest thereon from the date of forfeited to the Government without the necessity of an
delinquency to the date of sale, together with interest on order from a competent court.
said purchase price at the rate of fifteen percent (15%) per
annum from the date of purchase to the date of Within one (1) year from the date of such forfeiture, the
redemption, and such payment shall entitle the person taxpayer, or any one for him may redeem said property by
paying to the delivery of the certificate issued to the paying to the Commissioner or the latter's Revenue
purchaser and a certificate from the said Revenue District Collection Officer the full amount of the taxes and
Officer that he has thus redeemed the property, and the penalties, together with interest thereon and the costs of
Revenue District Officer shall forthwith pay over to the sale, but if the property be not thus redeemed, the
purchaser the amount by which such property has thus forfeiture shall become absolute.
been redeemed, and said property thereafter shall be free
form the lien of such taxes and penalties. When will there be forfeiture of real property in favor the
government?
The owner shall not, however, be deprived of the 1)case there is no bidder for real property
possession of the said property and shall be entitled to the exposed for sale
rents and other income thereof until the expiration of the 2) or if the highest bid is for an amount
time allowed for its redemption. insufficient to pay the taxes, penalties and costs
The taxpayer has 1 year within the date of sale to pay the How is it effected?
revenue district officer the amount of taxes including the
interest of such purchase price at a rate of 15% per annum The BIR officer will declare the property forfeited in favor of
from the date of purchase to the date of redemption and the government within 2 days after the conduct of sale.
such payment shall entitle the person paying to the delivery Even if the property is forfeited in favor of the government,
of the certificate issued to the purchaser and a certificate it does not really affect the taxpayers right to redeem the
from the said Revenue District Officer that he has thus property within 1 year.
redeemed the property.
If the taxpayer was not able to redeem, then the forfeiture
It is the RDO that will deliver the amount of the purchase becomes absolute and if he redeems, he gets back the
price to the purchaser and the taxpayer shall redeem the property.
property.
If the property is forfeited, it becomes absolutely owned by
Within the 1 year redemption period, the owner of the the government and the government should be allowed to
property or the taxpayer is entitled to possess the property resell the property forfeited.
including the benefits of that property as long as the
redemption period has not yet expired. Section 216. Resale of Real Estate Taken for Taxes. - The
Commissioner shall have charge of any real estate
If there is a failure to redeem the property, and there is a obtained by the Government of the Philippines in payment
consolidation of ownership, a final deed shall be issued in or satisfaction of taxes, penalties or costs arising under this
favor of the purchaser. Code or in compromise or adjustment of any claim
therefore, and said Commissioner may, upon the giving of
What if there are no bidders for the property? not less than twenty (20) days notice, sell and dispose of
the same of public auction or with prior approval of the
There will be forfeiture in favor of the government. Secretary of Finance, dispose of the same at private sale.
In either case, the proceeds of the sale shall be deposited
Section 215. Forfeiture to Government for Want of Bidder. with the National Treasury, and an accounting of the same
- In case there is no bidder for real property exposed for shall rendered to the Chairman of the Commission on
sale as herein above provided or if the highest bid is for an Audit.
amount insufficient to pay the taxes, penalties and costs,
the Internal Revenue Officer conducting the sale shall Section 217. Further Distraint or Levy. - The remedy by
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distraint of personal property and levy on realty may be of the Commissioner.

repeated if necessary until the full amount due, including all
expenses, is collected.
These provisions involve Judicial Proceedings. When it
Supports the principle that there is no hierarchy of comes to civil or criminal actions for recovery of taxes or
remedies. Even if there is already a distraint or levy but the enforcement of any penalty or forfeiture, they cannot be
proceeds are not enough to cover the liabilities, the BIR will filed in court without the approval of the commissioner.
still proceed with a distraint or levy until the full amount is
satisfied.
March 14, 2017
Section 219. Nature and Extent of Tax Lien. - If any (By: Arjan Uy)
person, corporation, partnership, joint-account (cuentas en
participacion), association or insurance company liable to SEC. 204. Authority of the Commissioner to
pay an internal revenue tax, neglects or refuses to pay the Compromise, Abate and Refund or Credit Taxes. -
same after demand, the amount shall be a lien in favor of The Commissioner may -
the Government of the Philippines from the time when the (A) Compromise the payment of any internal revenue
assessment was made by the Commissioner until paid, tax, when:
with interests, penalties, and costs that may accrue in (1) A reasonable doubt as to the validity of the claim
addition thereto upon all property and rights to property against the taxpayer exists; or
belonging to the taxpayer: Provided, That this lien shall not (2) The financial position of the taxpayer demonstrates
be valid against any mortgagee purchaser or judgment a clear inability to pay the assessed tax.
creditor until notice of such lien shall be filed by the Xxx
Commissioner in the office of the Register of Deeds of the
province or city where the property of the taxpayer is
situated or located. How do you define compromise? The Tax Code
uses the definition found in the Civil Code. Article 2028 of
A tax lien is a legal claim or charge to the property whether the Civil Code says that“A compromise is a contract
real or personal as a security for a tax obligation. Take note whereby the parties, by making reciprocal concessions,
that this lien is available to third persons if the same is avoid a litigation or put an end to one already commenced.”
registered in the Registry of deeds of the province or city So basically this is an agreement about parties. I found a
where the property of the taxpayer is situated or located Supreme Court decision, I forgot the citation that defines a
(2016 TSN). compromise penalty. A compromise penalty is a penalty
that is imposed by the BIR with the concurrence of the
What is the coverage of a tax lein? taxpayer. Without the consent of the taxpayer, the BIR
It covers both personal and real properties. cannot impose such compromise penalty. But its one of the
ways the BIR makes money. The amount is based on the
Tax Lien under the NIRC: any internal revenue tax. There tax assessment.
are as many tax liens as there are internal revenue tax.
The law allows the taxpayer and the BIR to enter
into a compromise. Compromise is actually encouraged.
Section 220. Form and Mode of Proceeding in Actions Yan yung gusto ng BIR. Can all tax cases be subject to
Arising under this Code. - Civil and criminal actions and compromise? No.
proceedings instituted in behalf of the Government under
the authority of this Code or other law enforced by the What are the cases that cannot be compromised?
Bureau of Internal Revenue shall be brought in the name of
the Government of the Philippines and shall be conducted 1. Withholding tax cases, unless the applicant-
by legal officers of the Bureau of Internal Revenue but no taxpayer invoke provisions of law that cast doubt
civil or criminal action for the recovery of taxes or the on the taxpayer’s obligation to withhold;
enforcement of any fine, penalty or forfeiture under this 2. Criminal tax fraud cases
Code shall be filed in court without the approval of the 3. Criminal violation already filed in court
Commissioner. 4. Delinquent accounts with duly approved
schedule of installment payments;
Section 221. Remedy for Enforcement of Statutory Penal 5. Cases which have become final and executory
Provisions. - The remedy for enforcement of statutory after a final judgment in court when the ground
penalties of all sorts shall be by criminal or civil action, as for for compromise where there is doubtful
the particular situation may require, subject to the approval validity of the assessment
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6. Estate tax cases where compromise is requested 4. The taxpayer is a compensation income earner
on the ground of financial incapacity of the with no other source of income and the family’s
taxpayer gross monthly compensation income does not
exceed the levels of compensation income, and it
If the criminal case is not yet filed in court, it can appears that the taxpayer possesses no other
actually be subject to compromise. Take note that there are leviable or distrainable assets, other than his
only two grounds under the NIRC for the compromise of family home; or
tax liability: (a) reasonable doubt as to the validity of the 5. The taxpayer has been declared by any
assessment against the taxpayer and (b) financial competent tribunal/authority/body/government
incapacity of the taxpayer to pay. When is there doubtful agency as bankrupt or insolvent.
validity of the assessment? There are theories that say in
the revenue regulations that indicate doubtful validity of the What are the grounds for denial of tax compromise?
assessment:
1. The taxpayer has an existing tax credit
1. When the delinquent account is one resulting certificate;
from a jeopardy assessment; 2. The taxpayer has a pending claim for tax refund
2. The assessment seems to be arbitrary in nature or tax credit before the BIR or the courts;
based on assumptions and lacking factual and 3. The taxpayer has an existing a compromise
legal basis; agreement;
3. Taxpayer failed to file an administrative protest 4. The taxpayer has an investment that could result
on the ground of lack of receipt of notice; into an increase in equity;
4. Assessment based on best evidence rule when 5. Presence of circumstances which place the
there is reason to believe there is more sufficient taxpayer’s inability to pay in serious doubt
and competent evidence;
5. The assessment was issued within the SEC. 204. Authority of the Commissioner to
prescriptive period for assessment as extended Compromise, Abate and Refund or Credit Taxes. –
by the taxpayer’s execution of Waiver of the xxx
Statute of Limitations the validity or authenticity The compromise settlement of any tax liability shall be
of which is being questioned or at issue and subject to the following minimum amounts:
there is strong reason to believe and evidence to For cases of financial incapacity, a minimum
prove that it is not authentic ; or compromise rate equivalent to ten percent (10%) of the
6. The assessment is based on an issue where the basic assessed tax; and
court of competent jurisdiction made an adverse For other cases, a minimum compromise rate
decision against the Bureau, but which the equivalent to forty percent (40%) of the basic assessed
Supreme Court has not decided upon finality. tax.
Where the basic tax involved exceeds One million
What are the different situations that constitute financial pesos (P1,000.000) or where the settlement offered is
inability to pay the tax? less than the prescribed minimum rates, the
compromise shall be subject to the approval of the
1. The corporation ceased operation or is already Evaluation Board which shall be composed of the
dissolved or Commissioner and the four (4) Deputy Commissioners.
2. The taxpayer, as reflected in its latest Balance Xxx
Sheet supposed to be filed with the Bureau of
Internal Revenue, is suffering from surplus or
earnings deficit resulting to impairment in the What is necessary in the compromise based on
original capital by at least 50%; or the ground of financial incapacity is that the taxpayer must
3. The taxpayer is suffering from a net worth deficit sign a waiver of the Bank Secrecy Law. When you talk
(total liabilities exceed total assets) computed by about compromise, there is a minimum compromise
deducting total liabilities (net of deferred credits amount by the BIR. Hindi pwede ma zero ang BIR. It is a
and amounts payable to stockholders/owners reduction of tax. If the ground if financial incapacity, the
reflected as liabilities, except business related taxpayer can go as low as 10% of the basic assessed tax.
transactions) from total assets (net of prepaid If the grounds is other grounds, the taxpayer can go as low
expenses, deferred charges, pre-operating as 40%. You can go lower but you will need the approval of
expenses, as well as appraisal increases in fixed the National Evaluation Board. So who approves of the
assets), taken from the latest audited financial compromise? First, you have the Regional Evaluation
statements; or Board. These are for assessments issued by the Regional
Office and which involve amounts not exceeding P500,000
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or involve minor criminal offenses. Second, you have the taxes or penalties shall be allowed unless the taxpayer
National Evaluation Board for assessments by the National files in writing with the Commissioner a claim for credit
Office for assessments exceeding P 500,000. or refund within two (2) years after the payment of the
tax or penalty: Provided, however, That a return filed
Now is there a conflict between the P 1 million showing an overpayment shall be considered as a
provided in Section 204? I don’t think there is a conflict written claim for credit or refund.
because I think what the P 1 million there refers to a A Tax Credit Certificate validly issued under the
compromise amount that goes below the compromisable provisions of this Code may be applied against any
amount or the floor. So I don’t think there Is a conflict. internal revenue tax, excluding withholding taxes, for
which the taxpayer is directly liable. Any request for
SEC. 204. Authority of the Commissioner to conversion into refund of unutilized tax credits may be
Compromise, Abate and Refund or Credit Taxes. – allowed, subject to the provisions of Section 230 of
xxx this Code: Provided, That the original copy of the Tax
(B) Abate or cancel a tax liability, when: Credit Certificate showing a creditable balance is
(1) The tax or any portion thereof appears to be surrendered to the appropriate revenue officer for
unjustly or excessively assessed; or verification and cancellation: Provided, further, That in
(2) The administration and collection costs involved do no case shall a tax refund be given resulting from
not justify the collection of the amount due. availment of incentives granted pursuant to special
All criminal violations may be compromised except: (a) laws for which no actual payment was made.
those already filed in court, or (b) those involving The Commissioner shall submit to the Chairmen of the
fraud. Committee on Ways and Means of both the Senate and
Xxx House of Representatives, every six (6) months, a
report on the exercise of his powers under this
Section, stating therein the following facts and
To compromise is to reduce but to about is to information, among others: names and addresses of
remove. What are the grounds for abatement of taxes? (a) taxpayers whose cases have been the subject of
unjust and excessive tax assessment and (b) when abatement or compromise; amount involved; amount
administration and collection costs involved do not justify compromised or abated; and reasons for the exercise
the collection of the amount due. of power: Provided, That the said report shall be
presented to the Oversight Committee in Congress that
Distinctions between Compromise and Abatement
shall be constituted to determine that said powers are
a) As to definition, compromise if the reduction of the reasonably exercised and that the Government is not
taxpayers liability while abatement is the cancellation of the unduly deprived of revenues.
taxpayer’s liability
b) As to authority, compromise can be effected by CIR, What are the grounds for tax refund?
NEB or REB while abatement is solely within the CIR’s
a) Credit or refund taxes erroneously or illegally
authority
received;
c) As to grounds, compromise is based on (a) reasonable b) Credit or refund penalties imposed without
doubt as to the validity of the assessment or (b) financial authority;
incapacity of the taxpayer while abatement is based on (a) c) Credit or refund any sum of money alleged to
unjust and excessive tax assessment and (b) when have been excessively or in any manner
administration and collection costs involved do not justify wrongfully collected;
the collection of the amount due d) Refund the value of internal revenue stamps
when they are returned in good condition by the
SEC. 204. Authority of the Commissioner to purchaser;
Compromise, Abate and Refund or Credit Taxes. – e) In the discretion of the Commissioner, redeem or
xxx change unused stamps that have been rendered
(C) Credit or refund taxes erroneously or illegally unfit for use and refund their value upon proof of
received or penalties imposed without authority, destruction.
refund the value of internal revenue stamps when they f) The taxpayer is actually tax exempt
are returned in good condition by the purchaser, and, Is tax refund the same with tax credit? They are
in his discretion, redeem or change unused stamps similar in the sense that there is a return to the taxpayer.
that have been rendered unfit for use and refund their But when you talk about tax refund, there is actual return of
value upon proof of destruction. No credit or refund of
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money. When we talk about tax credit certificate, you are Most often than not there will be a discrepancy
given a certificate which you can apply against internal between the tax paid by the corporation and the actual
revenue tax except withholding tax. What is the nature of a liability of the corporation. So kung malakiangnabayaranng
tax refund? It is in the nature of a tax exemption. So all the corporation, the taxpayer has two options: carry over or
principles you have learned on tax exemptions, you apply apply for tax credit certificate. Once the choice is made,
that to tax refunds. There is strict construction and the tax such would be irrevocable.
payer must prove the law and the factual basis of the
refund. In Philippine Phosphate Fertilizer versus CIR, SEC. 112. Refunds or Tax Credits of Input Tax. -
the Supreme Court ruled that the general rule is that there (A) Zero-rated or Effectively Zero-rated Sales. - Any
is a strict construction against tax refund. VAT-registered person, whose sales are zero-rated or
effectively zero-rated may, within two (2) years after
But take note of the Fortune Tobacco versus CIR the close of the taxable quarter when the sales were
case. Tax refunds (or tax credits), on the other hand, are made, apply for the issuance of a tax credit certificate
not founded principally on legislative grace but on the legal or refund of creditable input tax due or paid
principle which underlies all quasi-contracts abhorring a attributable to such sales, except transitional input tax,
persons unjust enrichment at the expense of another. The to the extent that such input tax has not been applied
dynamic of erroneous payment of tax fits to a tee the against output tax: Provided, however, That in the case
prototypic quasi-contract, solutioindebiti, which covers not of zero-rated sales under Section 106(A)(2)(a)(1), (2)
only mistake in fact but also mistake in law. Meaning if the and (b) and Section 108 (B)(1) and (2), the acceptable
law does not provide any tax imposition, the tax refund foreign currency exchange proceeds thereof had been
should be interpreted in favor of the taxpayer. If the law duly accounted for in accordance with the rules and
does not provide tax, we apply the general rule of regulations of the BangkoSentralngPilipinas (BSP):
interpretation of taxation meaning there is construction in Provided, further, That where the taxpayer is engaged
favor of the taxpayer. in zero-rated or effectively zero-rated sale and also in
taxable or exempt sale of goods of properties or
When you talk about tax refund there are many sections in services, and the amount of creditable input tax due or
tax refund, such as those we discussed way back in Tax 1. paid cannot be directly and entirely attributed to any
one of the transactions, it shall be allocated
SEC. 76. - Final Adjustment Return. - Every corporation proportionately on the basis of the volume of sales.
liable to tax under Section 27 shall file a final Provided, finally, That for a person making sales that
adjustment return covering the total taxable income for are zero-rated under Section 108(B) (6), the input taxes
the preceding calendar or fiscal year. If the sum of the shall be allocated ratably between his zero-rated and
quarterly tax payments made during the said taxable non-zero-rated sales.
year is not equal to the total tax due on the entire
taxable income of that year, the corporation shall
either: So take note of the period for application of the
(A) Pay the balance of tax still due; or tax refund: within two (2) years after the close of the
(B) Carry-over the excess credit; or taxable quarter when the sales were made. Diba the
(C) Be credited or refunded with the excess amount taxpayer has the option to appeal within 30 days from the
paid, as the case may be. decision of the CTA then you go to the CTA en banc then
In case the corporation is entitled to a tax credit or you go to the Supreme Court. If the taxpayer does not
refund of the excess estimated quarterly income taxes receive any decision from the BIR at the end of the 120 day
paid, the excess amount shown on its final adjustment period. What happens if he files during the 120 day period?
return may be carried over and credited against the The case is premature and susceptible to dismissal. The
estimated quarterly income tax liabilities for the 120+30 day period is mandatory and jurisdictional.
taxable quarters of the suceeding taxable years. Once
the option to carry-over and apply the excess quarterly Last is mentioned in Section 204(C). Take note
income tax against income tax due for the taxable that Section 204(C) must be read together with Section
quarters of the succeeding taxable years has been 229.
made, such option shall be considered irrevocable for
that taxable period and no application for cash refund SEC. 229. Recovery of Tax Erroneously or Illegally
or issuance of a tax credit certificate shall be allowed Collected. - no suit or proceeding shall be maintained
therefor. in any court for the recovery of any national internal
revenue tax hereafter alleged to have been erroneously
or illegally assessed or collected, or of any penalty
claimed to have been collected without authority, of
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any sum alleged to have been excessively or in any tax is imposed by statute. However, in case the taxpayer
manner wrongfully collected without authority, or of does not file a claim for refund, the withholding agent may
any sum alleged to have been excessively or in any file the claim. But while the withholding agent has the right
manner wrongfully collected, until a claim for refund or to recover the taxes erroneously or illegally collected, he
credit has been duly filed with the Commissioner; but nevertheless has the obligation to remit the same to the
such suit or proceeding may be maintained, whether or principal taxpayer.
not such tax, penalty, or sum has been paid under
protest or duress. When should the taxpayer pay the refund? Two years
In any case, no such suit or proceeding shall be filed from the date of erroneous payment. But if the payment is
after the expiration of two (2) years from the date of by installment, you reckon the two year period from the
payment of the tax or penalty regardless of any date of the payment of the last installment. In case of
supervening cause that may arise after payment: corporation, you file it on the date of the filing of the final
Provided, however, That the Commissioner may, even assessment return. What if there is an adverse decision
without a written claim therefor, refund or credit any from the CIR? The CIR will not grant a refund, so what will
tax, where on the face of the return upon which you do?>You have 30 days from the receipt of the decision
payment was made, such payment appears clearly to to appeal to the Court of Tax Appeals. Take note that the
have been erroneously paid. judicial claim for refund must be filed within the two year
period. What if you filed your administrative claim within the
two year period, then a decision came out, you wait for
What are the items covered under the Commissioner’s thirty days, then you appeal to the CTA beyond the two
power to refund under 204? year period? It means you can no longer claim for refund.
Look at Section 229: In any case, no such suit or
1) Taxes erroneously and illegally received proceeding shall be filed after the expiration of two (2)
2) Penalties imposed without any authority years from the date of payment of the tax or penalty
3) Sum of money excessively or wrongfully regardless of any supervening cause that may arise after
collected payment. So the claim referred to in Section229 refers to
4) Internal revenue stamps when they are returned administrative and judicial claim. So actually
in good condition by the purchaser pwedenasabaymo I file.
5) Redeem or change unused stamps upon proof of
their destruction Lastly, what are the instances where the two year
period can be suspended? (1) There is an agreement
What are the two conditions for refund to be allowed? between the CIR and the taxpayer and (2) That the
(1) evidence to show erroneous collection of tax and (2) a taxpayer was made to believe by the CIR that the
written application 2 years from the time tax was paid. If overpayment would be credited to other tax liabilities.
you talk about VAT, then you apply the VAT provisions.
What if the ground is erroneous collection of the VAT. SEC. 230. Forfeiture of Cash Refund and of Tax Credit.
When it comes to erroneous collection of taxes, the proper -
provision is Section 204(C) in relation to 229. (A) Forfeiture of Refund. - A refund check or warrant
issued in accordance with the pertinent provisions of
What is the quantum of proof for tax refund? this Code, which shall remain unclaimed or uncashed
Preponderance of evidence. Section 204(C) also says that within five (5) years from the date the said warrant or
when there is a return filed showing an overpayment shall check was mailed or delivered, shall be forfeited in
be considered as a written claim for credit or refund.Sa favor of the Government and the amount thereof shall
previous na tax law walaito. Take note of that. IS there an revert to the general fund.
instance where there no application for tax refund yet the (B) Forfeiture of Tax Credit. - A tax credit certificate
Commissioner grants a tax refund? Yes. Take note of the issued in accordance with the pertinent provisions of
last paragraph of Section 229: Provided, however, That the this Code, which shall remain unutilized after five (5)
Commissioner may, even without a written claim therefor, years from the date of issue, shall, unless revalidated,
refund or credit any tax, where on the face of the return be considered invalid, and shall not be allowed as
upon which payment was made, such payment appears payment for internal revenue tax liabilities of the
clearly to have been erroneously paid. taxpayer, and the amount covered by the certificate
shall revert to the general fund.
Who may claim the tax refund? It is the statutory
taxpayer. But there are instances where the withholding
agent is allowed to claim the tax refund. The person Take note that you must use the refund and the
entitled to claim the refund or tax credit is the person who tax credit within 5 years.
is statutorily liable to that tax or the person on whom the
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March 21, 2017

(By: Maria Jessa Noble) Section 129. Power to Create Sources of Revenue. -
Each local government unit shall exercise its power to
LOCAL GOVERNMENT TAXATION create its own sources of revenue and to levy taxes, fees,
and charges subject to the provisions herein, consistent
The local government taxation would, of course, with the basic policy of local autonomy. Such taxes, fees,
involve the Local Government Code. and charges shall accrue exclusively to the local
government units.
Local government taxes are enforced
contributions generally payable in money, proportionate in So, that is how the local government can raise
character, levied on persons, properties, or exercise of a money aside from doing its proprietary functions. The local
right or privilege by local government unit having government can engage in business.
jurisdiction through its legislature for public purpose and
paid at a regular period or intervals. Just take note, the basic principles we had in Tax
1 also applies in Tax 2. Like pag sinabi nating taxes, the
When we talk about local government taxation, main purpose of these is for raising money, for revenue
we are talking about the revenue generating powers of a purposes. But when you talk of police powers, even when
local government unit (LGU) or a municipal corporation. there is an incidental revenue that is being generated if the
These taxes are imposed and collected by LGUs so that it main purpose is to regulate, then, it is an exercise of the
can raise money to enable the LGUs to perform its police power.
functions. The other term for local government taxes is
municipal taxes. Fundamental Principles of Local Government Taxation
There are many types of taxes which can be Section 130. Fundamental Principles. - The following
imposed by the local government code. It can impose its fundamental principles shall govern the exercise of the
own amusement taxes. It can impose its own business taxing and other revenue-raising powers of local
taxes. You also have the real property taxes. We will government units:
discuss some of it, hindi lahat.
(a) Taxation shall be uniform in each local
I won’t require you to memorize the rates government unit;
because there are no uniform rates but there is a ceiling, a
maximum amount by which the local government will
impose taxes. But there is no uniform rate for every local (b) Taxes, fees, charges and other impositions
government unit. Depende na iyon upon the income of a shall:
particular municipality, city, barangay, or province.
(1) be equitable and based as far as
What is the extent of the powers of the local practicable on the taxpayer's ability to
government to impose taxes? pay;
The extent of power is actually found in Sec. 128 (2) be levied and collected only for
of the Local Government Code. Actually, it’s a misnomer public purposes;
pag sinabi nating power of the local government to impose
taxes. Sabihin nalang natin revenue-generating power to (3) not be unjust, excessive,
be precise. oppressive, or confiscatory;
Sec. 128. Scope. The provisions herein shall govern the (4) not be contrary to law, public policy,
exercise by provinces, cities, municipalities, and barangays national economic policy, or in the
of their taxing and other revenue-raising powers. restraint of trade;
From this provision, we can immediately deduce
that the local government is not limited in the imposition of (c) The collection of local taxes, fees, charges
taxes. It can generate money through fees or other and other impositions shall in no case be let to
charges. In other words, this is a police power any private person;
complementing the taxing powers of the local government.
(d) The revenue collected pursuant to the
In fact, if you read the following provision: provisions of this Code shall inure solely to the
38 | P a g e
benefit of, and be subject to the disposition by, taxing authority. All subjects and objects of taxation which
the local government unit levying the tax, fee, are similarly situated are subject to the same price and
charge or other imposition unless otherwise burdens without discrimination and those subjects and
specifically provided herein; and, objects are found within the jurisdiction of the taxing entity.
So when you talk of the uniformity principle of local
(e) Each local government unit shall, as far as government taxation, it pertains more on the territorial
practicable, evolve a progressive system of concept.
taxation.
Cases
You will notice that we already discussed this way
back in Tax 1. This is similar with the general principles in Ormoc Sugar vs. Treasurer of Ormoc
Taxation. So, basically when we discuss these matters in
the concept of LGUs, you just think of Tax 1. It’s practically Facts: An ordinance was crafted by the local government
the same. unit and that ordinance specifically imposed taxes on a
specific corporation. As per the ordinance, the tax was on
any and all productions of centrifugal sugar milled at
1. Uniformity and equitable taxation Ormoc Sugar Company, Inc.
Is there a distinction between the two? Issue: Is there a violation of the uniformity principle?
When you browse through the Supreme Court Held: YES. You go back to the four requirements.
decisions touching on these matters, uniformity and
equality of taxation, the Supreme Court has already 1. There must be a substantial distinction.
revoked the delineation between the two. In fact, it Is there a substantial distinction? None. In fact,
practically means the same. Pag sinabi nating uniformity they were taxing only one corporation even
and equity, parehas lang ang sinasabi ng Supreme Court. during that time there was only one sugar mill.
But if you want to be more specific about it, equity of But what about the sugar mills that opened
taxation means that the tax must be based on one’s ability afterwards?
to pay. When we speak of equitability, equity, or equitable
taxation, you think of theoretical justice. It means that it 2. It is germane to the purpose of the law.
must be based on taxpayer’s ability to pay. Probably it is germane to the purpose of the law
because it is for the purpose of raising income
When you talk about uniformity of taxation, the
Supreme Court would say that uniformity has something to 3. It must apply to existing and future
do with equal protection clause. conditions. Again, this is violated.
What are the requisites of equal protection? Stated And lastly,

otherwise, what are the requirements so that the
classification or discrimination intended by law is valid? 4. It must apply to all members of the same
class. You consider the other sugar companies
a. There must be substantial distinction; doing the same business as Ormoc.
b. It must be germane to the purpose;
c. It applies to existing and future conditions; and
d. It must be equally applicable to the same class.
Associations of Customs Broker vs. Municipal Board
When you talk of equal protection clause, the keyword
is non-discrimination. When you talk about equal protection Facts: There was an ordinance passed in the City of
clause, the law allows a certain degree of discrimination. Manila. This ordinance involved vehicles. One of the
It’s allowed. It’s almost impossible for us to have an provisions of the ordinance confers the municipal board the
absolute non-discrimination. That’s why we have equal power to tax motor and other vehicles operating within the
protection clause. The law allows discrimination but it does City of Manila, the provision of any existing law to the
not allow arbitrary discrimination of subjects. contrary notwithstanding. It is an imposition of taxes over
vehicles operating in Manila. The purpose of this is actually
In local government code, a tax satisfies the to raise money for the rehabilitation, repair, maintenance
requirement of uniformity when it operates with the same and improvements of Manila’s streets and bridges.
force and effect within the territorial boundaries of the
39 | P a g e
Held: There is a violation of the uniformity principle. While pag sinabi natin siyang tax, probably, you can exceed the
it is true that the ordinance is for the raising of money for cost of regulation. Pag police power siya, it must not
the repairs and maintenance of Manila roads, the problem exceed the cost of regulation.
is the subject of taxation. What is the subject here? The
motor vehicles. Does it distinguish the motor vehicle? (2) If it is a tax, is it a valid exercise of the power to tax?
Tanan iyahang gi-tax. But what about those motor vehicles
that are just passing through Manila? Held: (1) The Supreme Court said that the police
inspection fee is actually a tax. The main purpose of this
What is the meaning of operation? In simple terms, it would actually to raise money for revenue purposes. But this is a
seem that the SC is saying that the tax ordinance is not police inspection fee. The Court observed what the police
germane to the purpose of the law. For road repairs lang will inspect. Would they be able to determine whether the
but you are going to tax only vehicles which are operating cassava is edible or not? There is no purpose at all except
in Manila. What about those people coming in? What do kung tan-awon lang na if it’s wheat or flour. It’s not
you understand of operating? Is it passing through Manila? regulating, it’s actually for raising money.
Or is it registered in Manila? Or is it any motor vehicles
registered? There is no distinction at all. (2) It is very oppressive. The average profit of entity or
people engaged in the same kind of business is P0.40 per
bag. How much is the tax? P0.30. So P0.10 nalang nabilin.
Next principle: So you are practically killing the business without any
reason at all.
2. Public purpose
Next principle:
It is self-explanatory. The heart of taxation is public
purpose. 4. Not contrary to law, public policy, national
economic policy, or in the restraint of trade;
3. Not unjust, excessive, oppressive, or
confiscatory; You correlate this with Section 133 of the Local
Government Code:
As a rule, the tax powers are general and plenary. The
power to tax is strongest inherent power of the Section 133. Common Limitations on the Taxing Powers of
government. The taxing authority can select the objects or Local Government Units. - Unless otherwise provided
the subjects of taxation including the rates, the manner of herein, the exercise of the taxing powers of provinces,
collection, and all other things that deals with taxation. cities, municipalities, and barangays shall not extend to the
levy of the following:
But when we talk of local government taxation, there are
limitations. If these limitations are violated, the local taxes (a) Income tax, except when levied on banks and
imposed by the municipalities or the municipal corporations other financial institutions;
may be invalidated on the ground that it is unjust,
excessive, oppressive or confiscatory.
(b) Documentary stamp tax;
Who determines whether or not a municipal ordinance or
an ordinance is unjust, excessive, oppressive, or (c) Taxes on estates, inheritance, gifts, legacies
confiscatory? It is actually the courts. While it is true that an and other acquisitions mortis causa, except as
ordinance is presumed to be valid, the final say as to the otherwise provided herein;
reasonableness of the law is within judicial inquiry.
(d) Customs duties, registration fees of vessel
An example of an unjust tax measure is in: and wharfage on wharves, tonnage dues, and all
other kinds of customs fees, charges and dues
Matalin Coconut vs. Municipality of Malabang except wharfage on wharves constructed and
maintained by the local government unit
Facts: This is a tax on cassava flour. A tax of P0.30 is concerned;
imposed per sack of cassava flour. This P0.30 tax is a
police inspection fee. This was challenged on the ground (e) Taxes, fees, and charges and other
that it was unreasonable, oppressive, and confiscatory. impositions upon goods carried into or out of, or
passing through, the territorial jurisdictions of
Issues: (1) Is the measure or the imposition a tax? Kasi local government units in the guise of charges for
40 | P a g e
wharfage, tolls for bridges or otherwise, or other It provides for the common limitations of the
taxes, fees, or charges in any form whatsoever taxing powers of the LGUs. We will discuss these items
upon such goods or merchandise; later on.
(f) Taxes, fees or charges on agricultural and What about restraint in trade? The prohibition on
aquatic products when sold by marginal farmers restraint on trade is actually found in Sec. 133 (e) of the
or fishermen; LGC:
(e) Taxes, fees, and charges and other

(g) Taxes on business enterprises certified to by
impositions upon goods carried into or out of, or
the Board of Investments as pioneer or non-
passing through, the territorial jurisdictions of
pioneer for a period of six (6) and four (4) years,
local government units in the guise of charges for
respectively from the date of registration;
wharfage, tolls for bridges or otherwise, or other
taxes, fees, or charges in any form whatsoever
(h) Excise taxes on articles enumerated under upon such goods or merchandise;
the national Internal Revenue Code, as
amended, and taxes, fees or charges on Example:
petroleum products;
The goods are from Gensan and you need it to deliver it to
(i) Percentage or value-added tax (VAT) on Tagum. Davao City cannot impose taxes because the
sales, barters or exchanges or similar trucks will use Davao roads. The LGU of Davao cannot do
transactions on goods or services except as that because of this prohibition.
otherwise provided herein;
Next principle:
(j) Taxes on the gross receipts of transportation
contractors and persons engaged in the 5. Collection not let to any private person
transportation of passengers or freight by hire
and common carriers by air, land or water, What is the meaning of “let”? To let is to award. In other
except as provided in this Code; words, the LGC prohibits the award for the collection of
taxes, fees and charges, or other impositions to any private
(k) Taxes on premiums paid by way or persons. Under the NIRC, meron tayong authorized agent
reinsurance or retrocession; banks. There’s no prohibition under the NIRC. In other
words, the collection of taxes under the NIRC is privatized.
But when you talk of the local government taxes, it’s
(l) Taxes, fees or charges for the registration of
always the city or municipal treasurer. So the local
motor vehicles and for the issuance of all kinds of
government cannot enact to facilitate the collection of taxes
licenses or permits for the driving thereof, except
through a private entity. It cannot be done by reason of this
tricycles;
specific limitation under the LGC.
(m) Taxes, fees, or other charges on Philippine Last principle:
products actually exported, except as otherwise
provided herein; 6. Progressive system of taxation
(n) Taxes, fees, or charges, on Countryside and There are more direct taxes than indirect taxes.
Barangay Business Enterprises and cooperatives
duly registered under R.A. No. 6810 and
Republic Act Numbered Sixty-nine hundred NATURE AND SOURCE OF THE TAXING POWERS
thirty-eight (R.A. No. 6938) otherwise known as
the "Cooperative Code of the Philippines" It is based on the Constitution. It’s in Article X Section 5
respectively; and of the 1987 Constitution:
(o) Taxes, fees or charges of any kind on the Sec. 5. Each local government unit shall have the power to
National Government, its agencies and create its own sources of revenues and to levy taxes, fees
instrumentalities, and local government units. and charges subject to such guidelines and limitations as
the Congress may provide, consistent with the basic policy
of local autonomy. Such taxes, fees, and charges shall
41 | P a g e
accrue exclusively to the local governments. of revenue. They don’t have to wait for a statutory grant for
this power.
Is this Constitutional provision self-executing?
So, it is a direct grant. If there is no local
What is the nature of the taxing powers of the LGU? Is it a government code, can a LGU enact an ordinance imposing
direct grant? Or is it merely a delegated power? taxes? Yes. So, what is the purpose of the local
government code then? The purpose of the LGC is to limit
and restrict the LGU’s power to impose local taxes. It’s the
same with Constitution’s purpose. It does not grant tax
Section 192. Authority to Grant Tax Exemption powers to the government, it merely limits the power of the
Privileges. - Local government units may, through government to tax. This is a form of limitation.
ordinances duly approved, grant tax exemptions, incentives
or reliefs under such terms and conditions as they may
deem necessary. TAX EXEMPTION
There are two points of view in this scenario, one is in the If the LGU has the power to tax, it has also the power to
case of: grant tax exemption.
Manila Electric Company vs. Province of Laguna Section 193. Withdrawal of Tax Exemption Privileges. -
Unless otherwise provided in this Code, tax exemptions or
Held: The Supreme Court said that all taxing powers are incentives granted to, or presently enjoyed by all persons,
lodged in the national legislature and the grant to any other whether natural or juridical, including government-owned or
body merely a delegation. controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-
In other words, the power to tax of the LGU is stock and non-profit hospitals and educational institutions,
merely delegated. are hereby withdrawn upon the effectivity of this Code.
But in subsequent cases like the National Power When did the LGC take effect? January 1, 1992.
Corporation and Batangas Power Corporation vs.
Batangas City (these are Tax 1 cases), the Supreme Court What is the scope of the withdrawal of the tax exemption?
said that the taxing power of the LGU is a direct grant and
not merely a delegated power. The power to tax in no General Rule: All tax exemptions granted prior to the
longer vested exclusively to the Congress. The LGUs are enactment or the effectivity of the LGC are hereby
now given the authority to levy taxes and fees. withdrawn.
But in Ferrer vs. Bautista (2015), this case is Exceptions:
about the garbage fees and social housing taxes. The
Supreme Court said that LGUs are able to legislate tax 1. Local water districts;
laws because of a valid delegation of legislative power from 2. Cooperative duly registered under the
the national legislature. The Supreme Court went back to Cooperative Code;
saying that the power of the LGUs to tax is actually a 3. Non-stock and non-profit hospitals; and
delegated power. 4. Educational institutions.
Which theory do we follow? Which brings us to the case of:
If you answer the bar exam, probably you can Smart Communications v. Davao City
cite Ferrer because this is the later case.
Smart is a telecommunications company. They are
Atty. Donalvo’s answer: This is actually a direct grant of the challenging the franchise taxes being imposed by the City
Constitution. There is a case that says: of Davao against them. Its franchise was granted under RA
7294 which was enacted after the local government code.
Quezon City vs. ABS-CBN According to them, they are going to pay a franchise tax to
G.R. 155408, October 5, 2008 the national government in lieu of all other taxes.
The Constitution confers to the municipal corporation a Issue: Is Smart exempt from the payment of franchise tax?
general power to levy taxes and otherwise create sources
42 | P a g e
Is Smart correct when it said the withdrawal of tax RESIDUAL POWERS OF THE LOCAL GOVERNMENT
exemption applies only to the franchise taxes prior to the UNIT
enactment of the LGC? The Supreme Court agreed to this
contention. Since Smart’s franchise was granted after the It may impose taxes not specifically listed in the
enactment of the LGC, it is no longer covered of the LGC, but you have to go back to the common limitations
withdrawal of the tax exemption. and the other limitations provided by the LGC and other
pertinent laws. This is under Sec. 186 of the LGC.
However, laws granting tax exemption is strictly construed
against the taxpayer. What are the things that you have to Section 186. Power To Levy Other Taxes, Fees or
do? Charges. - Local government units may exercise the
power to levy taxes, fees or charges on any base or
1. You must be able to prove the legal basis. You subject not otherwise specifically enumerated herein or
must be able to show clearly that you are taxed under the provisions of the National Internal
exempted from such kind of taxes. Revenue Code, as amended, or other applicable laws:
Provided, That the taxes, fees, or charges shall not be
2. You must also prove the factual basis. unjust, excessive, oppressive, confiscatory or contrary to
declared national policy: Provided, further, That the
In this case, the “in lieu of all taxes” clause in RA 7294 ordinance levying such taxes, fees or charges shall not be
does not apply to local taxation. The franchise itself was enacted without any prior public hearing conducted for the
not clear. The “in lieu of all taxes” clause does not purpose.
distinguish whether it is a local or national tax. Because of
the ambiguity of that provision, the doubt was resolved What are the two conditions?
against Smart. Thus, Smart was made to pay the local
franchise tax imposed by Davao City. 1. That the taxes, fees, or charges shall not be
unjust, excessive, oppressive, confiscatory or
The “in lieu of all taxes” clause apply only to national contrary to declared national policy; and
internal revenue taxes and not to local taxes.
2. That the ordinance levying such taxes, fees or
PENALTIES FOR VIOLATIONS charges shall not be enacted without any prior
public hearing conducted for the purpose.
Section 516. Penalties for Violation of Tax
Ordinances. - The sanggunian of a local government unit
is authorized to prescribe fines or other penalties for March 23, 2017
violation of tax ordinances but in no case shall such fines (By: Zarah Domingo)
be less than One thousand pesos (P1,000.00) nor more
than Five thousand pesos (P5,000.00), nor shall Relate the case of Film Development Council vs City of
imprisonment be less than one (1) month nor more than six Cebu to one of the fundamental principles of the revenue
(6) months. Such fine or other penalty, or both, shall be collecting powers of the Local Government Units
imposed at the discretion of the court. The sangguniang particularly Section 130(d).
barangay may prescribe a fine of not less than One
hundred pesos (P100.00) nor more than One thousand Sec. 130: Fundamental Principles: The following
pesos (P1,000.00). fundamental principles shall govern the exercise of the
taxing and other revenue-raising powers of local
ADJUSTMENT OF LOCAL TAX RATES government units: xxx
(d) The revenue collected pursuant to the provisions of this
Section 191. Authority of Local Government Units to Code shall inure solely to the benefit of, and be subject to
Adjust Rates of Tax Ordinances. - Local government disposition by, the local government unit levying the tax,
units shall have the authority to adjust the tax rates as fee, charge or other imposition unless otherwise
prescribed herein not oftener than once every five (5) specifically provided herein; and xxx
years, but in no case shall such adjustment exceed ten
percent (10%) of the rates fixed under this Code.
This particular proviso is taken from the fiscal
They can adjust from time to time. There are autonomy granted by the Constitution to the local
ceilings involved when it comes to the amounts of taxes government units.
that the local government may impose.
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Anyway, if you remember this Film Development what happened in this case is that the Congress made the
Council. This involves the clash between the taxing powers tax exemption.
of the State and the local government units. What
happened in this case (Film Development Council vs City What does the SC say about this argument:
of Cebu): There is no tax exemption at all. If you read the provisions
of the law, RA 9167, still the LGU is still allowed to tax
Basically, there is this city ordinance imposing these cinemas. But where does the money go? How do
amusement taxes on cinemas, theaters etc. May you execute the law? It is not a grant of tax exemption. It is
companion case ito. There was a revenue-measure affirming that the LGUs have the power to tax and yet, the
enacted by the City of Cebu sometime in 1992, and after a LGUs will be deprived of using the money generated from
decade, a new law was passed by Congress, RA 9167 that tax ordinance. That is why, this is still a violation of
which essentially created the Film Development Council of local fiscal autonomy.
the Philippines.
Probably there is something wrong with the
One of the provisions of that law is that, the wording of the law. Kung tax exemption nga,
amusement taxes which will be collected by the LGUs of sanatinawagnalangniyataposginawang tax agents ang
highly-urbanized cities and cities in Metro Manila will be LGUs to collect these fees and it will be given to the FDCs.
transferred to the FilmDevelopment Council (FDC). This So that is one thing I could think of. Hindi kasalananng
FDC will distribute this money to A or B dependesa LGU, it is the fault of Congress.
classification ng film shown in that particular city covered
by the law. Now, of course, the people concerned, Where did we end up last time? I think we are
especially the cinema and the City of Cebu complained now in the local taxing authorities under the LGC. To whom
about it that it’s actually a __ law, why will you collect the is the local taxing power granted? If we follow Tax 1, it is
amusement taxes, this will violate the local autonomy lodged with the legislative because we all know that the tax
granted to the local government units. FDC says that the powers is essentially a legislative function. Kaya nga I will
power of the municipal corporation or the LGUs to tax is always emphasize to my students, way back in Tax 1 that
merely a delegated power and that the Constitution would do not confuse the power to tax with the power to enforce
say that: (1) the tax powers of the LGUs is subject to the the tax. Pagsinabinating power to tax, it is a legislative
guidelines and limitations set forth by Congress; (2) laws function, kaya ngapagsinabinating “levying of taxes” it is
that will be passed by Congress may be amended later on. legislative in nature. It is tax legislation. In the context of
LGC, the power to tax is lodged to the appropriate
The main issue is whether RA 9167 is Sanggunian.
unconstitutional. Among other reasons, the Supreme Court
said that the law is unconstitutional. Yes, FDC is correct Why do I say that it should be the appropriate
when it said that the power to tax is merely a delegated Sanggunian? Appropriate legislative body because there
power (nagbaliknanamansiya, I don’t know kung are essentially 4 types of LGUs. (Refer to Sec 48 and Sec
angnaunaba ay yungFerrer o ito) The power to tax may be 132 of LGC):
delegated to the municipal corporations but “under the
present Constitution, where there is neither a grant nor a Sec 48. Local Legislative Power.- Local legislative power
prohibition by statute, the tax power of municipal shall be exercised by the sangguniangpanlalawigan for the
corporations must be deemed to exist although Congress province; the sangguniangpanlungsod for the city; the
may provide statutory limitations and guidelines.” But the sangguniangbayan for the municipality; and the
problem is Congress forgot the Constitutional provision: sangguniang barangay for the barangay.
Art. X, Sec 5:Each local government unit shall have the

power to create its own sources of revenues and to levy Sec 132.Local Taxing Authority. – The power to impose a
taxes, fees, and charges subject to such guidelines and tax, fee or charge or to generate revenue under this Code
limitations as the Congress may provide, consistent with shall be exercised by the sanggunian of the local
the basic policy of local autonomy. Such taxes, fees, and government unit concerned through an appropriate
charges shall accrue exclusively to the local governments. ordinance.
One of the questions raised here is that, you 1.) Provinces : SangguniangPanlalawigan
might ask, Sir, this is a grant of tax exemption. Yes, tama 2.) Cities: SangguniangPanlungsod
man, it is correct, we must not undermine the fiscal 3.) Municipalities: Sangguniang Bayan
autonomy granted to the LGUs, tama man. But actually, 4.) Barangay: Sanggunaing Barangay
44 | P a g e
Through what form should local taxes be? It should be already lapsed, you cannot appeal to the SOJ anymore.
in the form of ordinance. Ang argument namanngkabila, the 30 day period has no
time to be reckoned from. Why? Because there is no public
How is an ordinance different from a resolution? If you hearing, it is as if that the ordinance was not in effect at all.
look at the RRI, the RRI of LGC says that ordinances are You cannot appeal the ordinance at anytime before the
legislative actions of a general and permanent character. Secretary of Justice.
That is essentially the definition of an ordinance. So if the
measure of a local legislative is more or less permanent, Sabi ng Supreme Court, it did not comply with
they do it in the form of ordinances. Conversely, the procedure for enacting an ordinance because of failure
pagsinabing resolution, this is merely temporary in to comply on the rules on public hearing. When should
character, like to honor someone. Like for example, the public hearing be conducted? It must be made prior to the
debaters last time, they were honored by the local enactment of an ordinance.
sanggunian for winning the debate.
In OngsucovsMalones is quite difference. To
Let us go now to the procedure for approval and make the long story short, there was a proposed
effectivity. But this time, we will just be talking about local ordinance. Let’s say pinalabasang ordinance today, and
tax laws. then 5 days thereafter, nakaschedulenaang public hearing.
If you read the rules and regulations implementing the
Sec 187. Procedure for Approval and Effectivity of Tax LGC, the public hearing should be conducted not earlier
Ordinances and Revenue Measures ; Mandatory Public than 10 days after the sending out of notices. So anyway,
Hearings.-- The procedure for approval of local tax the law took into effect and thereafter, nagconductulitng
ordinances and revenue measures shall be in accordance public hearing essentially to correct the previous problem.
with the provisions of this Code: Provided, That public What was the imposition involved here? Not a form of tax
hearings shall be conducted for the purpose prior to the but actually, rentals and goodwill fees.
enactment thereof: Provided, further, That any question on Magincreaseangrentangmga public market stalls. The
the constitutionality or legality of tax ordinances or revenue argument of the Mayor is that, this is not a tax ordinance
measures may be raised on appeal within thirty (30) days but just rents and goodwills.
from the effectivity thereof to the Secretary of Justice who
shall render a decision within sixty (60) days from the date There are 2 issues here. (1) What is the nature of
of receipt of the appeal: Provided, however, That such the imposition? Rentals and goodwill fees. (2) Is there a
appeal shall not have the effect of suspending the need for public hearing requirement in this case? Sabing
effectivity of the ordinance and the accrual and payment of Supreme Court, the rental and goodwill fees are not taxes.
the tax, fee or charge levied therein: Provided, finally, That They are in the exercise of the or police power function ng
within thirty (30) days after receipt of the decision or the local government. But it does not mean that if it is not
lapse of the sixty-day period without the Secretary of taxes, you need not comply with the public hearing
Justice acting upon the appeal, the aggrieved party may requirement. Because if you read the law again, “procedure
file appropriate proceedings with a court of competent for approval and effectivity of tax ordinances and revenue
jurisdiction. measures.” Meaning the revenue sources of a local
government is not merely limited to taxes, it includes other
sources diba? As long as the purpose of that is revenue
How is a tax ordinance initiated? First, there must generating, then a public hearing should be conducted.
be a proposal. The proposed ordinance should be in
writing, hindipwedeangmagyawyawka lang. Then there will So kailanganng public hearing. And then, the City
be a mandatory public hearing (refer to Sec 187). Mayor says, we actually conducted a public hearing, yes
we conducted it earlier than that stated in the revenue
The question is, when should the public hearing regulations but then we conducted a public hearing after
be conducted? That is answered in Reyes vs CA. What that, in fact in a few months just to comply with the public
happened here. hearing requirements in effect the people are already
notified of the increases. But the Supreme Court said no.
There was a tax ordinance which took effect You must comply with the notice requirements because
sometime in September 9, 1992. Then somebody appealed this is an element of due process. The law specifically says
it to the Secretary of Justice sometime in 1993. Later on, that public hearings should be conducted prior to the
you will learn that in case an ordinance will be approved, enactment of the city ordinance.
the taxpayer or the aggrieved party will appeal to the
Secretary of Justice within 30 days from the effectivity of Let’s move on. Now, who has the burden of proof
the ordinance, but here, they appealed around 6 months that public hearings were not conducted? The burden of
thereafter na.Angdefenseng City, the 30 day period has
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proof lies with the person or entities that alleges lack of If the Sanggunian finds out that the ordinance or
publication. resolution is beyond the power of the
SangguniangPanglungsod or the Sangguniang Bayan
This is kinda weird for me I think. This is one of concerned, as the case may be, then it shall declare the
their arguments: Why do we need to prove the lack of ordinance or resolution as invalid, whether in whole or in
publications when in fact the records are with the part.
Sanggunian. They should prove that they complied with the
publication requirement. GanunngasaLabordiba. 2.) SangguniangPanlungsod/Sangguniang Bayan (with
respect to Barangay Ordinances)- pretty much the same
But it turns out that when it comes to the public thing.
hearing requirement, if someone alleges lack of public
hearing, then the person who alleges must bear the burden Requirement of Publication and Posting:
of proving the lack of publication.
Art 114: Posting and Publication of Ordinance with Penal
Approval: Sanctions- (a) Ordinances with penal sanctions shall be
posted at conspicuous places in the provincial capitol, or
GR:The Sanggunian members constituting a quorum is city, municipal or barangay hall, as the case may be, for a
enough to pass a tax ordinance. minimum period of three (3) consecutive weeks. Such
ordinances shall also be published in a newspaper of
EXCEPTION: When it involves authorizing or payment of general circulation, where available, within the territorial
money or creating liability.In that case, when that situation jurisdiction of the LGU concerned, except in the case of
is present, then the majority vote of all Sanggunian barangay ordinances. Unless otherwise provided therein,
members must be had before such ordinance is approved said ordinances shall take effect on the day following its
and becomes effective. publication, or at the end of the period of posting,
whichever occurs later. Xxx
Rule on Veto: The local chief executive may veto the
ordinance. There are 2 grounds:
1.) ultra vires; or Take note of that, it is very codal. It is provided in
2.) prejudicial to the public welfare. your outline.
Take note of the days when should the veto be completed. Let us go now to the more important provisions.
I think: The review by the Secretary of Justice. After the ordinance
has taken effect, any person may challenge the
Province: 15 days (because most provinces are bigger
constitutionality or legality of the ordinance or revenue
than cities)
measure before the Department of Justice.
City/Municipality: 10 days
How will they do it? Through administrative
If the local chief executive fails to veto on time,
appeal. Meaning there is a provision provided by law by
then the ordinance shall be deemed approved as if he
which these persons who are aggrieved by the tax
signed it.
measure may take.
Limitations on the Power to Veto: The local chief executive
When will the appeal be made before the DOJ? It
may veto only once and the sanggunian may override such
must be made within 30 days from the effectivity to the
veto by a vote of 2/3 of all its members, not just chorum.
Secretary of Justice.
Of course, there are reviews which must be
What are the grounds?
made by the higher Sanggunians. Let’s first discussing the
1.) constitutionality; or
first authority.
2.) legality of the tax ordinance.
1.) SangguniangPanlalawigan- it reviews the:
Essentially, most of the Supreme Court cases
a.) ordinances of component cities and municipalities; and
would tackle on the constitutionality.
b.) resolutions of the sangguniangpanlalawigan.
What is the nature of this 30-day period? It is mandatory.
When is this done? Within 3 days after the
What happens next? Pag-file ng administrative
approval of the LCE and then there will be comments and
appeal within 30 days from the effectivity of such
recommendations.
ordinance, then the Secretary of Justice is given 60 days
46 | P a g e
within which to act on that administrative appeal. Then, 2 Elman, the rule on administrative remedies has its own
things may happen: exceptions. That is when the question propounded is a
pure legal question. Kung legal langnamanyan, the
ordinary courts has jurisdiction over it. It can decide on
1.) The taxpayer receives a decision from the Secretary of legal questions. Even the constitution itself diba, the final
Justice in which case, the taxpayer can now go to the arbiter of tax cases and the legalities of tax measures and
appropriate courts to challenge the validity of that ordinances rest upon the courts of the Philippines and the
ordinance. Supreme Court.
2.) If there is no decision received by the taxpayer within Again, if it is a pure question of law, you can still have a
the 60 day period to decide, then the taxpayer has 30 days remedy, even if you have not availed of Section 187.
within which to appeal the inaction of the SOJ by filing a
case in the regular courts. LOCAL TAXATION
Let’s go now to cases. Eto, medyomadugo because we will be talking about tax
base and tax rates which do not make any sense at all.
The first case is the Cagayan Electric vs City of Cagayan: Sabinatinmerontayong 4 na local government units
The CEPALCO filed a petition for declaratory relief before (provinces, cities, municipalites, and barangays).
the RTC. One of the defences of the City of Cagayan is
that CEPALCO failed to exhaust administrative remedies PROVINCES:
(Section 187 of LGC--the DOJ stuff etc). The SC upheld
the contention of the City of Cagayan. You failed to file an Scope of Taxing Powers:
appeal within the 30day period. That period is supposed to
be mandatory. But, in the end, because of the amount Sec 134: Scope of Taxing Powers.- Except as otherwise
involved and based on substantial matters, still the court provided in this Code, the province may levy only the
allowed such petition. What is the conclusion here, even if taxes, fees, and charges as provided in this Article.
the taxpayer failed to avail the provisions of Section 187,
the administrative appeal, it does not preclude the taxpayer
from assailing the law based on pure questions of law. What are these taxes? You have at least 6:
The case of Alta Vista Golf vs City of Cebu. Petitioner is a 1.) Transfer of Real Property Ownership
golf countryclub. It operates a golf course. Of course the 2.) Business of Printing and Publication
City of Cebu has its own revenue measures and revenue 3.) Franchise Tax
code which imposes amusement taxes. The City of Cebu 4.) Professional Tax
kept on sending demand letters or demand for the payment 5.) Amusement Tax
of amusement taxes to the golf course. The countryclub 6.) Annual Fixed Tax for Every Delivery Truck or
does not want to pay because their services there is not Van of Manufacturers or Producers, Wholesalers,
covered by the amusement taxes under the LGC. Then of Dealers or Retailers in Certain Products.
eventually, the City became fed up. Then the City Mayor
actually issued a Closure Order. (Joke: “Ang closure There is this one provision, the Residual Powers of LGUs.
palainoorder, hindi dine-demand.”) Of course, Those which are not listed in the LGC, as long as it is not
almaanggolfcourse, it filed a petition for injuction, one of the common limitations of the taxing powers of
mandamus, prohibition, against the City of Cebu. The City LGUs, then the provinces or any LGUs for that matter, may
of Cebu filed a motion to dismiss on the ground of failure to impose such kind of tax.
exhaust administrative remedies and on jurisdictional
1.) Tax on Transfer of Real Property Ownership
grounds and it did not avail of Section 187-pagpasa pa
langng tax ordinance, alammonamanpalanahindikakasalisa Make no mistake about it, this is not the Real Property Tax.
amusement taxes naiyan, why did you not appeal to the This is compatible to your capital gains tax, peroang CGT
SOJ. The Supreme Court said, mandatory dapatito. For not natin is actually an income tax based on your pursued
following it, you are bound, you must pay. income. But when we talk about ‘tax on transfer of real
property ownership,’ this refers to an excise tax. The tax on
There are two issues in this case. One is, did the filing of
the privilege of transferring the ownership of a real property
the RTC case violate Section 187 of the LGC? Sabing
from one person to another. What are the modes of
Supreme Court, Section 187 is mandatory. A party
transfers here? Any form of transfer. Sale, barter, or
aggrieved by a tax ordinance must follow the procedure in
donation and other modes of transfer of ownership and
Section 187. In other words, there must be an exhaustion
title. This will also include succession.
of administrative remedies. But, as you learned from Atty.
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Tax Rate: not more than 50% of 1% On top of that, you must also show that the real property
taxes have already been paid. What is the effect if you do
Tax Base: Fair market value of the property or the not show these receipts? Then you cannot really compel
consideration whichever is higher the ROD from registering the property in the buyer or
transferee’s table.
What are the transactions exempt under this provision?
b.) Duty of Provincial Assessor
1.) Transfers under RA 6657 (Comprehensive Agrarian
Reform Law) This is more of cancelling of the old tax declaration. You
have to present this. Of course, the local assessor may
2.) Transfers by the National Government or by LGU or any refuse to cancel the old tax declaration and input the new
other government agency exercising governmental tax declaration if such receipt has not been made. So
functions are also exempt from this provision (based on matanggunggihapunkapagabotsa ROD because that is one
some books). of the requirements. It’s really a long list peromacomply
man.
Mainly because of the inherent limitations: the
government cannot tax itself because it is stupid. It is like c.) Duty of the Notary Public
transferring your money from one pocket to another. It
does not really change anything on the part of the Notaries public shall furnish the provincial treasures with a
government in fact, nalugi pa ang government niyan copy of any deed transferring ownership or title to any real
because if you pay taxes, maglistaka pa ng form, you’ll be property within thirty (30) days from the date of
spending paper. (Joke: On top of that, it will destroy the notarization.
environment.)
But in practice, it is not really the lawyer who sends a copy
Section 135(b) is more of the administrative of the notarized document to the provincial assessors. It is
matters, particularly the duties of certain public officials. the party themselves normally, or it may also be the
brokers.
Sec 135: Tax on Transfer or Real Property Ownership
xxx Can this real property transfer tax be imposed by any other
(b) For this purpose, the Register of Deeds of the province LGUs? As a general rule, no, except cities. In effect, only
concerned shall, before registering any deed, require the provinces and cities are allowed to impose these transfer
presentation of the evidence of payment of this tax. The taxes on real property.
provincial assessor shall likewise make the same
requirement before cancelling an old tax declaration and 2.) Tax on Business of Printing and Publication
issuing a new one in place thereof. Notaries public shall
furnish the provincial treasures with a copy of any deed Again, this is an excise tax, on the privilege of conducting
transferring ownership or title to any real property within printing and publication of business.
thirty (30) days from the date of notarization.
It shall be the duty of the seller, donor, transferor, executor Tax Base: Gross annual receipts.
or administrator to pay the tax herein imposed within sixty
(60) days from the date of the execution of the deed or It is similar to your OPT or excise taxes under the NIRC.
from the date of the decedent's death.
Tax Rate: It will depend if the taxpayer owns an old printing
or publication business or a new business.
Let’s start with ROD. 1.) Old printing business: Tax rate is not exceeding
50% of 1% of the gross annual receipts for the
a.) Duty of ROD
preceding calendar year
The ROD, before registering any transfers of property, they 2.) New printing business: Tax rate not exceed 1/20
must require the taxpayer to present the: of 1% of the capital investment
1.) Certificate Authorizing Registration (CAR) from the Take note ha, pagbagongbusiness, it is based on the
BIR; capital investment. Are there exceptions? DECS prescribed
school text books, are exempt from these taxes.
2.) Proof that the transfer taxes have been paid, etonayun
usually they will ask you to present the receipt. 3.) Franchise Tax
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You all know what a franchise is right? It is the tax on the received by the franchise holder, but it also involves those
privilege of transacting business in the State and exercising which are realized.
franchises granted by the State. This is an excise tax. A tax
on the privilege of exercising a government granted Tax Rate: General Rule, not exceeding 50% of 1%.That is
franchise. the maximum amount as a general rule. If it is a newly
started business, then it is based on capital investment.
What are the requisites before a franchise tax may be
imposed on a franchise holder? Of course merontayong Take note of the other matters pertaining to this, yung ‘in
franchise, is it a primary franchise or secondary franchise? lieu of all taxes’ clause. We have already discussed this,
This refers to secondary. the Smart vs Davao City and Quezon City vs ABS-CBN.
Essentially they are the same cases. Pagsinabinating ‘in
In, City of Irigavs CASURECO, CASURECO is an Electric lieu of all taxes’ strict construction against the person
Coop registered under NEA. And then, the City of Iriga claiming the tax exemption and it refers only to the national
wants to impose franchise taxes against the cooperative. taxes. It does not include the local government taxes.
Let’s go immediately to the ruling. There are 2 issues here:
(1) Whether the electric coop not under CDA is liable for
the local franchise tax; (2) Whether the situs of taxation
should be in the place where the franchise holder exercises
his franchise regardless of trace where it delivers its March 28, 2017
service or products. Now, on the first issue, CASURECO is (By: Lyzzaik Laguialam)
not exempt from the payment of franchise tax because its
franchise was essentially granted before the enactment of SEC. 138. Tax on Sand, Gravel and Other Quarry
the LGC. Anolangbaang coverage ng withdrawal Resources. - The province may levy and collect not more
provisions, diba, those cooperatives registered under the than ten percent (10%) of fair market value in the locality
CDA? During that time, CASURECO was not registered in per cubic meter of ordinary stones, sand, gravel, earth, and
the CDA. Now, second, CASURECO said that I am a non- other quarry resources, as defined under the National
profit cooperative so why will you impose franchise taxes Internal Revenue Code, as amended, extracted from public
against me. Actually, it Is immaterial whether the lands or from the beds of seas, lakes, rivers, streams,
cooperative is for profit or not for profit, because what is creeks, and other public waters within its territorial
being taxed here is the privilege of exercising the franchise. jurisdiction. The permit to extract sand, gravel and other
It has nothing to do with profit. As long as you are quarry resources shall be issued exclusively by the
exercising the franchise, then you are supposed to pay the provincial governor, pursuant to the ordinance of the
franchise tax. It is not a tax on the entity but a tax on the sangguniangpanlalawigan. The proceeds of the tax on
exercise of the privilege conferred by a government sand, gravel and other quarry resources shall be
franchise. distributed as follows:
(1) Province - Thirty percent (30%);
There is another issue here as to the tax situs of franchise. (2) Component city or municipality where the sand, gravel,
Sabing CASURECO, our principal office is in the city of and other quarry resources are extracted - Thirty percent
Iriga but where do we deliver our services? We deliver our (30%); and
services on the cities outside of Iriga, not on the city of Iriga (3) Barangay where the sand, gravel, and other quarry
alone. So in effect, kungmeronmang franchise taxes, it resources are extracted - Forty percent (40%).
must be equitably reduced.
How did the Supreme Court rule on this matter? What is the transaction being taxed here?
CASURECO is still wrong because a franchise tax is in the
nature of a business tax. This is an excise tax. The situs is It’s the privilege of quarrying of ordinary stones,
where the privilege is exercised. Where does CASURECO sand, gravel, earth, and other quarry resourcesas defined
exercise its privileges. It is actually in the City of Iriga under the National Internal Revenue Code which should
where the principal office is located and where it actually have been taken from public lands or public waters.
operates. It does not really matter that it delivers products
to some other places but the fact is the franchise is What is the tax rate?
exercised also within the City of Iriga.
It should not exceed 10% of the fair market value
Tax Base: gross annual receipts of the preceding calendar in the locality per cubic meter of the subject resources
year based on the incoming receipt realized within its being quarried.
territorial jurisdiction pero it is not just the actual money
What is the tax base?
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It is the gross output which is the actual market

value of the mineral or mineral products without deductions
for mining, refining, transporting, marketing or any other What is the tax consequence if the extraction is made
expenses. It is like gross receipts. from private lands?
LEPANTO CONSOLIDATED vs. Ambanloc The SC said that the tax consequence is found in
the provisions of the NIRC on excise tax on quarry
Lepanto has a mining lease contract with the government. resources regardless of origin.
As per its contract, it had the right to extract and use for its
purposes all mineral deposits within the boundary of its SEC. 139. Professional Tax. - (a) The province may levy
mining claim. And then it asked for an opinion from the an annual professional tax on each person engaged in the
Mines and Geosciences Bureau and it advised Lepanto exercise or practice of his profession requiring government
that it did not have to get a permit to extract and use sand examination at such amount and reasonable classification
and gravel from within the mining claim for its operational as the sangguniangpanlalawigan may determine but shall
and infrastructure needs. Then, Lepanto started to quarry in no case exceed Three hundred pesos (P=300.00).
sand and gravel. The respondent, as Provincial Treasurer
of Benguet, sent a demand letter to Lepanto for the (b) Every person legally authorized to practice his
payment of sand and gravel tax under the LGC. profession shall pay the professional tax to the province
There are two principles discussed in this case: where he practices his profession or where he maintains
his principal office in case he practices his profession in
1. If you ask whether or not the LGU has the several places: Provided, however, That such person who
authority to impose such taxes, the first thing to has paid the corresponding professional tax shall be
look at is the LGC because it is the general law entitled to practice his profession in any part of the
that delegates to the provinces the authority or Philippines without being subjected to any other national or
power to tax the extraction of quarry resources. local tax, license, or fee for the practice of such profession.
But if you talk about the liability of the taxpayer,
in this case, Lepanto, you look at the province’s (c) Any individual or corporation employing a person
or municipality’s revenue code. subject to professional tax shall require payment by that
2. The sand and gravel extraction tax is actually an person of the tax on his profession before employment and
excise tax and not a business tax. Because one annually thereafter.
of the arguments of Lepanto is that it is already
being taxed on its business. Lepanto extracts the (d) The professional tax shall be payable annually, on or
sand and gravel for its main business so it before the thirty-first (31st) day of January. Any person first
questions why it is being taxed on sand and beginning to practice a profession after the month of
gravel extraction. It is like there is double January must, however, pay the full tax before engaging
taxation. The SC said that the subject of taxation therein. A line of profession does not become exempt even
is different because what it being taxed in this if conducted with some other profession for which the tax
case is the privilege of extracting quarry has been paid. Professionals exclusively employed in the
resources within the LGU’s territory. government shall be exempt from the payment of this tax.
(e) Any person subject to the professional tax shall write in

Province of Bulacan vs. Court of Appeals deeds, receipts, prescriptions, reports, books of account,
plans and designs, surveys and maps, as the case may be,
There is an ordinance enacted by the province of Bulacan the number of the official receipt issued to him.
which imposed sand and gravel extraction tax. The
problem here is that the provincial treasurer assessed the
Public Cement Corporation for said tax. This corporation is What is being taxed here and who is liable?
actually extracting its sand and gravel within private lands.
The subject of the tax here is the exercise or
So the question here is that can the province impose practice of a profession requiring government licensure
sand and gravel extraction tax extracted from private examination.The person liable is the professional.
properties?
What is the tax rate and when is it due?
Take note that under the LGC, what is being taxed is
extraction of quarry resources from public lands or public It is at rate not exceeding P300.00. It shall be
waters. In this case, it was wrong for the provincial payable annually, on or before the thirty-first (31st) day of
treasurer to assess the corporation for the extractions. January.
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What is the tax base? (d) The sangguniangpanlalawigan may prescribe the time,
manner, terms and conditions for the payment of tax. In
It is determined by the sanggunian. case of fraud or failure to pay the tax, the
sangguniangpanlalawigan may impose such surcharges,
What if the professional has two offices like for interests and penalties as it may deem appropriate.
example in Davao and Tagum? Is he required to pay
taxes in both cities? (e) The proceeds from the amusement tax shall be shared
equally by the province and the municipality where such
The professional is required to pay only once amusement places are located.
since it is provided in the law that person who has paid the
.
corresponding professional tax shall be entitled to practice
his profession in any part of the Philippines without being What is the definition of amusement?
subjected to any other national or local tax, license, or fee
for the practice of such profession. The professional is Amusement is a pleasurable diversion and
usually going to pay it in the place where his principal office entertainment. It is synonymous to relaxation, avocation,
is located. pastime, or fun.
What if the professional is a CPA and a lawyer? Is it What is an Amusement Place?
enough to pay for just one profession?
Amusement Places include theaters, cinemas,
There should be a payment for each of the concert halls, circuses and other places of amusement
professions since the law provides that a line of profession where one seeks admission to entertain oneself by seeing
does not become exempt even if conducted with some or viewing the show or performances. The LGC does not
other profession for which the tax has been paid. provide for a definition.
Why is it necessary to pay the professional tax? What is the tax rate and tax base?
It is necessary since it is provided by law that The tax should not exceed 30% of the gross
before employment of a professional,any individual or receipts.
corporation employing such person subject to professional
tax shall require payment by that person of the tax on his Who are the persons liable?
profession. Also,any person subject to the professional tax
shall write in deeds, receipts, prescriptions, reports, books They are the proprietors, lessees, or operators of
of account, plans and designs, surveys and maps, as the theaters, cinemas, concert halls, circuses, boxing stadia,
case may be, the number of the official receipt issued to and other places of amusement.
him.
Can the LGU impose amusement tax on the proprietors
SEC. 140. Amusement Tax. - (a) The province may levy of Night Clubs or Cockpits?
an amusement tax to be collected from the proprietors,
lessees, or operators of theaters, cinemas, concert halls, No, it is already subject to OPT. One of the
circuses, boxing stadia, and other places of amusement at limitations to the power of the LGU is that it cannot impose
a rate of not more than thirty percent (30%) of the gross taxes on those already taxed under the NIRC.
receipts from admission fees.
Philippine Basketball Association vs. Court of Appeals
(b) In the case of theaters or cinemas, the tax shall first be
deducted and withheld by their proprietors, lessees, or The issue here is whether the amusement tax on the
operators and paid to the provincial treasurer before the admission tickets to PBA games a national or local tax?
gross receipts are divided between said proprietors, The SC said that it is supposed to be part of national tax.
lessees, or operators and the distributors of the The LGUs cannot impose amusement taxes for PBA
cinematographic films. games. While Section 140 of the LGC mentions other
places of amusement, professional basketball games are
(c) The holding of operas, concerts, dramas, recitals, not covered by such term under the principle of ejusdem
painting and art exhibitions, flower shows, musical generis. The term must refer to the prior enumeration of
programs, literary and oratorical presentations, except pop, theaters, cinematographs, concert halls and circuses with
rock, or similar concerts shall be exempt from the payment artistic expression as their common characteristic.
of the tax herein imposed.
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Pelizloy Realty Corporation vs. Province of Benguet What is being taxed here?
Pelizloy owns Palm Grove Resortwhich is designed for It is not the act of delivery but on the use of
recreation and which has facilities like swimming pools, a delivery truck, van or any vehicle used by manufacturers,
spa and function halls. The province passed an ordinance producers, wholesalers, dealers or retailers in the delivery
which imposed amusement tax on resorts, swimming or distribution to sales outlets or consumers of distilled
pools, bath houses, hot springs and tourist spots. The spirits, fermented liquors, soft drinks, cigars and
province demanded payment of this tax from Pelizloy which cigarettes, and other products as may be determined
argued that it is not covered since it is not an amusement by the sanggunian whether directly or indirectly within the
place in the context of the LGC and claims that such act is province.
already an ulta vires act.The province argued that other
places of amusement encompasses resorts, swimming What is the tax rate?
pools, bath houses, hot springs, and tourist spots since the
definition of the LGC of amusement as pleasurable The rate should not exceed P500.00 on every
diversion and entertainment is synonymous to relaxation, delivery truck, van or any vehicle.
avocation, pastime, or fun. And it claims that in going to
Cities
swimming pools, you are supposed to have fun.
SEC. 151. Scope of Taxing Powers. - Except as
Issue: Can the province impose amusement taxes on otherwise provided in this Code, the city, may levy the
admission fees resorts, swimming pools etc.? taxes, fees, and charges which the province or municipality
may impose: Provided, however, That the taxes, fees and
The SC said that resorts, swimming pools, bath houses, charges levied and collected by highly urbanized and
hot springs and tourist spots are excluded from the term independent component cities shall accrue to them and
other places of amusement under the principle of ejusdem distributed in accordance with the provisions of this Code.
generis. The term must be interpreted in light of the The rates of taxes that the city may levy may exceed the
typifying characteristic of being venues "where one seeks maximum rates allowed for the province or municipality by
admission to entertain oneself by seeing or viewing the not more than fifty percent (50%) except the rates of
show or performances" or being venues primarily used to professional and amusement taxes.
stage spectacles or hold public shows, exhibitions,
performances, and other events meant to be viewed by an
audience. The business of Pelizloy is not primarily for The provision provides for two things:
staging shows.While it is true that they may be venues
where people are visually engaged, they are not primarily 1. The cities have the power to impose taxes like
venues for their proprietors or operators to actively display, provinces. The taxes they can impose are similar
stage or present shows and/or performances.Same ruling to those which the provinces may impose.
with the case of Alta Vista Golf vs. City of Cebu.
2. However, highly urbanized and independent
component cities may impose higher rates than
SEC. 141. Annual Fixed Tax For Every Delivery Truck those imposed by the provinces. They may
or Van of Manufacturers or Producers, Wholesalers of, exceed maximum rates allowed for the province
Dealers, or Retailers in, Certain Products. - (a) The or municipality by not more than fifty percent
province may levy an annual fixed tax for every truck, van (50%) except the rates for professional and
or any vehicle used by manufacturers, producers, amusement taxes should not exceed the
wholesalers, dealers or retailers in the delivery or maximum rates.
distribution of distilled spirits, fermented liquors, soft drinks,
cigars and cigarettes, and other products as may be Municipalities
determined by the sangguniangpanlalawigan, to sales
outlets, or consumers, whether directly or indirectly, within SEC. 142. Scope of Taxing Powers. - Except as
the province in an amount not exceeding Five hundred otherwise provided in this Code, municipalities may levy
pesos (P500.00). taxes, fees, and charges not otherwise levied by provinces.
(b) The manufacturers, producers, wholesalers, dealers,

and retailers referred to in the immediately foregoing The taxing powers of municipalities are actually
paragraph shall be exempt from the tax on peddlers residual in nature. If the provinces did not impose a tax on
prescribed elsewhere in this Code. a particular transaction, the municipalities can impose
taxes on it. Just read Sec. 143 which is business taxes.
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Yamane vs. BA-Lepanto depending on the revenue code, is also allowed to pay in
instalments.
BA-Lepanto is a condominium corporation. It collects dues
from its unit owners and as a corporation it does not really Who pays the business tax?
operate for profit. It just holds the title to the land where the
condominium was built, acts like a homeowners It is the person conducting the business.
association and is responsible for the maintenance of the
What are the rules to be observed on the payment of
place. The LGU of Makati here sent to the corporation
notice of assessment for the payment of business taxes. business taxes?
The corporation questions it and argues that it does not
In paragraph (a), the situation here is that the
conduct any business.
taxpayer has several separate and distinct business
establishments. The business taxes shall be payable for
Issue: Can the LGU compel the condominium corporation
every establishment. If the taxpayer has several branches,
to pay the business tax?
taxes must be paid on each of the branches. If the taxpayer
also has different lines of business, he must pay the
No, the condominium corporation is not engaged in
taxes for each line of business because payment of one
business. The SC said that for an entity to be subject to
line of business does not necessarily exempt the other
business taxes, its activities must fall within the definition of lines.
business provided under the LGC.Under the LGC,
"Business" means trade or commercial activity regularly In (b), the situation here is that the taxpayer is
engaged in as a means of livelihood or with a view to engaged in to 2 or more lines of businesses under Sec.
profit.The SC looked into the Articles of Incorporation and 143 and they are subject to the same tax rate. For
by-laws of BA-Lepanto to determine whether it is engaged example, the taxpayer is engaged in the manufacturing of
in business. However, this principle will apply only to local agricultural fertilizers and poultry feeds. They have the
taxes. Because in national taxes like VAT, even if the entity same tax rates. To compute the taxes, you combine the
is non-profit. It may still be liable for VAT. gross sales or receipts on these 2 related businesses and
multiply by the same rate.
SEC. 146. Payment of Business Taxes. - (a) The taxes SEC. 150. Situs of the Tax. - (a) For purposes of
imposed under Section 143 shall be payable for every collection of the taxes under Section 143 of this Code,
separate or distinct establishment or place where business manufacturers, assemblers, repackers, brewers, distillers,
subject to the tax is conducted and one line of business rectifiers and compounders of liquor, distilled spirits and
does not become exempt by being conducted with some wines, millers, producers, exporters, wholesalers,
other business for which such tax has been paid. The tax distributors, dealers, contractors, banks and other financial
on a business must be paid by the person conducting the institutions, and other businesses, maintaining or operating
same. branch or sales outlet elsewhere shall record the sale in
the branch or sales outlet making the sale or transaction,
(b) In cases where a person conducts or operates two (2) and the tax thereon shall accrue and shall be paid to the
or more of the businesses mentioned in Section 143 of this municipality where such branch or sales outlet is located.
Code which are subject to the same rate of tax, the tax In cases where there is no such branch or sales outlet in
shall be computed on the combined total gross sales or the city or municipality where the sale or transaction is
receipts of the said two (2) or more related businesses. made, the sale shall be duly recorded in the principal office
and the taxes due shall accrue and shall be paid to such
(c) In cases where a person conducts or operates two (2) city or municipality.
or more businesses mentioned in Section 143 of this Code
which are subject to different rates of tax, the gross sales (b) The following sales allocation shall apply to
or receipts of each business shall be separately reported manufacturers, assemblers, contractors, producers, and
for the purpose of computing the tax due from each exporters with factories, project offices, plants, and
business. plantations in the pursuit of their business:
(1) Thirty percent (30%) of all sales recorded in the
principal office shall be taxable by the city or municipality
When is business taxes usually paid? where the principal office is located; and
(2) Seventy percent (70%) of all sales recorded in the
Business taxes usually accrue on the first day of
principal office shall be taxable by the city or city or
January of the following year. It must be paid within the first
municipality where the factory is located.
20 days of January without any penalty. The taxpayer,
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(c) In case of a plantation located at a place other than the What if there is a principal office in Davao City and a
place where the factory is located, said seventy percent factory in Tagum and there is a plantation in
(70%) mentioned in subparagraph (b) of subsection (2) Nabunturan, how is the business taxes paid?
above shall be divided as follows:
(1) Sixty percent (60%) to the city or municipality where the In paragraph (c), the 70% mentioned in
factory is located; and paragraph (b) is further pro-rated between the factory and
(2) Forty percent (40%) to the city or municipality where the the plantation. 60% goes to where the factory is located
plantation is located. and the 40% goes to the city or municipality where the
plantation is located. (.70X.60) of the tax is payable in
(d) In cases where a manufacturer, assembler, producer, Tagum while (.70X.40) is payable in Nabunturan. And the
exporter or contractor has two (2) or more factories, project 30% is payable in Davao City.
offices, plants, or plantations located in different localities,
the seventy percent (70%) sales allocation mentioned in What if there are multiple factories and plantations?
subparagraph (b) of subsection (2) above shall be prorated
among the localities where the factories, project offices, In paragraph (d), the 70% mentioned in
plants, and plantations are located in proportion to their paragraph will be pro-rated among these factories and
respective volumes of production during the period for plantations in proportion to their respective volume or
which the tax is due. production.
What about paragraph (e)?

(e) The foregoing sales allocation shall be applied
irrespective of whether or not sales are made in the locality It means that it does not matter if the factories or
where the factory, project office, plant, or plan is located. plantations sell the products or not as long as you follow
the allocations.
In paragraph (a), there are two situations. First, Barangay
there is a principal office only. Second, there is a
principal officeand a branch or sales outlet elsewhere. SEC. 152. Scope of Taxing Powers. - The barangays
In the first case, regardless of the place where the product may levy taxes, fees, and charges, as provided in this
is sold, the business taxes will pertain only to the principal Article, which shall exclusively accrue to them:
office. You pay where the principal office is located. (a) Taxes - On stores or retailers with fixed business
establishments with gross sales or receipts of the
But for the second case, for example, Toyota Davao preceding calendar year of Fifty thousand pesos
which owns also Toyota Tagum and Gensan, how is (P=50,000.00) or less, in the case of cities and
the business taxes paid? Thirty thousand pesos (P=30,000.00) or less, in
the case of municipalities, at a rate not exceeding
The taxpayer should record the sale in the
one percent (1%) on such gross sales or
branch or sales outlet making the sale or transactionand
receipts.
the tax thereon shall accrue and shall be paid to the
municipality where such branch or sales outlet is located.
(b) Service Fees or Charges - barangays may collect
The sale of the branch is exclusive for that branch only and
reasonable fees or charges for services rendered
no other business taxes corresponding to such sales shall
in connection with the regulation or the use of
pertain to the principal office.
barangay-owned properties or service facilities
Suppose there is a principal office and there is a such as palay, copra, or tobacco dryers.
factory or a plant, what is the situation here?
In paragraph (b), there is a principal office and a (c) Barangay Clearance - No city or municipality may
factory or plant. For example, there is a textile company issue any license or permit for any business or
and its principal office is in Davao City while its factory is in activity unless a clearance is first obtained from
Tagum. The product is manufactured in the factory and the barangay where such business or activity is
sold in Davao City. The payment of taxes must be located or conducted. For such clearance, the
allocated in this case where the principal office and the sangguniang barangay may impose a reasonable
factory are located in different cities or municipalities. 30% fee. The application for clearance shall be acted
of the total sale is taxable where the principal office is upon within seven (7) working days from the filing
located and the remaining 70% is taxable where the factory thereof. In the event that the clearance is not
is located. issued within the said period, the city or
municipality may issue the said license or permit.
54 | P a g e
I remember before, dibasalikodngAteneo High School,

(d) Other Fees and Charges - The barangay may levy merongmalaking basketball court dyan?
reasonable fees and charges: Maramingnagapracticedyan,
(1) On commercial breeding of fighting cocks, cockfights bayarannilayungbaranagay so that they could use the
and cockpits; facilities and they could use the lights.
(2) On places of recreation which charge admission fees;
and 3) Toll fees and charges under Section 155.
(3) On billboards, signboards, neon signs, and outdoor
advertisements.
Section 155. Toll Fees or Charges. - The sanggunian
concerned may prescribe the terms and conditions
and fix the rates for the imposition of toll fees or
charges for the use of any public road, pier, or wharf,
March 29, 2017
waterway, bridge, ferry or telecommunication system
(By: Jing Lomondot)
funded and constructed by the local government unit
concerned: Provided, That no such toll fees or
Common revenue-raising powers
charges shall be collected from officers and enlisted
We call this as common revenue-raising powers men of the Armed Forces of the Philippines and
because any type of local government units may impose members of the Philippine National Police on mission,
these kinds of taxes and charges. Take note, this does not post office personnel delivering mail, physically-
involve only of taxes but this also involves charges and handicapped, and disabled citizens who are 65 years
fees in an exercise of the police power of the state. or older.
There are three Common revenue-raising powers of When public safety and welfare so requires, the
the LGU sanggunian concerned may discontinue the collection
of the tolls, and thereafter the said facility shall be free
1) Service fees and charges under Section 153. and open for public use.
This is not about taxing powers or power to tax on the In other words the LGUs can impose toll fees for
part of the LGUs but this is more of a police power on the use of public infrastructures that is being
the part of LGUs. maintained such LGUs or built by such LGU.
Section 153. Service Fees and Charges. - Local But there are some entities or persons that are
government units may impose and collect such exempt from the toll fees. Who are these?
reasonable fees and charges for services rendered.
1) Members of the Armed Forces of the Philippines.
2) The PNP
As we have said earlier, one of the services rendered 3) The Post Office delivering mail
by the LGU is actually the service of letters. 4) Those who are physically handicapped.
5) And lastly, you have disabled citizens who are 65
2) Then you have public utility charges years old or older.
under Section 154.
How do you determine physically handicapped?

Section 154. Public Utility Charges. - Local Kailanganbang PWD ID? Pag physically disabled,
government units may fix the rates for the operation of diba not all the physically disabled (PWDs) have
public utilities owned, operated and maintained by thisso-called by ID? So probably by visual observation
them within their jurisdiction. only, they can exempt these people from toll fees.
Then of course the imposition of toll fees and

The example that I kind think of is the use of gyms … charges may be suspended by the
Congressman Nograles. Diba that basketball court in Sanggunianconcerned but the ground is public safety
barangay… can be used for any purpose for pa-liga, and welfare.
or you use it for cheering or dance practice, you pay
the barangay.
55 | P a g e
Community Tax ii. Is engaged in business or occupation;
Section 156. Community Tax. - Cities or municipalities iii. Owns real property with an aggregate
may levy a community tax in accordance with the assessed value of P1,000.00 or more; or
provisions of this Article. iv. Is required by law to file an income tax return.
When you are required to file an ITR.
What is the community tax by the way? A
community tax is a tax imposed on residents of a city or a How much is the community tax?
municipality. This is in essence a poll tax or a tax on Estudyantekapalang, its just P5.00. Wala man kay lain
residency. income but to be specific about it, it’s P5.00 plus an
additional of P1.00 for every P1,000 income. So it’s based
Who are liable to community tax? on your income but the community tax certificate may not
exceed 5 thousand pesos.
1. Individuals
2. Juridical persons
Let’s discuss first Section 157 pertaining to individuals.
For juridical persons, look at Section 158 of the
Section 157. Individuals Liable to Community Tax. - Every Local Government Code.
inhabitant of the Philippines eighteen (18) years of age or
over who has been regularly employed on a wage or salary Section 158. Juridical Persons Liable to Community Tax. -
basis for at least thirty (30) consecutive working days Every corporation no matter how created or organized,
during any calendar year, or who is engaged in business or whether domestic or resident foreign, engaged in or doing
occupation, or who owns real property with an aggregate business in the Philippines shall pay an annual community
assessed value of One thousand pesos (P1,000.00) or tax of Five hundred pesos (P500.00) and an annual
more, or who is required by law to file an income tax return additional tax, which, in no case, shall exceed Ten
shall pay an annual additional tax of Five pesos (P5.00) thousand pesos (P10,000.00) in accordance with the
and an annual additional tax of One peso (P1.00) for every following schedule:
One thousand pesos (P1,000.00) of income regardless of
whether from business, exercise of profession or from (1) For every Five thousand pesos (P5,000.00)
property which in no case shall exceed Five thousand worth of real property in the Philippines owned by
pesos (P5,000.00). it during the preceding year based on the
valuation used for the payment of real property
In the case of husband and wife, the additional tax herein tax under existing laws, found in the assessment
imposed shall be based upon the total property owned by rolls of the city or municipality where the real
them and the total gross receipts or earnings derived by property is situated - Two pesos (P2.00); and
them.
(2) For every Five thousand pesos (P5,000.00) of
gross receipts or earnings derived by it from its
So let’s just outline the commission. business in the Philippines during the preceding
year - Two pesos (P2.00).
What are the requirements before an individual will
become liable for the community tax? The dividends received by a corporation from another
corporation however shall, for the purpose of the additional
1) The individual must be an inhabitant of the tax, be considered as part of the gross receipts or earnings
Philippines. This is one of the first requirements, of said corporation.
“inhabitant of the Philippines, meaning residing in
the Philippines.
Take note of the values. At least “P500 and an
2) The individual must be at least 18 years old. additional annual tax, which,in no case, shall
exceedP10,000”. So the maximum amount is P10,000.
3) The individual must be either of the following:
There are those persons or entities which are
i. Has been regularly employed on a wage or exempted from the community tax under the LGC. Who are
salary basis for at least thirty (30) these persons?
consecutive working days during any
Section 159. Exemptions. - The following are exempt from
calendar year;
the community tax:
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community tax for that year.

(1) Diplomatic and consular representatives; and,
If the tax is not paid within the time prescribed above, there
(2) Transient visitors when their stay in the shall be added to the unpaid amount an interest of twenty-
Philippines does not exceed three (3) months. four percent (24%) per annum from the due date until it is
paid.
Again, community tax is actually a tax on

residents.
1. Individuals
Where shall the community tax be paid?
Section 160. Place of Payment. - The community tax shall Let’s start with the individuals first, it’s Section 161
be paid in the place of residence of the individual, or in the (a). So the tax will not accrue on the first day of January
place where the principal office of the juridical entity is and it must be paid on or before the last day of February,
located. it’s either 28 or 29 kasiminsanmerontayongleap year.
Of course, it’s supposed to be paid in the place of
the residence of the individual, whether permanent or Now, take note of the principle that accrual of the tax
temporary, basta the residence of the individual. is different from the time of payment the tax. Pretty much
the same with your estate taxation, it doesn’t mean that
Example of a temporary resident: Supposing when the tax already accrues, you are obliged to pay it
mag-submitkang requirements for taking the BAR exam, because the law provides a timeframe wherein a taxpayer
you need a cedula. What if saMakati kana during that time is supposed to pay the taxes due.
because you will be reviewing at Ateneo de Manila?
Saankakukuhangcedula? The second scenario provided in Section 161 (a) is
what if a person reaches 18 years old during the year? The
When should it be paid? law says that “if a person reaches the age of 18 years or
otherwise loses the benefit of exemption” he shall be liable
for the community tax on the day he reaches such age or
Section 161. Time for Payment; Penalties for Delinquency. upon the day the exemption ends.
(a) The community tax shall accrue on the first (1st) day of Taposmeron pa siyang qualification dito, “if a person
January of each year which shall be paid not later than the reaches the age of 18 years or loses the benefit the
last day of February of each year. If a person reaches the exemption on or before the last day of March, heshall have
age of eighteen (18) years or otherwise loses the benefit of twenty (20) days to pay the community tax without
exemption on or before the last day of June, he shall be becoming delinquent.”
liable for the community tax on the day he reaches such
age or upon the day the exemption ends. However, if a
person reaches the age of eighteen (18) years or loses the
benefit of exemption on or before the last day of March, he 2. Corporations
shall have twenty (20) days to pay the community tax
without becoming delinquent.
Then you also have corporations,Section 161 (b).
Persons who come to reside in the Philippines or reach the What is the penalty if the community tax is not paid on
age of eighteen (18) years on or after the first (1st) day of time? There will be interest of 24% per annum from the due
July of any year, or who cease to belong to an exempt date until the day it is paid.
class or after the same date, shall not be subject to the
Section 162. Community Tax Certificate. A community tax
community tax for that year.
certificate shall be issued to every person or corporation
upon payment of the community tax. A community tax
(b) Corporations established and organized on or before
certificate may also be issued to any person or corporation
the last day of June shall be liable for the community tax for
not subject to the community tax upon payment of One
that year. But corporations established and organized on or
peso (P1.00).
before the last day of March shall have twenty (20) days
within which to pay the community tax without becoming
delinquent. Corporations established and organized on or
What is the significance of the CTC? It bears
after the first day of July shall not be subject to the
significance on certain transactions.
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For example, notarization of documents. Take 5. Receives money from any public fund;This is
note that the CTC right now, if you read the provision of the especially included when it comes to public
local government code, it is actually false to say that the officers who has custody of money.
CTC no longer has any value. If you read the Section 163, 6. Receives salary or wage. This is without regard
you must be able to present the CTC whenever you whether your employer is a private or public
acknowledge a particular document before a notary public. entity.
But of course the Supreme Court, apart from the CTC, will
require you to submit a competent evidence of identity and
usually this competent evidence of identity is in the form of Then you have a distribution of proceeds in Section 164.
government-issued IDs.
Section 164. Printing of Community Tax Certificates and
Section 163. Presentation of Community Tax Certificate Distribution of Proceeds.
On Certain Occasions.
(a) The Bureau of Internal Revenue shall cause the printing
(a) When an individual subject to the community tax of community tax certificates and distribute the same to the
acknowledges any document before a notary public, takes cities and municipalities through the city and municipal
the oath of office upon election or appointment to any treasurers in accordance with prescribed regulations.
position in the government service; receives any license,
certificate, or permit from any public authority; pays any tax The proceeds of the tax shall accrue to the general funds
or fee; receives any money from any public fund; transacts of the cities, municipalities and barangays except a portion
other official business; or receives any salary or wage from thereof which shall accrue to the general fund of the
any person or corporation with whom such transaction is national government to cover the actual cost of printing and
made or business done or from whom any salary or wage distribution of the forms and other related expenses. The
is received to require such individual to exhibit the city or municipal treasurer concerned shall remit to the
community tax certificate. national treasurer the said share of the national
government in the proceeds of the tax within ten (10) days
The presentation of community tax certificate shall not be after the end of each quarter.
required in connection with the registration of a voter.
(b) The city or municipal treasurer shall deputize the
(b) When, through its authorized officers, any corporation barangay treasurer to collect the community tax in their
subject to the community tax receives any license, respective jurisdictions: Provided, however, That said
certificate, or permit from any public authority, pays any tax barangay treasurer shall be bonded in accordance with
or fee, receives money from public funds, or transacts existing laws.
other official business, it shall be the duty of the public
official with whom such transaction is made or business (c) The proceeds of the community tax actually and directly
done, to require such corporation to exhibit the community collected by the city or municipal treasurer shall accrue
tax certificate. entirely to the general fund of the city or municipality
concerned. However, proceeds of the community tax
(c) The community tax certificate required in the two collected through the barangay treasurers shall be
preceding paragraphs shall be the one issued for the apportioned as follows:
current year, except for the period from January until the
fifteenth (15th) of April each year, in which case, the (1) Fifty percent (50%) shall accrue to the general fund of
certificate issued for the preceding year shall suffice. the city or municipality concerned; and
(2) Fifty percent (50%) shall accrue to the barangay where
the tax is collected.
Specifically, if you readSection 163, a community tax
certificate must be presented in the following instances:
[Refer to Section 164 (a), second paragraph.]So from
1. When an individual acknowledges any document this community tax, there will be a portion that will be given
before a notary public; to the national government and this portion will be used for
2. Takes an oath of office upon election or the printing of the CTCs and its distribution and other
appointment to any position in the government related expenses for its printing and distribution.
service;
3. Receives any license, certificate or permit from [Refer to Section 164 (c)]. So I would suggest in order to
any public authority; help the barangay where you reside, you get your CTC on
4. Pays any tax or fee; the barangay where you reside.
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Common Limitations on the Taxing Powers of Local General Rule is that LGUs cannot impose
Government Units transfer taxes except that which is provided in Section 133
(c)that is transfer taxes, tax of transfers of real property, of
The power of the LGU to tax or to impose whatever most of transfers.
charges and fees is a direct grant from the Constitution but
it’s still really … Actually, the Constitution itself would This is one of the requirements before the title of
provide that the power of the LGU to impose taxes is the property can be transferred to the transferee.
subject to the guidelines and limitations that may be
promulgated by the Congress and that is through the Local (d) Customs duties, registration fees of vessel and
Government Code. wharfage on wharves, tonnage dues, and all other kinds of
customs fees, charges and dues except wharfage on
The Common Limitations is found in Section 133 wharves constructed and maintained by the local
of the LGC. We will not discuss everything just a portion of government unit concerned;
it. Let’s go to the first item.
Section 133. Common Limitations on the Taxing Powers of General rule, LGUs cannot impose such fees
Local Government Units. Unless otherwise provided except when it comes to wharves or wharfage dues for the
herein, the exercise of the taxing powers of provinces, wharves constructed and maintained within LGU concern.
cities, municipalities, and barangays shall not extend to the
levy of the following: (e) Taxes, fees, and charges and other impositions upon
goods carried into or out of, or passing through, the
(a) Income tax, except when levied on banks and other territorial jurisdictions of local government units in the guise
financial institutions; of charges for wharfage, tolls for bridges or otherwise, or
other taxes, fees, or charges in any form whatsoever upon
such goods or merchandise;
The general rule is that LGUs cannot impose
income tax but in exemption of when it comes to banks and
other financial institutions. The definition of banks and If you have noticed, how is it different from the
other financial institutions is found in Section 133 (e). tax on delivery vans (not sure if “vans”). I think what is
being taxed here is the act of passing of vehicles within the
Section 131. Definition of Terms. When used in this Title, territorial jurisdiction of the LGUs, just for the delivery of
the term: xxx goods. Whereas when you talk about the tax on delivery
vans (?), it’s a tax on the van being used for the distribution
(e) "Banks and other financial institutions" include non-bank of goods.
financial intermediaries, lending investors, finance and
investment companies, pawnshops, money shops, (f) Taxes, fees or charges on agricultural and aquatic
insurance companies, stock markets, stock brokers and products when sold by marginal farmers or fishermen;
dealers in securities and foreign exchange, as defined
under applicable laws, or rules and regulations thereunder; (g) Taxes on business enterprises certified to by the Board
xxx of Investments as pioneer or non-pioneer for a period of six
(6) and four (4) years, respectively from the date of
registration;
This is somehow different from tax and other
financial institutions sa NIRC because it does not include (h) Excise taxes on articles enumerated under the national
pawnshops, paradoonsaOther Percentage Taxes Internal Revenue Code, as amended, and taxes, fees or
nadiscussion. But in this case, when you talk about the charges on petroleum products;
income tax in the context of local government taxation,
banks and other financial institutions include non-bank Then you have excise taxes or articles enumerated
financial intermediaries including pawnshops. under the NIRC. These excise taxes are imposed upon
(b) Documentary stamp tax; 1. Alcoholic liquors

2. Tobacco products
(c) Taxes on estates, inheritance, gifts, legacies and other 3. Manufactured oils and fuels
acquisitions mortis causa, except as otherwise provided 4. Miscellaneous articles such as automobiles, the
herein; non-essential products like jewelries, perfumes,
and among others.
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One of the exception, however, is the mineral and charges may be paid in quarterly installments. Okay,
products or sand and gravel taxes when taken from public but there is no rule regarding that matter. I tried looking at
land within the territorial jurisdiction of the LGU. the IRR, I think hindinakalagay.
(i) Percentage or value-added tax (VAT) on sales, barters Let’s go now to Section 166, Accrual of Tax.
or exchanges or similar transactions on goods or services
except as otherwise provided herein;
Section 166. Accrual of Tax. - Unless otherwise provided
in this Code, all local taxes, fees, and charges shall accrue
LGUs are not allowed to impose percentage or value- on the first (1st) day of January of each year. However,
added tax except as otherwise provided in the LGC. What new taxes, fees or charges, or changes in the rates
is an example of an exception? thereof, shall accrue on the first (1st) day of the quarter
next following the effectivity of the ordinance imposing such
1. Taxes on the business of printing and new levies or rates.
publication;
2. Franchise taxes;
3. Amusement taxes. The accrual of the local taxes, as a general rule,
is the first day of January each year.
These taxes although they are considered as But if there is a new tax ordinance, when can be
business taxes, can also be considered as a percentage the taxes accrue? Let’s say sabihinnatin, there is a new tax
tax. ordinance andlumabassiyaMarch 15. It became effective
March 16, so ibigsabihin mag bayadkanaagador does it
(l) Taxes, fees or charges for the registration of motor mean that you will immediately become liable upon the
vehicles and for the issuance of all kinds of licenses or effectivity date of the of the local tax? The law says no,
permits for the driving thereof, except tricycles; because when it comes to new taxes, it will accrue on the
first day of the quarter following the effectivity of the
ordinance imposing such new rates.
This cannot be done by the LGUs. Mag
rehistrokasa LTO that means you don’t need to register So sabihinnatinna effective angisang local
your motor vehicles with the local government unit. That is ordinance on imposing taxes on Feb. 14, Valentine’s day.
not specifically allowed under the LGUs. Hindi ka pa mag bayadng February,hiindika pa mag
bayadng March because that’s the first quarter. You will
What is the exception? The exception is the start to become liable for the taxes only on April 1 kasenext
registration of tricycles. Okay because whether you like or quarter pa.
not, third world country pa rintayo. We still work on
tricycles. What about the time of payment?
Section 167. Time of Payment. Unless otherwise provided

in this Code, all local taxes, fees, and charges shall be paid
Collection of Taxes within the first twenty (20) days of January or of each
subsequent quarter, as the case may be. The sanggunian
Section 165. Tax Period and Manner of Payment. - Unless concerned may, for a justifiable reason or cause, extend
otherwise provided in this Code, the tax period of all local the time for payment of such taxes, fees, or charges
taxes, fees and charges shall be the calendar year. Such without surcharges or penalties, but only for a period not
taxes, fees and charges may be paid in quarterly exceeding six (6) months.
installments.
So let us outline Section 167.

So by virtue of Section 165, the tax period of
all local taxes, fees, and charges, as a general rule, is The general rule is that if you look at the specific
using the calendar year. When we talk about local provision of the Local Government Code, there is a period
government taxes, always the calendar year‘yan. wherein you should pay your taxes as stated in the Local
Government Code.
Compare it to theNIRC,dibayou can you use the
calendar year or the fiscal year if the taxpayer is a One example of that is the community tax. Kung
corporation. Also the provision states that the taxes, fees, hindika pa mag bayadsa January 29, you have until the
60 | P a g e
end of February to pay your Community Tax without extra Section 170. Collection of Local Revenue by Treasurer. -
charges or fees. So that is one example of a specific All local taxes, fees, and charges shall be collected by the
provision of the Local Government Code wherein the provincial, city, municipal, or barangay treasurer, or their
payment of taxes is different from the General Rule. duly authorized deputies.
If there is no provision then you apply the general The provincial, city or municipal treasurer may designate
rule which is on or before 20 of January. And the barangay treasurer as his deputy to collect local taxes,
nakalagaydito“or of each subsequent quarter.” Meaning fees, or charges. In case a bond is required for the
you have to pay your business taxes daw quarterly as per purpose, the provincial, city or municipal government shall
Local Government Code or the Revenue Code of the LGU pay the premiums thereon in addition to the premiums of
bond that may be required under this Code.
From 2015-2016 TSN:
Take note that the deputies must be local
government officials because we have our general
a. If there is the specific provision under the LGC for the principles. One of the general principle is that the collection
payment of taxes, then you apply that specific provision. of the local government cannot be left by a private person.
An example is Community Tax, when do you pay this?
You pay it on or before the last day of February. Section 171. Examination of Books of Accounts and
b. If there is no provision under this code, you apply “on or Pertinent Records of Businessmen by Local Treasurer. The
before January 20” or 20 days after each subsequent provincial, city, municipal or barangay treasurer may, by
quarter. You are allowed to pay the taxes quarterly naman. himself or through any of his deputies duly authorized in
So, the LGC itself gives the taxpayers such leeway. writing, examine the books, accounts, and other pertinent
records of any person, partnership, corporation, or
concerned. association subject to local taxes, fees and charges in
order to ascertain. assess, and collect the correct amount
of the tax, fee, or charge. Such examination shall be made
during regular business hours, only once for every tax
The type of payment can be extended for period, and shall be certified to by the examining official.
justifiable reason by a Sanggunian concerned but such Such certificate shall be made of record in the books of
extension shall not exceed 6 months. accounts of the taxpayer examined.
What is the example? One example is I think In case the examination herein authorized is made by a
Leyte, yung Yolanda diba. So I think the Sanggunianhere duly authorized deputy of the local treasurer, the written
promulgated an ordinance or probably a resolution authority of the deputy concerned shall specifically state
suspending the payment of taxes until makabangon any the name, address, and business of the taxpayer whose
Leyte. books, accounts, and pertinent records are to be
examined, the date and place of such examination and the
Then you have Surcharges and Penaltiesunder procedure to be followed in conducting the same.
Section 168.
For this purpose, the records of the revenue district office
Section 168. Surcharges and Penalties on Unpaid Taxes, of the Bureau of Internal Revenue shall be made available
Fees, or Charges. The sanggunian may impose a to the local treasurer, his deputy or duly authorized
surcharge not exceeding twenty-five (25%) of the amount representative.
of taxes, fees or charges not paid on time and an interest
at the rate not exceeding two percent (2%) per month of
the unpaid taxes, fees or charges including surcharges, Pretty much the same thing with the BIR, the
until such amount is fully paid but in no case shall the total local treasurer has the power to inspect the books of
thirty-six (36%) months. accounts of the taxpayer concerned.
So there is a cap unlike saBIR or NIRC, there’s

no limit, as long as hindika mag bayadng up to 2% or Taxpayer’s Remedies
more.
Now, let’s go now to the taxpayer’s remedies
which is one of the important aspects here. Let us try to
compare it with our NIRC.
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Let’s start the periods of assessment. I would the preceding paragraphs shall be suspended for the time
always like to start with the periods of assessment. during
Pagtinanong kayo, when is the prescriptive period for the which:
assessment of local taxes? Your answer should be (1) The treasurer is legally prevented from making the
Section 194 (a) and (b). assessment of collection;
(2) The taxpayer requests for a reinvestigation and
Section 194. Periods of Assessment and Collection. – executes a waiver in writing before expiration of the period
(a) Local taxes, fees, or charges shall be assessed within within which to assess or collect; and
five (5) years from the date they became due. No action for (3) The taxpayer is out of the country or otherwise cannot
the collection of such taxes, fees, or charges, whether be located.
administrative or judicial, shall be instituted after the
expiration of such period: Provided, That. taxes, fees or
charges which have accrued before the effectivity of this This involves the instances wherein the periods of
Code may be assessed within a period of three (3) years prescription provided is suspended. What are these
from the date they became due. instances?
(b) In case of fraud or intent to evade the payment of taxes, 1. The treasurer is legally prevented from making
fees, or charges, the same may be assessed within ten the assessment of collection;
(10) years from discovery of the fraud or intent to evade
payment. 2. The taxpayer requests for a reinvestigation and
executes a waiver in writing before expiration of
the period within which to assess or collect; and
To simplify Section 194, the LGU has at least 5
years to assess the local taxes.
Take note that there are three requirements that you
When do you reckon this? You reckon this from have to follow here:
the date they became due. So you make reference to the
Local Government Code. Kailanbadapatbayaran? And then (1) There must be a protest in the form of
you begin, counting the period. reinvestigation.
(2) There must be a waiver in writing signed by a
This is different from the NIRC because taxpayer and a local government unit authorized
pagsinabinatin NIRC, it’s 3 years but if its covered by official concerned.
exceptional circumstances, its already 5 years. (3) And lastly, the waiver must be done before the
expiration of the period.
In case of fraud or intent to evade of payment of
taxes, fees, or charges, 10 years from the date of discovery
of the fraud or intent to evade the payment of taxes. 3. The taxpayer is out of the country or otherwise
cannot be located.
What about for the collection of taxes? Same
lang 5 years pa din. It’s pretty much the same with the
NIRC, its 5 years. Meaning the taxpayer has already absconded.
How will the LGU collect the taxes due? It’s Okay, Let’s go now toProtest.
through administrative action or judicial action after the 5
year period for collection. Section 195. Protest of Assessment. - When the local
treasurer or his duly authorized representative finds that
Take note also for Section 194 (d) correct taxes, fees, or charges have not been paid, he shall
issue a notice of assessment stating the nature of the tax,
(c) Local taxes, fees, or charges may be collected within fee, or charge, the amount of deficiency, the surcharges,
five (5) years from the date of assessment by interests and penalties. Within sixty (60) days from the
administrative or judicial action. No such action shall be receipt of the notice of assessment, the taxpayer may file a
instituted after the expiration of said period: Provided, written protest with the local treasurer contesting the
however, That, taxes, fees or charges assessed before the assessment; otherwise, the assessment shall become final
effectivity of this Code may be collected within a period of and executory. The local treasurer shall decide the protest
three (3) years from the date of assessment. within sixty (60) days from the time of its filing. If the local
treasurer finds the protest to be wholly or partly
(d) The running of the periods of prescription provided in meritorious, he shall issue a notice cancelling wholly or
62 | P a g e
partially the assessment. However, if the local treasurer When does the protest begin?You should protest
finds the assessment to be wholly or partly correct, he shall within 60 days from the receipt of the notice of the
deny the protest wholly or partly with notice to the taxpayer. assessment.
The taxpayer shall have thirty (30) days from the receipt of
the denial of the protest or from the lapse of the sixty (60) Compare it to the NIRC, ilangarawbasa NIRC? From
day period prescribed herein within which to appeal with the time that you receive your final assessment notice, it’s
the court of competent jurisdiction otherwise the just 30 days right? Pag-issue ng FAN you have 30 days to
assessment becomes conclusive and unappealable. protest.
i.After the submission of the protest, the local treasurer has

In case that the taxpayer or the LGU will issue an 60 days within which to decide the protest. In 60 days, the
assessment again for the taxpayer. The remedy of the treasurer will be either:
taxpayer is actually to file a protest.
a) Cancel the assessment.
When do you file? Essentially, you file your b) Decide the protest, meaning the taxpayer will
protest when there is an assessment. So normally, the first receive a decision from the local treasurer
thing the local government unit will do is that they will send c) The local treasurer will not do anything or there is
you a letter of authority (im not sure if authority, an inaction on the part of the local treasurer.
dilijudmaklaro, sorry)parang BIR din sila.
Letter of authoritydesignating persons who would ii.Now if the local treasurer will deny the protest, the
inspect the goods and of course, directing the taxpayer to remedy of the taxpayer it is to file an appeal within 30 days
show their accounting books and other impertinent from receipt of the denial of the protest.
documents in support of their supporting documents
relating to their accounting records. Where will the taxpayer will go for the appeal?
The taxpayer will go to a court of competent jurisdiction. In
Okay, the protest is provided in Section 195 other words, the taxpayer will go either of the MTC or RTC
ofthe Local Government Code.The assessment here is depending on the jurisdictional amount.
pretty much the same under the NIRC.The notice of
assessment shall state the nature of the tax, fee, or charge, What happens if the taxpayer fails to file his or
the amount of deficiency, the surcharges, interests and her appeal on time? Of course, the decision is final and
penalties. executory.
Then if the taxpayer receives an assessment from the The local treasurer has 60 days to decide the
local government unit, the taxpayer has two options: protest. What if the local treasurer does not do anything
within the 60-day period within which he is allowed to
1. The taxpayer can agree. decide? Then the taxpayer must appeal within 30 days
2. The taxpayer will disagree. from the lapse of the 60-day period.
After the 60-day period, the taxpayer must

This time when the taxpayer will appeal within the 30 day period after the lapse of the 60-
disagree,kailangannaniya mag protest. There is no day period. Otherwise, the assessment will become final
preliminary assessment when you talk about LGUs, and executory.
diretsokaprotest.
iii. From the RTC decision, if the decision is still adverse to
How is the protest done? If you read Section the taxpayer, then the taxpayer will have:
195,angsinasabidito“within 60 days from the receipt of the
notice of assessment, the taxpayer may file awritten a) To appeal before the Court of Tax Appeals in
protest.”It does not say anything butit’s either the protest division.
will be in a form of reconsideration or reinvestigation. b) If the Court of Tax Appeals in division,will still rule
against the taxpayer ,the next remedy is to file a
The protest must contain the facts and the law for motion for reconsideration or new trial before the
which the protest is based. What will happen to the Court of Tax Appeals en banc.
taxpayer if he fails to protest? The assessment will become c) If the decision of the CTA en banc is still adverse
final and executory and the LGU may now avail of its then you go to Supreme Court following Rule 45.
remedies to collect the taxes. You have 15 days to file a petition for review and
you can extend it to another 15 days for valid
63 | P a g e
reasons. Now, the importance of a written claim for refund

is highlighted in the case of
Okay, then the next remedy is Tax Refund. That is Metro Manila Shopping Mecca Corp., et al. vs. Toledo
found in Section 196. G.R. 190818, June 5, 2013
Section 196. Claim for Refund of Tax Credit. No case or FACTS: The petitioners here are the taxpayers. Toledo is
proceeding shall be maintained in any court for the the city treasurer of Manila. The city of Manila issued tax
recovery of any tax, fee, or charge erroneously or illegally assessments against petitioners pursuant to Section 21 of
collected until a written claim for refund or credit has been City Ordinance No. 7794, as amended by City Ordinance
filed with the local treasurer. No case or proceeding shall Nos. 7807, 7988, and 8011, otherwise known as the
be entertained in any court after the expiration of two (2) "Revenue Code of the City of Manila" (Manila Revenue
years from the date of the payment of such tax, fee, or Code).Petitioners paid under protest.
charge, or from the date the taxpayer is entitled to a refund
or credit. Petitioners informed the Office of the City Treasurer of
Manila of the nature of the foregoing payment, assailing as
well the unconstitutionality of Section 21 of the Manila
Reading Section 196, Revenue Code. Petitioners’ protest was however denied.
1. The first and most important requirement is you Petitioners filed a case RTC against respondents,
have to make a written claim for a refund. reiterating their claim that Section 21 of the Manila
Revenue Code is null and void. Accordingly, they sought
the refund of the amount of local business taxes they
Compare it with the NIRC, dibakailangankangwritten
previously paid to the City, plus interest.
claim of refund or if you will show that you have
overpayment of taxes in your ITR, that is already as good
as filing a written claim for a refund.But it doesn’t happen Respondents filed a Motion to Dismissbut the RTC did not
here in the Local Government Code, there must be a address the arguments raised in the aforesaid Motion to
written claim for refund filed before a local treasurer. Dismiss. Consequently, respondents filed their Answer,
they averred that petitioners failed to file any written claim
for tax refund or credit with the Office of the City Treasurer
of Manila.
2. And on top of that, the written claim for refund
must be made within 2 years from the date of Petitioners sent respondents a Request for Admissions &
payment of such tax or fee. Otherwise prescribed Interrogatories. Respondents did not respond to the said
na. Request for Admission.
The RTC here, said “Okay, Refund is granted. When the

Is there a form that you need to follow? In the case of
case went to the Court of Tax Appeals, CTA reversed the
China Banking Corporation vs. City Treasurer of Manila decision. The CTA said, “Okay. While it is true that you
G.R. 204117, July 1, 2015 have filed your protest, you did not file any claim for
refund.”
The Supreme Court said that the law does not prescribe
any formal requirement to constitute a valid protest. What Which brings us to the ISSUE: Is the filing of the protest
is important is that it was filed and it contains a tantamount to a claim for refund? That is basically the
spontaneous declaration made to acquire or keep some issue there.
right or to prevent any impending damage. Accordingly, the
protest is valid so long as it states the taxpayer’s objection HELD: Okay, what did the Supreme Court say? Are
to the assessment and the reasons therefore. petitioners entitled to claim a refund in the first place? To
answer that, of course, you have to answer first, Is a
protest tantamount to a filing of refund?
It’s okay if you write “Dear Mr. Treasurer,
Greetings!” diba usually? Okay lang. As long as you put The Supreme Court said, “Okay, the petitioners are not
there your objections and you provide the reasons why entitled to refund because they did not follow the procedure
you’re objecting to the local government from collecting the in Section 196. Yes, they followed the procedure but it’s a
taxes, fees, or charges. procedure in protesting the assessment.”
64 | P a g e
requirement is actually emphasized on the Chinabank case

Probably it would have been different. "Okay, I’m protesting that we mentioned earlier.
this assessment and at the same time because I am
protesting this, I am also filing my claim for refund since I China Banking Corporation vs. City Treasurer of Manila
paid in protest." That would have been different but the G.R. 204117, July 1, 2015
facts do not say.
In this case, the Supreme Court finds that the City
The law specifically provides that a written claim for refund Treasurer’s contention that CBC was not able to properly
must first be filed with a local treasurer. In other words, a protest the assessment to be without merit. The Court is of
claim for a protest is different from a claim for refund. the view that CBC was able to properly file its protest
against the assessment of the City Treasurer when it filed
The Second issue here is it involves a request for its letter on January 15, 2007, questioning the imposition
admission. Alamniyoyan? What is it in civil procedure, what while paying the assessed amount.
is a request for admission? It’s basically one party would
request to the other party to admit a certain set of facts? The Court, however, is of the view that the period within
What’s the effect of that? The party admitting that fact is which the City Treasurer must act on the protest, and the
already bound to admission there. It can usedagainst him. consequent period to appeal a "denial due to inaction,"
should be reckoned from January 15, 2007, the date CBC
What is the effect if you will not answer a request of filed its protest, and not March 27, 2007.
admission? You don’t want to admit. Failure to respond to
a request of admission, would result to the implied
admission of the facts of which of the requesting parties Local Government Remedies
seeks the other to admit. The exception for that is if the fact
sought to be admitted has already been denied in the This assumes that the assessment is already final and
pleadings. executory. It is the only time the LGU may collect the taxes
either judicially or administrative.
What happened in this case is this, they (petitioners) filed a
1. Local Government’s Lien.
case for a claim for a refund before the RTC. “Okay, we
2. Civil remedies, either by administrative action or
filed a request of admission but the other party did not
judicial action.
respond.”
But in this case sabingSupreme Court, “Even if he did not Let’s start with the Local Government’s Lien, in
respond, this does not mean that there’s already an implied Sections 172 and 173.This is purely codal.
admission because one of the exception is that they have
responded those facts sought to be admitted in the Section 172. Application of Chapter. - The provisions
pleadings. In this case, nag file naang governmentng of this Chapter and the remedies provided hereon
motion to be dismissed. Nag file nasilang answer, denying may be availed of for the collection of any delinquent
that they received any written claim for protest. local tax, fee, charge, or other revenue.
Let’s go back to the 2-year period. Section 173. Local Government's Lien. - Local taxes,
fees, charges and other revenues constitute a lien,
“No case or proceeding shall be entertained in superior to all liens, charges or encumbrances in favor
any court after the expiration of two (2) years from the date of any person, enforceable by appropriate
of the payment of such tax, fee, or charge, or from the date administrative or judicial action, not only upon any
the taxpayer is entitled to a refund or credit.” property or rights therein which may be subject to the
lien but also upon property used in business,
occupation, practice of profession or calling, or
Even if the local treasurer has not acted on the exercise of privilege with respect to which the lien is
request for a refund, then the taxpayer is required to file a imposed. The lien may only be extinguished upon full
court action for a refund within the two-year prescriptive payment of the delinquent local taxes fees and
period. charges including related surcharges and interest.
If the two-year period is about to expire, the

taxpayer must file an appeal before the RTC or the MTC How will this lien be extinguished? This will be
depending on the amount claimed as a refund. Okay, this extinguished upon full payment of the delinquent local
65 | P a g e
taxes, fees, and charges including related surcharges and discretion, to which list shall be added a statement of the
interest, if any. sum demanded and a note of the time and place of sale.
Then you have the CIVIL REMEDIES. It is (c) Publication - The officer shall forthwith cause a
basically the same with the NIRC. notification to be exhibited in not less than three (3) public
and conspicuous places in the territory of the local
Section 174. Civil Remedies. - The civil remedies for the government unit where the distraint is made, specifying the
collection of local taxes, fees, or charges, and related time and place of sale, and the articles distrained. The time
surcharges and interest resulting from delinquency shall of sale shall not be less than twenty (20) days after the
be: notice to the owner or possessor of the property as above
specified and the publication or posting of the notice. One
(a) By administrative action thru distraint of goods, chattels, place for the posting of the notice shall be at the office of
or effects, and other personal property of whatever the chief executive of the local government unit in which
character, including stocks and other securities, debts, the property is distrained.
credits, bank accounts, and interest in and rights to
personal property, and by levy upon real property and (d) Release of distrained property upon payment prior to
interest in or rights to real property; sale - If at any time prior to the consummation of the sale,
all the proper charges are paid to the officer conducting the
(b) By judicial action. sale, the goods or effects distrained shall be restored to the
owner.
Either of these remedies or all may be pursued
concurrently or simultaneously at the discretion of the local (e) Procedure of sale - At the time and place fixed in the
government unit concerned. notice, the officer conducting the sale shall sell the goods
or effects so distrained at public auction to the highest
bidder for cash. Within five (5) days after the sale, the local
There is no hierarchy of remedies when it comes treasurer shall make a report of the proceedings in writing
to collection of taxes. to the local chief executive concerned.
Section 175. Distraint of Personal Property. - The remedy Should the property distrained be not disposed of within
by distraint shall proceed as follows: one hundred and twenty (120) days from the date of
distraint, the same shall be considered as sold to the local
(a) Seizure - Upon failure of the person owing any local tax, government unit concerned for the amount of the
fee, or charge to pay the same at the time required, the assessment made thereon by the Committee on Appraisal
local treasurer or his deputy may, upon written notice, and to the extent of the same amount, the tax
seize or confiscate any personal property belonging to that delinquencies shall be cancelled.
person or any personal property subject to the lien in
sufficient quantity to satisfy the tax, fee, or charge in Said Committee on Appraisal shall be composed of the city
question, together with any increment thereto incident to or municipal treasurer as chairman, with a representative of
delinquency and the expenses of seizure. In such case, the the Commission on Audit and the city or municipal
local treasurer or his deputy shall issue a duly assessor as members.
authenticated certificate based upon the records of his
office showing the fact of delinquency and the amounts of (f) Disposition of proceeds - The proceeds of the sale shall
the tax, fee, or charge and penalty due. Such certificate be applied to satisfy the tax, including the surcharges,
shall serve as sufficient warrant for the distraint of personal interest, and other penalties incident to delinquency, and
property aforementioned, subject to the taxpayer's right to the expenses of the distraint and sale. The balance over
claim exemption under the provisions of existing laws. and above what is required to pay the entire claim shall be
Distrained personal property shall be sold at public auction returned to the owner of the property sold. The expenses
in the manner hereon provided for. chargeable upon the seizure and sale shall embrace only
the actual expenses of seizure and preservation of the
(b) Accounting of distrained goods. - The officer executing property
the distraint shall make or cause to be made an account of
the goods, chattels or effects distrained, a copy of which
signed by himself shall be left either with the owner or i. Basically it starts with seizure of personal properties,
person from whose possession the goods, chattels or whether tangible or intangible. If you take a look at Section
effects are taken, or at the dwelling or place or business of 174, how is it effected? Of course it’s by seizure,
that person and with someone of suitable age and kuhaonnilaang property and then the local treasurer will
66 | P a g e
issue an authenticated certificate. sanggunian concerned.
ii.There will be a publication in three (3) public and

conspicuous places. One of which should be the office of Levy is upon the real property.
the Chief Executive.
i. The local assessor will prepare a certificate showing the
iii. Take note that the time of sale for distrainedproperties name of the taxpayer and the amount of taxes and
must not be earlier than 20 days or shall not be less than penalties.
20 days after notice to the to the owner or possessor of the
property as and the publication or posting of the notice. ii. Written notice of the levy shall be mailed to or served
upon the assessor and the Register of Deeds of the
iv. Can the property distrained be released even before province or city where the property is located who shall
sale? Of course, yes. It’s pretty much like the NIRC that is annotate the levy on the tax declaration and certificate of
paid by payment of all the taxes and other proper charges. title of the property.
v. The procedure ofsale,you have public auction. Within iii. The taxpayer should be notified The notice shall be
five (5) days after the sale, the local treasurer shall make a serve to the delinquent taxpayer or, if he be absent, to his
report of the proceedings in writing to the local chief agent or the manager of the business in respect to which
executive concerned. the liability arose, or if there be none, to the occupant of the
property in question.
vi. There is forfeiture of property if the goods remain unsold
for a period of twenty (120) days from the date of distraint,
Section 178. Advertisement and Sale. - Within thirty (30)
Then you have Levy under SECTION 176. days after the levy, the local treasurer shall proceed to
publicly advertise for sale or auction the property or a
Section 176. Levy on Real Property. - After the expiration usable portion thereof as may be necessary to satisfy the
of the time required to pay the delinquent tax, fee, or claim and cost of sale; and such advertisement shall cover
charge, real property may be levied on before, a period of at least thirty (30) days. It shall be effected by
simultaneously, or after the distraint of personal property posting a notice at the main entrance of the municipal
belonging to the delinquent taxpayer. To this end, the building or city hall, and in a public and conspicuous place
provincial, city or municipal treasurer, as the case may be, in the barangay where the real property is located, and by
shall prepare a duly authenticated certificate showing the publication once a week for three (3) weeks in a
name of the taxpayer and the amount of the tax, fee, or newspaper of general circulation in the province, city or
charge, and penalty due from him. Said certificate shall municipality where the property is located. The
operate with the force of a legal execution throughout the advertisement shall contain the amount of taxes, fees or
Philippines. Levy shall be effected by writing upon said charges, and penalties due thereon, and the time and
certificate the description of the property upon which levy is place of sale, the name of the taxpayer against whom the
made. At the same time, written notice of the levy shall be taxes, fees, or charges are levied, and a short description
mailed to or served upon the assessor and the Register of of the property to be sold. At any time before the date fixed
Deeds of the province or city where the property is located for the sale, the taxpayer may stay the proceedings by
who shall annotate the levy on the tax declaration and paying the taxes, fees, charges, penalties and interests. If
certificate of title of the property, respectively, and the he fails to do so, the sale shall proceed and shall be held
delinquent taxpayer or, if he be absent from the either at the main entrance of the provincial, city or
Philippines, to his agent or the manager of the business in municipal building, or on the property to be sold, or at any
respect to which the liability arose, or if there be none, to other place as determined by the local treasurer conducting
the occupant of the property in question. the sale and specified in the notice of sale.
In case the levy on real property is not issued before or Within thirty (30) days after the sale, the local treasurer or
simultaneously with the warrant of distraint on personal his deputy shall make a report of the sale to the
property, and the personal property of the taxpayer is not sanggunian concerned, and which shall form part of his
sufficient to satisfy his delinquency, the provincial, city or records. After consultation with the sanggunian, the local
municipal treasurer, as the case may be, shall within thirty treasurer shall make and deliver to the purchaser a
(30) days after execution of the distraint, proceed with the certificate of sale, showing the proceeding of the sale,
levy on the taxpayer's real property. describing the property sold, stating the name of the
purchaser and setting out the exact amount of all taxes,
A report on any levy shall, within ten (10) days after receipt fees, charges, and related surcharges, interests, or
of the warrant, be submitted by the levying officer to the
67 | P a g e
penalties: Provided, however, That any excess in the And lastly, you have the right of redemption
proceeds of the sale over the claim and cost of sales shall within 1 year of the date of sale. The delinquent taxpayer or
be turned over to the owner of the property. his representative shall have the right to redeem the
property upon payment to the local treasurer of the total
The local treasurer may, by ordinance duly approved, amount of taxes, fees, or charges
advance an amount sufficient to defray the costs of
collection by means of the remedies provided for in this Just read all the remaining provisions, I think
Title, including the preservation or transportation in case of that’s it and we’re done with the Local Government
personal property, and the advertisement and subsequent Taxation.
sale, in cases of personal and real property including
improvements thereon. For the exam coverage your third exam will be
Tax remedies under the NIRC and then you have the
entirety of the Local Government Taxation except RPT,
How long shall the advertisement take? For a kasaliang remedies.
period of the 30 days after the levy.
It’s done by mostly on the publication. Where

should it be done? The posting should be done in the main
entrance of the municipal or city hall and in a public and
conspicuous place in the barangay of the real property. -END OF PRE FINALS COVERAGE-
That is the minimum requirement.
“Patient endurance is what you need now, so that you
How is the publication done? It must be once a will continue to do God’s will. Then, you will receive all
week for three consecutive weeks in a newspaper of that He has promised.”
general circulation in the province, city, or municipality
where the property is located. Hebrews 10:36
Section 179. Redemption of Property Sold. - Within one

(1) year from the date of sale, the delinquent taxpayer or
his representative shall have the right to redeem the
property upon payment to the local treasurer of the total
amount of taxes, fees, or charges, and related surcharges,
interests or penalties from the date of delinquency to the
date of sale, plus interest of not more than two percent
(2%) per month on the purchase price from the date of
purchase to the date of redemption. Such payment shall
invalidate the certificate of sale issued to the purchaser and
the owner shall be entitled to a certificate of redemption
from the provincial, city or municipal treasurer or his
deputy.
The provincial, city or municipal treasurer or his deputy,

upon surrender by the purchaser of the certificate of sale
previously issued to him, shall forthwith return to the latter
the entire purchase price paid by him plus the interest of
not more than two percent (2%) per month herein provided
for, the portion of the cost of sale and other legitimate
expenses incurred by him, and said property thereafter
shall be free from the lien of such taxes, fees, or charges,
related surcharges, interests, and penalties.
The owner shall not, however, be deprived of the

possession of said property and shall be entitled to the
rentals and other income thereof until the expiration of the
time allowed for its redemption.
68 | P a g e

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TAXATION II TRANSCRIPT OF STENOGRAPHIC NOTES

Based on the Lectures of Atty.Donalvo (2nd Semester of S.Y. 2016-2017)

PRE FINALS COVERAGE 3. Execution of judgments

March 2, 2017 (1st Hour)

BIR has enforcement powers. It enforces the

Who are the BIR officers in general? We have

You also have the Revenue Regional Director

1. To interpret tax laws

MISAMIS ORIENTAL ASSOCIATION vs. DEPARTMENT

Provided, That within three (3) years

(b) A statement of the information being sought,

Take note that the power to compromise is different

ISSUE: How do we interpret provisions on the

It is the CIR or his duly authorized representative. Section 6(A):

In other words, if the amendment will ultimately reduce

Review: Q: How do we compute the 3 year period?

(b) If before the expiration of the time Fraudulent return

within ten (10) days from the date of retirement or within

Protest is the act of the taxpayer questioning the

When should the protest be made?

It means the documents necessary to support the to submit

1) it must be from an appeal.Dapatnaka appeal 3) Civil Action: &

So if there is a fraudulent intention on Section 207. Summary Remedies. -

distraint of personal property and levy on realty may be of the Commissioner.

March 21, 2017

What are the requisites of equal protection? Stated And lastly,

(e) Taxes, fees, and charges and other

Art. X, Sec 5:Each local government unit shall have the

It is the gross output which is the actual market

(e) Any person subject to the professional tax shall write in

(b) The manufacturers, producers, wholesalers, dealers,

What about paragraph (e)?

I remember before, dibasalikodngAteneo High School,

How do you determine physically handicapped?

Then of course the imposition of toll fees and

Community Tax ii. Is engaged in business or occupation;

community tax for that year.

Again, community tax is actually a tax on

(b) Documentary stamp tax; 1. Alcoholic liquors

Section 167. Time of Payment. Unless otherwise provided

So let us outline Section 167.

So there is a cap unlike saBIR or NIRC, there’s

i.After the submission of the protest, the local treasurer has

After the 60-day period, the taxpayer must

reasons. Now, the importance of a written claim for refund

The RTC here, said “Okay, Refund is granted. When the

requirement is actually emphasized on the Chinabank case

If the two-year period is about to expire, the

issue an authenticated certificate. sanggunian concerned.

ii.There will be a publication in three (3) public and

It’s done by mostly on the publication. Where

Section 179. Redemption of Property Sold. - Within one

The provincial, city or municipal treasurer or his deputy,

The owner shall not, however, be deprived of the

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