TAXATION LAW REVEW (FINALS REVIEWER)
GENERAL PRINCIPLES OF TAXATION
Taxation – enforced proportional contribution,
imposed by the Sate by its sovereign capacity, to
support the government
Three elements of taxation
1. it is an enforced proportional contribution from
persons and properties
2. imposed by the state by virtue of its sovereignty
3. levied for the support of the government and for all
public needs
Two concepts of Taxation
1. power of tax
2. the act or process by which the taxing power is
exercised
Purposes and objectives
1. Revenue-raising – revenues derived from taxes
are intended primarily to finance the government and
its activities
2. Non-revenue/sumptuary purposes –
(a) promotion of the general welfare
(b) regulation
(c) reduction of social inequality
(d) encourage economic growth
(e) protectionism
Lifeblood Theory – taxation is the indispensable and
inevitable price for civilized society. Taxes are the
lifeblood of the State through which the government
and its agencies continue to operate and which the
state effects its functions for the welfare of the
constituents
And because of the lifeblood theory
- Injunction does not generally lie against the
government
- The State is not estopped from collecting
taxes by mistakes or errors of its agents
- Laws exempting subjects from taxation are
strictly construed against the taxpayer
Necessity Theory - of the government is a necessity.
It cannot continue without a means to pay its
expenses, and therefore has a right to compel all
citizens in property within its power to contribute.
Benefits- Protection Theory or Reciprocity Theory
(Doctrine of Symbiotic Relationship) – taxes paid
for the enjoyment of the benefits of the. organized
society, such enjoyment also extends to those
members of a state who do not pay taxes because
they are not able to do so. The government, for its
part, is expected to respond in the form of tangible
and intangible benefits intended to improve the lives
of the people and enhance their material and moral
values.
Jurisdiction over subjects and objects- The power
to tax can only be exercised within the territorial
jurisdiction of the taxing authority, except when there
is privity of relationship between the taxing state and
the object of tax.
Attributes of a Sound Taxation System
1. Fiscal Adequacy – the sources of revenue should
be adequate to meet the government expenditures and
their variations.
2. Administrative Feasibility - The tax system
should be capable of being effectively administered
and enforced with the least in convenience to the
taxpayer.
3. Theoretical Justice - The tax system should be
fair to the average taxpayer and based upon the
ability to pay.
Imprescriptibility of Taxes
General Rule: The right to assess and to collect are
imprescriptible.
Exceptions. When the laws provide for statute of
limitations.
Requisites of a Valid Tax
1. That either the person or property tax be within the
jurisdiction of the taxing authority.
 TAXATION LAW REVEW (FINALS REVIEWER)
2. That the assessment and collection of certain kinds
of taxes guarantee against injustice to individuals,
especially by providing notice, an opportunity for
hearing.
3. That it should be for a public purpose.
4. The rule of taxation shall be uniform.
5. The tax must not impinge on the inherent and
constitutional limitations on the power of taxation.
TAX LICENSE FEE
Inherent Limitations of the Power of Taxation
1. Taxes must be exacted for public purpose
- money raised by taxation can be expanded only for
public purpose and not for the advantage of private
individuals.
- Government functions and promotion of social
justice.
- Tests to determine public purpose.
Duty test. Whether the thing to be furthered
by the appropriation of public revenue is something
which is duty of the state.
Promotion of general welfare - proceeds will
directly promote the welfare of the community.
2. The power to tax is inherently legislative in
nature.
General rule: the power to tax is purely legislative
and cannot be delegated to other branches of the
government.
- Potestas non delegata non delegari
protest
-
Exceptions.
1. Delegation to local governments - Local
governments are granted the autonomous authority
to create their own sources of revenue and levy
taxes.
2. Delegation to the President such as the grant to
the President to impose tariff rates within the
bounds sanctions by the Customs and Tariffs
Modernization Act.
3. Delegation to administrative authorities, such as
the authority to fix rates within the limits specified
by the law.
Tests to determine Administrative authorities
1. completeness test - the law must be
complete in all its essential terms and
conditions when it leaves the legislature so
that there's nothing left to delegate except
to enforce it.
2. sufficient standard test - The law must
be of sufficient standard to specify the
delegates authority and specify the
conditions.
3. Government entities, agencies, and
instrumentality's are generally accepted from
taxation.
- GR: a GOCC is not subject to tax.
-EXC: GSIS, SSS, PhilHealth and Local
Water District
Well, government instrumentalities are
exempt from real property taxes.
Government owned or controlled
 TAXATION LAW REVEW (FINALS REVIEWER)

corporations are not exempt from real Government’s Remedies

property taxes.

4. International Comity
Outline of Remedies
1. Administrative Remedies
- Under International Comity , a state must
recognize the generally accepted tenets of A. Assessment
international law, some of which are those B. Collection
that limit the authority of the government to
effectively impose taxes on a sovereign (1) enforcement of a tax lien
state. (2) distraint of personal property and
- The tax treaties are entered into to minimise garnishment of bank deposits
harshness of international double taxation. (3) levy on real property
- The obligation to comply with the tax treaty (4) compromise and abatement
must take precedent over an administrative (5) penalties and fines
issue. Ones. And administrative is show one, (6) non-availability of injunction to restrain
such as the Revenue memorandum order collection
should not operate to divest entitlement to a (7) forfeiture and
relief granted by a tax treaty. (8) suspension of business operations

Basis of international comity: 2. Judicial remedies

1. doctrine of sovereign equality - the states are A. Civil

juridically equal and enjoy the same rights and have B. Criminal
equal capacity in their exercise of powers
- par in parem non habet imperium
Taxpayer’s remedies
2. doctrine of sovereign immunity - foreign
government may not be sued without its consent.

Outline of Remedies
5. taxes are limited to the state's territorial 1. Assessment
jurisdiction. a. Protest with request for reconsideration or
- The situs of taxation is the place or authority that request for reinvestigation
has the right to impose and collect taxes. b. Compromise or abatement
Taxation, maybe exercise only within the territorial
jurisdiction of the taxing authority.
2. Collection
a. Tax Refund
b. Tax Credit
Constitutional Limitations of the Power of
Taxation

It all begins in the filing of the tax returns…..

REMEDIES
If the BIR finds that there are deficiencies, it will
issue an assessment
 TAXATION LAW REVEW (FINALS REVIEWER)
Taxpayer’s remedies
1. protest or dispute the assessment
2. refund or recover of erroneously or illegally
collected taxes
1. protest or dispute the assessment
When is a PAN required?
Preliminary notice of assessment – if after the review
and evaluation by the Commissioner or his duly
authorized representative, as the case may be, it is
determined that there exists sufficient basis to assess
the taxpayer for any deficiency, tax or taxes, the said
office shall issue the taxpayer a preliminary
assessment notice for the proposed assessment.
When is PAN not required?
SEC. 228. Protesting of Assessment. - When the
Commissioner or his duly authorized representative
finds that proper taxes should be assessed, he shall
first notify the taxpayer of his findings: Provided,
however, That a pre-assessment notice shall NOT be
required in the following cases:
(a) When the finding for any deficiency tax is the
result of mathematical error in the computation of the
tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between
the tax withheld and the amount actually remitted by
the withholding agent; or
(c) When a taxpayer who opted to claim a refund or
tax credit of excess creditable withholding tax for a
taxable period was determined to have carried over
and automatically applied the same amount claimed
against the estimated tax liabilities for the taxable
quarter or quarters of the succeeding taxable year; or
(d) When the excise tax due on excisable articles has
not been paid; or
(e) When the article locally purchased or imported by
an exempt person, such as, but not limited to,
vehicles, capital equipment, machineries and spare
parts, has been sold, traded or transferred to non-
exempt persons.
The taxpayers shall be informed in writing of the law
and the facts on which the assessment is made;
otherwise, the assessment shall be void.
NOTES:
- If there is sufficient basis for an assessment,
the BIR will issue a preliminary assessment
notice, stating the facts, laws, rules,
regulations in jurisprudence on which the
proposed assessment is based.
- Taxpayer has 15 days from receipt of the
PAN to respond
o If he does not respond = default and
a FORMAL LETTER OF
DEMAND/ FINAL
ASSESSMENT NOTICE
(FLD/FAN) shall be issued
o If he responds = FLD/FAN will be
issued 15 days from the
filing/submission of the taxpayer’s
response
- Requisites of a valid FAN?
1. it must be in writing
2. addressed to the taxpayer
3. providing for the basis in fact and in law
for the computation of the tax
4. providing for the amount of the tax due
5. the due date
6. there is demand to pay
7. signed by the BIR Representative
8. issued within the prescriptive period
- CONTENTS OF THE PROTEST:
1. state the nature of the protest (if
reinvestigation or reconsideration)
2. date of the FAN
3. applicable laws, rules
= absence of all 3 protest is void
- The taxpayer must file a letter of protest
within 30 days from the date of receipt of
the FLD or FAN. If the taxpayer fails to do
so, then the assessment becomes final,
executory and demandable
- Filed before the Revenue District Office
- When: within 30 days from the receipt of
the FAN
 TAXATION LAW REVEW (FINALS REVIEWER)

-
- DISTINGUISH REINVESTIGATION VS
RECONSIDERATION issuance of a preliminary assessment notice
step 1
REINVESTIGATI RECONSIDERATIO
ON N
issuance of the FLD+ FAN
Refers to a plea or a plea of reevaluation step 2
free evaluation on the of an assessment on the
basis of newly basis of existing
discovered or records without need of
additional evidence additional evidence. protest the FLD/FAN
that a taxpayer the taxpayer must file a letter of protest
intends to present in It does not suspend the within 30 days from the receipt of the
the re- investigation. running of the step 3
prescriptive period.
FLD/FAN; if he fails to do so, the
The suspension of -Basically a plea for re •assessment
recourse inbecomes final andorexecutory
case of inaction denial by
the period only evaluation of existing FORM OF PROTEST: RECONSIDERATION
the CIR REPRESENTATIVE
records. • if protest is denied: (a) appeal to the
occurs when the ORCTA
REINVESTIGATION
within 30 days for receipt of the
taxpayer requests for
said decision (b) request for
the investigation and
reconsideration to the Commissioner
is granted by the CIR
within 30 days from receipt of decision

*period to appeal is
tolled
step 4

•if protest or administrative appeal is

not acted upon by the CIR within
180 days the taxpayer may
-appeal to the CTA within 30 days
from the expiration of the 180
day period
If theforrequest
-wait for decision
the final the reconsideration
of the CIRis
then appeal to the CTA within 30
stilldays
deniedfrom
by the CIR = appeal to the
receipt of decision
CTA within 30 days from the of receipt
of the said decision
 TAXATION LAW REVEW (FINALS REVIEWER)

any sum that may be

due and collectible to
the taxpayer, except
withholding taxes

Requirements for tax credit or refund

1. written claim for tax credit or refund filed with the
CIR (a return filed showing overpayment shall be
considered as a written claim) whether or not the tax
has been paid under protest
2. filed within 2 years after the actual payment of the
tax or penalty, regardless of the existence of any
supervening cause after payment

Common elements in refund cases:

1. filed within the period
2. substantive basis in law
3. documents to support or substantiate your claim

Why the strict requirements?

Whoever losses from the CTADiv decision, has to A claim for tax refund or credit partakes of the nature
file a Motion for Reconsideration – condition sine of an exemption and is strictly construed against the
qua non. claimant
- Refund privileges are strictly construed
- Must be filed within 15 days from the time
prejudicial decision was received
- After MR, go to CTA en banc (15 days)
- From CTA en banc to SC (15 days) Two venues for refund:
1. Admin (BIR)
2. Judicial (CTA)
2. refund or recover of erroneously or
illegally collected taxes
NOTES:

Instances when a claim for refund may be availed - On the written claim to the BIR
of by the taxpayer o The written claim for credit or
refund filed with the CIR is a
1. erroneously or illegally assessed or collected mandatory requirement
internal revenue taxes o Condition precedent
2. penalties imposed without authority - On refunding overpaid creditable
3. any sum alleged to have been excessive or in any withholding taxes
manner wrongfully collected o Requisites
(1) filing the same within the two-
TAX REFUND TAX CREDIT year period
(2) establishing the fact of
There is actual A tax certificate or tax withholding copies of the CWT
reimbursement credit memo is issued certificates
to the taxpayer and this
can be applied against
 TAXATION LAW REVEW (FINALS REVIEWER)

(3) showing that the income

received was declared as part of the
gross income file an administrative claim with cir
within 2 yrs from end of taxable
quarter
GENERAL RULE: the 2-year prescriptive period 1
runs from the payment of the tax

- 2-year period cannot be extended by a mere

revenue memorandum
. CIR has 120 days to rule on the claim

EXCEPTIONS: 2

(1) when the taxpayer and the government agree to

wait for the outcome of a case which is on all fours
with the instant case
(2) when the payment of the tax was not due because
of error or wrongful collection but because of
patriotic duty to help the cause of the nation
(3) when the taxpayer was made to believe that the
refund was going to be allowed by the government
. the taxpayer then has 30 days from
the decision of the CIR or from the
expiration of the 120 day period if the
CIR does not act, to file a judicial
claim with the CTA even if this is
3 beyond the two 2 year period

CLAIM FOR REFUNDS OR TAX CREDITS

FOR ZERO-RATED
 TAXATION LAW REVEW (FINALS REVIEWER)
LOCAL TAXATION
Local Government Taxation
It is the power of the local government units to
impose and collect access under constituents in order
to raise revenues to enable them to perform the
functions for which they have been organized.
Grant of the local taxing power
1. Each local government unit shall have the power to
create its own sources of revenues and to levy taxes,
fees, 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 accrue exclusively to the local
governments. (Constitution. Article X, Section 5.)
2. Each local government unit shall exercise its
power to create its own source of revenue and to levy
taxes, fees and charges subject to the provisions
herein., consistent with the basic policy of local
autonomy. Such taxes, fees and charges should
accrue exclusively to the local government units.
(Local Government Code. Section 129.)
Nature of the taxing power if the LGUs
1.Not inherent but a direct grant -the taxing power
of provinces, cities, municipalities and barangay
thought not inherent, is not a mere delegation by the
legislative body but DIRECT GRANT OF THE
CONSTITUTION
2. Limited - neither plenary nor absolute. The
authority of the legislature over the taxing authority
of local governments is merely a limit to the exercise
thereof
3. Legislative – it may be exercised by the local
legislative body
4. Territorial – can only be exercised within the
territorial jurisdiction
Each LGU has the power to:
1. to create its own sources of revenue
2. to levy fees, taxes and charges
Scope of the Local Government Taxation
1. Local Taxation - imposition of license taxes, fees,
and other impositions, including community tax, as a
means to create its own sources of revenue.
2. Real Property Taxation - system of levy on real
property imposed on a countrywide basis, but
authorizing the local governments to vary the rates of
taxation to a limited extent and within certain
parameters.
Fundamental Principles:
1. Uniform in each Local Government Unit (LGU)
2. Taxes, Fees and Charges must be:
a. Equitable and based on ability to pay
b. Levied for public purpose
c. Not be unjust, excessive, oppressive or
confiscatory
d. Not contrary to law, public policy, national
economic policy or in restraint of trade
3. Collection cannot be let to any private person
4. The revenue collected shall inure solely to the
benefit of the LGU levying the tax
5. Progressive rate of tax, as far as practicable
 TAXATION LAW REVEW (FINALS REVIEWER)
Rule of Interpretation on Local Taxes
- Sec. 5(b) of Local Gov’t. Code
“In case of doubt, any tax ordinance or revenue
measure shall be construed strictly against the
Local Government Unit enacting it, and liberally in
favor of the taxpayer.
Any tax exemption, incentive or relief granted by
any Local Government Unit pursuant to the
provisions of this Code shall be construed strictly
against the person claiming it .”
Provisions of the Local Government Code are not
self-operating since the local taxing authority is
limited under the following provisions:
• Sec. 132 – “The power to impose a tax, fee, or
charge or to generate revenue under this Code
shall be exercised by the Sanggunian of the
LGU concerned through an appropriate
ordinance.”
• Sec. 54 to 59 provides for the approval, review
and effectivity of ordinances
• Sec. 189 directs that there must be a public
hearing prior to the enactment of any local tax
ordinance or revenue measure
Local Taxing Power and Authority
The power to impose a tax, fee or charge or to
generate revenue, under this Code shall be exercised
by the sangguinan of the LGU concerned through an
appropriate ordinance
1. Provinces – Sangguniang Panlalawigan
2. Cities – Sangguniang Panlungsod
3. Municipalities – Sangguniang Pambayan
4. Barangay - Barangay Council
Requirements for an ordinance to become a law
1. Must be made in writing accompanied by a
note stating why should it be approved
2. Must be posted simultaneously in at least 4
public places within 10 days from filing
3. Written notices must be sent to affected
parties
4. Must be referred to an appropriate Sanggunian
Committee
5. Must prepare copies of proposed ordinance in
the form it was passed on 2nd reading and
provide a copy to each Sanggunian member
6. Sanggunian holds public hearing 10 days after
notices are sent or the last day of publication
of proposed ordinance, whichever is later
7. Sanggunian passes the proposed ordinance
and prepares the Minutes
8. Must be approved by majority of members
present during the meeting for an ordinance
to be valid
9. Approved ordinance must be stamped with the
Seal of Sanggunian and recorded in their
books
10. Must be submitted and approved by the
Mayor or Governor
11. The Sanggunian can override a veto with 2/3
vote
12. Must be published in a local newspaper
within 10 days of its approval before it takes
effect
(The tax ordinance will be null and void if it fails to
comply with such publication requirement [Coca-
Cola vs. City of Manila, G.R. No. 156252, June
27,2006]
13. The ordinance undergoes review
Local Tax Ordinance
Local Sanggunians have the authority to enact the ff
tax ordinances:
1. Imposing taxes, fees and charges to
generate revenue.
2. Prescribing penalties for violation of tax
ordinance.
 TAXATION LAW REVEW (FINALS REVIEWER)

3. Granting local tax exemptions and rests on the intention of the Congress.
incentives. Conversely should the Congress allow
municipal corporations to cover fields of
4. Condoning tax delinquencies
taxation it already occupies, then the
doctrine of preemption will not apply.
Requisites for imposition of fees or tax authorized
by the LGC.
The rate should be.
Common Limitations of the LGU in imposing
1. Within the range of rate provided by the taxes (Sec 133)
LGC.
2. Uniform throughout the political
Section 133. Common Limitations on the
subdivision &
Taxing Powers of Local Government Units. -
3. Fair and reasonable to taxpayers. Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the
Residual taxing power following:
LGUs may exercise the power to levy taxes, fees or
charges. On any base or subject not otherwise
(a) Income tax, except when levied on banks and
specifically enumerated in the LGC or attacks under
other financial institutions;
the provisions of the NIRC as amended or other
applicable laws.
NOTE: Cities and municipalities may impose
business taxes on banks and other financial
Limitations of the Residual Taxing Power
institutions.
1, Constitutional Limitations on taxing
power.
(b) Documentary stamp tax;
2. Common limitations to the taxing power
of local government units as prescribed in
Section 133 of the LGC.
(c) Taxes on estates, inheritance, gifts, legacies and
3. Fundamental principles governing the other acquisitions mortis causa, except as otherwise
exercise of taxing power by local provided herein;
governments as prescribed under section 130
Exception: when otherwise provided by the code, (i.e
of the LGC, particularly the requirement that
Tax on transfer of real property) However,
they must not be unjust, excessive,
transferred mid pursuant to RA 6657 (Comprehensive
oppressive or confiscatory.
Agrarian Reform) shall be exempt from tax on
4. The requirement prescribed in section 186 transfer.
of the LGC, which they are X. The
ordinance levying such residual taxes shall
not be enacted without any prior public (d) Customs duties, registration fees of vessel and
hearing conducted for that purpose. wharfage on wharves, tonnage dues, and all other
kinds of customs fees, charges and dues except
5. The principle of pre-emption.
wharfage on wharves constructed and maintained by
the local government unit concerned;
Principle of Pre-emption.
- also known as exclusionary doctrine. Exceptions:
- Where the national government elects to tax
a. wharfage on wharves constructed and maintained
a particular area, it impliedly withholds from
by the local government
the local government the delegated power to
tax the same field. This doctrine principally
 TAXATION LAW REVEW (FINALS REVIEWER)

b. issuance of licenses for the operation of fishing

vessels of 3 tons or less by municipalities
Gross receipts of common carriers derived from
incoming and outgoing freight shall not be subject to
local taxes imposed under Rep. Act. No. 7160 – Local
Wharfage - against the cargo of a vessel engaged in
Government Code of 1991” (Pipeline concessionaires
foreign or domestic trade based on quantity, weight
are considered as common carriers).
or measure received and or discharge by the vessel.

“Common carriers” in the Civil Code makes no

(e) Taxes, fees, and charges and other impositions
distinction as to means of transporting, whether by
upon goods carried into or out of, or passing
land, water or air. First Phil Industrial Corp. vs CA
through, the territorial jurisdictions of local
(G.R. No. 125948, Dec. 29, 1998)
government units in the guise of charges for
wharfage, tolls for bridges or otherwise, or other
taxes, fees, or charges in any form whatsoever upon
such goods or merchandise;
(k) Taxes on premiums paid by way or reinsurance or
retrocession;
(f) Taxes, fees or charges on agricultural and aquatic
products when sold by marginal farmers or
fishermen; (l) Taxes, fees or charges for the registration of
motor vehicles and for the issuance of all kinds of
licenses or permits for the driving thereof, except
Marginal Farmer - an individual engaged in the tricycles;
substinence farming or fishing, which shall be limited
to the sale, barter, or exchange for agricultural or
marine products produced by himself and his (m) Taxes, fees, or other charges on Philippine
immediate family. products actually exported, except as otherwise
provided herein;

(g) Taxes on business enterprises certified to by the

Board of Investments as pioneer or non-pioneer for a
period of six (6) and four (4) years, respectively from
the date of registration;
(h) Excise taxes on articles enumerated under the
national Internal Revenue Code, as amended, and
taxes, fees or charges on petroleum products;
(i) Percentage or value-added tax (VAT) on sales,
barters or exchanges or similar transactions on
goods or services except as otherwise provided
herein;
(j) Taxes on the gross receipts of transportation
contractors and persons engaged in the
transportation of passengers or freight by hire and
common carriers by air, land or water, except as
provided in this Code;
NOTES
(n) Taxes, fees, or charges, on Countryside and
Barangay Business Enterprises and cooperatives
duly registered under R.A. No. 6810 and Republic
Act Numbered Sixty-nine hundred thirty-eight (R.A.
No. 6938) otherwise known as the "Cooperative
Code of the Philippines" respectively; and
(o) Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities, and
local government units.
The said common limitations are classified as
follows:
1. taxes which are levied under the NIRC unless
otherwise provided by the LGC
2. taxes, fees and charges which ae imposed under
the Tariffs and Customs Code
3. Taxes, fees and charges where the imposition of
which contravenes the existing. Governmental
policies or which are violated. The fundamental
principles of taxation.
 TAXATION LAW REVEW (FINALS REVIEWER)
4. Access, fees and charges imposed under special
laws.
TAXING POWERS OF LGUS
Classification
1. common revenue raising powers
2. specific powers
3. community tax
4. residual taxing powers
Common Revenue Raising Powers:
1. Reasonable fees and charges for services rendered.
2. Public utility charges for the operation of Public
Utilities owned, operated, and maintained by the
LGU’s within their jurisdiction.
3. Toll, fees or charges for the use of any public road,
pier or Wharf, waterway, bridge, ferry, or Tele
communication system funded and constructed by the
LGU concerned.
Toll - imposed on goods or persons traveling, public
roads or bridges.
Charges – pecuniary liability as rents or fees against
persons or property.
Fee - A charge fixed by the law or ordinance for the
regulation or inspection of a business or activity. It
includes charges fixed by law or agency for the
service of a public officer in the discharge of his
official duties.
Exceptions:
1. Officers and enlisted men of the AFP.
2. Members of the PNP on mission.
3. Post office delivering mail.
4. Physically handicapped and disabled
citizens.
Local Tax on Condo Dues
City Treasurer of Makati vs. BA Lepanto
Condominium Corp. (Oct. 25, 2005)
• It was ruled that a condominium corp. is
generally exempt from local business tax
under LGC, irrespective of any local
ordinance that seeks to declare otherwise
• The City Treasurer failed to prove that
the corp. is engaged in business activities
beyond the statutory purpose of a condo
corp.
• The dues assessed against unit owners are
to defray the expenses of the condo
project
• There is no contemplation of business and
collecting tax violates due process of
law
When Does Local Business Tax Accrues?
• SC made a distinction between the
Annual Income Tax and Local Business
Tax to determine when local business tax
accrues
o Income Tax is a tax on income
realized in 1 taxable year but
payable on the following year
o Local Business Tax is paid for
the privilege of carrying on
business in the year the tax is
paid
• In the year an establishment terminates its
business, they would be required to pay
the difference if tax is collected
• It is based on the previous year’s gross
sales or receipts, is less than the actual tax
due based on the current year’s gross
sales or receipts as of the date of transfer
or retirement
Mobil Philippines Inc. vs. City Treasurer of
Makati, (G.R. No. 154902, July 14, 2005)
 TAXATION LAW REVEW (FINALS REVIEWER)
1. Question the newly enacted ordinance
TAXING POWERS OF LGUS
Taxpayer’s remedies in local taxation
3 remedies
1. Question the newly enacted ordinance
2. Protest against an assessment
3.Claim for a refund or tax credit
Notes:
If it’s a fee or charge that’s being assailed = go
straight to the courts,
If it’s a tax imposition/ ordinance/ revenue
measure = go to SOJ, under the doctrine of
exhaustion of administrative remedies
To reiterate their differences…..
Toll - imposed on goods or persons traveling, public
roads or bridges.
Charges – pecuniary liability as rents or fees against
persons or property.
Fee - A charge fixed by the law or ordinance for the
regulation or inspection of a business or activity. It
includes charges fixed by law or agency for the
service of a public officer in the discharge of his
official duties.
Exceptions:
1. Officers and enlisted men of the AFP.
2. Members of the PNP on mission.
3. Post office delivering mail.
4. Physically handicapped and disabled
citizens.
- There must be public hearings and,
within 10 days of enactment, there should
be publication of the ordinance in full for
3 consecutive days
- Procedure:
o Appeal within 30 days from
effectivity of the ordinance to the
Secretary of Justice
o Secretary must render within 60
days from receipt of the appeal
o Within 30 days from the lapse of
the 60 days without any action
from the Secretary of Justice or
within 30 days from the receipt of
the decision, the aggrieved taxpayer
may got to court
- Failure to follow the procedure in
enactment of tax measures renders the same
null and void
- What is void may not be annulled
- The SOJ may only review the
constitutionality or legality of the tax
ordinance and if warranted, to revoke it on
either or both grounds
- When disputing an ordinance, appeal to the
DOJ is mandatory.
- If no appeal to the DOJ, RTC may dismiss
the case
o Exception: pure questions of law,
the appeal to DOJ is mandatory
NATURE OF THE AUTHORITY OF THE
SECRETARY OF JUSTICE:
LGC authorizes the Secretary of Justice to review
only the constitutionality or legality of the Tax
Ordinance and, if warranted, to revoke it on either
or both of these grounds. When he alters or
modifies or sets aside a tax ordinance, he is not
also permitted to substitute his own judgment for
the judgment of the local government that enacted
the measure.
*alter, modify or revoke lang, but never substitute
his own judgment; he can only say if its
constitutional/unconstitutional because the wisdom
and policy behind the same belongs to the
Sanggunian, he cannot substitute his own judgment
 TAXATION LAW REVEW (FINALS REVIEWER)
*quasi judicial power
NOTES:
Appeals to the SOJ does not suspend the effectivity
of the ordinance and the accrual and payment of the
tax, fee or charge levied therein
No prohibition for injunction in collection of local
taxes (or even in the LGC), unlike in NIRC there is
no-injunction-rule, one cannot suspend collection of
internal revenue taxes
No Injunction Rule
In the case of Angeles City vs. Angeles City
Electric Corp. (June 29, 2010) SC ruled that:
“Unlike in NIRC, the Local Tax Code does not
contain any specific provision prohibiting injunction
where local taxes are involved but cannot negate the
procedural rules under Rule 58.”
Under this rule, the applicant is entitled to the relief if
the performance of the act will create injustice and
prevent damage to the applicant until the merits of
the case can be heard
GENERAL RULE: NO INJUNCTION RULE
EXCEPT: CTA can issue injunctive writ suspending
the collection of taxes on the ground that :
1. There is an appeal;
2. Prejudicial or will jeopardize the interest of the
government or the interest of the taxpayer and of
course
2. Subject to the posting of a surety bond of double of
the amount of the tax involved
2. Protest against an assessment
LOCAL TAX PROTEST
Treasurer will issue an assessment
1. Protest against local tax may be lodged within 60
days before the local treasurer from the receipt of the
notice of assessment, otherwise, it shall become final
and executory
2. Treasurer has within 60 days to decide from the
time of its filing
If meritorious = Treasurer will cancel the
assessment,
If not meritorious = He will deny the protest
3. Taxpayer has 30 days from the receipt of the denial
or 30 days from the lapse of the 60 day period within
which to appeal to the proper court of competent
jurisdiction, otherwise the assessment shall become
final and executory
4. The decision of the RTC is appealable to the Court
of Tax Appeals within 30 days from receipt thereof
via
- Petition for Review to the CTA Division
under Rule 42 (if from RTC acting original)
- Petition for Review to the CTA En Banc
under Rule 43 (if from RTC acting in
appellate jurisdiction)
5. The decision of the CTA en banc is appealable to
the SC within 15 days from receipt thereof
3. Claim for a refund or tax credit
Requirements in Tax Credit or Refund Cases
1. Written claim filed within the local treasurer
2. Filed within 2 years from
a. date of payment
b. date when the taxpayer is entitled to
refund or credit
Notes:
If a taxpayer wins a case against the LGU regarding
local taxes already paid, should the taxpayer move
 TAXATION LAW REVEW (FINALS REVIEWER)

for the issuance of a writ of execution to get his/her Secretary of Agriculture, in the case of
money back? agricultural product, commodity or article, in
connection with the imposition of the Anti-
- NO. the taxpayer should just request from
Dumping Duty, Countervailing and
the LGU the implementation of the tax Safeguard Duty
refund or tax credit
Under Republic Act Number 9282, the CTA's
original appellate jurisdiction was expanded to
INTERNAL REVENUE TAXES
include the following:

1. Criminal cases involving violations of the

TRAIN LAW
National Internal Revenue Code and the Tariff
and Customs Code;

CREATE LAW 2. Decisions of the Regional Trial Courts (RTC)

in local tax cases;

COURT OF TAX APPEALS (CTA) 3. Decisions of the Central Board of Assessment

Appeals (CBAA) in cases involving the
assessment and taxation of real property; and
RA 1125 and other laws prior to R.A. 9282, the Court
4. Collection of internal revenue taxes and
of Tax Appeals retains exclusive appellate
customs duties the assessment of which have
jurisdiction to review by appeal, the following:
already become final.
1. Decisions of the Commissioner of Internal
Revenue in cases involving disputed
assessments, refunds of internal revenue
taxes, fees or other charges, penalties
imposed in relation thereto, or other matters
arising under the National Internal Revenue
Code or other law or part of law
administered by the Bureau of Internal
Revenue;

2. Decisions of the Commissioner of Customs

in cases involving liability for customs
duties, fees or other money charges; seizure,
detention or release of property affected;
fines, forfeitures or other penalties imposed
in relation thereto; or other matters arising
under the Customs Law or other law or part
of law administered by the Bureau of
Customs [Rep. Act. No. 1125, (1954), Sec.
7];

3. In automatic review cases where such

decisions of the Commission of Customs
favorable to the taxpayer is elevated to the
Secretary of Finance (Sec. 2315, TCC); and

4. Decisions of the Secretary of Trade and

Industry, in the case of non-agricultural
product, commodity or article, or the