CHAPTER 2
TAXES, TAX LAWS, AND TAX ADMINISTRATION
TAXATION LAW
Taxation law refers to any law that arises from the
exercise of the taxation power of the State.
Types of taxation laws:
1. Tax laws - These are laws that provide for
the assessment and collection of taxes.
Examples:
a. The National Internal Revenue Code (NIRC)
b. The Tariff and Customs Code
c. The Local Tax Code
d. The Real Property Tax Code
2. Tax exemption laws - These are laws that
grant certain immunity from taxation.
Examples:
a. The Minimum Wage Law
b. The Omnibus Investment Code of 1987 (E.O. 226)
c. Barangay Micro-Business Enterprise (BMBE) Law
d. Cooperative Development Act
Sources of Taxation Laws
1. Constitution
2. Statutes and Presidential Decrees
3. Judicial Decisions or case laws
4. Executive Orders and Batas Pambansa
5. Administrative Issuances
6. Local Ordinances
7. Tax Treaties and Conventions with foreign
countries
8. Revenue Regulations
Types of Administrative Issuances
1. Revenue regulations
2. Revenue memorandum orders
3. Revenue memorandum rulings
4. Revenue memorandum circulars
5. Revenue bulletins
6. BIR rulings
Revenue Regulations are issuances signed by the
Secretary of Finance and recommendation of the
Commissioner of Internal Revenue (CIR) that
specially prescribe, or define rules and regulations for
the effective enforcement of provisions of the National
Internal Revenue Code (NIRC) and related statutes.
Revenue regulations are formal pronouncements
intended to clarify or explain the law and carry into
effect its general provisions by providing details of
administration and procedure. Revenue regulation
has the force and effect of a law, but is intended to
expand or limit the application of the law; otherwise, it
is void.
Revenue Memorandum Orders (RMOs) are
issuances that provide directives instructions;
prescribe guidelines; and outline processes,
operations, active workflows, methods, and
procedures necessary in the implementation of
policies, goals, objectives, plans, and programs of the
Bureau in all areas of operation except auditing.
Revenue Memorandum Rulings (RMRs) are
rulings, opinions and interpretations of CIR with
respect to the provisions of the Tax Code and other
tax laws as applied specific set of facts, with or
without established precedents, and which the CIR
issue from time to time for the purpose of providing
taxpayers guidance on the consequences in specific
situations. BIR Rulings, therefore, cannot contravene
on issued RMRs; otherwise, the Rulings are null and
void ab initio.
Revenue Memorandum Circulars (RMCs) are
issuances that publish pertinent applicable portions
as well as amplifications of laws, rules, regulations,
and precede issued by the BIR and other
agencies/offices.
Revenue Bulletins (RB) refer to periodic issuances,
notices, and official announcements of the
Commissioner of Internal Revenue that consolidate
the Bureau of Internal Revenue's position on certain
specific issues of law or administration in relation to
the provisions of the Tax Code, relevant tax laws, and
other issuances for the guidance of the public.
BIR Rulings are official positions of the Bureau to
queries raised by taxpayers and other stakeholders
relative to clarification and interpretation of tax laws.
Rulings are merely advisory or a sort of information
service to the taxpayer such that none of them is
binding except to the addressee and may be reversed
by the BIR at anytime.
Types of rulings:
1. Value Added Tax (VAT) rulings
2. International Tax Affairs Division (ITAD) rulings
3. BIR rulings
4. Delegated Authority (DA) rulings
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 Generally Accepted Accounting Principles
(GAAP) vs. Tax Laws
Generally accepted accounting principles or GAAP
are not laws, but are mere conventions of financial
reporting. They are benchmarks for the fair and
relevant valuation and recognition of income,
expense, assets, liabilities, and equity of a reporting
entity for general purpose financial reporting. GAAP
accounting reports are intended to meet the common
needs of a vast number of users in the general public.
Tax laws including rules, regulations, and rulings
prescribe the criteria for tax reporting, a special form
of financial reporting which is intended to meet
specific needs of tax authorities.
Taxpayers normally follow GAAP in recording
transactions in their books. However, in the
preparation and filing of tax returns, taxpayers are
mandated to follow the tax law in cases of conflict with
GAAP.
NATURE OF PHILIPPINE TAX LAWS
Philippine tax laws are civil and not political in nature.
They are effective even during periods of enemy
occupation. They are laws of the occupied territory
and not by the occupying enemy. Tax payments
made during occupations of foreign enemies are
valid.
Our internal revenue laws are not penal in nature
because they do not define crime. Their penalty
provisions are merely intended to secure taxpayers'
compliance.
TAX
Tax is an enforced proportional contribution levied by
the lawmaking body of the State to raise revenue for
public purpose.
Elements of a Valid Tax
1. Tax must be levied by the taxing power
having jurisdiction over the objects of taxation.
2. Tax must not violate Constitutional and
inherent limitations.
3. Tax must be uniform and equitable.
4. Tax must be for public purpose.
5. Tax must be proportional in character.
6. Tax is generally payable in money.
Classification of Taxes
A. As to purpose
1. Fiscal or revenue tax - a tax imposed for general
purpose
2. Regulatory - a tax imposed to regulate business,
conduct, acts of transactions
3. Sumptuary- a tax levied to achieve some social or
economic objectives
B. As to subject matter
1. Personal, poll or capitation - a tax on persons who
are residents of particular territory
2. Property tax - a tax on properties, real or personal
3. Excise or privilege tax - a tax imposed upon the
performance of an enjoyment of a privilege or
engagement an occupation
C. As to incidence
1. Direct tax - When both the impact and incidence of
taxation rest upon the same taxpayer, the tax is said
to be direct. The tax is collected from the person who
is intended to pay the same. The statutory taxpayer is
the economic taxpayer.
2. Indirect tax - When the tax is paid by any person
other than the one who is intended to pay the same,
the tax is said to be indirect. This occurs in the case
of business taxes where the statutory taxpayer is not
t economic taxpayer.
The statutory taxpayer is the person named by law to
pay the tax. An economic taxpayer is the one who
actually pays the tax.
D. As to amount
1. Specific tax - a tax of a fixed amount imposed on a
per unit basis such as per kilo, liter or meter, etc.
2. Ad valorem - a tax of a fixed proportion imposed
upon the value of the tax object
E. As to rate
1. Proportional tax - This is a flat or fixed rate tax. The
use of proportional tax emphasizes equality as it
subjects all taxpayers with the same rate without
regard to their ability to pay.
2. Progressive or graduated tax - This is a tax which
imposes increasing rates as the tax base increase.
The use of progressive tax rates results in equitable
taxation because it gets more tax to those who are
more capable. It aids in lessening the gap between
the rich and the poor.
3. Regressive tax - This tax imposes decreasing tax
rates as the tax base increase. This is the total
reverse of progressive tax. Regressive tax is
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regarded as anti-poor. It directly violates the
Constitutional guarantee of progressive taxation.
4. Mixed tax - This tax manifest tax rates which is a
combination of any of the above types of tax.
F. As to imposing authority
1. National tax - tax imposed by the national
government
Examples:
a. Income tax - tax on annual income, gains or profits
b. Estate tax - tax on gratuitous transfer of properties
by a decedent upon death
c. Donor's tax - tax on gratuitous transfer of properties
by a living donor
d. Value Added Tax - consumption tax collected by
VAT business taxpayers
e. Other percentage tax - consumption tax collected
by non-VAT business taxpayers
f. Excise tax - tax on sin products and non-essential
commodities such as alcohol, cigarettes and metallic
minerals. This should be differentiated with the
privilege tax which is also called excise tax.
g. Documentary stamp tax - a tax on documents,
instruments, loan agreements, and papers
evidencing the acceptance, assignment, sale or
transfer of an obligation, right or property incident
thereto.
2. Local tax - tax imposed by the municipal or local
government
Examples:
a. Real property tax
b. Professional tax
c. Business taxes, fees, and charges
d. Community tax
e. Tax on banks and other financial institutions
DISTINCTION OF TAXES WITH SIMILAR ITEMS
Tax vs. Revenue
Tax refers to the amount imposed by the
government for public purpose. Revenue refers to all
income collections of the government which. Includes
taxes, tariffs, licenses, toll, penalties and others. The
amount imposed is tax but the amount, collected is
revenue.
Tax vs. License fee
Tax has a broader subject than license. Tax
emanates from taxation power and imposed upon any
object such as persons, properties, or privileges to
raise revenue.
License fee emanates from police power and is
imposed to regulate the exercise a privilege such as
the commencement of a business or a profession.
Taxes are imposed after the commencement of a
business or profession where license fee is imposed
before engagement in those activities. In other words,
tax a post-activity imposition whereas license is a pre-
activity imposition.
Tax vs. Toll
Tax is a levy of government; hence, it is a
demand of sovereignty. Toll is a charge for the use of
other's property; hence, it is a demand of ownership.
The amount of tax depends upon the needs of the
government, but the amount toll is dependent upon
the value of the property leased. Both the government
and private entities impose toll, but private entities
cannot impose taxes.
Tax vs. Debt
Tax arises from law while debt arises from
private contracts. Non-payment of this leads to
imprisonment, but non-payment of debt does not lead
to imprisonment. Debt can be subject to set-off but tax
is not. Debt can be paid in kind (dacion en pago) but
tax is generally payable in money. Tax draws interest
only when the taxpayer is delinquent. Debt draws
*interest when it is so stipulated by the contracting
parties or when the debtor incurs legal delay.
Tax vs. Special Assessment
Tax is an amount imposed upon persons,
properties, or privileges. Special assessment is levied
by the government on lands adjacent to a public
improvement. It is imposed on land only and is
intended to compensate the government for a part of
the cost of the improvement.
The basis of special assessment is the benefit in
terms of the appreciation in land value caused by the
public improvement. On the other hand, tax is levied
without expectation of a direct proximate benefit.
Unlike taxes, special assessment attaches to the
land. It will not become a personal obligation of the
land owner. Therefore, the non-payment of special
assessment will not result to imprisonment of the
owner (unlike in non-payment of taxes).
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Tax vs. Tariff
Tax is broader than tariff. Tax is an amount
imposed upon persons, privilege, transactions, or
properties. Tariff is the amount imposed on imported
or exported commodities.
Tax vs. Penalty
Tax is an amount imposed for the support of
the government. Penalty is an amount imposed to
discourage an act. Penalty may be imposed by both
the government and private individuals. It may arise
both from law or contract whereas tax arises from law.
TAX SYSTEM
The tax system refers to the methods or schemes of
imposing, assessing, and collecting taxes. It includes
all the tax laws and regulations, the means of their
enforcement, and the government offices, bureaus
and withholding agents which are part of the
machineries of the government in tax collection. The
Philippine tax system is divided into two: the national
tax system and the local tax system.
TAX COLLECTION SYSTEMS
A. Withholding system on income tax - Under this
collection system, the payee of income withholds or
deducts the tax on the income before releasing the
same to the payee and remits the same to the
government. The following are the withholding taxes
collected under this system:
1. Creditable withholding tax (CWT)
a. Withholding tax on compensation - an
estimated tax required the government to be withheld
(i.e. deducted) by employers against the
compensation income to their employees
b. Expanded withholding tax - an estimated
tax required by the government to be deducted on
certain income payments made by taxpayers
engaged in business.
The creditable withholding tax is intended to
support the self-assessment method to lessen the
burden of lump sum tax payment of taxpayer and also
provides for a possible third-party check for the BIR
of non-compliant taxpayers.

Types of Tax Systems According to Imposition
1. Progressive - employed in the taxation of income
of individuals, and certain local business taxes
2. Proportional - employed in taxation of corporate
income and business
3. Regressive - not employed in the Philippines
2. Final withholding tax (FWT) - a system of tax
collection wherein payers. required to deduct the full
tax on certain income payments.
The final withholding tax is intended for the collection
of taxes income with high risk of non-compliance.

Types of Tax System According to Impact Similarities of final tax and creditable withholding
1. Progressive system – A progressive tax tax
system is one that emphasizes direct taxes. a. In both cases, the income payor withholds a
A direct tax cannot be shifted. Hence, it fraction of the income and receive the same
encourages economic efficiency as it leaves to the government.
no other resort to taxpayers than to be b. By collecting at the moment cash is available,
efficient. This type of tax system impacts both serve to minimize cash flow problems to
more upon the rich. the taxpayer and collection problems to the
2. Regressive system – A regressive tax government.
system is one that emphasizes indirect taxes.
Indirect tax are shifted by businesses to Differences between FWT & CWT
consumers; hence, the impact of taxation is FWT CWT
upon the bottom end of the society. In effect, Income tax Full Portion only
a regressive tax system is anti-poor. withheld
Coverage of Certain Certain
withholding passive passive and
It is widely believed that despite the income active income
Constitutional guarantee of a progressive Who remits the Income payor Income payor
taxation, the Philippines has a dominantly actual tax for the CWT
and taxpayer
regressive tax system due to the prevalence
for the balance
of business taxes.

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 Necessity of Not required Required
income tax
return for
taxpayer
B. Withholding system on business tax - when the
national government agencies and instrumentalities
including government-owned and controlled
corporations (GOCCs) purchase goods or services
from private suppliers, the law requires withholding of
the relevant business tax (i.e. VAT or percentage tax).
Business taxation is discussed under Business and
Transfer Taxation by the same author.
C. Voluntary compliance system - Under this
collection system, the taxpayer himself determines
his income, reports the same through income tax
returns and pays the tax to the government. This
system is also referred to as the "Self-assessment
method."
The tax due determined under this system will be
reduced by:
a. Withholding tax on compensation withheld
by employers
b. Expanded withholding taxes withheld by
suppliers of goods or services
The taxpayer shall pay to the government any tax
balance after such credit or claim refund or tax credit
for excessive tax withheld.
D. Assessment or enforcement system - Under
this collection system, the government identifies non-
compliant taxpayers, assesses their tax dues
including penalties, demands for taxpayer's voluntary
compliance or enforces collections by coercive
means such as a summary proceeding or judicial
proceedings when necessary.
PRINCIPLES OF A SOUND TAX SYSTEM
According to Adam Smith, governments should
adhere to the following principles or canons to evolve
a sound tax system:
1. Fiscal adequacy
2. Theoretical justice
3. Administrative feasibility
Fiscal adequacy – requires that the sources of
government funds must be sufficient to cover
government costs. The government must not incur a
deficit. A budget deficit paralyzes the government's
ability to deliver the essential public services to the
people. Hence, taxes should Increase in response to
increase in government spending.
Theoretical justice – or equity suggests that taxation
should consider the taxpayer's ability to pay. It also
suggests that the exercise of taxation should not be
oppressive, unjust, or confiscatory.
Administrative feasibility – suggests that tax laws
should be capable of efficient and effective
administration to encourage compliance.
Government should make it easy for the taxpayer to
comply by avoiding administrative bottlenecks and
reducing compliance costs.
The following are applications of the principle of
administrative feasibility:
1. E-filing and e-payment of taxes
2. Substituted filing system for employees
3. Final withholding tax on non-resident aliens or
corporations
4. Accreditation of authorized agent banks for the
filing and payment of taxes
TAX ADMINISTRATION
Tax administration refers to the management of the
tax system. The administration of the national tax
system in the Philippines is entrusted to the Bureau
of Internal Revenue which is under the supervision
and administration of the Department of Finance.
Chief Officials of the Bureau of Internal Revenue
1. 1 Commissioner
2. 4 Deputy Commissioners, each to be designed to
the following:
a. Operations group
b. Legal Enforcement group
c. Information Systems Group
d. Resource Management Group
POWERS OF THE BUREAU OF INTERNAL
REVENUE
1. Assessment and collection of taxes
2. Enforcement of all forfeitures, penalties and fines,
and judgments in all cases decided in its favor by the
courts
3. Giving effect to, and administering the supervisory
and police powers conferred to it by the NIRC and
other laws
4. Assignment of internal revenue officers and other
employees to other duties
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5. Provision and distribution of forms, receipts,
certificates, stamps, etc. to proper officials
6. Issuance of receipts and clearances
7. Submission of annual report, pertinent information
to Congress and reports to the Congressional
Oversight Committee in matters of taxation
POWERS OF THE COMMISSIONER OF INTERNAL
REVENUE
1. To interpret the provisions of the NIRC, subject to
review by the Secretary of Finance
2. To decide tax cases, subject to the exclusive
appellate jurisdiction of the Court of Tax Appeals,
such as:
a. Disputed assessments
b. Refunds of internal revenue taxes, fees, or
other charges
c. Penalties imposed
d. Other NIRC and special law matters
administered by the BIR
3. To obtain information and to summon, examine,
and take testimony of persons to effect tax collection
Purpose: For the CIR to ascertain:
a. The correctness of any tax return
or in making a return when none has
been made by the taxpayer
b. The tax liability of any person for
any internal revenue tax or in
correcting any such liability
c. Tax compliance of the taxpayer
Authorized acts:
a. To examine any book, paper,
record or other data relevant to such
inquiry
b. To obtain on a regular basis any
information from any person other
than the person whose internal
revenue tax liability is subject to audit
c. To summon the person liable for
tax or required to file a return, his
employees, or any person having
possession and custody of his books
of accounts and accounting records
to produce such books, papers,
records or other data and to give
testimony
d. To take testimony of the person
concerned, under oath, as may be
relevant or material to the inquiry
e. To cause revenue officers and
employees to make canvass of any
revenue district
4. To make an assessment and prescribe additional
requirerment for administration and enforecment
5. To examine tax returns and determine tax due
thereon.
The CIR or his duly authorized
representatives may authorize examination of any
taxpayers and the assessment of the correct amount
of tax notwithstanding any law requiring the prior
authorization of any government agency or
instrumentality. Failure to file a return shall not
prevent the CIR from authorizing the examination.
Tax or deficiency assessments are due upon
notice and demand by the CIR and his
representatives.
Returns, statements or declarations shall not
be withdrawn but may be modified, changed and
amended by the taxpayer within 3 years from the date
of filing, except when a notice for audit or investigation
has been served upon the taxpayer.
When a return shall not be forthcoming within
the prescribed deadline when there is a reason to
believe that the return is false, incomplete erroneous,
the CIR shall assess the proper tax on the basis of
best evidence available.
In case a person fails to file a required return
or other documents at the time prescribed by law or
willfully files a false or fraudulent return or other
documents, the CIR shall make or amend the return
from his own knowledge and from such information
obtained from testimony. The return shall be
presumed prima facie correct and sufficient for all
legal purposes.
6. To conduct inventory taking or surveillance
7. To prescribe presumptive gross sales and receipts
for a taxpayer when:
a. The taxpayer failed to issue receipts; or
b. The CIR believes that the books or other
records of the taxpayer do correctly reflect the
declaration in the return.
The presumptive gross sales or receipt shall
be derived from the performance of similar business
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under similar circumstances adjusted for other
relevant information.
8. To terminate tax period when the taxpayer is:
a. Retiring from business
b. Intending to leave the Philippines
c. Intending to remove, hide, or conceal his
property
d. Intending to perform any act tending to
obstruct the proceedings for the collection of the tax
or render the same ineffective
The termination of the taxable period shall be
communicated through a notice to the taxpayer
together with a request for immediate payment.
Taxes shall be due and payable immediately.
9. To prescribe real property values
The CIR is authorized to divide the Philippines into
zones and prescribe real property values after
consultation with competent appraisers. The values
thus prescribed are referred to as zonal value.
Zonal values are subject to automatic
adjustment once every 3 years through rules and
regulations issued by the Secretary of Finance based
on the current Philippine valuation standards.
However, no adjustment in zonal valuation shall be
valid unless published in a newspaper of general
circulation in the province, city or municipality
concerned, or in the absence thereof, shall be posted
in the provincial capitol, city or municipal hall and in 2
other conspicuous public places therein.
Furthermore, the basis of any valuation, including the
records of consultations done, shall be public records
open to the inquiry of any taxpayer.
For purposes of internal revenue taxes, fair value of
real property shall mean whichever is higher of:
a. Zonal value prescribed by the
Commissioner
b. Fair market value as shown in the schedule
of market values of the Provincial and City
Assessor's Office
The NIRC previously used the assessed
value which is merely a fraction of the fair market
value. Assessed value is the basis of the real property
tax in local taxation. The value to use now is the full
fair value of the property.
10. To compromise tax liabilities of taxpayers
11. To inquire into bank deposits, only under the
following instances:
a. Determination of the gross estate of a
decedent
b. To substantiate the taxpayer's claim of
financial incapacity to pay tax in an
application for tax compromise
In cases of financial incapacity, inquiry can
proceed only if the taxpayer waives his privilege
under the Bank Deposit Secrecy Act.
12. To accredit and register tax agents
The denial by the C1R of application for
accreditation Is appealable to Department of Finance.
The failure of the Secretary of Finance to act on
appeal within 60 days Is deemed an approval.
13. To refund or credit internal revenue taxes
14. To abate or cancel tax liabilities in certain cases
15.To prescribe additional procedures or
documentary requirements
16. To delegate his powers to any subordinate officer
with a rank equivalent to division chief of an office
Non-delegated power of the CIR
The following powers of the Commissioner shall not
be delegated:
1. The power to recommend the promulgation
of rules and regulations to Secretary of
Finance.
2. The power to issue rulings of first impression
or to reverse, revoke any existing rulings of
the Bureau.
3. The power to compromise or abate any tax
liability
Exceptionally, the Regional Evaluation Boards may
compromise tax liabilities under the following:
a. Assessments are issued by the regional
offices involving basic deficient tax of P500,000 or
less, and
b. Minor criminal violations discovered by
regional and district officials
Composition of the Regional Evaluation Board
a. Regional Director as chairman
b. Assistant Regional Director
c. Heads of the Legal, Assessment and Collection
Division
d. Revenue District Officer having jurisdiction over the
taxpayer
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4. The power to assign and reassign internal revenue
officers to establishment where articles subject to
excise tax are produced or kept.
Rules in assignments of revenue officers to other
duties
1. Revenue officers assigned to an establishment
where excisable articles are kept shall in no case stay
there for more than 2 years.
2. Revenue officers assigned to perform assessment
and collection functions should not remain in the
same assignment for more than 3 years.
3. Assignment of internal revenue officers and
employees of the Bureau to special duties shall not
exceed 1 year.
Agents and Deputies for Collection of National
Internal Revenue Taxes
The following are constituted agents for the collection
of internal revenue taxes:
1. The Commissioner of Customs and his
subordinates with respect to collection of national
internal revenue taxes on imported goods.
2. The head of appropriate government offices and
his subordinates with respect to the collection of
energy tax.
3. Banks duly accredited by the Commissioner with
respect to receipts of payments of internal revenue
taxes authorized to be made thru banks. These are
referred to as authorized government depositary
banks (AGDB).
OTHER AGENCIES TASKED WITH TAX
COLLECTIONS OR TAX INCENTIVES RELATED
FUNCTIONS
1. Bureau of Customs
2. Board of Investments
3. Philippine Economic Zone Authority
4. Local Government Tax Collecting Unit
5. Fiscal Incentives Review Board
Bureau of Customs (BOC) Aside from its
regulatory functions, the Bureau of Customs is tasked
to administer collection of tariffs on imported articles
and collection of the Value Added Tax on importation.
Together with the BIR, the BOC is under the
supervision of the Department of Finance.
The Bureau of Customs is headed by the
Customs Commissioner and is assisted by five
Deputy Commissioners and 14 District Collectors.
Board of Investments (BOI)
The BOI is tasked to lead the promotion of
investments in the Philippines by assisting Filipinos
and foreign investors to venture and prosper in
desirable areas of economic activities. It supervises
the grant of tax incentives under the Omnibus
Investment Code. The BOI is an attached agency of
the Department of Trade and Industry (DTI).
The BOI is composed of five full-time
governors, excluding the DTI secretary as its
chairman. The President of the Philippines shall
appoint a vice chairman of the board who shall act as
the Bol’s managing head.
Philippine Economic Zone Authority (PEZA)
The PEZA is created to promote investments
in export-oriented manufacturing industries in the
Philippines and, among other myriads of functions,
supervise and grant of both fiscal and non-fiscal
incentives.
PEZA registered enterprises enjoy tax
holidays for certain years, exemption from import and
export taxes including local taxes. The PEZA is also
an attached agent of the DTI.
The PEZA is headed by a director general
and is assisted by three department directors.
Local Government Tax Collecting Units
Provinces, municipalities, cities and barangays also
imposed and collect various local taxes, fees and
charges to rationalize their fiscal autonomy.
Fiscal Incentive Review Board (FIRB)
FIRB has oversight function on the
administration and grant of tax incentives the
Investment Promotion Agencies and other
government agencies administer tax incentives. It
approves or disapproves grant of tax incentives to
private entities and tax subsidies to government-
owned and controlled corporation of government
instrumentalities, government commissaries, state
universities and colleges.
TAXPAYER CLASSIFICATION FOR PURPOSES
OF TAX ADMINISTRATION
For purposes of effective and efficient tax
administration, taxpayers are classified into:
1. Large taxpayers - under the supervision of the
Large Taxpayer Service (LTS) of the BIR National
Office.
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2. Non-large taxpayers - under the supervision of the
respective Revenue District Offices (RDOs) where
the business, trade or profession of the taxpayer is
situated
Criteria for Large Taxpayers:
A. As to payment
1. Value Added Tax - At least P200,000 per
quarter for the preceding Year
2. Excise Tax - At least P1,000,000 tax paid
for the preceding year
3. Income Tax - At least P1,000,000 annual
income tax paid for the preceding year
4. Withholding Tax - At least P1,000,000
annual withholding tax payments or
remittances from all types of withholding
taxes
5. Percentage tax - At least P200,000
percentage tax paid or payable per quarter
for the preceding year
6. Documentary stamp tax - At least
P1,000,000 aggregate amount per year
6. Multinational enterprises with an authorized
capitalization or assigned capital of at least
P300,000,000
7. Publicly listed corporations
8. Universal, commercial, and foreign banks (the
regular business unit and foreign currency deposit
unit shall be considered one taxpayer for purposes of
classifying them as large taxpayer)
9. Corporate taxpayers with at least P100,000,000
authorized capital in banking, insurance,
telecommunication, utilities, petroleum, tobacco, and
alcohol industries
10. Corporate taxpayers engaged in the production of
metallic minerals

B. As to financial conditions and results of

operations
1. Gross receipts or sales - P1,000,000,000
total annual gross sales or receipts
2. Net worth - P300,000,000 total net worth at the
close of each calendar or fiscal year
3. Gross purchases - P800,000,000 total annual
purchases for the preceding year
4. Top corporate taxpayer listed and published by the
Securities and Exchange Commission

Automatic classification of taxpayers as large

taxpayers
The following taxpayers shall be automatically
classified as large taxpayers upon notice in writing by
the CIR:
1. All branches of taxpayers under the Large
Taxpayer's Service
2. Subsidiaries, affiliates, and entities of
conglomerates or group of companies of a large
taxpayer
3. Surviving company in case of merger or
consolidation of a large taxpayer
4. A corporation that absorbs the operation or
business in case of spin-off of any large taxpayer
5. Corporation with an authorized capitalization of at
least P300,000,000 registered with the SEC

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