REMINDER: Please be mindful of the dates 5. Situs or Territoriality (CIR v.

Marubeni,
provided in the question. The TRAIN Law took 2001).
effect on January 1, 2018. Prior to said date, the
1997 NIRC governs. 6. Most Favored Nation Clause.
It is intended to establish the principle of
GENERAL PRINCIPLES equality of international treatment by providing
that the citizens or subjects of the contracting
1. Lifeblood Theory. nations may enjoy the privileges accorded by
Taxation is the indispensable and inevitable either party to those of the most favored nation.
price for civilized society; without taxes, the The essence is to allow the taxpayer in one state
government would be paralyzed for lack of to avail of more liberal provisions granted in
motive power to activate and operate it (CIR v. another tax treaty to which the country of
Algue, 1988). residence of such taxpayer is also a party
provided that the subject matter of taxation (CIR
2. Benefits-protection Theory (Doctrine of v. S.C. Johnson And Son, Inc., 1999).
Symbiotic Relationship).
Taxes are paid for the enjoyment of the 7. BIR Cannot Impose Additional Requirements
benefits of organized society. The government that would Negate the Availment of Reliefs
for its part, is expected to respond in the form of Provided under International Agreements.
tangible and intangible benefits intended (CIR v. In Deutsche Bank, the Court categorically
Algue, 1988). held that the BIR should not impose additional
requirements that would negate the availment of
3. Power to Tax involves the Power to Destroy; the reliefs provided for under international
It is not the Power to Destroy as Long as the agreements, especially since said tax treaties do
Courts Sits. not provide for any prerequisite at all for the
The power to tax includes the power to availment of the benefits under said
destroy if it is used validly as an implement of the agreements. The application for a tax treaty
police power in discouraging and in effect, relief from the BIR should merely operate to
ultimately prohibiting certain things or confirm the entitlement of the taxpayer to the
enterprises inimical to the public welfare. But relief (CBK Power v. CIR, 2015).
where the power to tax is used solely for the
purpose of raising revenues, the modern view is 8. Specific or Direct Constitutional Limitations
that it cannot be allowed to confiscate or destroy. (P2UTO-SERV-JAIL).
If this is sought to be done, the tax may be a. Prohibition against imprisonment for non-
successfully attacked as an unconstitutional payment of poll tax (Art. III, Sec. 20);
exercise of the discretion usually vested in the b. Progressive system of taxation (Art. VI,
legislature in ascertaining the amount of the tax Sec. 28(1));
(CRUZ, Constitutional Law (2015)). c. Uniformity and equality of taxation (Art. VI,
Sec. 28(1));
4. Principles of a Sound Tax System: (FAT). d. Delegated authority of the President to
A. Fiscal Adequacy – sources of impose Tariff rates, import and export
government revenues must be sufficient quotas, tonnage and wharfage dues
to meet government expenditures and (Flexible Tariff Clause) (Art. VI, Sec.
other public needs (Chavez v. Ongpin, 28(2));
G.R. No. 76778, June 6, 1990). e. Origin of revenue and tariff bills and
B. Administrative Feasibility – the tax appropriations (Art. VI, Sec. 24);
system should be capable of being f. Prohibition on use of tax levied for Special
effectively administered and enforced with purpose (Art. VI, Sec. 29(3));
the least inconvenience to the taxpayer. g. Votes required to grant tax Exemptions
(Diaz v. Secretary of Finance, 2011)." (Art. VI, Sec. 28(4));
C. Theoretical Justice – a sound tax system h. Tax exemption of Religious, charitable,
must be based on the taxpayers’ ability to and educational entities (Art. VI, Sec.
pay (Ability-to-Pay Theory). Taxation must 28(3));
be uniform and equitable (CONST., Art. i. President’s Veto power (Art. VI, Sec. 27
VI, Sec. 28(1)). (2));
j. Non-impairment of Supreme Court’s
5. Inherent Limitations of Taxation. Jurisdiction (Art. VIII, Sec. 5(2));
1. Public Purpose (Planters v. Fertiphil, k. Non-Appropriation or use of public money
2008); for religious purposes (Art. VI, Sec. 29(2));
2. International Comity (Arigo v. Swift, 2014); l. Non-taxability of non-stock, non-profit
3. Non-delegability of the taxing power (QC educational Institutions (Art. XIV, Sec.
PTCA v. DepEd, 2016); 4(3)); and
4. Exemption of the Government (MIAA v. m. LGU’s power to create its own sources of
CA, 2006); and revenue (Art. X, Sec. 5).

TAXATION LAW COMMITTEE ATTY. DANTE O. DELA CRUZ, C.P.A. Adviser, CARISSA GUINTO Subject Chair, SHENA BAYLON, JELLYN CLEMENTE,
MIGUIEL DE ALVA, ATHENAI QUINTON, APOLLO STA. MARIA, and REINA FABREGAS Members
EXECUTIVE COMMITTEE MARY CYRIELL C. SUMANQUI Over-all Chairperson, ERICA MAE C. VISTA Chairperson for Academics, BEN REI E. BARBERO
Chairperson for Hotel Operations, JHELSEA LOUISE B. DIMAANO Vice Chairperson for Secretariat, EARL JUSTIN M. YAMBAO Vice Chairperson for Operations,
MA. ANGELICA B. DE LEON Vice Chairperson for Finance, ARRA OLMAYA J. BADANGAN Vice Chairperson for Audit, JORDAN N. CHAVEZ Vice Chairperson
for EDP, HANZ DARRYL D.TIU Vice Chairperson for Logistics, and DOHN ALFRED E. AQUILIZAN Vice Chairperson for Membership
ADMINISTRATIVE STAFF Camille Victoria D. Dela Cruz, Paulo O. Hernandez, Nestor J. Porlucas, Jr., Roger P. Cuaresma, Joelle Mae J. Garcia, Micah
Regina A. Gonzales, Ma. Consoloda V. Ben, Raph Kevin L. Santos, Christine Grace S. Panahon, Cheyenne Hope Dumlao, Corina R. Tampus, Marion Patricia
L. Rodriguez, Christian Ernest C. Biagtan, Elizabeth Marino, Aira Marielle Geronimo, Kenneth Aldwin M. Quejada
Page 1 of 20
9. Tax Exemption of properties actually,
directly and exclusively used for Religious,
Charitable, and Educational Purposes.
Article VI, Section 28(3) of the 1987
Constitution provides that “charitable
institutions, churches and personages or
convents appurtenant thereto, mosques, non-
profit cemeteries, and all lands, buildings, and
improvements, actually, directly, and exclusively
used for religious, charitable, or educational
purposes shall be exempt from taxation”. While
the Court allows a more liberal and non-
restrictive interpretation of the phrase
"exclusively used for educational purposes",
reasonable emphasis has always been made
that exemption extends to facilities which are
incidental to and reasonably necessary for the
accomplishment of the main purposes. (Abra
Valley v. Aquino, 1988).
10. Tax Laws are interpreted liberally in favor of
the taxpayer and strictly against the
Government.
General rule: In the interpretation of statutes
levying taxes or duties, the rule is not to extend
their provisions beyond the clear import of the
language used. In case of doubt, such statutes
are construed strongly against the government.
Exceptions: In the matter of tax exemptions, in
which case the tax exemption is construed
strictly against the taxpayer (CIR v. Suyoc,
1958).
11. Taxability of Non-stock, Non-profit
Educational Institutions.
All revenues and assets of non-stock, non-
profit educational institutions used actually,
directly, and exclusively for educational
purposes shall be exempt from taxes and duties.
Proprietary educational institutions, including
those cooperatively owned, may likewise be
entitled to such exemptions subject to the
limitations provided by law including restrictions
on dividends and provisions for reinvestment.
(CONST., Art. XIV, Sec. 4, pars. (3)).
The tax exemption of non-stock, non-profit
educational institutions is conditioned only on
the actual, direct and exclusive use of their
revenues and assets for educational purposes.
While tax exemptions may also be granted to
proprietary educational institutions, these
exemptions may be subject to limitations
imposed by Congress (CIR v. DLSU, 2016).
12. Conditions for Granting of the Reduced Rate
of 10% on Taxable Income of Proprietary
Educational Institutions.
a. If the proprietary educational institution is
non-profit; and
b. Its gross income from unrelated trade,
business or activity does not exceed 50%
of its total gross income (CIR v. DLSU,
2016).
13. Non-stock, Non-profit Hospitals become
Taxable on Income Derived from Activities
Conducted for Profit.
Although a non-stock, non-profit hospital
organized for charitable purposes, is generally
exempt from income tax, it becomes taxable on
income derived from activities conducted for
profit. Services rendered to paying patients are
considered activities conducted for profit which
are subject to income tax, regardless of the
disposition of said income. The hospital is
subject to income tax of 10% of its net income
derived from the paying patients considering
that the income earned appears to be derived
solely from hospital-related activities (CIR v. St.
Lukes, 2012).
14. Requisites of a Valid Tax:
a. Person or property taxed must be within
the jurisdiction of the taxing authority
(Reagan v. CIR, 1969);
b. Assessment and collection of certain
kinds of taxes guarantee against
injustice to individuals;
c. It should for a public purpose;
Note: It does not only pertain to those
purposes which are traditionally viewed as
essentially government functions, such as
building roads and delivery of basic
services, but also includes those purposes
designed to promote social justice
(Planters Products, Inc. v. Fertiphil Corp.,
2008).
d. It must be uniform (Pascual v. Secretary
of Public Works and Communications,
1960);
e. It must not impinge on the inherent and
constitutional limitations of taxation
(Basco v. Philippine Amusements and
Gaming Corp., 1991);
15. Person Suing as Taxpayer Must Show that
the Act Complained of Directly Involves the
Illegal Disbursement of Public Funds
Derived from Taxation.
A taxpayer is allowed to sue where there is
a claim that public funds are illegally disbursed,
or that public money is being deflected to any
improper purpose, or that there is wastage of
public funds through the enforcement of an
invalid or unconstitutional law.
For a taxpayer’s suit to prosper, two
requisites must be met namely, (1) public funds
derived from taxation are disbursed by a political
subdivision or instrumentality and in doing so, a
law is violated or some irregularity is committed;
and (2) the petitioner is directly affected by the
alleged act (Land Bank of the Philippines vs.
Cacayuran, 2013).
16. Tax v. License Fee v. Toll.
Toll Tax License Fee
As to Basis
A demand of Power of Police power
proprietorship Taxation
Page 2 of 20
 As to Purpose (CIR v. S.C. Johnson And Son, Inc.,
1999).
Compensation for To generate Regulatory 20. Shifting of Tax Burden v. Tax Evasion v. Tax
the cost and revenue
Avoidance.
maintenance of
the property used Shifting of Tax burden applies only in
indirect taxes in which the liability of the payment
As to Limitations may fall on a person other than whoever actually
Determined by Inherent and Limited to bears the burden of the tax (Chevron v. CIR,
the cost of the constitutional costs of 2015). Tax avoidance is the tax saving device
property or of the limitations issuing the within the means sanctioned by law. This
improvement license; method should be used by the taxpayer in good
Necessary faith and at arms length. Tax evasion, on the
inspection or other hand, is a scheme used outside of those
police lawful means and when availed of, it usually
surveillance
subjects the taxpayer to further or additional civil
Effect of Non-payment or criminal liabilities (CIR v. Benigno Toda,
2004).
Does not make Makes the
the business business
illegal illegal 21. Tax Exemption; General Rule and
Exceptions.
(Progressive Dev’t v. QC, 1989)
General Rule: Tax exemptions and exclusions
are regarded as derogation of sovereign
17. Requisites of an Obnoxious Double
authority and to be construed strictissimi juris
Taxation.
against the person or entity claiming the
There is double taxation if respondent is
exemption (CIR v. Eastern
subjected to the taxes being imposed:
Telecommunications, 2010).
(1) On the same subject matter;
(2) For the same purpose;
Exceptions: Except when:
(3) By the same taxing authority;
a. The statute granting exemption provides
(4) Within the same taxing jurisdiction;
for liberal construction thereof;
(5) For the same taxing periods; and
b. In case of special taxes relating to special
(6) Of the same kind or character (Nursery v.
cases and affecting only special classes of
Acevedo, 2014).
persons;
c. It refers to public property;
18. International Juridical Double Taxation.
d. In cases of exemptions granted to
The imposition of comparable taxes in two
traditional persons who are exempt, such
or more states on the same taxpayer in respect
as religious, charitable and educational
of the same subject matter and for identical
institutions;
periods. It usually takes place when a person is
e. In cases of exemptions in favor of the
a resident of a contracting state and derives
government, its political subdivisions or
income from, or owns capital in the other
instrumentalities; or
contracting state and both states impose tax on
f. If the taxpayer falls within the purview of
that income or capital (CIR v. S.C. Johnson And
exemption by clear legislative intent[CG1]
Son, Inc., 1999).
[RF2] (CIR v. Arnoldus, 1988)
19. Methods by which a treaty eliminate double
22. Doctrine of Equitable Recoupment.
taxation.
The doctrine of equitable recoupment is a
In order to eliminate double taxation, a tax
common law doctrine which allows a claim for
treaty resorts to several methods:
refund that is barred by prescription to offset tax
liabilities, pertinent to the taxes arising from the
i. First, it sets out the respective rights to tax
same transaction on which an overpayment is
of the state of source or situs and of the
made and an underpayment is due (CIR v. UST,
state of residence with regard to certain
1958).
classes of income or capital.
ii. The second method applies whenever the
Note: This doctrine is not applicable in our
state of source is given a full or limited right
jurisdiction. The reason is that “if allowed, both
to tax together with the state of residence.
the collecting agency and the taxpayer might be
There are two methods of relief:
tempted to delay and neglect the pursuit of their
1) Exemption method - the income or
respective claims within the period prescribed by
capital which is taxable in the state of
law” (CIR v. UST, 1958).
source or situs is exempted in the
state of residence.
23. Taxes Cannot be the Subject of
2) Credit method - the income or
compensation Between Government and Tax
capital is taxed in the state of source
Payer.
and in the state of residence, but the
General Rule: The government and the tax
tax paid in the former is credited
payer are not mutually creditors and debtors of
against the tax levied in the latter
each other.

Page 3 of 20
 Exception: When the determination of the
taxpayer’s liability is intertwined with the
resolution of the claim for tax refund of
erroneously or illegally collected taxes under INCOME TAXATION FOR INDIVIDUALS
Sec. 229, NIRC (CIR v. Toledo, 2015).
Income Tax 1. Taxable net income subject to
24. Compliance with the Requirements of Rate/s for graduated rate of 20% to 35%
Amnesty Law Entitles the Taxpayer to its Individual (Sec. 24(A)(2)(a)); or
Taxpayers
Benefits. 2. Option to be taxed at 8% of
The completion of the requirements Purely Self- Employed
provided under the tax amnesty law shall be Individual/Professionals and
deemed full compliance with the tax amnesty Mixed Income Earners on
Gross Sales/Receipts for those
program; the taxpayer shall thereafter be who fall below the VAT
immune from the payment of taxes, and threshold (Sec. 24(A)(2)(b) and
additions thereto, as well as the appurtenant (c)).
penalties under the NIRC, arising from failure to
Note: Option 2 is only available for
pay any and all internal revenue taxes (CIR vs. RC, NRC and RA. NRA-NETB is
Philippine Aluminum, 2017). still subject to 25% Final Income tax
on the gross income (Sec. 25(B)).
25. Tax Amnesty vs. Tax Exemption vs. Tax
Assumption. Personal and additional Exemptions on Individual
Taxpayers
Tax Amnesty Tax Tax (REMOVED by TRAIN Law)
Exemption Assumption
Increased P90, 000
It is the It is the To "assume" threshold for
non-taxable 13th
government’s freedom, means "[t]o month pay and
absolute immunity, or take on, other benefits
forgiveness, privilege from become
waiver, the burden of bound as Increase on De 1. Medical Cash Allowance to
exercise of a taxation to another is Minimis Benefits Dependents of Employees -
general pardon, which others bound, or put Threshold Not exceeding P1,500 per
employee per semester or
or intentional are oneself in
P250 per month;
condonation of subjected. It place of 2. Rice Subsidy - P2, 000 or one
its right to is generally another as to sack of 50kg rice per month
collect past due prospective an obligation amounting to not more than P2,
and unpaid tax in application or liability." 000 per month; and
collectibles, (People v. This means 3. Uniform and clothing allowance
- Not exceeding P6, 000 per
including Castañeda, that the year.
imposable 1988). obligation or
penalties on liability
persons guilty remains, Optional OSD may be availed only once
of evasion or although the Standard either: (a) by the GPP or (b) the
violation of a same is Deduction (OSD) partners comprising the partnership
for General (Sec. 34 (L)).
revenue or tax merely Professional
law, giving tax passed on to Partnership Note: The partners comprising the
evaders who a different (GPPs) GPP can no longer claim further
wish to relent person deduction from their distributive
and are willing (Mitsubishi v. share in the net income of the GPP
and are not allowed to avail of the
to reform a CIR, 2017). 8% income tax rate option since
chance to do so their distributive share from the
(People v. GPP is already net of cost and
Castañeda, expenses (R.R. No. 08-2018, Sec.
1988). 8).

Changes on 1. Philippine Charity

SALIENT FEATURES OF TRAIN LAW Passive Income Sweepstakes and lotto
Tax Rates winnings - EXEMPT for ₱10,
000 or less; and 20% for those
Legend: in excess ₱10, 000 (Secs.
RC – Resident Citizen 24(B)(1)) and 25(A)(2));
NRC - Non-Resident Citizen Note: This is NOT applicable to
RA – Resident Alien NRA-NETB. Also, for NRA-
NRA – ETB – Non-Resident Alien Engaged in Trade ETB, those in excess ₱10, 000
or Business is also EXEMPT from tax.
NRA – NETB - Non-Resident Alien Not Engaged in
Trade or Business 2. Interest Income from Expanded
Foreign Currency Deposit Units
Effective Date: January 1, 2018 (FCDUs) - 15% Final Tax (only
for RESIDENT Taxpayers);
otherwise, exempt (Secs.
24(B)(1) and 25(A)(2)).

Page 4 of 20
Change on Final Tax 15% of Net Capital Gains amount will be subject to a final
Capital Gains (Secs. 24(C) and 27(D)(2)). withholding tax of 6% (Sec. 97).
Tax (CGT) on
Sale of shares of Note: Applies to both individuals
DONOR’S TAX
stock not traded and domestic corporations.
in the stock
exchange Tax Rate Flat rate of 6% based on the total
gifts in excess of P250, 000,
regardless whether donee is
INCOME TAXATION FOR CORPORATIONS
relative or stranger (Sec. 99).
Increase in 35% of grossed-up monetary value
Dowries or gifts made on account of marriage as
Fringe Benefit (Sec. 33(A)).
exempt gift
Tax (FBT) Rate*
(REMOVED by TRAIN Law)
Note: FBT rate for NRA-NETB
shall still be at 25% (Sec. 25(B)).
Rule on Transfer A sale, exchange, or transfer of
for less than an property made, even for less than
Philippine TAXABLE Corporation (before a
adequate an adequate and full consideration
Charity Tax-Exempt Corporation)
and full in money, in the ordinary course
Sweepstakes
consideration of business, will be considered as
Office
made for an adequate and full
consideration in money or money’s
INCOME TAXATION FOR ESTATES AND TRUSTS worth (Sec. 100).

Exemptions Allowed to Estates and Trusts of Note: A transaction in the ordinary

P20, 000 (REMOVED by TRAIN Law) course of business is one which is
a bona fide, at arm’s length, and
ESTATE TAX free from any donative intent.

Tax Rate Flat rate of 6% based on the value VALUE ADDED TAX
of the net estate (Sec. 84)
VAT Threshold P3, 000, 000 (Sec. 109(BB)).
Allowable STANDARD DEDUCTIONS
Deductions to 1. Resident or Citizen decedent Note: Exceeding PhP 3 Million
the Estate - P5,000,000 without need of vatable. Not exceeding Php 3
substantiation (Sec. Million, not vatable but may register
86(A)(1)); and as vatable.
2. NRA decedent - P500, 000
without need of VAT-Exempt 1. Lease of residential units – (a)
substantiation (Sec. Transactions monthly rental per unit not
86(B)(1)). exceeding P15,000 (Sec.109
(Q)); or (b) monthly rental
Note: This is in lieu of the removal exceeds P15,000, but the
of funeral, judicial, and medical aggregate of such rentals of the
expenses as allowable deductions lessor during the year do not
from the gross estate. exceed P3, 000,000 (R.R. No.
13-18);
FAMILY HOME Note: For (b), same shall be
Allowable deduction is up to subject to 3% percentage tax.
P10,000,000 (Sec. 86(A)(4)).
Note: This is only applicable for 2. Association dues, membership
Citizen or Resident decedent. fees, and other assessments
and charges collected on a
Filing of Notice of Death purely reimbursement basis by
(REMOVED by TRAIN Law) homeowners’ associations and
condominiums (Sec. 109(Y))
Filing of Estate In all cases of transfer, estate tax (New in TRAIN Law); and
Tax Return return (ETR) must be filed (Sec.
90(A)). 3. Importation of fuel, goods and
supplies by those engaged in
Timing: Within 1 year from the international shipping or air
decedent’s death (Sec. 90(B)). transport operations – To be
exempt this shall be used for
Statement which ETR with gross estate exceeding international shipping or air
must be duly P5, 000, 000 shall be accompanied transport operations (Sec.
certified by CPA by statement duly certified by 109(U)).
Certified Public Accountant (CPA)
(Sec. 90(A)). REMEDIES

Payment by In case the available cash of the Interest on 12% (double the rate of legal
Installment of estate is insufficient to pay the total unpaid amount of interest for loans or forbearance of
Estate Taxes estate tax due, installment payment tax any money in the absence of an
shall be allowed within 2 years express stipulation as set by the
from the statutory date for its BSP; prevailing BSP-set legal
payment without civil penalty and interest is 6%)
interest (Sec. 91(C)).
Deficiency and Deficiency and delinquency interest
Rule on If the bank has knowledge of the Delinquency shall in no case be imposed
withdrawal from death of the person, who Interest simultaneously.
estate’s bank maintained a bank deposit account
deposit account alone, or jointly with another, it shall
allow any withdrawal provided

Page 5 of 20
 NATIONAL TAXATION
26. Non-retroactivity of Rulings.
Any revocation, modification or reversal of
any of the rules and regulations promulgated in
accordance with the preceding Sections or any
of the rulings or circulars promulgated by the
Commissioner shall not be given retroactive
application if the revocation, modification or
reversal will be prejudicial to the taxpayers,
except in the following cases:
a. Where the taxpayer deliberately
misstates or omits material facts from
his return or any document required of
him by the Bureau of Internal Revenue;
b. Where the facts subsequently gathered
by the Bureau of Internal Revenue are
materially different from the facts on
which the ruling is based; or
c. Where the taxpayer acted in bad faith
(Sec. 246).
27. Summary of Factors Considered in
Determining the Source of Income.
Type of Income Factor Considered
Interest Income Residence of the
debtor
Dividends
From Domestic Corporation (DC) – Income
within the Philippines
From Foreign Corporations (FC)
Note: This test is called Predominance Test.
- Income is partly within and partly without
if 50% or more of its gross income for the
three (3)-year period ending with the close of
its taxable year preceding the declaration of
such dividends or for such part of such period
as the corporation has been in existence is
from sources within the Philippines;
- Income without the Philippines if less than
50% of its gross income for the three (3)-year
period ending with the close of its taxable
year preceding the declaration of such
dividends or for such part of such period as
the corporation has been in existence is from
sources within the Philippines
Sale of Shares of Stock of
DC - Income within the Philippines
FC - Income without the Philippines
28. Expenditure method.
Expenditure method is a method of
reconstructing a taxpayer’s income by deducting
the aggregate yearly expenditures from the
declared yearly income. When the amount of the
money that a taxpayer spends during a given
year exceeds his reported or declared income
and the source of such money is unexplained, it
may be inferred that such expenditures
represent unreported or undeclared income
(BIR v. CA and Sps. Manly, 2014).
29. Non-Resident Citizen.
a. A citizen of the Philippines who
establishes to the satisfaction of the
Commissioner the fact of his physical
presence abroad with a definite intention
to reside therein.
b. A citizen of the Philippines who leaves the
Philippines during the taxable year to
reside abroad, either as an immigrant or
for employment on a permanent basis.
c. A citizen of the Philippines who works and
derives income from abroad and whose
employment thereat requires him to be
physically present abroad most of the time
during the taxable year.
d. A citizen who has been previously
considered as nonresident citizen and
who arrives in the Philippines at any time
during the taxable year to reside
permanently in the Philippines shall
likewise be treated as a nonresident
citizen for the taxable year in which he
arrives in the Philippines with respect to
his income derived from sources abroad
until the date of his arrival in the
Philippines.
e. The taxpayer shall submit proof to the
Commissioner to show his intention of
leaving the Philippines to reside
permanently abroad or to return to and
reside in the Philippines as the case may
be for purpose of this Section (Sec.
22(E)).
30. Dividends is any distribution made by a
corporation to its shareholders out of its
earnings or profits and payable to its
shareholders.
Dividends mean any distribution made
by a corporation to its shareholders out of its
earnings or profits and payable to its
shareholders, whether in money or in
property (CIR v. Goodyear Philippines, Inc.,
2016).
31. Rules on the Taxability of the Income of
Special Individual Taxpayers.
Kinds of Tax Base Tax Rates
Individual
Taxpayers
Minimum Exempt from the payment of
Wage income tax on their taxable
Earners income: Provided, further, That
(MWE) the holiday pay received by such
minimum wage earner shall
likewise be exempt from income
tax (Sec. 24(A))
The holiday pay, overtime pay,
night shift differential pay and
hazard pay received by such
earner are likewise exempt (R.R.
No. 11-2018, Sec. 6).
Page 6 of 20
 Estate and Income derived Taxable net
Trust during a taxable income
year from all subject
sources, within graduated
and without the rate of 20%
Philippines to 35%
32. Self-employed individuals earning income
purely from Self-Employment or Practice of
Profession.
Individuals earning purely from self-
employment and/or practice of profession
whose gross sales/receipts and other non-
operating income does not exceed the value-
added tax (VAT) threshold (P3,000,000) shall
have the option to avail of:
a. The graduated rates under Section
24(A)(2)(a) of the Tax Code, as amended;
OR
b. An eight percent (8%) tax on gross sales
or receipts and other non-operating income
in excess of two hundred fifty thousand
pesos (P250, 000) in lieu of the graduated
income tax rates under Section 24(A) and
the percentage tax under Section 116 all
under the Tax Code, as amended (R.R No.
8-2018, Sec. 3(C)).
33. Statutory Test of Deductibility/Statutory
Test Principle.
To be deductible as a business expense,
three conditions are imposed, namely: (1) the
expense must be ordinary and necessary; (2) it
must be paid or incurred within the taxable year,
and (3) it must be paid or incurred in carrying on
a trade or business. In addition, not only must
the taxpayer meet the business test, he must
substantially prove by evidence or records the
deductions claimed under the law, otherwise,
the same will be disallowed. The mere allegation
of the taxpayer that an item of expense is
ordinary and necessary does not justify its
deduction (Pilmico-Mauri Foods Corp. v. CIR,
2016).
34. Intention to opt for the 8% income tax rate
must be expressed by the taxpayer in the 1st
quarter income tax return or the initial
quarter return of the taxable year when the
taxpayer commenced business. (R.R No. 8-
2018, Sec. 3(C)).
35. The option to be taxed at 8% income tax rate
is not available to the following:
a. VAT-registered taxpayer, regardless of
the amount of the gross sales/receipts;
b. A taxpayer who is subject to Other
Percentage Taxes; and
c. partners of a General Professional
Partnership (GPP) by virtue of their
distributive share from GPP which is
already net of cost and expenses (R.R
No. 8-2018, Sec. 3(C)).
36. Tax-Free Exchanges of Property.
(1) No gain or loss is recognized where in
to pursuance of a plan of merger or
consolidation:
a. Property for Stock - A corporation
which is a party to a merger or
consolidation, exchanges property
solely for stock in a corporation, which
is a party to the merger or
consolidation;
b. Stock for Stock - A shareholder
exchanges stock in a corporation,
which is a party to the merger or
consolidation, solely for the stock of
another corporation also a party to the
merger or consolidation; or
c. Security for Stock - A security holder
of a corporation, which is a party to the
merger or consolidation, exchanges
his securities in such corporation,
solely for stock or securities in such
corporation, a party to the merger or
consolidation; and
(2) If property is transferred to a corporation
by a person in exchange for stock or unit
of participation in such a corporation of
which as a result of such exchange said
person, alone or together with others, not
exceeding four (4) persons, gains control
of said corporation: Provided, that stocks
issued for services shall not be considered
as issued in return for property (Estate
Planning) (Sec. 40(C)(2)(c)).
Note: The exchange of goods and
properties including the real estate properties
used in business or held for sale or for lease by
the transferor, for shares of stocks, whether
resulting to corporate control or not, is subject to
VAT (R.R. No. 10-2011, Sec. 2).
37. Life Insurance as Exclusions from Gross
Income.
The proceeds of life insurance policies paid
to the heirs or beneficiaries upon the death of the
insured, whether in a single sum or otherwise,
but if such amounts are held by the insurer under
an agreement to pay interest thereon, the
interest payments shall be included in gross
income (R.R No. 8-2018, Sec. 6(A)).
38. Ordinary and necessary trade, business or
professional expenses as Deductions from
Gross Income (D-STROWN).
a. It must be paid or incurred During the
taxable year;
b. It must be Substantiated by proof;
c. It must be incurred in Trade or business
carried on by the taxpayer;
d. It must be Reasonable (not lavish,
extravagant or excessive under the
circumstances);
e. It must be Ordinary and necessary;
f. If subject to withholding taxes, have been
properly Withheld and remitted on time to
the BIR; and
Page 7 of 20
 g. Not contrary to law, public policy or morals
(Sec. 34(A) and (K); R.R. No. 02-40, Sec.
65).
39. Tax Benefit Rule.
Taxes claimed and allowed as deductions
from gross income when refunded or credited,
shall be included as part of gross income in the
year of receipt to the extent of the income tax
benefit of said deduction.
This rule applies to: Bad debts claimed and
allowed as deductions from gross income
deducted but subsequently paid or recovered
and Casualty losses deducted as such but later
recovered.
40. Ordinary Asset.
Assets that are used primarily in the ordinary
course of trade or business such as:
1) Stock in trade or other property included
in the taxpayer's inventory at the close of
the taxable year;
2) Property held primarily by the taxpayer for
sale to customers in the ordinary course of
his trade or business;
3) Property used in the trade or business of
the taxpayer and subject to depreciation
allowance; and
4) Real property used in trade or business
(Sec. 39(A)(1)).
41. 20% Senior Citizen’s Discount is claimed as
deduction from gross income.
The law provides that business
establishments extending the twenty percent
discount may claim the discount as a deduction
from gross income (Carlos Superdrug Corp. v.
DSWD, 2007).
42. Conditions for the 15% final tax imposed on
dividends received by a NRFC from a
domestic corporation (Tax Sparing Rule or
Tax Deemed Paid Rule).
1. The country in which the non-resident
foreign corporation is domiciled allows a
tax credit against the tax due from the
NRFC taxes deemed to have been paid in
the Philippines equivalent to fifteen percent
(15%); or
2. Such country does not impose tax on
dividends (Sec. 28(B)(5)(b)).
43. Regular corporate income tax vs. minimum
corporate income tax.
As to taxpayer
Applies to all Applies to domestic
corporate taxpayers corporations and
resident foreign
corporations
As to tax rate
30% 2%
As to tax base
Based on the net Based on gross income
taxable income
(Secs. 27(A) and (E); RR No. 9-98).
44. Branch Profit Remittance Tax.
Tax Rate: 15%
Tax Base: Total profit applied or earmarked for
remittance without any deduction for the tax
component thereof (Sec. 28(A)(5)).
45. Improperly Accumulated Earnings Tax.
Corporation liable: Domestic Corporation and
closely-held corporations
Tax Rate: 10%
Tax Base: Improperly accumulated taxable
income
It refers to profits of a corporation that are
permitted to accumulate instead of being
distributed to its shareholders for the purpose of
avoiding the income tax with respect to its
shareholders or the shareholders of another
corporation (R.R. No. 2-2001, Sec. 2).
Immediacy Test
It construed the reasonable needs of the
business as the immediate and reasonably
anticipated needs supported by a direct
correlation of anticipated needs to such
accumulation of profits. If the corporation did not
prove an immediate need for the accumulation
of the earnings and profits, the accumulation
was not for the reasonable needs of the
business, and the IAET would apply (Cyanamid
Philippines, Inc. v. Court of Appeals, G.R. No.
108067, January 20, 2000).
46. Tax on Fringe Benefits.
Tax rate: 35%
Tax base: Grossed-up monetary value of fringe
benefits furnished or granted to an employee
(except rank and file employees) by the
employer whether an individual or a corporation
(R.R No. 8-2018, Sec. 7).
Convenience of the Employer Rule – grants
exemption to the benefits which are given for the
exclusive benefit or convenience of the
employer (Henderson v. Collector, 1961).
47. Tax Arbitrage.
The 'tax arbitrage rule' reduces the
allowable deduction for interest expenses by
33% of the interest income subjected to
final tax.
48. Tax Treatment for Non-Stock Non-Profit
Education Institution (NSNP-EI) vs.
Proprietary Education Institution / Hospital
(PEI/H).
NSNP-EI PEI/H
GIFTS/Donations RECEIVED BY THESE
INSTITUTIONS are NOT SUBJECT TO
Income Tax; Gifts, bequests, and devises are
items of exclusions from gross income
Page 8 of 20

Gifts/Donations are NOT
Deductible from DEDUCTIBLE from
Gross Income of Gross Income of
donor; Individual donors
(purely
compensation
income earner, no
deduction);
Individual
(business income
earner, up to 10%
of taxable income
prior to this
deduction);
Corporation ( up to
10% of taxable
income prior to this
deduction
49. Withholding taxes v. Indirect Taxes.
Indirect taxes, like VAT and excise tax, are
different from withholding taxes. To distinguish,
in indirect taxes, the incidence of taxation falls
on one person but the burden thereof can be
shifted or passed on to another person, such as
when the tax is imposed upon goods before
reaching the consumer who ultimately pays for
it. On the other hand, in case of withholding
taxes, the incidence and burden of taxation fall
on the same entity, the statutory taxpayer. The
burden of taxation is not shifted to the
withholding agent who merely collects, by
withholding, the tax due from income payments
to entities arising from certain transactions and
remits the same to the government (Asia
International Auctioneers, Inc. v. CIR, 2012).
TRANSFER TAX
ESTATE TAX
50. Date-of-death rule.
Date-of-death rule provides that estate
taxation is governed by the statute in force at the
time of death of the decedent. The estate tax
accrues as of the death of the decedent. Upon
the death of the decedent, succession takes
place (CIVIL CODE, Art. 777) and the right of the
State to tax the privilege to transmit the estate
vests instantly upon death (R.R. No. 12-2018,
Sec. 3).
51. Rule of Reciprocity in Case of Intangible
Property of NRA Decedent.
The intangible personal property of NRA
decedent, if:
1. With reciprocity – shall not be included
in the gross estate if:
a. The decedent at the time of his death
was a citizen and resident of a
foreign country which at the time of
his death did not impose a transfer
tax of any character, in respect of
intangible personal property of
citizens of the Philippines not
residing in that foreign country; or
b. The laws of the foreign country
which the decedent was a citizen and
resident at the time of his death
allow a similar exemption from
transfer or death taxes of every
character in respect of intangible
personal property owned by citizens
of the Philippines not residing in that
foreign country (Sec. 104).
2. Without reciprocity – shall be included
in the gross estate (Sec. 104).
INCLUSIONS ON THE GROSS ESTATE
52. Requisites to Include Life Insurance as Part
of Gross Estate (DAm-ER):
1. The Decedent takes an insurance policy
on his own life; and
2. The Amounts are receivable by:
a. The Estate, his executor, or
administrator irrespective of whether
or not the insured retained the power
of revocation; or
b. Any beneficiary designated as
Revocable (Sec. 85 (E)).
Note: Proceeds are not included in a
decedent’s gross estate when the beneficiary is
other than the estate, his executor, or
administrator and the designation is irrevocable
(Sec. 85 (E)).
DEDUCTIONS FROM GROSS ESTATE
53. Deductions from Gross Estate: (SC-CUP-
TraFAN).
1. Standard Deduction – P5,000,000 (R/C)
or P500,000 (NRA);
2. Claims against the estate;
3. Claims against insolvent persons;
4. Unpaid mortgages, taxes, and casualty
losses;
5. Property previously taxed (or Vanishing
Deductions);
6. Transfers for public use;
7. Family Home up to P10, 000, 000;
8. Amount received by heirs under R.A. No.
4917; and
9. Net share of the surviving spouse (Sec.
86).
Note: For NRA, no deduction for Family Home
and Amount received by heir under R.A No.
4917.
54. Requisite for Deductibility of Property
Previously Taxed (Vanishing Deductions)
(DIPIN).
a. Death – the present decedent died within
five (5) years from the receipt of the
property from a prior decedent or donor;
b. Identity – the property sought to be
deducted is the one received from a prior
decedent or donor;
c. Previously determined and paid – the
donor's tax on the gift or estate tax on the
prior succession was finally determined
and paid;
Page 9 of 20
 d. Inclusion – the property must have
formed part of the gross estate situated in
the Philippines of the prior decedent, or
the total amount of the gifts of the donor;
and
e. No previous deduction – no vanishing
deduction on the property was allowed to
the estate of the prior decedent (Sec. 86
(A)(5)).
Note: Property must still be part of the gross
estate of present decedent.
55. Requisites for deduction of Family Home
(ATL).
1. The family home must be the Actual
residential home of the decedent and his
family at the time of his death, as certified
by the Barangay Captain of the locality
where the family home is situated;
2. The Total value of the family home must
be included as part of the gross estate of
the decedent; and
3. Allowable deduction must be in an amount
equivalent to the Lowest of:
a. The Current fair market value of the
decedent’s family home;
b. The extent of the decedent's Interest
(whether conjugal/community or
exclusive property); or
c. P10,000,000 (NIRC, Sec. 86 (A)(7)).
Note: Deduction for Family Home is not
applicable to NRA. If the family home is a
conjugal or community property, the amount to
be deducted is equivalent to ½ of the fair market
value but shall not exceed P 10,000,000.
DONOR’S TAX
56. Transfer for Less than Adequate and Full
Consideration is Deemed a Gift.
General Rule: If the property transferred is for
less than adequate and full consideration in
money or money’s worth, the amount by which
the FMV exceeds the consideration shall be
deemed a gift and be included in computing
the amount of gifts made during the calendar
year (NIRC, Sec. 100).
Exception: Transfers made in the ordinary
course of business (a transaction which is a
bona fide, at arm's length, and free from any
donative intent) and free from donative intent,
even if the consideration is inadequate in
account, is excluded (NIRC, Sec. 100).
57. Tax Implication of Renunciation by an Heir.
Renunciation Tax Effect
Renunciation by surviving spouse Subject to
of his/her share in conjugal donor’s tax
partnership or absolute
community after dissolution of
the marriage in favor of the heirs
General renunciation by an heir, Not subject
including the surviving spouse, of to donor’s
share in the hereditary estate tax
left by the decedent
Renunciation by an heir, including Subject to
the surviving spouse, of share in donor’s tax
the hereditary estate to a
specified and identified heir to
the exclusion or disadvantage of
the other co-heirs
(R.R. No. 12-2018, Sec. 12).
58. Election Campaign Contribution Not Subject
to Donor’s Tax.
Any contribution to candidate, or political
party or coalition of parties for campaign
purposes, duly reported to the Commission,
shall not be subject to the payment of any
donor’s tax (R.A. 7166, Sec. 13).
Note: Contribution of cash and campaign
materials is considered gift/donation (Abello v.
CIR, 2005).
VALUE-ADDED TAX
59. In the Course of Trade or Business (Rule of
Regularity).
Regular conduct or pursuit of a commercial
or an economic activity, including transactions
incidental thereto, by any person regardless of
whether or not the person engaged therein is
a non-stock, non-profit private organization
(NIRC, Sec. 105).
60. Sale pursuant to privatization of government
assets is not an Incidental Transaction
subject to VAT.
The sale of power plants pursuant to EPIRA
law is not in pursuant of a commercial or
economic activity but a governmental function
mandated by law to privatize National Power
Corporation (NPC) generation assets (Power
Sector Assets and Liabilities Management
Corporation v. CIR, 2017).
61. Destination Principle and Cross-Border
Doctrine.
According to the Destination Principle,
goods and services are taxed only in the country
where these are consumed. In connection with
the said principle, the Cross-Border Doctrine
mandates that no VAT shall be imposed to form
part of the cost of the goods destined for
consumption outside the territorial border of the
taxing authority (Atlas Consolidated Mining and
Development Corp. v. CIR, 2007).
62. Sales to Ecozone deemed Exports.
While an ecozone is geographically within
the Philippines, it is deemed a separate customs
territory and is regarded in laws as foreign soil.
Sale by suppliers located outside the borders of
the ecozone to this separate customs territory
(or ecozone) are deemed exports and treated as
Page 10 of 20
 export sales (CIR v. Seksui Jushi PHL, Inc., 66. 120+30 [TRAIN: 90+30] Day Period are
2006). Mandatory and Jurisdictional for filing
Judicial Claim of VAT Refund.
63. Technical Importation. The taxpayer can file its administrative claim
In the case of tax-free importation of goods for refund or credit of VAT at any time within the
into the Philippines by persons, entities or two-year prescriptive period:
agencies exempt from tax, where such goods a. If it files its claim on the last day of said
are subsequently sold, transferred or exchanged period, it is still filed on time. The CIR will
in the Philippines to non-exempt persons or have 120 days [TRAIN: 90 days] from
entities, the purchasers, transferees or such filing to decide the claim;
recipients shall be considered as the b. If the CIR decides the claim on the 120th
importers thereof, who shall be liable for any [TRAIN: 90th] day, or does not decide it
internal revenue tax on such importation on that day, the taxpayer still has 30 days
(NIRC, Sec. 107(B) as amended by TRAIN to file its judicial claim with the CTA;
Law). otherwise, the judicial claim would be
dismissed for being filed out of time and
64. Vatable v. Zero-rated Transactions v. not, prescribed (CIR vs. Burmeister and
Effectively Zero-rated v. VAT-Exempt Wain Scandinavian Contractor
Transactions. Mindanao, Inc., 2014, Perlas-Bernabe,
Vatable Zero- Effectiv VAT-
J.).
Rated ely- Exempt
Zero 67. BIR Ruling No. DA-489-03 is an exception
rated from the mandatory and jurisdictional
As to being considered as subject to Output Tax
120+30 [TRAIN: 90+30] day period in filing for
judicial claim.
Taxable Still a Still a Not subject Reconciling the pronouncements in the
resulting taxable taxable to output tax Aichi and San Roque cases, the rule must
to output transacti transacti therefore be that during the period December
tax on but on but
does not does not 10, 2003 (when BIR Ruling No. DA-489-03 was
result in result in issued) to October 6, 2010 (when the Aichi case
an output an output was promulgated), taxpayers-claimants need
tax tax not observe the 120-day period before it could
As to Refund of Input Tax
file a judicial claim for refund of excess input
VAT before the CTA. Before and after the
Allowed as May be allowed as tax The input tax aforementioned period (i.e., December 10, 2003
credit credits or refund attributable to to October 6, 2010), the observance of the 120-
from VAT-exempt day period is mandatory and jurisdictional to the
output tax sales shall filing of such claim (Mindanao II Geothermal
not be
allowed as
Partnership v. CIR, 2014).
credit against
the output 68. Requirement for Claim of unutilized input
tax, but VAT.
should be A claim for refund or tax credit for unutilized
treated as input VAT may be allowed only if the following
part of cost of
requisites concur, namely:
asset or
operating (a) The taxpayer is VAT-registered;
expense (b) The taxpayer is engaged in zero-rated
or effectively zero-rated sales;
(c) The input taxes are due or paid;
As to Registration
(d) The input taxes are not transitional
Required to register Optional
input taxes;
(e) The input taxes have not been applied
against output taxes during and in the
65. Transitional Input Tax. succeeding quarters;
A person who becomes liable to VAT or any (f) The input taxes claimed are
person who elects to be a VAT-registered attributable to zero-rated or effectively
person shall, subject to the filing of an inventory zero-rated sales;
according to rules and regulations prescribed by (g) For zero-rated sales:
the Secretary of Finance, upon recommendation (h) Where there are both zero-rated or
of the Commissioner, be allowed input tax on his effectively zero-rated sales and taxable
beginning inventory of goods, materials and or exempt sales, and the input taxes
supplies equivalent to two percent (2%) of the cannot be directly and entirely
value of such inventory or the actual value- attributable to any of these sales, the
added tax paid on such goods, materials and input taxes shall be proportionately
supplies, whichever is higher, which shall be allocated on the basis of sales volume;
creditable against the output tax (NIRC, Sec. and
111). (i) The claim is filed within two years after
the close of the taxable quarter when

Page 11 of 20
 such sales were made (Luzon Hydro (J.R.A. PHL, Inc. v. CIR, 2010, Perlas-Bernabe,
Corporation v. CIR, 2013) J.).

69. Transaction Deemed Sale subject to VAT. 75. Enhanced VAT Refund System.
The following transactions shall be deemed It is a VAT refund system that grants and
sale: pays refunds of creditable input tax within ninety
a. Transfer, use or consumption not in the (90) days from the filing of the VAT refund
course of business of goods or properties application with the Bureau. The 90-day period
originally intended for sale or for use in the shall start from the filing of the application/claim
course of business; for refund up to the release of the payment of the
b. Distribution or transfer to shareholders or VAT refund. Provided, That, the
investors as share in the profits of the VAT- claim/application is considered to have been
registered persons or creditors in payment filed only upon submission of the official receipts
of debt; or invoices and other documents in support of
c. Consignment of goods if actual sale is not the application as prescribed under pertinent
made within sixty (60) days following the revenue issuances (R.R. No. 13-18).
date such goods were consigned; and
d. Retirement from or cessation of business, REMEDIES
with respect to inventories of taxable goods
existing as of such retirement or cessation. Real
(Sec. 106 (B)). Local
NIRC Property
Taxes
Taxes
70. VAT Exempt Transaction – Sale of Real
Property.
Within 3 Within 5 No express
The following sales of real properties are
years after years from provision on
exempt from VAT, namely: (1) Sale of real
properties not primarily held for sale to Prescripti the last day the date prescriptive
ve Period prescribed they period for
customers or held for lease in the ordinary
for by law for become assessment.
course of trade or business; (2) Sale of real
properties utilized for low-cost housing as Assessm filing a due
defined by RA No. 7279; (3) Sale of real ent return or
properties utilized for socialized housing as actual filing
defined under RA No. 7279; (4) Sale of of return,
residential lot valued at ₱1,500,000.00 and whichever
below, or house & lot and other residential comes later
dwellings valued at ₱2,500,000. (NIRC, Sec.
109(p) as amended by TRAIN Law, R.R. No. 13- 1. In case of Local taxes, N/A
18). false or fees, and
fraudulent charges
71. VAT Exempt – Cinema Tickets are NOT return or which
subject to VAT. failure to accrued
Among those included in the enumeration of file a before the
vatable services is the "lease of motion picture return – effectivity of
films, films, tapes and discs." This, however, is within 10 the LGC – 3
not the same as the showing or exhibition of Exception years after years from
motion pictures or films (CIR v. SM Prime s to discovery the date
Holdings, 2010) Period of of falsity, they
Assessm fraud or became
72. VAT Exempt – Pawnshop. ent omission due.
Pawnshops are considered as non-bank
financial intermediaries, thus exempted from 2. Waiver of
VAT, but liable to percentage tax (Tambunting Statute of
Pawnshop, Inc. v. CIR, 2010). Limitation
– up to the
73. Invoice vs. Official Receipt. extended
VAT Invoice issued for every sale, barter or period
exchange of goods or properties. While VAT agreed
Official Receipts are issued for every lease of upon
goods or properties and for every sale, barter or
exchange of services (Sec. 113 (A)). 5 years 1. 5 years 1. Within 5
following from the years
74. Failure to write “zero-rated” in VAT Prescripti the date of from the
Invoice/OR fatal to claim of refund. ve period assessment assessm date they
ent by become
Failure to print the word “zero-rated” on the for of the tax.
collection administr due.
invoices or receipts is fatal to a claim for credit
In case of ative or 2. In case of
of refund of input VAT on zero-rated sales judicial fraud or
false or
fraudulent action intent to

Page 12 of 20
 Real vs. Asalus
Local
NIRC Property Corporation, 2017)
Taxes
Taxes

return or 2. In case evade

Period to Assess
non-filing of of fraud payment,
return, or intent such Within 10 years after the discovery of the falsity, fraud or
within 10 to evade within 10 omission
years from payment years
the date of – within from the
10 years discovery Note: There is a prima facie evidence of a false
discovery of
from of such return if there is a substantial under declaration
falsity or
discover fraud or of taxable sales, receipt or income. The failure
fraud or y of intent to to report sales, receipts or income in an amount
non-filing. fraud. evade exceeding 30% what is declared in the returns
payment constitute substantial under declaration. A prima
In case the
taxpayer facie evidence is one which that will establish a
has waived fact or sustain a judgment unless contradictory
the Statute evidence is produced (CIR v. Asalus
of Corporation, 2017).
Limitations,
collection 77. Requisites of the waiver of Statute of
Limitations (FoSNA-DeDaT).
within the
a. The waiver must be in the proper Form
period
prescribed by RMO 20- 90;
agreed
b. The waiver must be Signed by the
upon
taxpayer himself or his duly authorized
representative. In the case of a
corporation, the waiver must be signed by
any of its responsible officials;
c. The waiver should be duly Notarized;
76. Fraudulent Return v. False Return v. Failure
d. The CIR or the revenue official authorized
to File return.
by him must sign the waiver indicating that
Fraudulent False Failure to File Return the BIR has Accepted and agreed to the
Return Return
waiver;
Nature e. Both the Date of execution by the taxpayer
and Date of acceptance by the Bureau
A fraudulent A false The following should be before the expiration of the
return implies return constitutes failure to file period of prescription or before the lapse
intentional or contains return to warrant the 10-
deceitful entry wrong year prescriptive period: of the period agreed upon in case a
with intent to information 1. A deficient return subsequent agreement is executed;
evade the whether due which prevented f. The waiver must be executed in Three
taxes due to mistake, the CIR from copies, the original copy to be attached to
(Aznar v. carelessnes computing taxes
Commissioner s or due. Such the docket of the case, the second copy
of Internal ignorance defective return is for the taxpayer and the third copy for the
Revenue, (Aznar v. the same as if no Office accepting the waiver
1974). Commissio return is filed at all (Commissioner of Internal Revenue v.
ner of (Commissioner of
Internal Internal Revenue Systems Technology Institute, Inc., 2017,
Revenue, v. Gonzales, Covered Case).
1974) . 1966); Note: If without the execution of the waiver of
2. Failure to report statute of limitations, the right of the BIR to
income in the
returns which were assess should be considered prescribed 3
clearly not years after the last day prescribed by law for the
exempted from filing of the return or from the date of actual filing
tax. The Court did of the return, whichever comes later (NIRC, Sec.
not treat this as a
simple omission as 203).
the same involved
substantial sums Note further: The general rule is that a defective
(Standard waiver cannot extend the prescriptive period.
Chartered Bank v.
Commissioner of However, take note that when the taxpayer is
Internal Revenue, also guilty of causing defects in the waiver (i.e.
2012); and in bad faith), the waiver shall still be considered
3. Undeclared VAT- valid and shall thus serve to extend the period to
able sales more
than 30% of that assess and /or collect. (CIR v. Next Mobile, Inc.,
declared in Asalus’ 2015).
VAT returns
(Commissioner of
Internal Revenue

Page 13 of 20
78. When substantial compliance of the notice
requirement under Section 228 was accepted
by the Supreme Court.
Although the FAN and demand letter issued
to the cooperative were not accompanied by a
written explanation of the legal and factual bases
of the deficiency taxes assessed against it.
Considering the exchange of correspondence
and documents between the parties, the
requirement of Section 228 was substantially
complied with. The CIR had fully informed the
cooperative in writing of the factual and legal
bases of the deficiency taxes assessment
(Samar-I Electric Cooperative. v. CIR, 2014).
79. Jeopardy Assessment when proper.
It is one issued by the Commissioner if he
believes that the collection of taxes is in
jeopardy. It may be issued when the taxpayer is:
1. Retiring from business subject to tax;
2. Intending to:
a. Leave the Philippines;
b. Remove his property therefrom; or
c. Hide or conceal his property; or
3. Performing any act tending to obstruct the
proceedings for the collection of the tax
(NIRC, Sec. 6 (d)).
80. Delinquency v. Deficiency Interest.
Deficiency Interest Delinquency Interest
Regional Offices) or bv the Chief of Division
concerned (in the case of the BIR National
Office) of the discrepancy or discrepancies in the
taxpayer’s payment of his internal revenue
taxes. for the purpose of “Informal Conference,"
in order to afford the taxpayer with an
opportunity to present his side of the case (R.R.
No. 7-2018).
Note: With the effectivity of R.R. No. 18-
2013 on December 15, 2013, the issuance of a
Notice for Informal Conference for audit
investigations was discontinued until it was
reinstated by R.R. No. 7-2018 which became
effective on MARCH 16, 2018.
82. For Prescription purposes, it is the date of
the FAN not the PAN (PAN vs. FAN).
The PAN gives both the taxpayer and the
CIR the opportunity to settle the case at the
earliest possible time without the need for the
issuance of a FAN. On the other hand, a FAN
contains not only a computation of tax liabilities
but also a demand for payment within a
prescribed period. As soon as it is served, an
obligation arises on the part of the taxpayer
concerned to pay the amount assessed and
demanded. It also signals the time when
penalties and interests begin to accrue against
the taxpayer (CIR v. Transitions Optical
Philippines, Inc., 2017).

Imposed on any deficiency Shall be subject to the
in the tax due. Any interest rate above and
deficiency in the tax due imposed in case of failure to
shall be subject to the pay:
interest rate above, which
interest shall be assessed a. The amount of tax
and collected from the due on any return
date prescribed for its required to be filed;
payment until the full b. The amount of tax
payment thereof, or upon due for which no
issuance of a notice and return is required; or
demand by the c. A deficiency tax,
Commissioner of Internal surcharge or interest
Revenue, whichever thereon on the due
comes earlier (NIRC as date appearing on
amended by TRAIN law, the notice and
Sec. 249 (B)). demand of the CIR,
there shall be
assessed and
collected on the
unpaid amount, shall
be subject to the
interest rate above
(NIRC as amended
by TRAIN law, Sec.
249 (C)).
81. Issuance of Notice of Informal Conference;
Reinstated Step in Assessment Process.
The Revenue Officer who audited the
taxpayer's records shall, among others, state in
his report whether or not the taxpayer agrees
with his findings that the taxpayer is liable for
deficiency tax or taxes. If the taxpayer is not
amenable, based on the said Officer's submitted
report of investigation, the taxpayer shall be
informed, in writing, by the Revenue District
Office or by the Special Investigation Division, as
the case may be (in the case of Revenue
If the PAN is not issued before the FAN and
the taxpayer only received the latter, it is
tantamount to denial of due process. The
taxpayer must be informed of the facts and laws
upon which the assessment is made. It is not
merely a formal requirement but a substantive
one. However, the law recognizes several
exceptions wherein the PAN need not be issued
(CIR v. Metro Star Superama, 2010).
83. Unavailability of Appeal to CIR in case of
Inaction by CIR’s duly authorized
representative.
The taxpayer does not have the option to
appeal to the CIR in case the CIR’s
representative does not act on the protest. The
taxpayer must choose between the following two
options:
a. Appeal to the CTA within 30 days after
the expiration of the 180-day period
counted from the date of filing of the
protest in case of a request for
reconsideration or from the date of
submission by taxpayer of the required
documents within 60 days from filing of
protest in case of a request for
reinvestigation; or
b. Await the final decision of the duly
authorized representative on the
disputed assessment (PAGCOR v. BIR,
2016).
84. Rulings of First Impressions.
It refers to rulings, opinions, and
interpretation of the CIR with respect to the
NIRC and other tax laws without established

Page 14 of 20
 precedent and which are issued in response to However, in the case of People v. Judy Ann
a specific request for ruling filed by the taxpayer Santos (CTA Crim. Case no. 012, Jan. 16,
with the Bureau. The term also includes 2013), Ms. Santos participated and maintained
reversal, modification or revocation of any her intention to settle the case, and thus
existing ruling (Revenue Administrative Order provided all the documents needed as well as
No. 2-2001). payment of her taxes. The element of willfulness
was not established and the CTA found her to
Note: Under Sec. 7 of the NIRC, the power to be merely negligent.
issue rulings of first impression or to reverse,
revoke or modify any existing ruling of the 88. Power of the CTA to receive evidence not
Bureau is one of the powers that cannot be presented at the administrative level.
delegated by the Commissioner. The CTA is a court of record and it may
receive new and additional evidence not
85. Compromise v. Abatement. presented at the administrative level. Parties are
Compromise Abatement to litigate and prove their case anew before the
court and formally offer their evidence
A contract whereby the Cancellation of the (Philippine Airlines, Inc. vs. Commissioner of
parties, by making entire tax liability of Internal Revenue, 2018).
reciprocal concessions, the taxpayer (NIRC,
avoid litigation (CIVIL Sec. 204(B)). 89. CTA has jurisdiction over the validity or
CODE, Art. 2028).
constitutionality of a law, or a rule or
Grounds regulation issued by the administrative
agency in the performance of its quasi-
1. Doubtful validity– 1. The tax or any
reasonable doubt as portion thereof legislative function.
to the validity of appears to be The law intends the Court of Tax Appeals to
claim against the unjustly or have exclusive jurisdiction to resolve all tax
taxpayer exists; and excessively problems. With respect to administrative
2. Financial assessed; or issuances, issued by the Commissioner under
incapacity – when 2. The its power to make rulings or opinions in
the financial position administration connection with the implementation of the
of the taxpayer and Collection provisions of internal revenue laws. Tax rulings
demonstrates a costs involved are official positions of the Bureau on inquiries
clear inability to pay do not justify the of taxpayers. Hence, the determination of the
the assessed tax collection of the validity of these issuances clearly falls within the
(NIRC, Sec. amount due exclusive appellate jurisdiction of the Court of
204(A)). (NIRC, Sec. Tax Appeals under Section 7(l) of Republic Act
204(B)). No. 1125, as amended, subject to prior review
by the Secretary of Finance, as required under
86. Distinction between the application of the 2- Republic Act No. 8424 (Commissioner of
Year prescriptive period under Sec. 112 and Internal Revenue vs. Court of Tax Appeals and
Sec. 229. Petron Corporation, 2018).
Under Sec. 112, the 2-year prescriptive
period applies only to the administrative COURT OF TAX APPEALS
claim before the CIR and not to judicial claim
before the CTA because the taxpayer always 90. Injunction generally not available as a
has 30 days from the decision of the CIR or from remedy to restrain collection of national
the lapse of the 120-day period even after the taxes; Exception.
lapse of 2 years from the taxable quarter where No court shall have the authority to grant an
the sales were made Thus, it is only the injunction to restrain the collection of any
administrative claim that must be filed within the national internal revenue tax, fee, or charge
two-year prescriptive period; the judicial claim imposed by NIRC.
need not fall within the two-year prescriptive By way of exception pursuant to Sec. 11 of
period (CIR v. Mindanao Geothermal II R.A. No. 1125 as amended, it is only the CTA
Partnership, 2014). that has jurisdiction to suspend the collection of
Under Section 229, the taxpayer need not taxes but only when in its opinion the collection
wait for the action of the CIR on the claim for by the BIR may jeopardize the interest of the
refund before taking his claim to the CTA. Both government and/or the taxpayer in which case
the claim for refund and the appeal to the the CTA may suspend the collection of taxes
CTA must be done within the two-year period and require the taxpayer either to deposit the
(Commissioner of Internal Revenue v. CBK amount claimed or to file a surety bond for not
Power Company Limited, 2015). more than double the amount being assessed
(R.M.O. No. 42-2010).
87. Willful Blindness Doctrine.
A taxpayer can no longer raise the defense 91. CTA En Banc Cannot Annul Judgment of
that the errors on their tax returns are not their their Divisions.
responsibility or that it is the fault of the SC, CA, and CTA en banc cannot annul
accountants they hired (People v. Gloria judgment of their divisions. Annulment of
Kintanar, 2010).

Page 15 of 20
 Judgment (Rule 47 of the Rules of Court)
involves exercise of original jurisdiction and
implies power by a superior court against the
final judgment, decision or ruling of an inferior
court based on the grounds of extrinsic fraud
and lack of jurisdiction. The Divisions are not
separate and distinct courts but are divisions of
one and the same court. There is no hierarchy
of courts within the SC, CA, and CTA, for each
remain as one court notwithstanding that they
also work in divisions (Commissioner of Internal
Revenue v. Kepco Ilijan Corporation, 2016).
92. Jurisdiction of DOJ over tax disputes
between BIR and another government
agency.
This case involves a dispute between
PSALM and NPC, which are both wholly
government-owned corporations, and the BIR, a
government office, over the imposition of VAT on
the sale of the two power plants. If the
government entity disputes the tax assessment,
the dispute is already between the BIR
(represented by the CIR) and another
government entity, in this case, the petitioner
PSALM. Under PD 242, all disputes and claims
solely between government agencies and
offices, including GOCCs, shall be
administratively settled, depending on the
issues and government agencies involved. As
regards cases involving only questions of law, it
is the Secretary of Justice who has jurisdiction
(Power Sector Assets and Liabilities
Management Corporation vs. CIR, 2017).
93. Amended Decision is subject to Motion for
Reconsideration (MR).
An amended decision is a different decision,
and thus, is a proper subject of a MR (Asiatrust
Development Bank, Inc. v. CIR, 2017).
LOCAL TAXATION
94. FUNDAMENTAL PRINCIPLES.
The following fundamental principles shall
govern the exercise of the taxing and other
revenue-raising powers of local government
units:
a) Taxation shall be uniform in each local
government unit;
b) Taxes, fees, charges and other
impositions shall:
1) be equitable and based as far as
practicable on the taxpayer's ability
to pay;
2) be levied and collected only for
public purposes;
3) not be unjust, excessive, oppressive,
or confiscatory;
4) not be contrary to law, public policy,
national economic policy, or in
restraint of trade;
c) The collection of local taxes, fees,
charges and other impositions shall in no
case be let to any private person;
d) The revenue collected pursuant to the
provisions of this Code shall inure solely
to the benefit of, and be subject to
disposition by, the local government unit
levying the tax, fee, charge or other
imposition unless otherwise specifically
provided herein; and,
e) Each local government unit shall, as far
as practicable, evolve a progressive
system of taxation (LGC, Sec. 130).
95. Mandatory public hearing for enactment of
local tax ordinance.
No tax ordinance or revenue measure shall
be enacted or approved in the absence of a
public hearing (A.O No. 270, Art. 276 (c)). The
initial public hearing shall be held not earlier than
ten (10) days from the time notices were sent
out, posted, or published, whichever is later (A.O
No. 270, Art. 276 (b)).
SPECIFIC TAXING POWERS OF LGUs
Scope of Taxing Powers
Provinces
Except as otherwise provided, the province
may only levy the following taxes, fees and
charges:
1. Tax on Transfer of Real Property;
Ownership;
2. Tax on Business of Printing and
Publication;
3. Franchise Tax;
4. Tax on Sand, Gravel and Other Quarry
Resources;
5. Professional Tax;
6. Amusement Tax; and
7. Annual Fixed Tax for every delivery truck or
van of manufacturers or producers,
wholesalers of, dealers, or retailers in,
certain products (LGC, Secs. 134 to 141)
Municipalities
Except as otherwise provided, municipalities
may levy taxes, fees, and charges not
otherwise levied by provinces.
1. Tax on Business enumerated in Section
143.
2. Fees and Charges on business and
occupation and, except as reserved to the
province in Section 139 (Professional Tax),
on the practice of any profession or calling,
commensurate with the cost of regulation,
inspection and licensing
3. Fees for the sealing and licensing of
weights and measures at such reasonable
rates as shall be prescribed by the
Sangguniang Bayan.
4. Municipalities shall have the exclusive
authority to grant fishery privileges in the
municipal waters and impose rentals, fees
or charges therefor (LGC, Secs 142 to 150)
Common only to Cities and Municipalities
Cities or municipalities may levy a community
tax (LGC, Sec. 156)
Page 16 of 20
96. Situs of the Tax collected under Section 143
(Tax on Business). the 70% sales Among the localities
1. Branch or Sales outlet allocation where the factories,
Branch or Where to Accrual and mentioned above project offices, plants,
Sales record the sale payment of shall be prorated and plantations are
outlet tax shall in proportion to located
pertain to their respective
what LGU volumes of
production during
With Branch or sales Municipality the period for
branch or outlet making where such which the tax is
sales the sale or branch or due
outlet transaction sales outlet is Note: The foregoing sales allocation shall be
located
applied irrespective of whether or not sales are
No branch Principal office City or made in the locality where the factory, project
or sales municipality office, plant, or plantation is located (LGC, Sec.
outlet where the 150).
principal office
is located 97. Franchise tax is not levied on the
corporation, upon its property or its income,
LGC, Sec. 150 simply for existing as a corporation but on its
exercise of the rights or privileges granted to
2. Manufacturers, assemblers, it by the government.
contractors, producers, and exporters A franchise tax is a tax on the privilege of
with factories, project offices, plants, and transacting business in the state and exercising
plantations in the pursuit of their corporate franchises granted by the state.
business Thus, to be liable for local franchise tax, the
Ratio Allocation to LGUs following requisites should concur: (1) that one
has a "franchise" in the sense of a secondary
Manufacturers, assemblers, contractors, or special franchise; and (2) that it is exercising
producers, and exporters with factories, project its rights or privileges under this franchise
offices, plants, and plantations in the pursuit of within the territory of the pertinent local
their business government unit.
30% of all sales City or municipality There is a confluence of these
recorded in principal where the principal requirements in the case at bar. By virtue of PD
office office is located
269, National Electrification
70% of all sales City or municipality Administration(NEA) granted CASURECO III a
recorded in principal where the factory, franchise to operate an electric light and power
office project office, plant, or service for a period of fifty (50) years, and it is
plantation is located undisputed that CASURECO III operates within
Iriga City and the Rinconada area. It is,
Manufacturers, assemblers, contractors, therefore, liable to pay franchise tax
producers, and exporters’ plantation is notwithstanding its non-profit nature (City of
located at a place other than the place Iriga v. Camarines Sur III Electric Cooperative,
where the factory is located, the 70% Inc., 2012, Perlas-Bernabe Case).
mentioned above shall be divided as follows:
98. Principle of Pre-Emption or Exclusionary
i. 60% City or municipality Doctrine.
where the factory is Where the National Government elects to
located
tax a particular area, it impliedly withholds from
ii. 40% City or municipality the local government the delegated power to
where the plantation is tax the same field. This doctrine principally
located rests on the intention of the Congress.
Conversely, should the Congress allow
Manufacturers, assemblers, contractors, municipal corporations to cover fields of
producers, and exporters has two (2) or taxation it already occupies then the doctrine of
more factories, project offices, plants, and pre-emption will NOT apply (Victorias Milling
plantations are located in different localities Co., Inc. v. Municipality of Victorias Negros
Occidental, 1968).

99. The Local Government Code does not

specifically prohibit an injunction enjoining
the collection of taxes.
It must be emphasized that although there
is no express prohibition in the Local
Government Code, injunctions enjoining the

Page 17 of 20
 collection of local taxes are frowned upon. (c) Real property shall be assessed on the
Courts therefore should exercise extreme basis of a uniform classification within
caution in issuing such injunctions (Angeles each local government unit;
City v. Angeles City Corp., 2010). (d) The appraisal, assessment, levy and
collection of real property tax shall not be
100. When questioning the constitutionality or let to any private person; and
legality of an ordinance, the appeal to the (e) The appraisal and assessment of real
Secretary of Justice is mandatory. property shall be equitable (LGC,
Sec. 187 requires that the dissatisfied Sec.198).
taxpayer who questions the validity or legality
of a tax ordinance must file his appeal to the 102. LGUs that may impose annual ad valorem tax
Secretary of Justice, within 30 days from on real property (Imposing Authority):
effectivity thereof. In case the Secretary 1. Province;
decides the appeal, a period also of 30 days is 2. City; and
allowed for an aggrieved party to go to court. 3. Municipality within Metro Manila (LGC,
But if the Secretary does not act thereon, after Sec. 232)
the lapse of 60 days, a party could already Note: This refers only to the Municipality of
proceed to seek relief in court. These three Pateros.
separate periods are clearly given for
compliance as a prerequisite before seeking 103. Assessment v. Appraisal
redress in a competent court and these Assessment Appraisal
provisions of statutes is construed as
mandatory. Hence, failure of a taxpayer to Definition
interpose the requisite appeal to the Secretary
of Justice is fatal to their cause (Jardine Davies An act or process of An act or process of
Insurance Brokers v. Aliposa, 2003). determining the value of determining the
a property or proportion value of a property
thereof subject to tax as of a specific date
101. Failure to comply with the procedural
for a specific
requisites stated under Section 196 of the
purpose
LGC in order to be entitled to a refund/credit
of local taxes, will warrant denial of the claim DIFFERENCES
for local tax refund/credit.
Section 196 of the LGC reveals that in order As to purpose
to be entitled to a refund/credit of local taxes, the
following procedural requirements must concur: Taxation purposes Private purposes
first, the taxpayer concerned must file a written
claim for refund/credit with the local treasurer; As to exercising authority
and second, the case or proceeding for refund
has to be filed within two (2) years from the Performed by LGUs Performed by
date of payment of the tax, fee or charge from through Provincial, City independent private
or Municipal Assessor’s appraisers
the date the taxpayer is entitled to a refund or
office
credit. It is hornbook principle that a claim for a
tax refund/credit is in the nature of a claim for an As to appeal
exemption and the law is construed in strictissimi
juris against the one claiming it and in favor of May be appealed to the Cannot be
the taxing authority. LBAA within 60days from appealed, but
receipt of notice of second opinion from
Consequently, as MM Shopping Mecca assessment (LGC, Sec. another appraiser is
Corp. has failed to prove that they have 226) possible
complied with the procedural requisites stated
(Local Assessment Regulations No. 1-04
under Section 196 of the LGC, their claim for
(2004), p. 2-3)
local tax refund/credit must be denied (Metro
Manila Shopping Mecca Corp et al v. Toledo
103. In classifying Machinery as Real Property for
2013, Perlas-Bernabe Case).
Real Property Tax, LGC prevails over Art.
415(5) of Civil Code.
REAL PROPERTY TAXATION The Supreme Court disagrees on
harmonizing Art. 415(5) of Civil Code and the
FUNDAMENTAL PRINCIPLES LGC for this would necessarily mean imposing
additional requirements for classifying
The appraisal, assessment, levy and machinery as real property for real property tax
collection of real property tax shall be guided by purposes not provided for, or even in direct
the following fundamental principles: conflict with, the provisions of the LGC. As
(a) Real property shall be appraised at its between the Civil Code, a general law governing
current and fair market value; property and property relations, and the LGC, a
(b) Real property shall be classified for special law granting local government units the
assessment purposes on the basis of its power to impose real property tax, then the latter
actual use; shall prevail (Manila Electric Company v. The

Page 18 of 20
 City Assessor and City Treasurer of Lucena
City,2015).
104. Manila International Airport Authority (MIAA)
and Mactan-Cebu International Airport
Authority (MCIAAA) Exempt from RPT.
MIAA and MCIAA are not GOCCs but
government instrumentalities vested with
corporate powers and performing essential
public services. As government
instrumentalities, they are not subject to any kind
of tax by local governments under Section
133(o) of the LGC (MIAA v. CA, 2006).
105. When the Republic grants the beneficial use
of its real property to an agency or
instrumentality of the national government, it
does not result in the loss of the real
property tax exemption. However, portions
of the property that such agency or
instrumentality leases to private entities are
not exempt from real estate tax.
The Republic may grant the beneficial use
of its real property to an agency or
instrumentality of the national government. This
happens when title of the real property is
transferred to an agency or instrumentality
even as the Republic remains the owner of the
real property. Such arrangement does not
result in the loss of the tax exemption. Section
234(a) of the Local Government Code states
that real property owned by the Republic loses
its tax exemption only if the "beneficial use
thereof has been granted, for consideration or
otherwise, to a taxable person."
MIAA, as a government instrumentality, is
not a taxable person under Section 133(o) of
the Local Government Code. Thus, even if we
assume that the Republic has granted to MIAA
the beneficial use of the Airport Lands and
Buildings, such fact does not make these real
properties subject to real estate tax. However,
portions of the Airport Lands and Buildings that
MIAA leases to private entities are not exempt
from real estate tax (MIAA v. CA, 2006).
106. Requisites of Machinery to be classified as
real property.
1. Actually, directly and exclusively used to meet
the needs of a particular industry, business or
activity; and
2. By their very nature and purpose are designed
for, or necessary to manufacturing, mining,
logging, commercial, industrial or agricultural
purposes (LGC, Sec. 199(o)).
Note: Movable equipment to be immobilized in
contemplation of the law must first be
"essential” and “principal elements" of an
industry or works without which such industry or
works would be “unable to function or carry on
the industrial purpose for which it was
established" (Mindanao Bus Co. v. City
Assessor, G.R. No. L-17870, September 29,
1962).
Examples:
The transformers, electric posts,
transmission lines, insulators and electric
meters of MERALCO may qualify as
machinery under Local Government Code
subject to real property tax. (Manila Electric
Company v. The City Assessor and City
Treasurer of Lucena City, 2015).
107. Special Levies on Real Property.
a. Special Education Fund (SEF) – 1% of
assessed value which shall be in
addition to the basic real estate tax to
finance the Special Education Fund
(LGC, Sec. 235);
b. Additional Ad Valorem on Idle Lands
– not exceeding 5% of the assessed
value of the property (LGC, Sec. 236);
Not Considered as Idle Lands:
i. Agricultural lands planted to
permanent or perennial crops with
at least fifty (50) trees to a
hectare; and
ii. Lands actually used for grazing
purposes (LGC, Sec. 237 (a)).
LGU may Exempt Idle Lands from
Additional Levy by Reason of: (FC3)
i. Force majeure;
ii. Civil disturbance;
iii. Natural Calamity; or
iv. Any Cause which physically or
legally prevents the owner of
the property or person having
legal interest therein from
improving, utilizing, or
cultivating the same (LGC, Sec.
238).
c. Special Assessments (or Special Levy)
– on lands specially benefited by public
works, projects, or improvements
funded by the local government unit
shall not exceed 60% of the actual cost
of such projects and improvements,
including the costs of acquiring land and
such other real property in connection
therewith (LGC, Sec. 240).
108. Payment under protest is a mandatory
requirement when there is a question as to
the reasonableness of the amount of real
property assessed.
Sec. 252 of the LGC provides that no
protest shall be entertained unless the
taxpayer first pays the tax. There shall be
annotated on the tax receipts the words "paid
under protest". The protest in writing must be
filed within thirty (30) days from payment of the
tax to the provincial, city treasurer, or
municipal treasurer, in the case of a
municipality within Metropolitan Area, who
shall decide the protest within sixty (60) days
from receipt. Failure to comply with this
mandatory requirement is fatal, and any
appeal shall not be entertained by the LBAA
(National Power Corporation v. The Provincial
Treasurer of Benguet, 2016).
Note: Payment under protest is not necessary
on protest of assessment for local taxes (LGC,
Sec. 195).
Page 19 of 20
 109. Strict adherence to the statutes governing Real Property
Local Taxes
tax sales is imperative not only for the Tax
protection of the taxpayer’s property rights
and right to due process, but also to avoid of depending on
collusion between the buyer and public denial jurisdictional
of amount) 2. CBAA
officials. (Central
Section 254 of the Local Government protest
2. Appeal to: Board of
Code mandates that the notice of delinquency and
a. RTC – Assessment
must be posted and published. In addition, proper Appeals)
decision of
Section 258 provides that the warrant of levy courts
MTC (A.M.
shall be sent to the registered owner, or wherein
No. 05-11-
person having legal interest therein. The taxpaye 07-CTA); 3. CTA En Banc
public auction of land to satisfy delinquency r should b. CTA Division- (A.M. No.
derogates or impinges on property rights and file decision of 05-11-07-
due process. Thus, the steps prescribed by appeal RTC CTA)
law are mandatory and must be strictly from
followed; if not, the sale of the real property is each 3. CTA En Banc
invalid and does not make its purchaser the court’s (A.M. No. 05-11-
4. Supreme
new owner (Salva vs. Magpile, 2017, Covered decision 07-CTA)
Court
Case).
4. Supreme Court
110. No motion for reconsideration upon the
adverse decision of the local
assessor/treasurer; the remedy is to appeal
to the LBAA.
The last action of the local assessor on a
particular assessment shall be the notice of
assessment; it is this last action which gives the
owner of the property the right to appeal to the
LBAA. The procedure likewise does not permit
the property owner the remedy of filing a motion
for reconsideration before the local assessor
(FELS Energy, Inc. v. The Province of
Batangas, 2007).

111. Difference in Taxpayer’s Remedies between

LT and RPT.

Real Property
Local Taxes
Tax

Within sixty (60) The protest

days from receipt must be filed
of the notice of within thirty
assessment (30) days from
(LGC, Sec. 195). payment of tax.

Period
for
Filing a Note: The
Protest protest may be
filed at the time
of payment of
the tax being
protested
(LGC, Sec.
252(a))).

Sixty (60) days Sixty (60) days

Period
from receipt of from receipt of
to written protest written protest
Decide (LGC, Sec. 195) (LGC, Sec.
Protest
252(a))

Where 1. Court of 1. LBAA (Local

Competent Board of
to
Jurisdiction Assessment
appeal
(LGC, Sec. 195) Appeals)
in case (MTC or RTC-

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