TAXATION LAW REVIEW

By: Atty. Lilibeth D. Gabutero, CPA, MBA

NAME: KRISHA FAYE F. AMBOL

SEATWORK 1 ( April 9, 2021)

INSTRUCTIONS: The following are based on Item J of Part I of the 2020/2021

Syllabus. Answer the questions and submit (turn-in) not later than 9:30PM
tonight:

1. Define the doctrine of non-retroactivity of tax laws;

The doctrine of non-retroactivity of tax laws means that the rulings, circular, rules and
regulations promulgated by the Commissioner of Internal Revenue would have no retroactive
application if to so apply them would be prejudicial to the taxpayers. This is as enshrined in
Sec. 246 of the NIRC, to wit:

SEC. 246. 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.

The determination of whether the taxpayer had suffered prejudice is a factual issue (CIR v.
Benguet Corp. G.R. Nos. 134587 & 134588 July 8, 2005).

2. Define Imprescriptibility in Taxation;

As a rule, taxes are imprescriptible as they are the lifeblood of the government.
However, tax statutes may provide for statute of limitations, such as the
following:

a) Under the NIRC-the statute of limitation for assessment of tax if a return

is filed is with three years from the last they prescribed by law for the
filing of the return or if filed after the last day with in three years from
date of actual filing. If no return is filed or the return is filed falsely or
fraudulently, the period To assess is within 10 years from discovery of
fraud or falsity.
 b) Under the tariff and customs code- after the expiration of three years
from the date of the final payment of duties, articles which have been
entered and passed free of duty of final adjustments of duty is made with
subsequent delivery such entry and passage free of duty or settlements
of duties, in the absence of fraud or protest or compliance audit
pursuant to the provision of this code, Will be final in conclusive upon all
parties unless the liquidation of the import and she was merely tentative.
c) Local government code- local taxes fees or charges shall be assessed
within five years from the date they baking due. In case of fraud or intent
to evade the payment of taxes, fees or charges the same may be assessed
within 10 years from discovery of the fraud or intent to invade payment.
They should also be collected either by administrative or judicial action
within five years from date of assessment.

3. What determines the situs of taxation in the Philippines?

In the Philippines, situs of income taxation is determined using the citizenship

principle, residency principle and the source principle. Resident citizens and
domestic corporations are taxed on their worldwide income, while nonresident
citizens, aliens (whether resident or nonresident) and foreign corporations
(whether resident or nonresident) are taxed only on income sourced from
within the Philippines.

4. What are the factors that determine the situs of taxation;

The situs of taxation in the Philippines depends on the nature and kind
of tax levied. The following are the rules of serve in fixing tax situs:

a) Poll/capitation/community tax-based upon the residence of the

taxpayer, regardless of the source of income or location of the
property of the taxpayer.
b) Property tax
i. Real property- real estate is subject to taxation in the state
or country where it is located, regardless of whether the
owner is a resident or a non-resident.
ii. Personal property- the domicile of its owner, regardless of
where ever it was actually cap or located. Following the age
all doctrine of mobilia sequuntur personam.( that movables
follow the law- of the person.)

The rule applies when convenient, provided it is not

inconsistent with express provisions of the law or when it’s
application would result in injustice or unless such property
has acquired an actual site was elsewhere. Does in cases of
 shares of stock it’s situs for the purpose of taxation is the
state in which they are permanently get regardless of the
domicile of the owner or the state in which the corporation
was organized.
c) Excise tax;
i. Income tax, donor tax, estate tax -depends on the place
where income was derived or the property is situated,
nationality of taxpayer, donor, decedent, residence;
d) Value added tax- the place where the transaction is made. If the
transaction is made outside of the Philippines we can no longer tax
such transaction.

5. What is the situs of taxation in electronic transactions?

Currently, the Philippines does not tax digital transactions differently from ordinary
transactions.

Situs is determined using the citizenship principle, residency principle and the
source principle Resident citizens and domestic corporations are taxed on their
worldwide income, while nonresident citizens, aliens (whether resident or
nonresident) and foreign corporations (whether resident or nonresident) are taxed
only on income sourced from within the Philippines.
In order to be considered as an activity that is generating income within the
Philippines, the following rules generally apply:

 With regard to services, it must be performed within the Philippines;

 With regard to the sale of personal property, the contract of sale must be
consummated or perfected in the Philippines.

As an exception to the situs rules, income of non-resident foreign individuals and

corporations not engaged in business in the Philippines may be exempt from
Philippine taxes or subjected to lower tax rates if there is an existing tax treaty
between the Philippines and the country of residence of the non-resident foreign
individual/corporation. However, this is still subject to compliance with the
conditions of the applicable tax treaty, such as if the foreign entity does not have a
permanent establishment in the Philippines.

6. Define double taxation.

Double taxation is where one tax is imposed by the state and the other is
imposed by the city; it being widely recognized that there is nothing
inherently obnoxious in the requirement that license fees or taxes be an
acted with respect to the same occupation, calling or activity by both the
state and the political subdivision thereof;
7. What are the two kinds of double taxation?

The two kinds of double taxation are the following:

i. Direct -constitutes double taxation in the objectionable or

prohibited sense. This occurs when the same property is taxed
twice when it should be taxed once.

The requisites are the following:

1. Taxes are imposed on:

a. The same property or subject matter,
b. for the same purpose,
c. by the same state, government, or taxing authority,
d. within the same jurisdiction or taxing district,
e. during the same taxing period.
2. And they must be of the same kind or character of tax.

ii. Indirect -is permissible double taxation. This is allowed if the

taxes are of different nature or character, imposed by different
taxing authorities.

8. What is international juridical double taxation?

Refers to the imposition of comparable taxes in two or more states on the

same taxpayer in respect of the same subject matter and for identical
periods. Double taxation usually takes place when a person is resident of
a contracting state and derives income from, or owns capital in, the other
contracting state in both states them post tax on that income or capital.

9. What are the methods used in tax treaties to avoid international double
taxation?

In order to eliminate double taxation, tax treaty resorts to two methods of

relief, to wit:

i. Exemption method- the income or capital which is taxable

in the state of source or situs is exempted in the state of
residence, although in some instances, it may be taken into
account in determining the rate of tax applicable to the
taxpayers remaining income or capital.
ii. Credit method -the tax paid in the state of source is
credited against the tax levied in the state of residence.
10. What are the remedies against double or multiplicity of taxation.

The following are the remedies against double or multiplicity

of taxation:

i. Unilateral:
a. tax deduction;
b. tax credit;
c. exemption;
d. allowance on the principle of reciprocity.

ii. Bilateral:
a. tax treaty.

11. What are the forms of escapes from Taxation?

The following are the forms of escape from taxation:

i. Shifting - refers to the transfer of tax burden from the

person directly liable for the text to someone else.
ii. tax evasion- the use by the taxpayer of illegal or fraudulent
means to defeat or lessen the payment of tax. and
iii. tax avoidance- occurs when taxpayers take advantage of
legally permissible alternative tax rates or methods of
assessing taxable property/income/transactions in order to
avoid or minimize tax liability;

12. Distinguish Tax Evasion, Tax Avoidance, and Tax Exemption from
one another.

As to legality;

Both tax avoidance and tax exemption are allowed by

law. However tax invasion is illegal.

As to how applied;

tax avoidance is the tax saving device which uses

alternative methods of assessing tax to listen or mitigate tax
liabilities, for exemption the taxpayer applies Express
provisions of the law on property granted such exemptions
which lessens tax liability. For tax invasion fraud and
misrepresentation are often used to escape paying taxes.
 13. What are the different kinds of tax exemptions.

1. Express or affirmative- when certain persons property or

constructions are expressed provision of law, exempted from
certain taxes in whole or in part.
2. Implied -when a taxes levied on certain classes without
mentioning other classes.

14. Give examples of tax exemptions under RA 8424.

The following are the exemptions under the NIRC;

 Merger of usufruct in the owner of the naked title [Sec. 87 (A), NIRC]
 Transmission of inheritance or legacy by fiduciary heir or legatee to the
fideicommissary [Sec. 87 (B), NIRC]
 Transmission from the first heir, legatee, or donee in favor of another
beneficiary, in accordance with the desire of the predecessor [Sec. 87
(C), NIRC]
 Bequests, devises, legacies or transfers to social welfare, cultural and
charitable institutions, no part of the net income of which inures to the
benefit of any individual: provided that not more than 30% of said
transfer shall be used for administration purposes [Sec. 87 (D), NIRC

15. Give examples of tax exemptions under Special laws?

The following are examples of tax exemptions under special law:

 Proceeds of life insurance under a group insurance taken by employer

 War damage payments and Benefits received from US Veterans
Administration [R.A. 227]
 Transfer of property to the National Government or to any of its
political subdivisions
 Benefits received by beneficiaries residing in the Philippines under
laws administered by the
 US Veteran Administration [R.A. 360]

16. Define the doctrine of Equitable Recoupment.

The doctrine of equitable recoupment, means that a claim for

refund part by prescription may be allowed to offset unsettled tax
liabilities. This doctrine find snow application in this jurisdiction.

17. May taxes be subject to legal compensation?

 As a general rule internal revenue taxes cannot be subject of set of our
compensation as this would adversely affect the government revenue
system. Moreover government and taxpayers are not creditors and
debtors of each other.

An exemption to the general rule, takes place if the claims against the
government has been recognized and an amount has already been
appropriated for that purpose. Where both claims have already become
due and demandable as well as fully liquidated, compensation takes
place by operation of law and both decks are extinguished to the
concurrent amount.

18. What is Tax Amnesty

Tax Amnesty is the absolute forgiveness or waiver by the government of

its right to collect what otherwise would be due to it. It is never favored
nor presumed in law.

19. Who are the taxpayers that cannot avail of a tax amnesty program;

According to RA 11213, section 16, The general tax amnesty shall not extend to
the following:

(a) Withholding tax agents who withheld taxes but failed to remit the
same to the Bureau of Internal Revenue:

(b) Taxpayers with cases pending in appropriate courts involving:

(1) Those that fall under the jurisdiction of the Presidential

Commission on Good Government;

(2) Unexplained or unlawfully acquired wealth under

Republic Act No. 3019, otherwise known as the Anti-
Graft and Corrupt Practices Act, and Republic Act No.
7080 or An Act Defining and Penalizing the Crime of
Plunder;

(3) Violations of Republic Act No. 9160, otherwise known as

the Anti-Money Laundering Act, as amended;
 (4) Tax evasion and other criminal offenses under Chapter
II of Title X of the National Internal Revenue Code of
1997, as amended; and

(5) Felonies of frauds, illegal exactions and transactions,

and malversation of public funds and property under
Chapters III and IV of Title VTI of the Revised Penal
Code;

(c) Tax cases that have become final and executory; and

(d) Delinquencies and assessments that have become final and executory.

20. When will the taxpayer enjoy the benefits and privileges under the tax
amnesty program if he has complied with all the requirements provided by law?

After the taxpayer has complied with all the requirements provided by
law, he can enjoy the benefits and privileges under the tax amnesty, after
the issuance of the authority to cancel assessment by the BIR. The same
is issued within 15 days from submission of the BIR of the acceptance
payment form and the tax honesty on delinquency’s return. The
completion of these requirements shall be deemed full compliance. Upon
full compliance with all the conditions and payment of the corresponding
tax on delinquency, that’s honestly granted shall become final and a
revocable. (RA 11213 SECTION 20)