MB2022 TaxLaw Reviewer

TAXATION LAW REVIEWER
UST FACULTY OF CIVIL LAW | Atty. Kenneth Manuel
Mock Bar 2022

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Table of Contents GUIDELINES ON PROPER EXECUTION OF WAIVERS......... 43

SUSPENSION OF STATUTE OF LIMITATIONS .................... 43
GENERAL PRINCIPLES OF TAXATION ................................. 1 TAX REFUNDS ................................................................. 44
TAXATION IN GENERAL ..................................................... 1 GOVERNMENT LIABILITY FOR INTEREST ......................... 47
INHERENT POWERS OF THE STATE ................................... 1 IRREVOCABILITY RULE..................................................... 47
SIMILARITIES OF THE INHERENT POWERS ........................ 2 REFUND OF INPUT VAT ................................................... 47
TAXATION BEING ENFORCED............................................ 2 COMPROMISE AND ABATEMENT.................................... 50
PRINCIPLES OF A SOUND TAX SYSTEM .............................. 3 ADDITIONS TO TAX ......................................................... 51
TAXES AS MONETARY CONTRIBUTIONS ........................... 4 CRIMES UNDER THE NIRC ............................................... 52
TAXES BEING LEVIED BY THE LAWMAKING BODY ............. 4
GENERAL PRINCIPLES ...................................................... 52
TAX LEGISLATION ............................................................. 8
PRINCIPLES IN TAX CRIMES ............................................. 53
NATURE OF TAXING POWER ............................................. 8
NATURE OF TAXING POWER ............................................. 8 JUDICIAL REMEDIES ........................................................ 53
LIMITATIONS TO THE POWER TO TAX ............................... 9
THE JUDICIARY ................................................................ 53
CONSTITUTIONAL LIMITATIONS ..................................... 16
THE COURT OF TAX APPEALS .......................................... 54
BUREAU OF INTERNAL REVENUE .................................... 21 JURISDICTION OF THE CTA .............................................. 54
EXCLUSIVE ORIGINAL JURISDICTION ............................... 54
EXECUTIVE DEPARTMENT .............................................. 21
APPEAL TO SC.................................................................. 56
BUREAU OF INTERNAL REVENUE .................................... 21
EFFECT OF APPEAL TO COLLECTION ................................ 56
STRUCTURE OF THE BIR .............................................. 21
NOTES ON THE CTA ......................................................... 56
BASIC FUNCTIONS OF THE BIR .................................... 22
POWERS OF THE COMMISSIONER .............................. 22 SUMMARY OF JUDICIAL REMEDIES ................................. 57
DELEGABILITY OF THE POWERS OF THE CIR ............... 27
TAX REMEDIES ............................................................... 28
EXAMINATION OF RETURNS ........................................... 28
ASSESSMENT .................................................................. 28
Definition of Assessment ............................................ 28
Importance of Assessment ......................................... 28
KINDS OF ASSESSMENT .................................................. 29
PRINCIPLES GOVERNING TAX ASSESSMENT ................... 30
LETTER OF AUTHORITY ................................................... 31
NOTICE OF INFORMAL CONFERENCE AND NOTICE OF
DISCREPANCY ................................................................. 33
PRELIMINARY ASSESSMENT NOTICE .............................. 34
FINAL ASSESSMENT NOTICE AND FORMAL LETTER OF
DEMAND ........................................................................ 36
DISPUTED ASSESSMENTS ............................................... 36
FINAL DECISION ON DISPUTED ASSESSMENT (FDDA) ..... 37
COLLECTION AND OTHER GOVERNMENT REMEDIES....... 38
MODES OF COLLECTION ................................................. 38
TAX LIEN ......................................................................... 38
DISTRAINT ...................................................................... 39
GARNISHMENT ............................................................... 39
LEVY ................................................................................ 39
PRESCRIPTIVE PERIODS .................................................. 40
BASIC PRINCIPLES ON PRESCRIPTION ......................... 40
PRESCPTIVE PERIODS IN ASSESSMENT ....................... 40
PRESCRIPTIVE PERIODS IN COLLECTION ..................... 40
FALSE RETURN vs. FRAUDULENT RETURN .................. 40
RATIONALE BEHIND PRESCRIPTION ........................... 41
WHEN ASSESSMENT IS MADE? ....................................... 41
AMENDED RETURNS....................................................... 41
WAIVER OF THE STATUTE OF LIMITATIONS .................... 42
Mock Bar 2022

for public use. This stems from the Regalian Doctrine

which means that all lands are owned by the state.
TAXATION LAW
July 11, 2022
Inherent Powers of the State
Why inherent?
GENERAL PRINCIPLES OF TAXATION Lifeblood Doctrine

Taxes are the lifeblood of the nation through which
the government agencies continue to operate and
with which the State effects its functions for the
TAXATION IN GENERAL welfare of its constituents.
CIR v. Court of Appeals, G.R. No. 106611, 21 July

Taxation is the inherent power of the state to collect 1994
enforced, proportional, monetary contributions levied by
the lawmaking body in order to raise revenues for public
purpose. Q: Why is the power of taxation inherent?
A: According to the Life Blood Doctrine, taxes are the
Atty. Manuel: lifeblood of the nation through which the government
These enforced monetary contributions are what we call agencies continue to operate and with which the State
taxes and who levy those taxes? It will be the lawmaking effects its functions for the welfare of its constituents.
body in order to raise revenue for public purpose (CIR v. Court of Appeals, G.R. No. 106611, 21 July
1994)
Q: What is the purpose of taxation?
A: To raise revenues for public purpose whether or not Also, pursuant to such doctrine, the government chiefly
you actually feel it. relies on taxation to obtain the means to carry on its
operations. Taxes are essential to its very existence.
Atty. Manuel: (CIR v. Solidbank Corporation, G.R. No. 148191, 25
When we speak of inherent power it is innate, it does November 2003)
not require any grant of law or constitution in order for
the state to exercise such power. The constitution only Atty. Manuel:
provides for a limitation in the power of taxation. Without taxes, the government cannot continue to
operate and will cease to operate. Aside from death,
Lifeblood Doctrine another thing that is certain, of course, are taxes.
Taxes are the life and blood of the government, and all In CIR v. Pineda (G.R. No. L-22734, 15 Sept. 1967),
states have the power of taxation because without it the taxes are the lifeblood of the government, and their
government will die and will lack to moving power to prompt and certain availability is an imperious
operate. need.
Atty. Manuel:
INHERENT POWERS OF THE STATE
Palaging minamadali ang collection ng taxes kasi funds
for the government’s use must always be available in
1. Police Power – The power of promoting the order for the government to be able to effectively render
public welfare by restraining and regulating the public service. For example, in tax remedies, meron
use of liberty and property. (City Government of tayong tinatawag na no injunction rule when it comes
Quezon City v. Ericta, G.R. L-34915, 24 June to the collection of taxes. Here, courts may not enjoin
1983) the collection of taxes. As a general rule, once an
2. Eminent Domain – it is the taking of private assessment has been made by the BIR, it can proceed
property for public use with payment of just to collection especially if the assessment has already
compensation become final and executory. And this may not be
3. Taxation – stopped by the court. Of course, alam natin, that by
virtue of the act creating the CTA, it is only the CTA that
Atty. Manuel: may issue the injunction by way of a suspension of
By prescribing crimes, liberty and property are regulated collection of payments.’
by the state exercising the inherent power of police
power. Our use of property is being limited. Aside from the lifeblood doctrine, we also have the
necessity theory.
Eminent Domain is otherwise known as expropriation
the only requirement is payment of just compensation to
the prior owner of the property and the taking must be
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Necessity Theory
Similarities of the Inherent Powers
Without taxes, government cannot fulfill its mandate
1. Inherent
of promoting the general welfare and well-being of
2. Indispensable
the people.
3. Legislative in nature
4. Limitation on rights
Gerochi v. Department of Energy, G.R. No. 159796,
5. Equivalent compensation
17 July 2007
Atty. Manuel: SIMILARITIES OF THE INHERENT POWERS

Taxes are needed by the government because, of
course, it cannot function well without such. So 1. Inherent in nature
basically, it is just a rephrasing of your lifeblood doctrine. 2. Indispensable – government will fail without the
inherent powers.
Q: Why is there a need for the government to collect 3. Legislative in nature
taxes?
Atty. Manuel:
A: It is because of what we call the Benefits-Received It is the Congress that exercises the power of
Theory. This is what is known as the basis of taxation. taxation and not the BIR. It is the legislative
Basically, it is a theory of tax fairness that says people branch that exercises it through the stage of
should pay taxes based on the benefits they receive levying – the exercise proper of taxation.
from the government.
4. They impose limitations on rights
Atty. Manuel:
Taxes are what we pay for a civilized society. Without Eminent Domain – limitation on
taxes, the government will be paralyzed. So anong property rights particularly on real
mangyayari? Naturally, taxpayers are reluctant to pay properties
taxes because it is a diminution of their income.
However, by virtue of this benefits-received theory, Police Power – limitation on liberty and
since we benefit from the government by virtue of a use of property
certain relationship with the government, kailangan
natin magbayad ng taxes. It must be a give and take Taxation – limitation on property; a
relationship. The government gives us a civilized portion of your earnings may be given to
society, the government renders public service to us; the government through taxation.
and therefore, in return, we should pay taxes to the
government. Or vice versa, since we pay taxes to the 5. Equivalent compensation
government, the government must be able to provide us
either tangible or intangible benefits that may improve Eminent domain – it is the most tangible
our lives. and most obvious inherent power that
has equivalent compensation because
NOTE: The Benefits-Received Theory establishes a of the just compensation (in the form of
conclusive presumption, a presumption that cannot be money )given to the owner of the real
rebutted by contrary evidence. It is conclusively property taken for public use.
presumed that all subjects of taxation benefit from the
government. Police Power – it is the altruistic feeling
that we have contributed to the general
Atty. Manuel: welfare; the feeling of safety and
Of course, pwede kong sabihin na hindi naman ako security
nakikinabang sa gobyerno, na hindi naman umaangat
ang buhay ko sa gobyernong ito. Nakakairita ang Taxation – by virtue of the Benefits
gobyernong ito. Kung may benefit naman, kaunti lang. Received Theory, it is the public service
But it does not justify the non-payment of taxes. that we enjoy coming from the
Because it is conclusively presumed that we benefit government
from the government.
The Benefits-Received Theory is also known as the TAXATION BEING ENFORCED

Doctrine of Symbiotic Relationship, wherein it is
expressed that both organisms benefit from each Taxation is mandatory. It is an obligation of taxpayers to
other. Under this doctrine, taxation arises because of pay. Once you qualify as taxpayer or once you enter into
the reciprocal relation of protection and support certain transactions, it is mandatory to pay taxes.
between the State and the taxpayers.
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Income Tax – tax on the income you earn qualifies under the substituted
Donor’s Tax – tax when you donate something filing of income tax return (ITR).
Estate Tax – tax on the transfer of property from
the decedent to the heirs, legatees or devisees - The employee need not file his
upon the death of a person; it is not a tax on the own ITR; it would be the filing of
death of a person the employer particularly BIR
Value-Added Tax (VAT) – tax when you sell Form No. 1604 CF or 2316.
something in the course of trade or business; tax Whatever the employer files
on importation before the BIR is already the
compliance of such employee
Non-compliance with tax laws is dealt with civil and for that particular taxable year.
criminal penalties.
Atty. Manuel:
Civil Penalties It is easier to collect from a single
1. Interest – 12% or double the legal employer than collect from his hundreds
interest rate of employees.
2. Surcharge – either 25% or 50%,
depending if there is willfulness, b. Electronic Filing and Payment
fraud, etc. System (EFPS)
3. Compromise Penalty - The BIR introduces electronic
modes of filing returns and
Criminal Penalties payment of taxes
1. Fine
2. Imprisonment 3. Theoretical Justice
It states that the rule of taxation shall be uniform

PRINCIPLES OF A SOUND TAX SYSTEM and equitable. The Congress shall evolve a
progressive system of taxation.
1. Fiscal Adequacy
1987 CONSTITUTION
It requires that sources of revenues must be
adequate to meet government expenditures and ARTICLE VI
their variations (Chavez v. Ongpin, G.R. No.
76778, 06 June 1990). LEGISLATIVE DEPARTMENT
Atty. Manuel: SECTION 28. (1) The rule of taxation shall be uniform
There must be a budget surplus and not a and equitable. The Congress shall evolve a
budget deficit. progressive system of taxation.
2. Administrative Feasibility
Taxes are proportional in nature. Why?
It means that the tax system should be capable Because it complies with the principle of
of being effectively administered and enforced theoretical justice.
with least inconvenience to the taxpayer
(Municipality of Cainta v. Pasig City, G.R. Nos. “Progressive System” – Taxes must be based
176703 & 176721, 28 June 207). on a person’s ability to pay. Those who have the
ability to pay should pay more and those who
Atty. Manuel: cannot should be reduced of their taxes up to the
It involves ease of paying taxes. It must cause point of exemption.
the least inconvenience on the part of the
taxpayer. If hassle magbayad, taxpayers will Manifestations of the Progressive System of
necessarily be discouraged to pay taxes. Taxation include:
Manifestations of administrative feasibility a. Minimum wage earners

include: - Workers who earn the statutory
minimum wage are exempt from
a. Substituted Filing taxation.
- If an employee is a purely
compensation income b. Income tax bracket (Graduated
earner, has only one employer, Tax)
and the taxes have been - Income not exceeding
correctly withheld by such P250,000.00 is exempt from
employer, such employee income tax. It is only annual
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income that exceeds said

amount that is subject to tax. Q: Can Congress enact a law that taxes will be
payable in any other form than money?
NATIONAL INTERNAL REVENUE CODE
A: Yes.
TITLE II
Atty. Manuel:
TAX ON INCOME There is no prohibition under the Constitution that taxes
must only be payable in money. It may be payable in
CHAPTER III any other form. For instance, by virtue of Warrant of
(Slides) TAX ON INDIVIDUALS Distraint and Levy. For distraint, personal property, and
levy for real property. Those are obtained for the
SECTION 24. Income Tax Rates – satisfaction of taxes. In a way, it can be considered as
money because the distraint or levied properties are
(A) Rates of Income Tax on Individual Citizen nevertheless sold and the proceeds are being used for
and Individual Resident Alien of the the payment of taxes. However, we must recognize that,
Philippines in the powers of Warrant of Distraint and Levy,
particularly when the Local Government exercise it, it is
(2) Rates of Tax on Taxable Income of the BIR and LGU’s themselves who may actually
Individuals. – The tax shall be computed in acquire these distraint or levied properties. In a way,
accordance with and at the rates established in property may be used to pay taxes but not upfront.
the following schedule:
What if there will be a law that will be passed that
(a) Tax Schedule Effective January 1, chickens must be used to pay taxes, that would be
2018 until December 31, 2022 violative of the principle of Administrative Feasibility.
Because, 1) if it will be paid in properties, there must be
Not over P250,000 0% an appraisal, there must be a determination of what
Over P250,000 but 20% of the excess would be the fair market of the property or if this
not over P400,000 of P250,000 particular property is enough for the payment of taxes.
Unlike cash, alam natin kung ano ang value – indicated
c. Donor’s Tax on the face of the cash itself.
- Gifts not exceeding P250,000.00 are
exempt from Donor’s Tax (Sec. 98, NIRC) But take note that the principles of sound tax system are
not necessarily enforced or mandatory in nature such
d. Estate Tax that violation of these principles of sound tax system will
- Automatic Standard Deduction of render the tax law void. These are just guidelines in
P5,000,000.00 for residents or citizens and determining whether a tax system is sound but not
P500,000.00 for non-resident aliens. (Sec. necessarily standards to determine whether tax laws
86, NIRC) are valid. These are just principles and not binding
constitutional provisions, except Theoretical Justice
e. Business Tax because there is a provision from the Constitution.
- In Section 109 and 116, we have the
threshold of P3,000,000.00. If your Gross
TAXES BEING LEVIED BY THE LAWMAKING
Sales or Receipts do not exceed 3M pesos
in a taxable year, then instead of payment BODY
of the 12% VAT, you may pay 3%
Percentage Tax which has been Branches of the Government
temporarily reduced by CREATE to 1%. 1. Legislative – exercises the power of taxation,
tax legislation.
Atty. Manuel: 2. Executive – implements the NIRC.
May mga thresholds na ineexempt. Kung hindi ka 3. Judiciary – if there is conflict between the
naman lalagpas doon, then you’re exempted from the taxpayer and the tax authorities, the judiciary
payment of taxes. will interpret the applicable law.
LEGISLATIVE
TAXES AS MONETARY CONTRIBUTIONS
1. House of Representatives – headed by the
Speaker of the House, composed of 316
Q: Are taxes payable in money? representatives – 253 Congressional District
Representatives and 63 Partylist
A: Yes. Representatives, based on the ration provided
by law.
Atty. K: 2. Senate – headed by the Senate President, 24
Taxes are monetary in nature, as a general rule. Senators.
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Legislation Process
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TAX LEGISLATION
In granting tax exemptions, the absolute majority
vote of all the members of Congress is required. It
1987 CONSTITUTION means at least 50% plus 1 of all the members voting
separately. (Art. VI, Sec. 28[4], 1987 Constitution)
ARTICLE VI
NATURE OF TAXING POWER
LEGISLATIVE DEPARTMENT
SECTION 24. All appropriate, revenue or tariff bills, The taxing power of the State … is unlimited, plenary,
… shall originate exclusively in the House of comprehensive and supreme. The power to impose
Representatives, but the Senate may propose or taxes is one so unlimited in force and so searching in
concur with amendments. extent. It is subject only to restrictions which rest on the
discretion of the authority exercising it. (Republic v.
Illustrative Case Caguioa, G.R. No. 168584, October 15, 2007)
In Tolentino vs. Secretary of Finance (G.R. No. 115455 As a general rule, the power to tax is plenary and
August 25, 1994), petitioners contended that in enacting unlimited in its range, acknowledging in its very nature
Republic Act No. 7716, or the Expanded Value-Added no limits, so that the principal check against its abuse is
Tax Law, Congress violated the Constitution because, to be found only in the responsibility of the legislature
although H. No. 11197 had originated in the House of (which imposes the tax) to its constituency who are to
Representatives, it was not passed by the Senate but pay for it. (Ibid.)
was simply consolidated with the Senate version (S. No.
1630) in the Conference Committee to produce the bill Nevertheless, it is circumscribed by constitutional
which the President signed into law. limitations.
However, the Court ruled that it is not the law — but the
revenue bill — which is required by the Constitution to
NATURE OF TAXING POWER
"originate exclusively" in the House of Representatives.
It is important to emphasize this, because a bill
originating in the House may undergo such extensive
changes in the Senate that the result may be a rewriting Republic v. Caguioa
of the whole. G.R. No. 168584, 15 October 2007
The President shall have the power to veto any The taxing power of the State is unlimited, plenary,
particular item/s in an appropriation, revenue or tariff comprehensive and supreme. The power to impose
bill, but the veto shall not affect the item or items to taxes is one so unlimited in force and so searching in
which he does not object. (Sec. 27(2), Art. VI, 1987 extent, it is subject only to restrictions which rest on the
Constitution) discretion of the authority exercising it.
Atty. Manuel:
Atty. Manuel:
Although normally, a veto must be made of the entire
bill by the President, item veto is allowed in tax bills. However, sabi it is only subject to restrictions, which rest
on the discretion of the authority exercising it.
A majority of each House shall constitute a quorum Therefore, kung i-limit ng Congress ang kanyang sarili,
to do business xxx (Sec. 16[2], Art. VI, 1987
pwede, diba? Sa batas, kung gusto niyo sabihin na ito
Constitution)
ay exempted edi sundin, exempted yan. Kung ito ay
Atty. Manuel: taxable, taxable yan.
A majority of those present in a quorum shall be
sufficient in order to pass a bill.
Chamber of Real Estate and Builders’ Association
Illustration: v. Romulo
G.R. No. 160756, 09 March 2010
There are currently 216 members in the House of
Representatives. The number of representatives As a general rule, the power to tax is plenary and
required to constitute a quorum is 158. Only 80 out of unlimited in its range, acknowledging in its very nature
those 158 representatives shall be required in order to no limits, so that the principal check against its abuse is
pass a bill. to be found only in the responsibility of the legislature
(which imposes the tax) to its constituency who are to
However, a bill granting tax exemptions requires a pay it. Nevertheless, it is circumscribed by constitutional
higher threshold. It requires the absolute majority vote limitations.
of all members of Congress.
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Atty. Manuel: Of course, Justice Bernas did not mince his words sa
kanyang libro. Sabi nya,
Sinasabi pa ng ng Supreme Court dito that the power to
tax is plenary and unlimited in its range. However, kahit To lay with one hand, the power of the government
comprehensive, unlimited, plenary, supreme ang on the property of the citizen, and with the other to
description natin, it is nevertheless circumscribed by, bestow it upon favored individuals to aid private
limited by, restricted by constitutional limitations. So, enterprises and build up private fortunes, is a
meron pa ring limitations. Kahit sabihing unlimited, robbery because it is done under the forms of law
that’s only the general rule. It’s unlimited, however, its and is called taxation.
not really unlimited in the truest sense kasi meron
Bernas, J., The 1987 Constitution of the Republic of
tayong tinatawag na mga limitations to the power to tax.
the Philippines: A Commentary, 1996 ed., p. 714.
LIMITATIONS TO THE POWER TO TAX

Atty. Manuel:
So, ayan ang sabi ni Justice Bernas sa kanyang libro. If

I. Inherent Limitations
II. Constitutional Limitations taxation will be used for private purposes, it’s a robbery.
Alam naman natin ang Guinness book world holder sa
INHERENT LIMITATIONS greatest robbery of a government, de charot lang talaga
yon.
1. Public purpose So, of course pag-usapan natin, dahil nasa public

2. Inherently legislative purpose tayo, pag-usapan natin ang mga purposes of
3. Territoriality principle taxation.
4. International comity
Purposes of Taxation
5. Non-taxability of the government
6. Prohibition on double taxation Primary Purpose
Abakada Guro Party List v. Ermita

Atty. Manuel: G.R. No. 168056, 1 September 2005
First, of course, let’s begin with Inherent Limitations. Of
course, public purpose, inherently legislative, The NIRC of 1997 is the single Code that governs all
territoriality principle, international comity, non-taxability our national internal revenue taxes. While it does cover
of government, and prohibition on double taxation. So, different taxes, all of them are imposed and collected
ito ang ating mga Inherent limitations. Isa-isahin natin by the national government to raise revenues.
sila.
Atty. Manuel:
1. Public Purpose Let’s talk of the purposes of taxation. Malamang primary

purpose is to raise revenues for public purpose, diba.
Planters Products, Inc. v. Fertiphil Corp. That’s what we call the fiscal purpose of taxes, ayan,
G.R. No. 166006, 14 March 2008 that is the revenue raising purpose. Kaya naman
nangongolekta ng tax ang gobyerno para kumita, diba,
Taxes are exacted only for a public purpose. They para may pang gastos sa pang araw-araw na
cannot be used for purely private purposes or for the operasyon ng ating gobyerno, para may pang gastos sa
exclusive benefit of private persons. The power to tax mga proyekto ng ating gobyerno. The primary purpose
exists for the general welfare. is to raise revenues. However, we have the secondary
purposes.
Atty. Manuel:
Secondary Purpose
First, of course, public purpose. Yung pinakanilalabag,
charot. Taxes are exacted only for public purpose. That Atty. Manuel:
happens in real life. Taxes are exacted only for a public We have the secondary purposes. Sabi dito sa
purpose. Bawal purely private purpose or bawal for the American Case of McCulloch v. State of Maryland:
exclusive benefit of private persons kasi it’s for the
general welfare. Benefits-received theory means it’s for McCulloch v. State of Maryland
public service being rendered by the Government. It’s 17 U.S. 316 (1819)
for the Government to be able to operate pursuant to
the Lifeblood Doctrine. So dapat hindi private "An unlimited power to tax involves, necessarily, a
mapupunta ang ating mga buwis. power to destroy; because there is a limit beyond which
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no institution and no property can bear taxation." (C.J. destroy while this Court sits. That’s of course the
Marshall) Panhandle Oil Company case, a US Supreme Court
Case, 1928 and of course that provides naman the
Taxation is unlimited in nature. Kung unlimited in nature Holmes Doctrine.
ang taxation; therefore, ang ating mga negosyo, ang
ating mga taxpayers can only bear so much of taxes. So, we have the Marshall Doctrine and the Holmes
And therefore, necessarily daw the power to tax Doctrine.
involves the power to destroy.
Sabi ni Justice Marshall, the power to tax is the power
Marshall Doctrine to destroy. Sabi ni Justice Holmes, the power to tax is
not the power to destroy while this Court sits.
The power to tax involves the power to destroy
according to Chief Justice John Marshall, taong 1819. Doon muna tayo kay mareng Marshall. Of course sabi
ni Mareng Marshall, the power to tax is the power to
McCulloch v. State of Maryland destroy. Of course, this is the use of taxation as an
17 U.S. 316 (1819) implement of police power. Taxation ang means, but of
"A question of constitutional power can hardly be made
course, the purpose is nevertheless regulation or is
to depend on a question of more or less. If the states
nevertheless the promotion of general welfare. Taxes
may tax, they have no limit but their discretion; and the
for the promotion of general welfare and therefore taxes
taxpayer, therefore, must depend on the discretion of
may be use as an implement of police power.
the state governments for its existence. This
consequence is inevitable." Has this been done? Of course, yes this has been done.
Atty. Manuel: EXAMPLE
According to him at least ‘no, before to 1819 pa, to Excise Taxes. We have your excise tax on tobacco
question the constitutionality ay depende kung gaano products na medyo malaki laki, ayan, for ano ba to,
kataas o kababa ang rate ng tax is improper according tobacco products, heated tobacco products, vapor
to him. If the states may tax, they have no limit but their products, yung mga electronic cigarettes and vape,
discretion; and the taxpayer, therefore, must depend on cigars and cigarettes, they are all subject to additional
the discretion of the government for its existence. This taxes. Meron silang excise tax na tinatawag. Excise tax
consequence is inevitable by virtue of the taxing power on alcohol, ayan. Excise tax on alcohol, we have your
of the government being described as unlimited. Yan wines, fermented liquors, distilled spirits, they are all
ang sabi jaan sa kasong iyan ni McCulloch v. State of subject to excise taxes. Dahil of course in order for, para
Maryland. mapilitan ang mga tao to drink moderately dahil
mamahalan ang alak. Sweetened beverages because
Therefore, inadapt at palaging tinuturo yan sa Philippine
they pose health risks sa mga tao. Sweetened
taxation that’s what is known as the Marshall Doctrine.
beverages have likewise been imposed excise tax
The power to tax is the power to destroy.
under the TRAIN law. So we have, halimbawa, flavored
So, again sabi ni Justice John Marshall, the power to tax fruit juice drink ayan na hindi naman 100% natural, ang
is the power to destroy, ayan. However, of course that’s mangyayari doon ay that is already subject to excise
1819. tax.
Holmes Doctrine Atty. Manuel: They are all subject to additional taxes.
Meron silang excise tax na tinatawag. Excise tax on
Taong 1928, another US case, Panhandle Oil Company alcohol i.e., wines, fermented liquors, distilled spirits,
versus Mississippi had to say the following: etc., are all subject to excise taxes para mapilitan ang
mga tao to drink moderately dahil mamahalan ang alak.
Panhandle Oil Co. v. Mississippi
Sweetened beverages have likewise been imposed
277 U.S. 218, 14 May 1928
excise tax under the TRAIN law because they pose
If the States had any power it was assumed that they health risks [such as] flavored juice drink na hindi
had all power, and that the necessary alternative was to naman 100% natural. That is already subject to excise
deny it altogether. But this Court which so often has tax.
defeated the attempt to tax in certain ways can defeat Reconciling Marshall and Holmes Doctrine
an attempt to discriminate or otherwise go too far
without wholly abolishing the power to tax. The power to Taxation may be used as an implement of police power.
tax is not the power to destroy while this Court sits. However, let’s reconcile it with [the] Holmes Doctrine.
Sabi ni Holmes “the power to tax is not the power to
Atty. Manuel: destroy while the Court sits”.
Sabi, of course, this one is from Justice Holmes ng US Philippine Health Care Providers, Inc. v. CIR
Supreme Court, the power to tax is not the power to
Mock Bar 2022 | 10
G.R. No. 17330 (Resolution), 18 September 2009 For instance, [under] Sec. 108, NIRC, renewable
energy is a zero-rated service because we encourage
The power of taxation is sometimes called also the the use of renewable sources of energy than non-
power to destroy. Therefore, it should be exercised with renewable sources i.e., coal and fossil fuels because it's
caution to minimize injury to proprietary rights of a detrimental to the environment.
taxpayer.
Electric cars are exempt from excise tax as opposed to
Atty. Manuel: ordinary vehicles which are not exempt from excise tax.
Stated alternatively, while we recognize that taxes may So maraming ine-encourage ang ating gobyerno na
be used as the power to destroy, it should be exercised gawin natin by way of taxation. So yan ang ibang
with caution to minimize injury. Accordingly, it must be purposes of taxation.
exercised fairly and uniformly [because] “tax should not
kill the hen that lays the golden egg”. Syempre, hindi mo
papatayin yung business ni taxpayer kasi doon ka sa 2. Inherently Legislative
negosyo kumukuha ng buwis na nagsusustento sayo.
Yan ang limitation natin sa power to destroy—it must be GR: The power to tax is exclusively exercised by the
exercised with the appropriate inherent and Congress.
constitutional limitations; it must not be exercised
Atty. Manuel:
arbitrarily, capriciously, and whimsically and likewise
observe [the] tenets of due process and equal It's inherently legislative. The power to tax is exclusively
protection clause, among other constitutional exercised by the Congress. When we speak of
limitations. “exercised by the Congress” that involves the face of
taxation known as levying. It’s the determination of the
Nevertheless, even though the power to tax has the
power to destroy and that taxation must be used as an subject of taxation, rate of taxation, and timing of
implement of police power, still, it is a law which must taxation.
be exercised within the bounds of the Constitution and Q: Ano ang object of taxation?
the Court may strike down any law as unconstitutional if A: It would be the Congress who will determine.
it transgresses, violates [or] overtakes any provision of
the Constitution.
[Again,] the Holmes doctrine [provides] that the power Q: Sino nagsabi na ang income ay [taxable]?
to tax is not the power to destroy as long as this Court A: Congress.
sits.
Other Purposes of Taxation

Q: Sino nagsabi na every sale in the course of
1. Encouraging measure business is subject to VAT?
2. Economic protectionism A: Congress.
Atty. Manuel:
For instance, import taxes may be increased in order to Q: Sino nagsabi na ang donation ay subject to tax?
protect local industries para mas mahal yung imported A: Congress.
goods compared to locally manufactured products.
Import taxes, tariffs may be increased to protect local
economies. Q: Who determined that the rate of corporate income
tax is 20/25%?
Encouraging measures
A: Congress.
Tax incentives may be provided to foreign investors,
such as those which are settled in Eco-zones in
economic zones or Freeport zones. Under CREATE Q: Who determined that the rate of VAT is 12%?
law, meron sila mga incentives. That's the Philippine A: Congress.
Government encouraging them, by way of taxation, na
mag invest [sila] sa Pilipinas because if [they will] invest
in the Philippines, they will enjoy lower taxes [and]
Q: Sino nagsabi na ang rate of estate tax is 6%?
certain tax incentives. Kung tataasan ang tax, that’s a
A: Congress.
discouraging measure; that's the power to tax being
used as a power to destroy. Under [the] Marshall Atty. Manuel: Because that's part of their power of
doctrine, kapag bababaan ang tax, that’s in order to levying–that's the exercise of the power of taxation.
encourage certain activities.
Mock Bar 2022 | 11
Take note [that] what has been delegated can no longer implementation of a law that was passed by
be delegated. Since the power to tax has already been Congress. Specifically, yan ang ginagawa ng
delegated to the Congress, hindi na pwede ipasa ng BIR with respect to the NIRC through the
Congress sa iba, as a general rule. The power to tax is issuances of Revenue Regulations.
non-delegable.
Inherently Legislative
Q: Sino nagsabi na required for large taxpayers ang
Exceptions: electronic filing and payment? Walang electronic filing
and payments sa Tax code.
1. President – tariffs (Art. VI, Sec 28(2), 1987
Constitution A: [It is] under [a] revenue regulation.
2. LGU – local taxes (Art. X, Sec. 5, 1987 Constitution Atty. Manuel:
3. Administrative agencies Under Tax 1, napagaralan natin ang de minimis benefits

e.g., rice and clothing allowance, etc. To a certain extent
XPNs: and limit, meron mga exemptions sa mga empleyado.
Laundry allowance hanggang 200 pesos per month
Atty. Manuel: The following can exercise the power to
lang. Who set those particular limits? Wala sa tax code
tax as delegated by Congress:
yan. That is prescribed by your administrative agencies,
particularly your BIR. Therefore, in a very limited sense,
may delegation din sa BIR as an administrative agency.
1. President – tariffs: Under the Constitution, the
president can exercise the power to fix tariffs
under what we call the Flexible Tariff Laws
3. Territoriality Principle
under Art. VI(28)(2), Constitution.
Under the flexible tariff laws, import quotas, Taxation is a sovereign act.
tariff rates may be set by the President because
Benefits of taxation are confined within the territorial
that is being used as a tool of Foreign Relations.
boundaries of the taxing State.
Kung kaibigan mo ang bansa, babaan mo.
Kung kaaway mo ang banse, edi taasan mo
Atty. Manuel:
ang tariffs doon sa mga produkto nila. Taxation is an act of sovereignty. If ikaw ay nabuwisan,
meaning you are being subject to the sovereign power
of that particular state. Benefits of taxation are confined
And of course, since the chief architect of within the territorial boundaries of that particular state.
foreign relations is our President, siya ang may Hindi pwedeng na ako ay nasa Pilipinas, tapos biglang
kapangyarihan to set the rate of tariffs. That’s sinisingil ako ng Chinese government ng Chinese Tax
under the flexible tariff laws. kasi kumite ka.
Taxation is an act of sovereignty, the power to tax is

limited within the territorial jurisdiction of the taxing
2. LGU – local taxes: Under Art. X(5), state. Bawal lumagpas dito as a general rule.
Constitution, alam natin na pursuant to the Otherwise, without this inherent limitation, ano ang
principle of local autonomy, LGUs are likewise mangyayari? Then taxation will have no borders. Sa
empowered to generate their own revenues dami ng bansa sa mundo, all of them can collect taxes
para sila ay magkaroon din ng fiscal autonomy. sa akin, if taxation will have no borders. So necessarily
And therefore, LGUs can exercise the power to in order for taxation to be proper and orderly, kailangan
tax, subject to limitations as prescribed by the may territoriality principle.
Congress sa LGC.
Atty. Manuel: However, we have 2 exceptions,

3. Administrative agencies: To a certain extent, intraterritoriality exception and extraterritoriality
may likewise legislate in relation to taxation. exception.
Q: Ano ang mga intraterritoriality exceptions?

Alam natin that administrative agencies have
A: Nasa loob na ng Pilipinas pero hindi pa rin tinataxan.
what we call quasi-legislative powers. Sa quasi-
legislative powers, they may craft IRRs which Atty. Manuel: Because they cannot be subject to the
may set forth, within the boundaries provided by authority of the Philippine Government.
the law, specific details as to the
Mock Bar 2022 | 12

EXAMPLE:
Zero-Rated Sale of Goods
Goods sold to persons or entities whose exemption

from direct and indirect taxes under special laws
or international agreements.
Section 4.106-5 RR No. 16-2005, as amended by RR

No. 21-2021
Atty. Manuel: United Nations, ADB, IRRI by virtue of

international agreements, they are exempt from direct
and indirect taxes. Bawal pasahan ng VAT; therefore,
ang pagkabenta natin sa kanila vatable pero walang
papasang VAT. Ang tawag natin diyan ay Effectively
Zero-Rated Sale.
Atty. Manuel: We also have extraterritoriality
Effectively Zero-Rated Sale - the local sale of services exception. That is kahit nasa labas na ng Pilipinas,
by a VAT -registered person to a person or entity who nabubuwisan pa rin ng ating bansa.
was granted indirect tax exemption under special laws
or international agreement. For instance, transfer tax on both gross estate and
gross gift. Residents or citizens are subject to estate
tax and donor tax on their property wherever situated
within and outside the Philippines.
Other Exempt Compensation
For income situs, only resident citizens are taxed on
their income derived from sources within and outside
1. SSS Benefits
2. GSIS Benefits the Philippines. The rest hindi. Domestic corporation are
3. Compensation for services by a taxed on their incomed derived from sources within and
outside of the Philippines. The rest of our foreign
citizen/residents for a foreign government or
corporations, hindi.
an international organization
4. Compensation for injuries or sickness
Q: Bakit may extraterritoriality exceptions?
A: Kasi halimbawa for resident citizen, they are deemed

Atty. Manuel: Re: #3 – ako ay emplayado sa ng UN or
to still benefit from the Philippine Government, kahit sila
US embassy, ang akin sweldo ay supposedly exempt
nasal abas ng Pilipinas.
from income tax.
EXAMPLE:
Q: Nakibugbugan si Pacquiao abroad. Kumita siya,

taxable pa rin ba si Pacquiao?
A: Yes, because nevertheless Pacquiao is abroad, he

still benefits from the Philippine government. The fact
that we had diplomatic relations with other countries; the
fact that there is an embassy there; the fact that he was
a holder of Philippine passport para makapunta ng
ibang bansa, the benefit being enjoyed by such resident
citizen and therefore he should be subject to tax
wherever he goes.
Atty. K: However, for the rest of the taxpayers, less na

ang benefit nila, then hindi natin sila tataxan, they are
only taxed on income derived on sources within the
Philippines.
4. International Comity
Mock Bar 2022 | 13

Air Canada v. CIR international law, embassies are treated as foreign soil
G.R. No. 169507, 11 January 2016 land.
A Tax Treaty is an agreement entered into between

sovereign states “for purposes of eliminating double 5. Non-taxability of the government
taxation on income and capital preventing fiscal
evasion, promoting mutual trade and investment, and NATIONAL INTERNAL REVENUE CODE
according fair and equitable tax treatment to foreign
residents or nationals. TITLE II
TAX ON INCOME
Atty. Manuel: The principle of international comity
CHAPTER IV
provides that all states are sovereign equals. If a tax
treaty entered into between two sovereign states, both
TAX ON CORPORATIONS
states must honor the treaty.
GR: GOCCs are subject to tax
Tax treaties are usually entered into for purposes of
eliminating double taxation. Ang tawag natin dito ay
XPNs: Exempt GOCCs:
international double taxation. Kung saan the same
1. Government Service Insurance System;
subject, the same income, the same property is taxed
2. Social Security System;
by the same kind but by different taxing jurisdiction.
3. Philippine Health Insurance Corporation;
4. Local Water Districts; and
Pacta sunt servanda
5. Home Development Mutual Fund (new under
CREATE).
Air Canada v. CIR
G.R. No. 169507, 11 January 2016
Atty. Manuel: It is non-taxable since it is equivalent to
Pacta sunt servanda is a fundamental international law
transferring of funds from one pocket to another. By way
principle that requires agreeing parties to comply with
of exception, GOCCs are subject to tax.
their treaty obligations in good faith
Atty. Manuel: We follow Pacta sunt servanda that is 6. Prohibition on Double Taxation
compliance in good faith with our treaty obligation. And,
therefore we are bound by the treaties we entered into. Double Taxation
Q: Which is more superior, is it the NIRC or Tax Treaty? City of Manila v. Coca-Cola Bottlers Philippines,
Inc.
G.R. No. 181845, 4 August 2009
A: Necessarily tax treaty ang masusunod by virtue of
Pacta Sunt Servanda which is equivalent to an implied
repeal of the NIRC. Mangyayari ay tax treaties are Double taxation means ... "taxing the same person twice
considered as superior compared to our local municipal by the same jurisdiction for the same thing". It is
laws. obnoxious when the taxpayer is taxed twice, when it
should be but once
Atty. Manuel: Tax treaties are where countries sheds
apart its sovereignty in order to agree with other country.
Doctrine of Sovereign Equality Two (2) kinds of Double Taxation:
Foreign governments are exempt from Philippine 1. Direct double taxation

Taxes. 2. Indirect double taxation
Atty. Manuel:
Atty. Manuel: Considering the doctrine of sovereign
equality, that all government are treated sovereign We have two (2) kinds of Double Taxation, one of which
equal, therefore foreign government are exempt from is allowed and one of which is disallowed.
PH taxes.
1. Direct double taxation
For instance, ang lupang tinatayuan ng mga embahada
ng iba’t ibang bansa, they are all exempt from RPT. Direct double taxation is not allowed.
Because they cannot be subjected to PH taxes. Under
Also: Double taxation in the strict sense
Mock Bar 2022 | 14

a. on the same subject matter, 2. Indirect double taxation

b. for the same purpose,
c. by the same taxing authority, Indirect double taxation is allowed but
d. within the same jurisdiction, nevertheless discouraged.
e. during the same taxing period, and
f. the taxes must be of the same kind or EXAMPLE:
character.
a. International double taxation
City of Manila v. Coca-Cola Bottlers Philippines, Inc.,
G.R. No. 181845, 4 August 2009 Halimbawa, nakipagbugbugan si Pacquiao sa
ibang bansa. Resident citizen si Pacquiao,
Atty. Manuel: therefore taxable sa Pilipinas.
Kailangan mag-comply dito sa anim na ito. If pare- What if sabihin ni Pacquiao "Hindi, tinax-an na
parehas lahat ng iyan, then that is direct double ako sa America noong ako ay
taxation. nakipagbugbugan doon. 'Yung kita ko bawas
na ng tax sa America, babawasan pa ba ng
In the case of City of Manila v. Coca-Cola Bottlers Pilipinas?" Answer: Why not? Because that is
Philippines, Inc., local tax ang pinag-uusapan diyan. only indirect double taxation, particularly,
Mayroon tayong tax on sellers tapos mayroon pang tax international double taxation. Allowed naman
on retailers. So, basically, that is same subject matter, iyan.
etc. and therefore, it was struck down by the Supreme
Court as direct double taxation. Q: Bakit indirect double taxation?
A: Because one of the 6 requisites was not
Kapag direct double taxation, that is a violation of the satisfied, particularly, "by the same taxing
due process of the taxpayer and, therefore, invalid. authority." It was not taxed by the same taxing
authority. It was the US IRS na nangolekta kay
City of Manila v. Coca-Cola Bottlers Philippines, Pacquiao doon, then it's the BIR who collected
Inc. here. Therefore, that is just indirect double
G.R. No. 181845, August 4, 2009 taxation as a necessary consequence of the
extraterritoriality application of Taxation.
Doctrine: There is indeed double taxation if respondent
is subjected to the taxes under both Sections 14 and 21 b. Income Tax and VAT
of Tax Ordinance No. 7794, since these are being
imposed: (1) on the same subject matter – the privilege Income Tax and VAT constitute double
of doing business in the City of Manila; (2) for the same taxation, pero indirect in nature.
purpose – to make persons conducting business within
the City of Manila contribute to city revenues; (3) by the May argument kasi na Income Tax, tinatax-an
same taxing authority – petitioner City of Manila; (4) 'yung income, tapos VAT, tatax-an mo rin 'yung
within the same taxing jurisdiction – within the territorial benta? Eh hindi ba 'yung income nanggaling din
jurisdiction of the City of Manila; (5) for the same taxing sa benta? So, that is double taxation daw.
periods – per calendar year; and (6) of the same kind or
character – a local business tax imposed on gross sales Sabi ng Supreme Court, yes, double taxation
or receipts of the business. 'yan but indirect double taxation. Different
subject matter (iba naman ang sale sa income),
When a municipality or city has already imposed a different kind ('yung isa income tax, 'yung isa
business tax on manufacturers, etc. of liquors, distilled business tax), and, therefore, indirect double
spirits, wines, and any other article of commerce, taxation lang.
pursuant to Section 143(a) of the LGC, said municipality
or city may no longer subject the same manufacturers, Under the CREBA case, Minimum Corporate
etc. to a business tax under Section 143(h) of the same Income Tax (MCIT) is being assailed as
Code. Section 143(h) may be imposed only on unconstitutional kasi direct double taxation
businesses that are subject to excise tax, VAT, or daw. Sabi ng Supreme Court, hindi. MCIT is
percentage tax under the NIRC, and that are "not based on gross income, samantalang ang ating
otherwise specified in preceding paragraphs." In the Regular Corporate Income Tax (RCIT) is based
same way, businesses such as respondent’s, already on taxable income. Therefore, may double
subject to a local business tax under Section 14 of Tax taxation, but indirect double taxation naman
Ordinance No. 7794 [which is based on Section 143(a) siya. And of course, hindi naman siya double
of the LGC], can no longer be made liable for local taxation talaga kasi MCIT is imposed in lieu of
business tax under Section 21 of the same Tax RCIT. Hindi naman nagsasabay ang MCIT at
Ordinance [which is based on Section 143(h) of the RCIT under Sec. 27. Hindi ba, ang binabayaran
LGC]. lang doon is whichever is greater between your
MCIT and RCIT. Therefore, walang nalabag.
Mock Bar 2022 | 15

MCIT, in the CREBA case, was upheld as valid

and constitutional. Atty. Manuel: We have two (2) kinds of due process:
Chamber of Real Estate and Builders' Association, 1. Procedural due process

Inc. v. Romulo
G.R. No. 160756 | March 9, 2010 This involves notice and opportunity to be
heard. Therefore, lahat ng proseso na gagawin
Doctrine: Certainly, an income tax is arbitrary and in the observance of the collection of taxes must
confiscatory if it taxes capital because capital is not comply with procedural due process. Hindi
income. In other words, it is income, not capital, which pwedeng kumatok agad sila diyan sa aking
is subject to income tax. However, the MCIT is not a pinto at maniningil ng P1M nang hindi man lang
tax on capital. ako ininform na may utang pala ako. So,
kailangan may notice muna and kailangang
The MCIT is imposed on gross income which is arrived marining muna ang aking panig. If I have
at by deducting the capital spent by a corporation in the evidence to be offered, or if I have arguments
sale of its goods, i.e., the cost of goods and other direct to be said, kailangan ako ay may opportunity to
expenses from gross sales. Clearly, the capital is not be heard. Of course, that would involve
being taxed. administrative due process, judicial due
process, and tax remedies.
Furthermore, the MCIT is not an additional tax
imposition. It is imposed in lieu of the normal net 2. Substantive due process
income tax, and only if the normal income tax is
suspiciously low. The MCIT merely approximates the Kailangan it is a valid law pursuant to a valid
amount of net income tax due from a corporation, purpose. Kung walang batas na nagsasabing
pegging the rate at a very much reduced 2% and uses kailangang singilin ito, bakit sisingilin? Kung
as the base the corporation’s gross income. Besides, walang tax sa maganda, bakit ako magbabayad
there is no legal objection to a broader tax base or ng P1M tax para sa magaganda? Wala naman
taxable income by eliminating all deductible items and sa NIRC ang beauty tax. Alam kong maganda
at the same time reducing the applicable tax rate. ako pero hindi taxable subject ang
kagandahan. Therefore, that would violate my
Inherent Limitations substantive due process.
1) Public purpose
2) Inherently legislative 2. Equal Protection Clause
3) Territoriality principle
4) International comity
5) Non-taxability of government Atty. Manuel:
6) Prohibition on double taxation
In the same provision, we have the Equal Protection
Clause. Persons similarly situated must be treated
CONSTITUTIONAL LIMITATIONS similarly under the law. Kung ia-apply natin sa Taxation,
persons similarly situated must be taxed similarly.
1. Due Process Clause Take note that the Equal Protection Clause does not
presuppose absolute equality. Hindi pinapantay ang tax
1987 CONSTITUTION ng bawat nilalang. Hindi pantay ang tax ni Kris Aquino
ARTICLE III at Henry Sy.
BILL OF RIGHTS
Persons similarly situated must be taxed similarly. Kung
SECTION 1. No person shall be deprived of life, pareho kaming resident citizen, parehas kaming tatax-
liberty, or property without due process of law, nor an on our income derived from sources worldwide.
shall any person be denied the equal protection of the Kung pare-parehas kaming minimum wage earner,
laws. pare-parehas kaming exempt. Kung pare-parehas
kaming ang taxable income ay P900,000.00, pasok
Atty. Manuel: kami sa tax bracket na 30% ang tax, so dapat lahat
kami, 30% ang tax, without any distinction.
Due Process Clause and Equal Protection Clause
equally apply to Tax Laws. It is not absolute equality because equal protection
clause, under the Constitution, allows valid
Due Process classification
1. Procedural due process
- Notice and opportunity to be heard
2. Substantive due process
- Valid law pursuant to a valid purpose
Mock Bar 2022 | 16
REQUISITES FOR VALID CLASSIFICATION ARTICLE III

1. Apply both to present and future conditions. BILL OF RIGHTS
2. Apply equality to all members of the same class
3. Must be germane to the purpose of the law SECTION 5. No law shall be made respecting an
4. Must be based on substantial distinctions establishment of religion, or prohibiting the free
exercise thereof.
(Ormoc Sugar Co. Inc. v. Treasurer of Ormoc City, G.R.
No. L-23794, 17 February 1968)
Atty. Manuel:
Atty. Manuel: Re: #3: Must be germane to the purpose
of the law. The purpose of majority of tax laws is in order Alam naman natin na religion enjoys a preferred status
to raise revenues, so kailangan, related sa revenue- sa ating Constitution. It is part of the basic liberties of
raising purposes ang batas. man na maniwala at i-profess ang kanyang paniniwala,
at mabuhay ayon sa kanyang paniniwala o sa kanyang
For instance, tatax-an yung income, since income is the kawalan ng paniniwala.
best evidence of a person’s ability to pay, therefore, very
germane to the purpose of the law ang pagi-impose ng Freedom of religion likewise includes freedom FROM
income tax. religion. Whatever you believe in or not believe in, that
is protected by the Free Exercise Clause under Article
Transfers presuppose that you are able to part of a part III, Section 5.
of your property. Therefore, when you transfer, lets say
by way of succession or donation, it means that you Basically, it is a two-way street. Hindi pwedeng
have the ability to pay, which is germane to the purpose suportahan ang isang religion at hindi rin pwedeng i-
of the law of raising revenues. Therefore, the imposition prohibit ang isang religion.
of donor’s tax and estate tax is proper.
2. Non-establishment clause
Re: #4: Must be based on substantial distinction which
is still related to the purpose of the law. ARTICLE VI
In Ormoc Sugar Co. Inc. v. Treasurer of Ormoc City, the LEGISLATIVE DEPARTMENT
ordinance of Ormoc City was struck down as
unconstitutional because the ordinance imposed tax on SECTION 29 (2). No public money or property shall
sugar manufacturers, pero ang tanging sugar be appropriated, applied, paid, or employed, directly
manufacturer lang that time was Ormoc Sugar or indirectly, for the use, benefit, or support of any
Company, na pinangalangan sa ordinance. It is a tax on sect, church, denomination, sectarian institution, or
Ormoc Sugar Co. Inc. at wala nang iba, kasi siya lang system of religion, or of any priest, preacher,
yung sugar manufacturer. minister, or other religious teacher, or dignitary as
such, except when such priest, preacher, minister,
The Supreme Court said that it violated the equal or dignitary is assigned to the armed forces, or to
protection clause because Ormoc Sugar Co. Inc. was any penal institution, or government orphanage or
singled out in the ordinance. It would not apply both to leprosarium.
present and future conditions, kasi what if magkaroon
ng bagong sugar company in the future? If magkaroon
ng bagong sugar company tapos ang nakapangalan
lang sa ordinance specifically ay si Ormoc Sugar Co. Atty. Manuel:
Inc., if nagkaroon ng Ormoc Sugar Company 2, hindi na
siya subject to tax kasi it was only Ormoc Sugar Hindi pwedeng gamiting ang taxation in order to prohibit
Company which was specifically named under the someone from exercising his or her religion (Free
ordinance, kahit sabihin pa na siya ang pinangalangan exercise clause).
kasi siya lang ang sugar manufacturer that time. It must
apply both to present and future conditions. Therefore, With regard to the disposition of public funds, bawal sa
the ordinance was struck down as invalid. religious purposes.
However, we have these cases, the Peralta (Peralta v.

3. Religious Freedom Philippine Postal Corp., G.R. No. 22395, 4 December
2018) and Aglipay (Aglipay v. Ruiz, G.R. No. 45459, 13
1. Free exercise clause March 1937) cases, both involving the Philippine Postal
Corporation, with stamps, meaning publicly funded.
Yung isa ay commemorative stamp at yung isa naman
ay Roman Catholic stamp.
Mock Bar 2022 | 17

In both cases, the Supreme Court held it as valid therefore they may also be exempt from income tax.
because they recognize that religious events have But, what is only in the Constitution is with regard to
significance here in the Philippines. exemption from real property taxation, because it is a
part of religious freedom.
In fact, what is being applied in religious freedom cases
would be Benevolent Neutrality, which recognizes the A place of worship is part of one’s exercise of religion.
religious nature of the Filipino people and the influence In order for us to freely exercise our religion, we must
of religions to our lives. Therefore, Benevolent have a place where we can congregate, commune,
Neutrality is applied when it comes to test of religious celebrate, and worship together. That is part and parcel
freedom. of the practice of religion. If such will not be exempt from
real property taxes, under the LGC, for failure to pay real
LEMON TEST property taxes, the LGU may exercise its power to levy
the land that is being subjected to real property tax if the
1. The statute must have a secular purpose. real property tax has not yet been paid.
2. Its principal or primary effect must be one
that neither advances nor inhibits religion. Therefore, if the said land will be confiscated, it is
3. The statute must not foster “an excessive equivalent or tantamount to prohibiting the exercise of
religion. Para hindi makamkam ang lupa ng ating mga
government entanglement of religion.”
relihyon.
(Lemon v. Kurtzman, 403 U.S. 602, 1971)
Atty. Manuel:
Yung mga ating churches, mosque, and other places of

Atty. Manuel: worship. Kaya may provision na “All lands, buildings,
and improvements ADE used for religious, charitable or
Re: #2: Bawal suportahan or i-prohibit ang isang religion educational purposes, para hindi madamay ang mga
– Free Exercise Clause. relihiyon, they are exempt from real property taxes.
Re: #3: Hindi dapat masyadong nagi-intermingle dahil 4. Exemption of non-stock, non-profit
separate ang Church at State. educational institutions (NSNPEI)
5.
Lemon Test also applies to Tax in order to determine
whether a tax law violates the constitutional provision 1987 CONSTITUTION
on religious freedom.
ARTICLE XIV
Related to religious freedom would be the following
provisions under Article VI, Section 28 (3). EDUCATION, SCIENCE AND TECHNOLOGY,
ARTS, CULTURE AND SPORTS
3. Exemption from Real Property Taxation
SECTION 4(3). All revenues and assets of non-
ARTICLE VI stock, non-profit educational institutions
(NSNPEI) used actually, directly, and exclusively for
LEGISLATIVE DEPARTMENT educational purposes shall be exempt from taxes and
duties.
SECTION 28 (3). Charitable institutions, churches
and parsonages or convents appurtenant thereto, Atty. Manuel:
mosques, non-profit cemeteries, and all lands,
buildings, and improvements, actually, directly, This has been interpreted in the landmark case of DLSU
and exclusively used for religious, charitable, or v. CIR as to cover all duties and taxes (income tax, VAT,
educational purposes shall be exempt from taxation. Local taxes, real property taxes). As long as gagamitin
(Emphasis supplied) for actually, directly, and exclusively for educational
purposes, exempt ang non-stock, non-profit educational
institutions.
Atty. Manuel:
In the case of DLSU v. CIR, siningil ng CIR ang DLSU
Article VI, Section 28 (3) pertains to REAL PROPERTY dahil ang daming income from unrelated sources. Inside
TAXES ONLY. Although phrased in such a way, it has DLSU there are many private concessionaires and
been interpreted as to only pertain to only real property therefore they are paying rent to DLSU. However, DLSU
taxes. Other exemptions are found in other laws. alleged that they are NSNPEI and therefore it actually,
directly, and exclusively used its income from whatever
EXAMPLE: Section 30 of the NIRC on Exemption from sources for educational purposes. CIR alleged that they
Tax on Corporations enumerate the same list, and should be liable for income tax and VAT. The Court
ruled in favor of DLSU because the exemption of
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NSNPEI is different because it is stemmed with Art. XIV, SUMMARY: Educational Institutions
Sec. 4 of the 1987 Constitution. Ang nilalaban kasi ni
CIR ay Sec. 30 of the tax code na if the income is from PEI GEI NSNPEI
activities conducted for profit or from properties, Governing Sec.27(B) Sec. 30, ART. XIV,
whether real or personal, such would be subject to Provision , NIRC NIRC Sec. 4(3),
income tax. But the SC rendered that particular Const.
provision UNCONSTITUTIONAL only in relation in Rule <50% TI as such, ADE used
NSNPEI. unrelated, exempt; TI for educ
apply 10% for profit or purposes,
RECAP IN INCOME TAX: EDUCATIONAL (1%) to all from exempt.
INSTITUTION TI; properties, Otherwise,
RCIT 20/25%
Proprietary - They enjoy a preferential >50%
Educational rate of 10%, if their gross unrelated,
Institution income from unrelated trade, apply 30%
business, or other activity to all TI
does not exceed 50% of the Test Source Source Use
total gross income derived
from all other sources.
- 10% based on their taxable 6. Uniformity and Eligibility of Taxation
income.
- If the unrelated trade, ARTICLE VI
business, or other activity LEGISLATIVE DEPARTMENT
exceeded 50%, they would
be subject to tax as if they SECTION 28(1). The rule of taxation shall be
are an ordinary corporation. uniform and equitable. The Congress shall evolve
- Under CREATE, yung 10% a progressive system of taxation.
pwede pa bumaba (July
2020 – June 2023, the rate is
1%) Atty Manuel:
Government - The provision for Uniformity is very similar to equal protection clause. All
Institution government institution is persons belonging to same class shall be tax on the
found under Sec.30 which same rate. Equitability rule of the taxation is similar to
provides that the following the progressive system which provides that taxes shall
corporations are exempt on be based on the person’s ability to pay.
their income as such
- Income ng government 7. Non-imprisonment for payment of debt
institution as an educational and non-payment of poll taxes
institution is EXEMPT from
income tax. However,
income from activities 1987 CONSTITUTION
conducted for profit (Ex: ARTICLE III
Nagbenta ng property or BILL OF RIGHTS
nagparent, then they would
be subject to regular income SECTION 20. No person shall be imprisoned for debt
tax rules(20% or 25%)) or non-payment of a poll tax
Non-stock, - We do not care about the
non-profit source of the income, we are
Atty. Manuel:
educational after the use and disposition
institutions of the income.
Walang makukulong sa hindi pagbabayad ng utang or
- As long as it is Actually, poll tax. It presupposes that non-payment of tax,
Directly, and Exclusively mayroon kulong. ONLY poll tax yung walang kulong.
used for educational But for taxes in general, there is criminal liability (fine or
purposes such will be imprisonment).
exempt.
Poll tax
A poll tax is one levied on persons who are residents

within the territory of the taxing authority without regard
to their property, business, or occupation
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necessarily applicable to
Atty. Manuel: tax.
NOTE: However, there
Dahil tao kang buhay, just because of your mere are many modes of
existence, you are liable to pay tax. Poll tax is otherwise extinguishment of an
known as a personal tax or capitation tax. obligation.
3 kinds of tax according to subject:

1. Personal / poll / capitation tax
2. Property tax As to payment, we have
3. Excise / transactional / privilege tax dacion en pago, cession
in payment, which are
POLL TAX applicable to debt.
Amount:
1. Individuals – AS TO COMPENSATION/SET-OFF
a. Basic: P5.00
b. Additional: Additional tax of P1.00 for Debt is capable of In tax, compensation or
every P1,000 income regardless of compensation or set-off set-off not applicable.
whether from business, exercise of that is when two persons
profession or from property which in no are debtors and creditors
case shall exceed P5,000.
of each other. There is NOTE: Hindi porket may
Atty. Manuel: compensation or set-off utang ang gobyerno
under the Civil Code sa’yo hindi ka na
Dahil tao ka, automatic na magbabayad ka dapat ng magbabayad ng Tax.
P5.00 to your LGU.
- Community tax certificate or otherwise known
as “cedula”
- Walang nakukulong sa hindi pagbabayad ng i.e. hindi pa binabayaran
P5.00 ng gobyerno ung just
compensation ng lupang
kinuha nila sa’yo kaya
Debt vs. Tax
hindi kana muna
It is recognized that debt is different from tax because magbabayad ng tax,
in tax there is imprisonment. hindi pwede ‘yon dapat
tuloy-tuloy pa rin ang
DEBT TAX pagbabayad ng tax,
walang compensation or
AS TO SOURCE set-off pag dating sa
taxes.
Art. 1157 of the Civil Tax arises from law.
Code: Debt arises from
contract.
AS TO EFFECT OF NON-PAYMENT
AS TO ASSIGNABILITY
Non-imprisonment Non-payment of tax can
There is delegation, There is no novation in be penalized by
subrogation, novation in tax. imprisonment or fine.
debt.
AS TO INTEREST (RATE AND STIPULATION)
NOTE: Hindi mo Interest rates for debts There is no stipulation as
pwedeng ipasa ung must be stipulated by the to taxes. It is already
utang mo to other parties. provided and fixed by law
people. Tax is non- at 12%.
assignable.
AS TO PRESCRIPTION
AS TO MODE OF PAYMENT
It is usually 6 or 10 years, *to be discussed later*
Both are normally payable in money. depending if it is an oral
or written contract.
Legal tender Dacion en pagp, cession
in payment are not
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What is unique with tax legislation?

8. Non-impairment of obligations and
1. There is item veto;
contracts
2. There is absolute majority in case of tax
exemption; and
1987 CONSTITUTION 3. It must originate in the House of
Representatives.
ARTICLE III
BILL OF RIGHTS
BUREAU OF INTERNAL REVENUE
SECTION 10. No law impairing the obligation of
contracts shall be passed.
EXECUTIVE DEPARTMENT
Atty. Manuel:
Tax laws must also observe the non-impairment clause. Tax laws are implemented by the executive department,
Pero marami ng jurisprudence which provided that headed by our President. Under the executive
power to tax is superior than that provision, pero sina- department, there are different cabinet secretaries and
cite pa rin ‘yan as one of the constitutional limitations. different executive departments. i.e. DPWH, DOA,
DOT, DBM
9. Freedom of the press
Department Of Finance – it is under this department
that we get to be introduced to other departments that
are related to tax such as the Bureau of Customs (BOC)
and Bureau of Internal Revenue (BIR). DTI may also
be related to tax because they provide the certain
incentives because under DTI we have the investment
promotion agencies for instance PEZA (Philippine
STRUCTURE OF THE BIR Economic Zone Authority) and the Board of
Investments, they also play a role to taxation but to a
1987 CONSTITUTION lesser extent.
ARTICLE III
BILL OF RIGHTS
SECTION 4. No law shall be passed abridging the NATIONAL INTERNAL REVENUE CODE
freedom of speech, of expression, or of the press, or
TITLE I
the right of the people peaceably to assemble and
petition the government for redress of grievances. ORGANIZATION AND FUNCTION OF THE
Atty. Manuel: Medyo weak din itong freedom of the SECTION 3. Chief Officials of the Bureau of
press as a constitutional limitation kasi parang wala Internal Revenue. - The Bureau of Internal Revenue
namang masyadong ganap ‘yang freedom of the press shall have a chief to be known as Commissioner of
in relation to taxation. Internal Revenue, hereinafter referred to as the
Commissioner, and four (4) assistant chiefs to be
The closest to it is Section 109 pertaining to VAT
known as Deputy Commissioners.
exemptions of newspapers, magazines and bulletins.
(but these are not exempt from income tax.) Also in
overseas communication tax, news agencies have NOTE: Lilia Guillermo – current Commissioner of
exemption. Internal Revenue.
NOTE: Taxes are unlimited, comprehensive, supreme Under the Commissioner we have 4 Deputy
and plenary. Thus, the legislative department has Commissioners: (Also consists of the 4 divisions)
unlimited discretion in determining what to tax, when to 1. OPERATIONS
tax, how much to tax, that is part of taxation called as 2. LEGAL
levying. It is the Congress exercising the power of 3. RESOURCE MANAGEMENT
taxation. However, by way of emphasis, it is not truly 4. INFORMATION SYSTEMS
unlimited because the Congress is still circumscribed,
limited, restricted by our inherent and constitutional Under the Deputy Commissioners we have the
limitations. Regional Offices, Revenue District Offices, the latter
has smaller area of jurisdiction.
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original jurisdiction of the Commissioner, subject to

BASIC FUNCTIONS OF THE BIR review by the Secretary of Finance.

The power to decide disputed assessments, refunds
TITLE I of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters
ORGANIZATION AND FUNCTION OF THE arising under this Code or other laws or portions
BUREAU OF INTERNAL REVENUE thereof administered by the Bureau of Internal
Revenue is vested in the Commissioner, subject to
SECTION 2. Powers and Duties of the Bureau of
the exclusive appellate jurisdiction of the Court of Tax
Internal Revenue. - The Bureau of Internal Revenue
Appeals.
shall be under the supervision and control of the
Department of Finance and its powers and duties
shall comprehend the assessment and collection of
all national internal revenue taxes, fees, and charges, 1. Interpret Tax Laws
and the enforcement of all forfeitures, penalties, and
fines connected therewith, including the execution of
judgments in all cases decided in its favor by the Exclusive and original jurisdiction of CIR, subject to
Court of Tax Appeals and the ordinary courts. The review of the Secretary of Finance.
Bureau shall give effect to and administer the
supervisory and police powers conferred to it by this Atty. Manuel:
Code or other laws.
Kung may tax laws pursuant to both quasi-legislative
and quasi-judicial powers of the Commissioner of
Atty. Manuel: Internal Revenue, the CIR has the power to interpret tax
laws.
First phase is LEVYING and now that we have a Tax
law, the second phase will be ASSESSMENT and ▪ QUASI-LEGISLATIVE – to issue implementing
COLLECTION. rules and regulations; or
Sino ang namamahala dito? Mostly the BIR but only for ▪ QUASI-JUDICIAL – to decide on tax disputes.
national internal revenue taxes, which means those
revenues that are internally generated. Ito yung mga
nasa NIRC such as estate tax, donor’s tax, Under Section 244 of the Tax Code, the Secretary of
documentary stamp tax, VAT etc. Finance can promulgate needful rules and regulations.
Ang tawag natin dito, ito ang ating Revenue
Custom duties are not part of international revenue Regulations.
taxes, these are being collected by the Bureau of
Customs. EXAMPLE:
This is a Revenue Regulation from 2021. Ganito ‘yung
As for the enforcement of all forfeitures, penalties, and
fines connected therewith, including the execution of itsura ng last page ‘nung Revenue Regulation back
judgments in all cases decided in its favor by the Court then, ‘nung 2021.
of Tax Appeals and the ordinary courts – BIR will be the
one in charge.
POWERS OF THE COMMISSIONER
TITLE I
ORGANIZATION AND FUNCTION OF THE

SECTION 4. Power of the Commissioner to

Interpret Tax Laws and to Decide Tax Cases. - The Atty. Manuel: So it is promulgated by the Secretary of
power to interpret the provisions of this Code and Finance, then, it was Carlos Dominguez. And of course,
other tax laws shall be under the exclusive and it was recommended only by the Commissioner of
Internal Revenue. So revenue regulations are
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promulgated by the Secretary of Finance, • Although these are internal instructions,

recommended only by the Commissioner of Internal nevertheless, these are made public in
Revenue. order to inform the public of what happens
inside the Bureau of Internal
Issuances of the BIR
3. Revenue Memorandum Circular (RMC)
Therefore, since the nabanggit na natin ‘yung revenue
• These are just reiterations and
regulations, pag-usapan natin kung ano ba ang mga ini-
amplifications of existing laws.
issue ng BIR. Let's talk of four major issuances.
• May mga batas na, uulitin lang ng Revenue
Revenue Regulations Memorandum Circular. That is the purpose
- Signed by SOF, recommended by CIR of RMC.
Specify, define, and prescribe rules • May mga batas na, i-eexplain lang ng
Revenue Memorandum Circular – isa pang
Revenue Memorandum Order purpose ng RMC
- Internal instructions, processes, operations,
policies, objectives EXAMPLE: Taxability of Social media Influencers
Revenue Memorandum Circular Isa sa mga nag-trending last year will be the RMC
- reiterations and amplifications of existing pertaining to taxation of social media influencers.
laws Matagal nang taxable sila ayon sa batas because, you
know, they are income earners. By all means, kailangan
BIR Rulings nila magbayad ng tax.
- Questions and answers, applicable to the
specific taxpayer requesting for ruling Pero dahil may confusion kung papaano sila
magbabayad ng tax, nag-issue ng RMC regarding that.
Atty. Manuel:
That is only to reiterate existing laws. Walang bagong
1. Revenue Regulations batas na nagtatax sa social media influencers. Inulit
• Again, signed by the Secretary of Finance, lang yung currently existing NIRC of 1997 – inapply sa
promulgated by the Secretary of Finance, social media influencers. That is by way of RMC.
recommended only by the Commissioner of
Internal Revenue under Section 244 EXAMPLE: Solo Parents’ Welfare Act.
• They specify, define, and prescribe rules,
Section 12 of the Solo Parents’ Welfare act provides for
as long as they are within the bounds of the
VAT exemption.
law they seek to implement. Basically, ito
yung IRR ng isang batas but specifically Meron nang VAT exemption ang ating mga solo parents
applied to tax laws – we call it revenue para sa kanilang mga bibilhin na milk, dietary
regulations. supplements para sa kanilang mga junakis.
• Kung may kulang pa sa batas, revenue
regulations ang kukumpleto. Meron silang VAT exemption, provided na hindi
• Of course, dapat mag-comply sa valid lalagpas sa 6 years old ‘yung anak and provided the
delegation of legislative powers. solo parent does not earn income more than 250,000
pesos.
2. Revenue Memorandum Order
• Basically, these are internal instructions, So dahil nasa batas na ito na Expanded Solo Parents’
Welfare Act, para ulitin lang, pwede mag-RMC lang ang
processes, operations, policies, objectives.
BIR doon.
• These are memoranda to employees of the
Bureau of Internal Revenue and officers of
4. BIR Rulings
the BIR?
• These are question and answer portion.
• Ano ang collection target natin? Papaano
• Magrerequest for ruling, sasabihin mo ang
ba ang process dito internally? Kapag
facts, then itatanong mo sa Bureau of
pinasa sa atin ang papel, sino ang
Internal Revenue – What is the tax
tatanggap? Kanino mapupunta? Sino ang
implication of this particular transaction?
magrereiew? ‘Yan ay nakalagay sa
• Then the Bureau of Internal Revenue will
Revenue Memorandum Order.
answer – that is binding to the specific
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taxpayer who requested for such ruling. – because the contrary ruling of the BIR prior na hindi
Hindi pwedeng i-apply sa ibang taxpayer. na kailangan hintayin ‘yung 120 days constitutes
But of course, that would be indicative of equitable estoppel on the part of the BIR.
the opinion of the Bureau of Internal
Revenue, but not necessarily binding. So ‘yan ‘yung ruling doon sa series of cases detailing
with 120 + 30 days.
So ‘yan ang apat na pinaka-importanteng issuances ng
BIR. Any revocation, modification, or reversal of the rules
shall not be given retroactive application if it will be
Non-retroactivity of rulings prejudicial to the taxpayer.
NATIONAL INTERNAL REVENUE CODE Sinabi ni BIR na exempt tapos biglang babawiin niya sa
TITLE IX dulo kung kalian na-implenet na yung transaction –
ADMINISTRATIVE PROVISIONS hindi pwede ‘yun kasi that is bad faith on the part of BIR.
CHAPTER III
RULES AND REGULATIONS Exceptions to the Rule on Non-Retroactivity of
Rulings:
SECTION 246. Any revocation, modification, or
reversal of any of the rules and regulations or any of 1. Where the taxpayer deliberately misstates or
the rulings or circulars by the CIR shall not be given omits material facts from his return or any
retroactive application if it will be prejudicial to the document required of him by the BIR;
taxpayer. 2. Where the facts subsequently gathered by
the BIR are materially different from the facts
on which the ruling is based; or
Atty. Manuel: 3. Where the taxpayer acted in bad faith.
Once an RR or a BIR Ruling is issued, hindi pwedeng Section 246, National Internal Revenue Code
retroactive effect. Hindi pwedeng retroactive effect,
particularly if it will be prejudicial to the taxpayers. Atty. Manuel:
‘Yan ang mga exception natin sa non-retroactivity of
So ang famous dito would be CIR v. Aichi Forging rulings. Pwedeng mag-retroact ang ibang ruling na
Company (2014). detrimental sa taxpayer if it is the taxpayer’s fault kaya
mali ‘yung unang ruling. That is under Section 246. Of
Ang dami dami niyong cases sa VAT dealing with 120 course, that is the quasi-legislative power of the BIR.
+ 30 na mandatory and jurisdictional period for the filing
of a claim of VAT Refund, ‘diba? Pero may binanggit Tungo tayo sa quasi-judicial power.
doon na BIR Ruling No. DA-489-03.
BIR Ruling No. DA-489-03 na inissue ng BIR na 2. Power to decide disputed assessments
sinasabi na hindi kailangan maghintay ng 120 days para
mag-file ng Petition for Review before the CTA.
Ngayon kasi, ang rule is kailangang maghintay ng 120 TITLE I
days (currently 90 under CREATE) bago tayo mag-file ORGANIZATION AND FUNCTION OF THE BIR
ng Petition for Rev before the CTA in our claims for
SECTION 4. The power to decide disputed
unutilized input VAT attributable to zero-rated sales assessments, refunds of internal revenue taxes, fees
under Section 112. or other charges, penalties imposed in relation
thereto, or other matters arising under this Code or
But there is a BIR Ruling, BIR Ruling No. DA-489-03, other laws or portions thereof administered by the
which answers a query na hindi naman kailangan BIR is vested in the Commissioner, subject to the
hintayin ‘yung expiration of 120-day period bago mag- exclusive appellate jurisdiction of the CTA.
file sa CTA. Eventually, that ruling was reversed. Ano
ang sabi ng BIR? Ina-apply ngayon ng BIR during the
effectivity of BIR Ruling No. DA-489-03. Atty. Manuel:
When it comes to disputed assessments, the
Sabi ng Supreme Court, hindi pwede mag-retroact Commissioner of Internal Revenue can decide. May
‘yung ruling na kailangan hintayin ‘yung 120 days, to the away ang revenue officer versus taxpayer. May away
detriment of those who filed before that particular ruling ‘yung Regional Office versus taxpayers sa paniningil ng
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tax, sa refund ng tax, or sa penalties – the CIR can available, the Commissioner of Internal Revenue can
decide on these matters, exercising its quasi-judicial assess the taxpayer.
power as an administrative agency.
Examination of Books
Ano ang kanyang mga kapangyarihan para
makapagdecide? CIR is authorized to examine any book, paper,
record, or other data which may be relevant or
Examination of return material to such inquiry.
Section 5(A), National Internal Revenue Code

After a return has been filed, the CIR or his duly
authorized representative may authorize the Atty. Manuel:
examination of any taxpayer and the assessment
of the correct amount of tax. Hindi lang ang return ang pwedeng i-examine, pwedeng
i-require ang ating taxpayer na mag-submit ng any
Section 6(A), National Internal Revenue Code book, paper, record, or other data relevant or material
to such inquiry of taxes under Section 5(A).
Atty. Manuel:
Gusto mong ipa-submit ang financial statements? Go.
Kapag tayo ay nag-file ng income tax return, donor’s tax Gusto mong ipa-submit ang books of accounts? Journal
return, and estate tax return sa BIR, they will not say Entries? Ledgers? Go.
that it is conclusively correct. ‘Diba? Hindi niya
tatanggapin na correct ‘yun. It is always subject to Gusto niyong ipasubmit ang board resolution, secretary
review by the Bureau of Internal Revenue. certificate kung may transaction, invoices and
transaction receipts, the CIR Commissioner may
Remember – when we file our returns – that our sworn compel the taxpayer to submit and the CIR may
declaration that the amounts reflected therein are examine the documents. This is part of the CIR’s power
correct under the pain of penalty of perjury. under Section 5 for the CIR to be able to assess the
taxpayer properly. That’s part of “modes of discovery” of
So ang mangyayari ay pwede pa ring reviewhin pa rin the CIR to assess tax.
ng Bureau of Internal Revenue. It may authorize the
Obtain Information
examination of any taxpayer and the assessment of the
correct amount of tax, especially since it is merely a
voluntary declaration, it is in the taxpayer’s interest na CIR is authorized to obtain on a regular basis from
babaan ang bayad ng tax, kailangan lang bigyan ng any person other than the person whose internal
kapangyarihan ang BIR na reviewhin ‘yung pagakaka- revenue tax liability is subject to audit or investigation,
declare ng ating taxpayer. That is under Section 6(A). any information such as, but not limited to, costs and
volume if production, receipts or sales and GIs of
Best Evidence Obtainable taxpayers, and the names, addresses, and FS.
When a report required by law shall not be Section 5(B), National Internal Revenue Code
forthcoming within deadline or when there is reason
to believe that any such report is false, incomplete or Atty. Manuel:
erroneous,
Hindi lang sa mismong taxpayer but from any person.
THEN: the CIR shall assess the proper tax on the Halimbawa kung gusto ko malaman kung may benta
best evidence obtainable siya, tatanungin ko yung possible niyang customer.
“Customer, ano ang mga purchases mo? May binili ka
Atty. Manuel: ba sa kanya?” Kasi kung may binili ka sa kanya at hindi
niya dineclare, as part of his benta, then pwede iyon
gamitin ni BIR para makapag-assess. It’s not only on
Q: What if walang makuhang evidence ang BIR?
that particular taxpayer, the CIR may obtain information
also from other persons. Such information may be
A: Then the CIR shall assess the proper tax on the best obtained on a regular basis, by prescribing
evidence which they can obtain. That is the best documentary requirements attached to the returns
evidence rule under Section 6 of the Tax Code. being filed.
If hindi nag-file si taxpayer, hindi cooperative si Issue Summons
taxpayer, there is reason to believe that what the
taxpayer has supplied is false, incomplete, or
erroneous, then in accordance with the best evidence
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To summon the person liable for tax or required to file

a return, or any officer or employee of such person, Para mapatunayan na financially incapacitated
or any person having possession, custody, or care of nga si taxpayer applying for a compromise with
the accounting records, or any other person, to the BIR, kailangan niya i-waive ang kanyang
appear before the CIR or his DAR at a time and place secrecy of bank deposit para makita ng BIR na
specified in the summons and to produce such wala nga siyang pambayad.
books, papers, records, or other data, and to give
testimony under oath. 3) A specific taxpayer or taxpayers subject of a
request for the supply of tax information from a
Section 5(C) and (D), National Internal Revenue foreign tax authority pursuant to an international
Code agreement on tax matters to which the PH is a
signatory or a party of. (Sec. 6(F), NIRC)
Atty. Manuel:
Atty. Manuel:
May power to issue summons ba ang CIR? The answer If a foreign tax authority requests for information
is YES. Pwede siyang mag-patawag under pain of regarding a particular taxpayer here in the
contempt ng kahit sinong tao. Para of course, either Philippines, we should grant that request
mag-produce ng documents or mag-testify. May pursuant to an international agreement. Again,
subpoena powers kumbaga ang CIR, either ad international agreements supersede our
testificandum or duces tecum – to produce documents municipal or local laws.
or take testimony.
Halimbawa, may isang tax evader sa America
Secrecy of Bank Deposits at may deposit siya dito sa Pilipinas. Sabi ng
US Internal Revenue Service (US-IRS), “BIR,
All deposits with banks in PH and hereby considered patingin naman ng deposit niya diyan sa
as of an absolutely confidential nature and may not Pilipinas kung magkano para malaman naming
be examined, inquired, or looked into by any person, kung tax evader talaga siya.” Should the BIR
government official or office, except upon written grant?
permission of the depositor…
Yes, the BIR should grant pursuant to a request
Section 2, Republic Act No. 1405 by such foreign authority.
Atty. Manuel:
3. Other authorities
Under Mercantile Law, we have secrecy of bank
deposits, RA 1405 your basic law on secrecy of bank
deposits. Under Sec. 2, they are absolutely confidential Other authorities
in nature, except upon written permission of the
depositor, bribery, dereliction of duty, impeachment, 1) Conduct inventory-taking and surveillance
etc. But meron bang lusot ang CIR jan? (Sec. 6(C), NIRC)
2) Terminate taxable period based on the
As a general rule, the CIR cannot inquire on bank following grounds (Sec. 6(D), NIRC):
deposits, however, by way of exceptions, pwedeng • Retiring from business
mag-inquire sa bank deposits ang CIR in the following • Intending to leave PH
circumstances: • Concealing his property
• Tending to perform an act
1) Decedent in determining gross estate. (Sec. obstructing the proceedings of
6(F), NIRC)
collections of tax
3) Prescribe real property values (Sec. 6(E),
Atty. Manuel: NIRC)
4) Accredit and register bank agents (Sec.
Wala nang privacy si decendent, patay na siya. 6(G), NIRC)
Therefore, considering na patay na siya, pwede 5) Prescribe additional documentary
nang mag-inquire sa bank deposit ng ating requirements (Sec. 6(H), NIRC)
decedent for purposes of determining the gross
estate.
1) Conduct inventory-taking and surveillance
2) Any taxpayer who has filed an application for (Sec. 6(C), NIRC)
compromise of his tax liability by reason of
financial incapacity to pay his tax liability (Sec. Atty. Manuel:
6(F), NIRC)
This is particularly useful for excise tax compliance.
Atty. Manuel: Halimbawa, on excise tax on alcoholic products,
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beverages, tobacco products, petroleum products, they Zonal value is that assessed by the BIR, while assessed
are imposed per liter, per volume, per box. Ang value is the one used by the local assessors for
mangyayari ay they can conduct inventory-taking para purposes of determining real property tax (RPT).
bilangin kung ilan ang subject to excise tax and they can
determine kung ilan ang masisingil doon. 4) Accredit and register bank agents (Sec. 6(G),
NIRC)
The BIR has the power to visit the premises of taxpayers • Based on professional competence,
for inventory-taking and surveillance. integrity, and moral fitness
• Denial of accreditation may be
2) Terminate taxable period based on the appealed to SOF.
following grounds (Sec. 6(D), NIRC): • Lapse of 120 days is deemed an
• Retiring from business approval.
• Intending to leave PH
• Concealing his property Atty. Manuel:
• Tending to perform an act obstructing
the proceedings of collections of tax Tax agents can sign returns on behalf of a taxpayer.
Atty. Manuel: 5) Prescribe additional documentary requirements

(Sec. 6(H), NIRC)
Re: #1 – Retiring from business
For instance, in VAT. VAT is imposed per quarter, pero Atty. Manuel:
may monthly VAT declaration naman, pero ang return
talaga ay per quarter. Let’s say na hindi pa talaga tapos Sino ang nag-require na kailangan may alphabetical list
ang quarter, magre-retire na from business. In that of employees attached to the remittance returns? BIR.
case, the BIR can terminate the quarter as well. Kung Sino ang nag-require na kailangan may summary list of
January pa lang, nag-terminate na ng business, ang sales and summary list of purchases sa VAT returns?
end of the quarter ay January, kahit na alam natin na BIR. Sino ang nag-prescribe ng mga returns, ng itsura
first month of the year pa lang ‘yon. Pwede nang at ng format? BIR. Sino ang nagsabi nag anito ang
maningil ang BIR doon. itsura ng invoices at official receipts? BIR, pursuant to
the power of the BIR under Sec. 6(H) of the NIRC.
If a corporation gets dissolved in the middle of the year,
pwede nang tapusin ng BIR ang kanyang taxable year
DELEGABILITY OF THE POWERS OF THE CIR
at that point in time.
Para saan ang termination of taxable periods? NATIONAL INTERNAL REVENUE CODE
Remember that we have deadlines. TITLE I
• VAT - 25 days following the close of the taxable GENERAL PROVISIONS
quarter;
• Income tax - 15th day of the 4th month following SECTION 7. The Commissioner may delegate the
the close of the taxable year; powers vested in him under the pertinent provisions
• Estate tax - one (1) year from the date of death; of this Code to any or such subordinate officials with
• Donor’s tax - 30 days from the date of donation. the rank equivalent to a division chief or higher,
subject to such limitations and restrictions as may
In income tax, if tumatakas na sa Pilipinas ang isang be imposed under rules and regulations to be
taxpayer, pwede niyang pigilan na ang kanyang taon. promulgated by the Secretary of Finance, upon
The taxpayer’s year ends here, and now the BIR can recommendation of the Commissioner
collect. Bago pa makatakas si taxpayer, hindi na
hihintayin ng BIR yung April 15 next year, at pwede
nang singilin si taxpayer.
Q: Can the CIR delegate powers?
3) Prescribe real property values (Sec. 6(E), A: Yes.
NIRC)
GR: The CIR can delegate powers, especially for
• Called zonal values (ZV)
instance, assessment. Since the CIR is only one
• Adjusted every 3 years
person, and there are many tax evaders in the
• ZV must be published in a newspaper Philippines, they cannot be assessed by only one
of general circulation person. Therefore, the CIR may delegate assessment
powers to his or her employees.
Atty. Manuel:
XPN: Non-delegable powers
In fact, Sec. 6(E) defines fair market value, which is 1) Recommend the promulgation of rules and
zonal value or assessed value, whichever is higher. regulations by the SOF
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Atty. Manuel: After the return has been filed, the CIR has the power
to examine such. And, of course, to obtain information
The CIR is the only one who should sign the revenue to make an assessment for the correct amount of tax.
regulation as the recommending approval, together with
the secretary of Finance. Therefore, pursuant to this provision, among others,
found under the NIRC, the CIR or the BIR in general can
2) Issue rulings of first impression or reverse, make assessments.
revoke, modify any existing any BIR ruling.
Atty. Manuel: ASSESSMENT
If there is a BIR ruling of first impression, meaning it’s a Definition of Assessment

novel question never before asked, such power cannot
be delegated to the Assistant Commissioners. It is only Adamson v. Court of Appeals
the CIR which can issue rulings of first impressions. G.R. No. 120935. 21 May 2009
If the BIR ruling to be issued involves reversal of a Doctrine: A formal written notice/communication with
previous ruling, it cannot be done by any other person, the computation of the tax liability to the taxpayer and
but only the CIR. demanding for the settlement of a due tax liability within
the indicated period thereof.
3) Compromise or abatement of tax liability
• XPN: If P500,000 or less, it may be Purpose of Assessment
assigned.
It is to inform the tax payer. That’s why it must be sent
Atty. Manuel: to the taxpayer himself/herself.
Pursuant to the Lifeblood Doctrine, the tax liability of a NOTE: It is not just enough that we have informed the
taxpayer cannot just be cancelled. It being special, it is taxpayer of his/her tax liability, it must be coupled with a
supposed to be the CIR who should be authorized to demand for the settlement of such deficiency tax liability
compromise or abate a tax liability, EXCEPT if the within the indicated period in the assessment.
liability is P500,000.00 or less, it may be delegated or
assigned since the value is immaterial. That’s basically an assessment as will be used sa ating
Tax Remedies under the NIRC.
4) Assign or reassign internal revenue officers to
establishments where articles subject to excise Atty Manuel:
tax are kept.
Actually, maraming meaning ang assessment, e.g. (1)
Atty. Manuel: Assessment as a phase of taxation; or (2) Assessment
involves the determination of tax due.
Only the CIR may assign or reassign revenue officers
as to the factories they are to supervise for purposes of But when we speak of Tax Remedies, assessment is a
determining excise tax compliance of taxpayers. formal written notice. Particularly when we speak of an
assessment, that pertains to your Final Assessment
Notice and Formal Letter of Demand (FAN/FLD).
TAX REMEDIES NOTE: Palagi magkatambal si FAN and FLD, hindi mo

mapapghihiwalay dapat ang FAN/FLD.
EXAMINATION OF RETURNS Importance of Assessment
§ TO THE GOVERNMENT
After a return has been filed, the CIR or his duly
authorized representative may authorize the To the Government:
examination of any taxpayer and the assessment
of the correct amount to tax. (Section 6(A), NIRC) 1. To enforce taxpayer liabilities and certain
matters and certain matters that relate to it,
Part of the powers of the BIR is the quasi-judicial such as the imposition of surcharges and
powers. It has the power to decide disputed interests
assessments, refunds, and other matters arising from
the National Internal Revenue Code. It enables the government to enforce tax laws on the
taxpayers. Of course, it allows the government to
impose surcharges and interests among other civil
penalties.
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Atty. Manuel:
KINDS OF ASSESSMENT
Para makapaningil ang ating gobyerno pursuant to its
mandate and pursuant to the characterization of taxes
as the lifeblood of the government. Kailangan maningil I. Self-Assessment
ng ating gobyerno dahil hindi lahat ng ating taxpayers
ay honest, therefore, kailangan may assessment power
ang ating gobyerno. Self-Assessment – When the taxpayer computes
his own liability, files his return and pays the tax
To the Government: based on his computation. (Section 56(A), NIRC)
2. Statute of Limitations; This is the ordinary assessment. One mode of collection

3. Establishment of Tax Liens; and of taxes, the ordinary mode actually of collection of
4. In estimating the revenues that may be taxes, is by way of self-assessment.
collected.
Atty. Manuel:
2. Statute of limitations
- Kailangan makapag-assess ang ating Ang ginagawa ay, it is the taxpayer who computes
gobyerno, otherwise, beyond a certain point of his/her own taxes, files his/her return at puro self-
time, the government cannot collect the taxes computation ang nandyaan. Basically, that’s his/her
rightfully due from a particular taxpayer. own self-representation. But that’s not the assessment
being talked about sa ating tax remedies.
3. Establishment of Tax Liens
- Kailangan makapag-assess in order for the Ang assessment na pinag-uusapan natin dito would be
government to establish tax liens on the the Deficiency Assessment.
property of the taxpayer in order for the
government to be secured in the payment of II. Deficiency Assessment
taxes
-
4. In estimating the revenues that may be collected Deficiency Assessment – this occurs upon
- By means of administration, it is important for discovery of the BIR that the self-assessment was
the government in estimating the revenues that either deficient or when no return was made by the
it may be collected which will be helpful in the taxpayer.
budgeting process of the government.
Atty. Manuel:
§ TO THE TAXPAYER
Binanggit natin, it is not conclusive upon the BIR that
To the Taxpayer: once we have filed the return that ‘yun na talaga ang
ating tax liability. The BIR has the power to review, and
1. To be informed of his liabilities; examine our returns in order to determine the correct
2. To determine the period to protest; and amount due. That’s what we call deficiency
3. To determine the prescription of government assessment. Deficiency is kulang. Mare nagkulang ka
claim. ng bayad ng tax, therefore sisingilin ka namin sabi ni
BIR.
Atty. Manuel:
We know that conflicting ang interest of the taxpayer
Mahalaga ang assessment sa taxpayer to be informed and the government – the taxpayer wants to pay less in
of his/her liabilities, to determine the period to protest order to enjoy his money more, and the BIR would want
and to determine the prescription of government claim. to collect more because taxes are the lifeblood of the
government. Practically speaking, ang performance
NOTE: Mahalaga ang information as part of due measure ng ating mga BIR officers would be the amount
process because without being informed of the that they have collected.
liabilities, and what is being collected, then the taxpayer
cannot set-up meaningful and intelligent defenses Therefore, nagkakaroon ng conflict between them,
against any collection attempts by the BIR. chances are kailangan natin pag-aralan ‘tong tax
remedies especially as future lawyers dahil maraming
It requires information because “Ano ba sinisingil sa transactions na we will handle na may tax implications,
akin ng BIR?”, and “Ano ba ang kanyang factual or legal maraming taxpayers na may tax problems especially if
basis?” Of course, with that information, the taxpayer kayo ay magta-tax practice. Hindi nawawalan ng
can set-up meaningful and intelligent defenses against trabaho dahil ang pagbu-buwis ay tuloy-tuloy lamang.
the assessment of the BIR. That’s why it is important na
magkaroon ng assessment to the taxpayer.
Mock Bar 2022 | 29
PRINCIPLES GOVERNING TAX ASSESSMENT

There is this likelihood that the taxpayer has the
1. Prima face presumed correct and made in information to rebut such but did not do so. - Kasi
good faith syempre, nasa taxpayer ‘yung records, nasa taxpayer
2. Should be based on actual facts. ‘yung books of accounts, ‘yung mga invoices, resibo,
3. Discretionary on the part of the among other documents, which will require the
Commissioner correctness of the assessment, which will result to the
4. Must be directed to the right party
correctness of the assessment.
5. The authority vested in the Commissioner to
assess taxes may be delegated
So therefore, if hindi na-overthrow ni taxpayer yung
presumption of correctness, ang assessment ay
Presumption of Correctness
magiging final and executory.
Based on Actual Facts

FELS Energy, Inc. V. The Province of Batangas, et
al.,
G.R. No. 168557. 16 February 2007
The presumption of correctness of assessment being
Doctrine: Assessments are prima face presumed a mere presumption cannot be made to rest on
correct and made in good faith, with the taxpayer having another presumption.
the burden of proving otherwise. CIR v. Benipayo (1962)
Atty. Manuel:
Assessments are presumed to be correct. Atty. Manuel:
Alam natin that there is a presumption of regularity on Hindi dahil binanggit natin na may presumption of
the part of the practice of our government officials and correctness, automatically correct na ang assessment.
therefore, assessments are presumed to be correct. It It must be based on actual facts. Kung puro
is up to the taxpayer to overthrow that particular presumption lang din naman ang laman ng assessment,
disputable presumption, to overcome the burden of hindi pwedeng i-uphold ng court because again, it must
proof that is required of him. be based on actual facts.
That is why ang assessment, kahit mali-mali, ‘pag hindi XPN:

mo inaksyunan, hinintay mo mag-expire yung period to In the absence of the accounting records, his tax
protest or reply or appeal, ano ang mangyayari? The liability may be determined by estimation. The CIR is
assessment, no matter how outrageous it is, normally, not required to compute such tax liabilities with
would be upheld as valid for you have failed to timely mathematical exactness. Approximation in the
file a protest or appeal thereto, it becomes final and calculation of the taxes due is justified.
executory as a general rule, because of the prima facie
presumption of correctness. CIR v. Hantex Trading Co. Inc. (2005)
ACMDC v. CA
242 SCRA 289
Best Evidence Obtainable Rule
Doctrine: In the absence of any irregularities in the
When the report required by law shall not be
performance of official duties, an assessment will not be
forthcoming within deadline or when there is reason
disturbed. Failure to present proof of error in
to believe that any such report is false, incomplete or
assessments will justify judicial affirmance of said
erroneous,
assessment.
THEN: the CIR shall assess the proper tax on the
Therefore, kailangan of course, ma-overthrow natin
best evidence obtainable.
‘yung burden of proof.
Bakit may presumption of correctness?

Atty. Manuel: As long as it is evidence based, as long
Babalik ulit tayo sa lifeblood doctrine, which
as it is based on actual facts, basta may pinagbasehan
presupposes that taxes are the lifeblood of the
ang computation ni CIR, pwede na, that’s the best
government, and therefore, the presumption is in favor
evidence obtainable. But kung walang evidence na
of the taxing authority against our, you know, taxpayers.
pinagbasehan si CIR, lahat puro presumption, then
And ‘yung binanggit nga natin na presumption of that would be a violation of the taxpayer’s due process.
regularity.
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Discretionary assessment. It’s as if it’s the CIR who made the

assessment. This LOA signifies that there is a contract
of agency between them (the CIR and the officer).
Mandamus cannot lie to compel the CIR to impose
deficiency tax assessment. The CIR’s power to
assess is a discretionary one.
LETTER OF AUTHORITY
Mercado v. Sevillano (1982)
Basis
Atty Manuel: For example, I saw Andrea and I know
that Andrea is a tax evader, sinumbong ko sya sa
Commissioner of Internal Revenue, sabi ko, “CIR, hindi TITLE I
nagbabayad etong si Andrea, singilin nyo sya ngayon
din.” Pwede ko ba i-compel by way of mandamus si GENERAL PROVISIONS
CIR? No, because it’s discretionary on the part of the SECTION 13. A Revenue Officer assigned to
CIR. There are a lot of factors which the CIR may perform assessment functions in any district may,
determine whether to collect taxes. It is the CIR’s duty pursuant to a Letter of Authority issued by the
but it is not ministerial in nature, there is an exercise of Revenue Regional Director, examine taxpayers
discretion. If the cost of assessment outweighs within the jurisdiction of the district in order to collect
whatever taxes will be predicted to be collected from the correct amount of tax, or to recommend the
Andrea, then it is on the sound discretion of the CIR assessment of any deficiency tax due in the same
whether to collect or not. We cannot compel the manner that the said acts could have been performed
Commissioner to assess a certain person. by the Revenue Regional Director himself.
Delegable
Atty. Manuel:
Delegability of CIR’s powers Kailangan may LOA, without such, the assessment
The CIR may delegate the powers vested in him would be void for being unauthorized. We know naman
under the pertinent provisions of this Code to any or na the power under the law is vested with the CIR, but
such subordinate officials with the rank equivalent to it can be delegated. Without the delegation, a revenue
a division chief or higher. officer is unauthorized kahit empleyado sya ng BIR.
What a revenue officer may do without an LOA is
Section 7, National Internal Revenue Code unauthorized assessment and therefore a violation of
the substantive due process of the taxpayer for not
being conducted in accordance with law.
Atty Manuel: The CIR may delegate powers vested in
An LOA is the authority given to the appropriate RO
him, including making assessments, to certain officials.
assigned to perform assessment functions. It
The authority to make tax assessments may be empowers or enables said RO to examine the books
delegated to subordinate officers. Said assessment of account and other records of a taxpayer for the
has the same force and effect as that issued by the purpose of collecting tax.
CIR if not revised or reviewed by the latter. Medicard Philippines v. CIR (2017)
Oceanic Network Wireless Inc. v. CIR (2005)

Atty, Manuel:
In the Medicard case, ni-conduct yung audit ng RO

Atty. Manuel: Kahit delegated na yung powers. It has where were not named in the LOA. May LOA naman,
the same force and effect as that issued by the CIR. pero iba lang yung mga nakapangalan, hence, the
Take note that the delegation requires a document, and assessment is void.
that document is the Letter of Authority (LOA).
Rules in LOA
This Letter of Authority (LOA), it is basically like an SPA
on law on agency. It contains the delegations of certain A Letter of Authority should cover a taxable period
functions to his/her revenue officers and therefore the not exceeding one taxable year. The practice of
revenue officers becomes the agents, alter egos, and
representation of the CIR with regard to making
Mock Bar 2022 | 31
issuing Las covering audit of “unverified prior years” practice. So kung sa LOA ang nakapangalan ay si
is therefore prohibited. Revenue Officer Patricia Uy and si Revenue Officer
Robinson Mojica… Audits may last for years. There are
CIR v. Sony Philippines (2010) instances wherein 2017 na-audit, for ex. tumatagal ng
isang taon but ofcourse we have employees of the BIR,
minsan nagpaparellocate or transfer or minsan
Atty. Manuel: nagreresign at lumilipat ng ibang agency ng
government or biglang nagpa-private practice.
Hindi pwedeng magkaroon ng LOA which covers
unverified prior years. Kailangan sabihin kung anong So kung sa LOA ang nakapangalan ay si Revenue
year ang covered ng ating Letter of Authority. Why? Officer Patricia Uy at si Rafael Domingo, pero si Rafael
Because kasabay ng ating LOA is normally, a notice for ay nag resign at lumipat ng DOF, tapos ang pumalit sa
presentation of document, kung saan magrerequest sila kanya na Revenue Officer ay si Daniella Besino, sya na
ng documents (nakalista yon). ang bagong Revenue Officer, walang inissue na
bagong LOA to inform the tax payer that it would be
It would be burdensome on the part of the taxpayer if Revenue Officer Daniella Besino, who would take the
unverified prior years ang nakalagay, kas lahat ng case of Rafael Domingo. In such a case, it would
documents kakalkalin nila. Therefore, in order to ease invalidate the audit, it would invalidate the assessment
the audit process on the part of the taxpayer, specify because the assignment or transfer of cases would
naman sana yung taon. require a new Letter of Authority.
NOTE: The LOA shall also likewise indicate the taxes Hindi porket sabihin nating nagresign, automatic may
being audited. Kailangan nakalagay kung anong taxes replacement, kailangan may bagong LOA, para masabi
lamang ang i-audit. Pero normally, sapat na iligay na na valid. That RMO provision is frequently cited in court
cases.
“internal revenue taxes”, which is basically all taxes.
However, remember that there are LOAs which only
assess income taxes and value-added taxes. Rules in LOA
Service must be done within 30 days from the date Revalidation of LAs is done through the issuance of
of Issuance. a new LA.
It can be revalidated:
Within 120 days, RO to conduct audit and submit the
1. only once, if issued by the Regional Director;
required report of investigation.
2. twice, if issued by the CIR.
Section 3, DOF Department Order No. 06-99))
Q: Papaano irerevalidate?
A: Through the issuance of a new LOA. Btw, minsan LA
Atty. Manuel: or LOA yung acronyms. Normally, for BIR Issuances,
LA yung gamit nilang acronym. For court cases LOA
Within 120 days from the issuance, kailangan may
ang ginagamit nilang acronym sa Letter of Authority.
results na kung ano ang naging imbestigasyon ng ating
Revenue Officer. Revalidation may be done once, if it is issued by the
Regional Director and twice if issued by the CIR.
Any re-assignment/transfer of cases to another
RO(s), and revalidation of L/As which have already
expired, shall require the issuance of a new L/A, with
the corresponding notation thereto, including the
previous L/A number and date of issue of said L/As.
Item C(5), Revenue Memorandum Order No. 43-

1990
Atty. Manuel:
Audits may last for years. For example, 2017 na audit,

tumatagal ng isang taon. But of course, we have
employees of the BIR, minsan not keen on staying,
looking for other opportunities, nagpapa-relocate,
nagpapa-transfer, or minsan nagre-resign at lumilipat
ng ibang ahensya ng gobyerno or biglang nagpa-private
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Frequency of Examination
NOTICE OF INFORMAL CONFERENCE AND
GR: Only once per taxable year NOTICE OF DISCREPANCY
XPN:
1. When the CIR determines that fraud, Notice of Informal Conference

irreqularities, or mistakes were committed by the
taxpayer; The Revenue Officer who audited the taxpayer's
records shall, among others, state in his report
2. When the taxpayer himself requests for the re- whether or not the taxpayer aqrees with his findings
investiqation or re-examination of his books of that the taxpayer is liable for deficiencv tax or taxes.
accounts and it was granted by the CIR
If the taxpayer is not amenable based on the said
--Sec. 5 and 235, National Internal Revenue Code-- Officer's submitted report of investigation, the
taxpayer shall be informed, in writing, of the
3. When there is a need to verify the discrepancy/ies in the taxpayer's payment of his
taxes, for the purpose of "Informal Conference," in
4. When the taxpayer's CGT liabilities must be order to afford the taxpayer with an opportunity to
verified: or present his side of the case.
5. When the CIR chooses to exercise his power to The Informal Conference shall in no case extend
obtain information relative to the examination of beyond thirty (30) days from receipt of the notice for
other taxpayers. informal conference.
Section 3.1.1, Revenue Regulations No. 7-2018

Q: Gaano kadalas pwedeng i-audit ang ating tax
payer?
A: Atty. Manuel:
GR: Only once per taxable year, so wag mo naman i- So first, Magkakaroon ng report si Revenue Officer
audit for the same tax ang isang tax payer for the same regarding his or her findings after receipt of the
taxable year. So the frequency of examination is only document from the Letter of Authority. Then initial
once per taxable year. Although a taxpayer may receive findings will be sent to the taxpayer, kailangan the
multiple LOAs, as long as they pertain to different taxes findings must be in writing for the purpose of informal
or different period. But for the same tax tapos same conference, para may opportunity si taxpayer to present
period tapos dalawang LOA, hindi pwede. his or her side. This informal conference shall in no case
extend beyond 30 days from receipt of the notice of
Exception: these are the grounds for multiple informal conference. So basically mag uusap lang si
examinations: there is (1) fraud, irregularity or mistakes Revenue officer and taxpayer, with the taxpayer
committed by the tax payer or (2) the tax payer himself explaining his or her side why he/she/it is not liable for
request for the reinvestigation or re-examination (3) the payment of taxes in accordance with the initial report
compliance with withholding and other taxes (4) CGT of the Revenue Officer.
Liabilities, kasi in here 30 days ang deadline natin, as
stated in Sec. 24, par. C and D, if madami kang CGT
transactions in a year, you may be examined for your Amendments:
multiple CGT transactions in a year, and when the CIR
chooses to exercise his power to obtain information NIC under RR No. 7-2018 has been amended to
relative to the examination of other tax payer. NOD under RR No. 22- 2020.
So the assessment story begins with filing of the return,

then payment of taxes. Pag natanggap na ang return, Atty. Manuel:
Nakita ng CIR/ Revenue officer na parang mali, next
would be the LOA. After the LOA, and nakapag submit However, take note that the notice of informal
na ng documents and the investigation has been done, conference under RR No. 7-2018 has been amended,
panahon na for NOD or NIC. hindi na notice of informal conference ang tawag, your
books, your references, your reviewers might still call it
Illustration: notice of informal conference, ang tawag na natin ay
Notice of Discrepancy, that’s under RR No. 22- 2020.
Filing of return à Payment of Taxes à if the CIR
noticed that there is something wrong, it would send Q: Ano tong Notice of Discrepancy? Ano
an LOA à NOD or NIC. pinagkaiba nya sa notice of informal conference?
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Notice of Discrepancy
The NOD aims to fully afford the taxpayer with an
opportunity to present and explain his side on the After the Discussion of Discrepancy, it is still found
discrepancies found. that the taxpayer is liable for deficiency tax and he
does not pay the taxes or he does not agree with the
Based on the said RO's submitted initial report of findings, the case shall be endorsed for issuance of
investigation, the taxpayer shall be informed, in a PAN within 10 days from the conclusion of the
writing of the discrepancy in the taxpayer's payment Discussion.
of his internal revenue taxes, for the purpose of the
"Discussion of Discrepancy." Sec. 3.1.1, Revenue Requiations No. 22-2020
amending Revenue Requlations No 12-1999
The Discussion of Discrepancy shall in no case
extend beyond thirty (30) days from receipt of the Q: Kelan nagkakaroon ng PAN?
NOD. A: After discussion of discrepancy, liable parin si
taxpayer sa paningin ng BIR, hindi pa nagbayad si
Sec. 3.1.1, Revenue Regulations No. 22-2020, taxpayer, or hindi parin agree sa findings si tax payer
amending Revenue Regulations No. 12-1999 mag iissue na tayo ng PAN within 10 days from the
conclusion of the Discussion.
RECAP:
A: Similar sa purpose of Notice of Informal Conference,
which is to inform the taxpayer. Then, magkakaroon ng Filing of Returnà Payment of Taxes à LOA à
discussion ng discrepancy which before we call as within 30 days, serves to taxpayer, within 120 days
Notice of Informal Conference, ngayon ang tawag lang report sa LOA yung findings à Notice of
ay discussion of discrepancy. So basically, it serves the Discrepancy, from the time of receipt of the notice
same purpose. And same na the discussion of of discrepancy, within 30 days kailangan
discrepancy shall in no case extend beyond 30 days magkaroon na ng discussion of discrepancy. From
from receipt of the notice of discrepancy, parang NIC the conclusion of the discussion of discrepancy,
rin- the informal conference should in no case extend within 10 days the issuance of PAN.
beyond 30 days from receipt of the NIC.
PRELIMINARY ASSESSMENT NOTICE

BASIS
If the taxpayer disagrees with the discrepancy/ies
detected during the audit, he must explain and
provide documents submitted within 30 days after
When the Commissioner or his dulv authorized
receipt of the NOD. representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his
Sec. 3.1.1, Revenue Regulations No. 22-2020 findings.
amending Requlations No. 12-1999
Sec. 228, National Internal Revenue Code
Atty. Manuel:
If the taxpayer disagrees with the discrepancy, pwede Atty. Manuel:
pa syang magpadala ng ibang documents to the BIR,
provided it is submitted within 30 days after receipt of Basically notice, and therefore the purpose is to notify
the NOD. So pwede magpadala ng additional the taxpayer kung ano ang finding ng BIR.
documents to rebut whatever is indicated doon sa report
attached sa NOD. However, if after the NOD hindi parin Q: Sir, hindi bai to ulit lang ng notice of
sila magkasundo, panahon na para sa PAN discrepancy?
(Preliminary Assessment Notice). A: Madalas, kung ano ang nakalagay sa NOD, yun din
ang lalabas sa PAN, kasi di napag-agreehan. Kung
matinong usapan naman ang nangyare sa discussion of
discrepancy, may changes naman na mangyayare.
Atty. Manuel:
Avon Manufacturing Corporation v. CIR, provides

that if there is identity of NOD, PAN and FAN, if
Mock Bar 2022 | 34
magkakaparehas ang mga ito, kahit nagsubmit si Importance of informing the taxpayer of the law and
taxpayer ng kanyang mga pieces of evidence, facts
documentary requirements, etc. then it is a violation of
a taxpayer’s right to due process. Atty. K: Aside from the fact that it is for due process
requirement, it is done in order for the taxpayer to set-
Q: Bakit violation of taxpayer’s right to due up intelligent defences.
process?
VOLUNTARY PAYMENTS
A: Kasi yung requisites of administrative due process
under Ang Tibay v. Court of Industrial Relations, Even prior to the issuance of PAN, the taxpayer may be
yung requisites of administrative due process doon, one allowed to make voluntary payments of probable
requisite therein provided na- the administrative agency deficiency taxes and penalties. (Revenue Memorandum
must consider the party’s evidence. Kung parehas lang Order No. 11-2014)
yung NOD, copy paste sa PAN, it is as if the
administrative agency did not consider at all the Note: Payment will stop the assessment process and
evidence of the tax payer. Therefore, that is a violation will stop the BIR from issuing the PAN. However, this
of the taxpayer’s right to due process, if there is identity rarely happens.
between or among the NOD, PAN and FAN.
DEFAULT IN PAN
If after review and evaluation by the CIR or his DAR, If the taxpayer fails to respond within 15 days from the
it is determined that there exists sufficient basis to date of receipt of the PAN, he shall be considered in
assess the taxpayer for any deficiency tax, à PAN default, in which case, a Formal Letter of Demand and
shall be issued for the proposed assessment. Final Assessment Notice (FLD/FAN) shall be issued
calling for payment of the taxpayer’s deficiency tax
Section 3.1.1., Revenue Requlations No. 18-2013 liability. (Section 3.1.1, Revenue Regulations No. 18-
2013)
Q: When will PAN be issued? The failure to file a reply to PAN will not bar the taxpayer
A: If it is determined that there is a sufficient basis to from protesting the FAN. (Section 3.1.1, Revenue
assess the taxpayer. Regulations No. 18-2013)
REQUISITES OF A VALID PAN Protest against PAN is optional/not mandatory.

(Revenue Memorandum Order No. 26-2016)
Q: What are the requisites of a valid PAN?
Atty. K: Therefore, it appears that failure to reply to PAN
is inconsequential because even if you failed to reply to
PAN, you may still file a protest to the FLD/FAN.
Requisites of a valid PAN
What is consequential is the FLD/FAN. Failure to file a
1. In writing and signed by the BIR; and protest against the FLD/FAN would make the
assessment FINAL AND EXECUTORY.
2. Should inform the taxpayer of the law and the
facts on which the assessment is made. ACTION AFTER RESPONSE
Section 228, National Internal Revenue If the taxpayer, within 15 days from date of receipt of the
Code PAN, responds that he/it disagrees with the findings of
the deficiency tax or taxes, an FLD/FAN shall be issued
within 15 days from filing/submission of the taxpayer’s
response, calling for payment of the taxpayer’s
A: It must be in writing, signed by the BIR. Also, due deficiency tax liability, inclusive of the applicable
process requires that the taxpayer be informed of the penalties (Section 3.1.1., Revenue Regulations No. 18-
factual and legal basis on which the assessment is 2013)
made.
EXCEPTIONS TO PAN REQUIREMENT
Q: What is the purpose of being informed?
A: The importance is for the taxpayer to set up Atty. K: In these cases, the BIR can directly issue
intelligent defenses, without the factual and legal basis, FLD/FAN.
paano mo sya irerebut. So that’s the importance of the
assessment notices, as part of due process (a) When the finding for any deficiency tax is the result
requirement. of any mathematical error in the computation of the
Mock Bar 2022 | 35

tax as appearing on the face of the return. (Sec.

228, NIRC) 1. If there is no need to issue a PAN;
2. If the taxpayer is in default for failure to respond
e.g. In the Donor’s Tax Return, P1M was the amount to a PAN; or
donated multiplied by 6%. After multiplying, only P600 3. If the CIR or his duly authorized representative
was paid. There is an obvious miscalculation. does not agree with the reply to the PAN.
(b) When a discrepancy has been determined REQUISITES OF A VALID FAN/FLD

between the tax withheld and the amount actually
remitted by the withholding agent. (Sec. 228, 1. In writing and signed by the BIR;
NIRC) 2. Contains the law and the facts on which the
assessment is based (basis must be provided);
e.g. In the return, it was provided that the tax withheld [DUE PROCESS]
from your employees was P200,000. What you paid 3. Contains a demand for payment within the
before the BIR is only P150,000. prescribed period;
4. Must be served and received by the taxpayer.
(c) When a taxpayer who opted to claim a refund or (Sec 228, NIRC; Section 3.1.3., Revenue
tax credit of excess CWT for a taxable period was Regulations No. 18-2013)
determined to have carried over and automatically
applied the same amount claimed against the Note: Failure to comply with any of the requisites would
estimated tax liabilities for the taxable quarter or render the assessment VOID.
quarters of the succeeding taxable year.
You cannot refund and carry over at the same time. DISPUTED ASSESSMENTS
(d) When the excise tax due on excisable articles has

not been paid. (Sec. 228, NIRC) Atty. Manuel: RECAP:
1. Filing
e.g. Excise tax on wines and distilled spirits 2. Payment of Taxes
3. Filing of return
4. Payment of Taxes
5. LOA (to be received within 30 days by the
taxpayer and to be reported within 120 days)
6. Notice of Discrepancy (NTD) (within 30 days of
receipt, there must be a discussion of the
discrepancy)
7. PAN (10 days after the discussion)
8. Reply to PAN (within 15 days after receipt of
PAN) [Note: PAN can be dispensed with in
certain situations]
9. FAN/FLD (within 15 days after receipt of reply)
PROTEST
The taxpayer may protest the assessment within 30

days from receipt.
Atty. K: In excise tax, we have a fixture of “Official
Label” in the bottles. This is applied for excise taxes on
Atty. Manuel:
wines and distilled spirits. If there is no label, it means
that they did not pay excise tax.
It is termed as PROTEST, and not a reply, unlike in
PAN.
(e) When the article locally purchased or imported by
an exempt person, such as, but not limited to,
EFFECT OF NON-PROTEST
vehicles, capital equipment, machineries and
spare parts, has been sold, traded or transferred to
The assessment becomes final, executory,
non-exempt persons.(Sec. 228, NIRC)
demandable, and NOT appealable to the CTA.
FINAL ASSESSMENT NOTICE AND FORMAL After issuance of FAN

LETTER OF DEMAND
The taxpayer may protest the assessment within 30
days from receipt.
The CIR or his duly authorized representative may issue
the FLD/FAN:
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Effect of non-protest: the assessment becomes final,

executory, demandable and not appealable to the Standard Charter Bank v. CIR
CTA. CTA Case No. 5696
Atty. Manuel: Doctrine: Relevant supporting documents are those

which the taxpayer feels would be necessary to support
Reply is to the PAN. Protest is to the FAN. his protest and not what the Commissioner feels should
be submitted, otherwise, the taxpayer would always be
Kung sa PAN, hindi tayo nakareply, FAN/FLD will be at the mercy of the BIR which may require production of
issued then we can protest. But sa FAN, pag hindi ka such documents which taxpayer could not produce.
nakapagprotest, the assessment will become final and
executory. The BIR may proceed to collection. MULTIPLES ISSUES IN FAN
REQUISITES OF PROTEST If there are several issues involved in the FLD or FAN
but the taxpayer only disputes or protests against the
1. Must be in writing validity of some of the issues raised, the assessment
2. Addressed to the CIR or his duly authorized attributable to the undisputed issue or issues shall
representative become final, executory and demandable.
3. Statement of facts, applicable to laws, rules and
regulations or jurisprudence on which the protest is Those issues are deemed admitted. Final and
based otherwise the protest would be void. executory na magproceed ng collection si BIR on those
4. Must contain the following: issues which were not contested sa protest.
a. Name of the taxpayer and address for the
immediate past 3 taxable years For instance, the FAN contains an assessment for
b. Nature of the request, specifying the newly income tax, VAT, DST. Ang prinotest lang, income tax.
discovered evidence to be presented Therefore, pwede nang magproceed sa collection with
c. Taxable periods covered by the respect to VAT and DST which were not protested by
assessment the taxpayer.
d. Amount and kind of tax involved and the
assessment notice number Eventually, decision na. Once we have filed a protest,
e. Date of receipt of the assessment notice or magkakaroon ng final decision on disputed assessment
letter of demand (FDDA).
f. Itemized statement of the finding to which
the taxpayer agrees (if any) as basis for the
computation of the tax due, which must be FINAL DECISION ON DISPUTED ASSESSMENT
paid upon filing of the protest (FDDA)
g. Itemized schedule of the adjustments to
which the taxpayer does not agree Final Decision on Disputed Assessment (FDDA)
h. Statements of facts or law in support of the is the final decision of the CIR or a duly authorized
protest representative on the protest to the FAN.
KINDS OF PROTEST The CIR issues the FDDA within 180 days from filing
of protest or submission of additional documents.
1. Request for reconsideration – refers to a plea of re-
evaluation of an existing records without need of Atty. Manuel:
additional evidence
2. Request for reinvestigation – refers to a plea of re- So mas mahaba ang timeline kapag request for
evaluation of an assessment on the basis of newly reinvestigation.
discovered or additional evidence that a taxpayer
intends to present in the reinvestigation The FDDA should state the facts, the applicable law,
the rules and regulations, or the jurisprudence on
Supporting documents for requests for which such decision is based.
reinvestigation
- The taxpayer shall submit all relevant Atty. Manuel:
supporting documents in support of his
protest within sixty (60) days from date of filing The FDAA should state the factual and legal basis para
of protest. if gustong i-appeal ni taxpayer to the CTA, at least alam
niya kung papaano siya mag-appeal.
Atty. Manuel:
EFFECT OF VOID FDDA
Otherwise, it’s as if the taxpayer did not file a request for
reinvestigation. Therefore, it would make the CIR v. Liquigaz Philippines Corp.
assessment final and executory G.R. No. 215334
Mock Bar 2022 | 37
1. Files a false or fraudulent return with intent to

Doctrine: A void FDDA does not ipso facto render the evade the tax; or
assessment void. The assessment remains valid 2. Fails to file a return.
notwithstanding the nullity of the FDDA because the
assessment itself differs from a decision on the disputed Atty. Manuel: Normally, that is being stricken down.
assessment. It is as if there was no decision rendered Bibihira lang itong exception na ito. It requires palagi an
by the CIR. assessment bago tayo magtungo ng collection.
Atty. Manuel: A void FAN renders the assessment

void. A void PAN renders the assessment void. A void MODES OF COLLECTION
LOA renders the assessment void.
1. Payment
But a void FDDA does not render the assessment void 2. Tax lien
because the assessment still stands, ang nangyari lang 3. Distraint
void yung desisyon ng CIR. The assessment itself 4. Levy
differs from a decision. It is as if hindi nagdecide si CIR. 5. Forfeiture of Real Property
Inaction is likewise appealable. Kapag hindi nagdecide
si CIR, that is tantamount to a denial by inaction if after
the lapse of 180 days hindi nagdecide si CIR, which is TAX LIEN
appealable before the courts within 30 days from the
lapse of the 180-day period. NATIONAL INTERNAL REVENUE CODE
TITLE VIII
REMEDY AGAINST FDDA REMEDIES
If the protest is denied in whole or in part by the CIR: CHAPTER II

1. The taxpayer may appeal to the CTA within 30 CIVIL REMEDIES FOR COLLECTION OF TAXES
days from receiving the said decision; or
2. Elevate his protest through a request for Section 219. Nature and Extent of Tax Lien. - If any
reconsideration to the CIR within 30 days of the person, corporation, partnership, joint-account
decision. (cuentas en participacion), association or insurance
company liable to pay an internal revenue tax,
Atty. Manuel: The FDDA may be issued by the duly neglects or refuses to pay the same after demand, the
authorized representative or the CIR. If it is the CIR who amount shall be a lien in favor of the Government of
issued the FDDA, pwede ka nang dumeretso ng CTA the Philippines from the time when the assessment
within 30 days from receipt of the decision of CIR. was made by the Commissioner until paid, with
However, if it is the duly authorized representative who interests, penalties, and costs that may accrue in
issued the FDDA, pwedeng (1) dumeretso sa CTA addition thereto upon all property and rights to
within 30 days from receipt of the FDDA; or (2) file a property belonging to the taxpayer: Provided, That this
request for reconsideration within 30 days to the CIR lien shall not be valid against any mortgagee
and the CIR has a fresh period of 180 days to decide. purchaser or judgment creditor until notice of such lien
shall be filed by the Commissioner in the office of the
Register of Deeds of the province or city where the
property of the taxpayer is situated or located.
COLLECTION AND OTHER GOVERNMENT
REMEDIES It is a legal claim or charge on property, personal or
real, established by law as a sort of security for the
payment of tax obligations.
Atty. Manuel:
WHEN TO COLLECT
Walang actual taking of the property but mostly it can
GR: Collection is only allowed when there is already be a mere annotation lang doon sa title. That is already
a final assessment made for the determination of a tax lien.
the tax due.
If the land has tax lien, for it to be binding against
Atty. Manuel: third persons, as with any claim on any property, the
CIR must register the tax lien before the Register of
Kahit hindi pa executory, even though it is appealed Deeds.
before the court, as long as may FDDA na and there is
no injunction issued, pwede na rin mangolekta ang BIR. Therefore, if I sold my land prior to the registration of
the tax lien, the purchaser takes the land free from
XPN: Judicial action to collect the tax liability is any liens and encumbrances, and the CIR may not
permitted even without an assessment when the enforce any lien on the property which I sold to an
taxpayer: innocent third person (purchaser in good faith).
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Warrant
This lien shall not be valid against any mortgagee Warrant of Warrant of Distraint / Levy
purchaser or judgment creditor until notice of such Garnishment
lien shall be filed by the Commissioner (CIR) in
the office of the Register of Deeds of the province - Issued directly to the
or city where the property of the taxpayer is situated bank to release the
or located. funds / deposit in
favor of the BIR.
DISTRAINT Atty. K:
Hindi na dumadaan
It is a summary remedy whereby the collection of tax sa taxpayer ‘yung
is enforced on the goods, chattels or effects of the personal property
taxpayer. The property may be offered in a public niya, diretso na sa
sale, if taxes are not voluntarily paid. BIR, because it is
already in the
Atty. Manuel: possession of the 3rd
Personal property ang distraint. Kukunin ang person, so si 3rd
property, it will be subject to a public sale, and proceeds person na lang ang
would be used in order to satisfy any tax liability. sisingilin.
Property
2 Kinds of Distraint
Personal property Personal property
1. Actual Distraint – consists in the actual
seizure and taking possession of personal
property of the taxpayer. LEVY
Atty. K:
Actual seizure, meaning, there is really taking. It is the seizure of real property and interest in or rights
Kukunin talaga ang property from the taxpayer. to such properties for the satisfaction of taxes due from
the delinquent taxpayer.
2. Constructive Distraint – a preventive
remedy which aims at forestalling a possible Atty. Manuel:
dissipation of the taxpayer’s assets when Real property ang levy. Same process with distraint –
delinquency sets in. No actual tax delinquency kukunin ang property, it will be subject to a public sale,
of the taxpayer is necessary before the same is and proceeds thereof would be used in order to satisfy
resorted to by government. any tax liability or for the payment of taxes.
Atty. K: Levy Distraint

Preventive remedy, meaning, ipinagbabawal Property
ang disposition or dissipation of the assets. Real property Personal property
“Bawal mo siyang ibenta”, that is already
constructive distraint.
It may be effected by serving upon the taxpayer a
written notice of levy* in the form of a duly
GARNISHMENT authenticated certificate prepared by the Revenue
District Officer containing:
Garnishment Distraint 1. Description of the property upon which levy is
Who is in possession? made;
Personal property is 2. Name of the taxpayer;
in the possession of 3. Amount of tax and penalty due.
third persons.
Example Atty. Manuel:
E.g. Bank deposits of
the taxpayer. *Normally, ‘yung warrant is in the form of a Warrant of
Distraint / Levy (WDL). Magkasama na, kasi baka ma-
- It is the taxpayer’s confuse pa sa classification ng property if it is real or
property in the personal property. Baka mahirap i-apply ‘yung Art. 415
possession of the of the Civil Code. Kaya sinasama na lang ‘yung distraint
bank. / levy. Pero ang warrant of garnishment, hiwalay ‘yan.
Owner: Taxpayer
Possessor: Bank
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False Return Fraudulent Return

PRESCRIPTIVE PERIODS
Contains wrong Intentional and deceitful

BASIC PRINCIPLES ON PRESCRIPTION information due to: with the sole aim of
1. Mistake evading the correct tax
1. Prescription must be proved or established by (inadvertence); due.
the taxpayer relying upon it. 2. Carelessness; or
Atty. Manuel: 3. Ignorance
Note that prescription must be alleged. Absent any “Hindi mo sinasadya na “With bad faith”
allegation of prescription, the defense of prescription will ikaw ay nagkamali”
not be honored by the court.
2. Defense of prescription is waivable.

3. Such defense is not jurisdictional and must be
raised seasonably. Notes on Fraud
Atty. Manuel: Fraud is a question of fact.

The court cannot motu propio say that “the period to
assess tax has already prescribed. Therefore, even The circumstances constituting fraud must be alleged
though it is not alleged, the court will now dismiss the and proved.
case agad.” That is waivable and it is not jurisdictional.
Atty. Manuel:
However, we have a rule sa Court of Tax Appeals na Hindi pwedeng sabihin ng CIR na mag-aapply ang 10-
even though an argument or legal issue has not year prescriptive period without alleging or proving fraud
been raised as an issue by both parties, - without stating the factual basis of fraud that is being
nevertheless, the CTA has the power to tackle such. committed by the taxpayer. Kailangan masabi ‘yun in
So, pwede pa rin actually, pero sa Court of Tax order for the 10-year prescriptive period to apply.
Appeals level nga lang. Otherwise, only the 3-year prescriptive period should
apply.
But, generally, if may tax case sa RTC or MTC (regular
courts) then, the defense of prescription is waivable. However, there is a presumption of fraud.
We cannot fault the judge for not considering such.
Prima Facie Evidence of Fraud
PRESCPTIVE PERIODS IN ASSESSMENT
The taxpayer:
GR: 3 years from due date or actual filing, whichever is 1. Substantially underdeclared his taxable sales,
later. receipts or income; or
2. Substantially overstated his deductions.
XPN: False, Fraudulent filing and non-filing: 10 years
from discovery. (Extraordinary prescriptive period) Taxpayer is liable for substantial underdeclaration
and overdeclaration when there is a:
PRESCRIPTIVE PERIODS IN COLLECTION
1. Failure to reports sales, receipts or income in
an amount exceeding 30% of that declared
GR: 5 years from receipt of FAN by the taxpayer. per return
XPN: Fraudulent filing and non-filing: 10 years from 2. Claim of deduction in an amount exceeding
discovery. (Extraordinary prescriptive period) 30% of actual deduction
Atty. Manuel: Ø These shall render the taxpayer liable for
Sa 5 years, may confusion whether it is 3 or 5 years. But substantial underdeclaration and
court cases incline on 5 years from receipt of FAN ang overdeclaration.
prescriptive period. Bakit sa FAN? Kasi nandito ‘yung
Formal Letter of Demand. Sec. 248 of the NIRC
Na-ssuspend naman ang prescriptive period for
EXAMPLE:
collection during the pendency of the case before the
court. Therefore, there are grounds for suspension of
P1M talaga ang halaga ng aking sales. Pero, ang ni-
prescriptive period. report ko lang ay P600K para mababa ang bayaran
kong tax. Considering that bawas ng 40% ang aking
FALSE RETURN vs. FRAUDULENT RETURN dineclare ng sales, therefore, per investigation of the
BIR, that is already a prima facie evidence of fraud, and
.
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the 10-year prescriptive period will apply pursuant to At the point of release or mailing, that’s the date the
Sec. 248 of the NIRC. assessment is made. Para saan iyan? Ang importance
niyan ay para sa pagbibilang ng prescriptive period.
Normally, ang computation ng BIR ay lagpasang 30%
ang i-aassess sa’yong tax. Madalas, ang inaallege nila
ay 10-year prescriptive period would apply. Atty. Manuel:
Sa pagbibilang ng prescriptive period, kailangan yung
RATIONALE BEHIND PRESCRIPTION releasing, mailing, or sending must be within 3 years or
10 years, as the case may be.
.
Q: Para saan ang prescription? Papaano natin malalaman kung prescribed na ba?
A: Yung 3 years from due date or filing, whichever is later.
I. To the government: Officers would be obliged to act Yun ang rule natin sa prescription.
properly and promptly in making assessments.
EXAMPLE:
Atty. K: So let’s say, January 1, 2022 nag-file ng return. Let’s
Remember, prompt and certain availability of taxes is an say eto rin deadline para madali. Eto kunwari yung start
imperious need pursuant to the lifeblood doctrine. Para ng reckoning day para sa prescription. So 3 years—
magmadali, kailangan ng prescription. January 1, 2025.
II. To the taxpayers: December 25, 2024, a few days before January 1, 2025,
1. For feelings of security against unjust tax audit. nakatanggap ng LOA. Tapos naissue yung PAN nung
January 5. Naissue ang FAN, Fenruary 14.
Atty. K:
Para mapanatag ang kanilang loob na hindi na Prescribed na ba yung assessment kung natanggap
sila maassess for something that is super long yung LOA before the 3 year period? And yung PAN and
ago. FAN after the expiration of the 3 year period? Answer is
yes.
2. Limit on obligation to keep their books and for
inspection. The assessment contemplated in Secs. 203 and 222
refers to the service of the FAN upon the taxpayer
Atty. K: (CIR v. Transitions Optical Philippines, 2017)
Kasi magugulat na lang na baka mag-assess
ang BIR na “Itong transaction mo noong 1852 Atty. Manuel:
parang hindi pa buhay si Rizal noon, inaassess Papasok dapat sa 3-year period—not the receipt of
mo na, tapos paparusahan mo ‘yung LOA, not receipt of PAN, not the receipt of the NOD, but
corporation taxpayer dahil hindi makaproduce rather the releasing, mailing or sending of the Final
ng documents noong 1852. Baka nabomba na, Assessment Notice or Formal Letter of Demand. Eto
or kinain ng anay or binagyo na ‘yung yung dapat pumasok within the 3-year period.
documents. Therefore, it would be impractical
to assess a taxpayer for something that is
so long ago. AMENDED RETURNS
WHEN ASSESSMENT IS MADE? If the taxpayer files an amended return which is

substantially different from the original return,
. prescription is counted from the filing of the
CIR v. Pascor Realty and Development Corporation amended return.
G.R. No. 128315
Atty. Manuel: Amended returns may alter your
Doctrine: An assessment is deemed made only when prescriptive period especially if the amendment is
the Collector of Internal Revenue releases, mails or substantial. Kailan natin macoconsider na substantial?
sends such notice to the taxpayer.
Amendment considered substantial:
To consider the affidavit attached to the Complaint as a
proper assessment is to subvert the nature of an 1. There is underdeclaration (exceeding 30%)
assessment and to set a bad precedent that will of taxable sales, receipts or income; or
prejudice innocent taxpayers. An assessment informs 2. There is overstatement (exceeding 30%) of
the taxpayer that he or she has tax liabilities. But not all deductions.
documents coming from the BIR containing a
computation of the tax liability can be deemed Section 248(B), National Internal Revenue Code
assessments.
Atty. Manuel:
Atty. Manuel:
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30% ang nabago. 30% increase in sales or 30% yung 1. A waiver of the right to invoke the defense of
deduction. Ano ang mangyayari? The amendment is prescription
considered substantial. 2. but a waiver of the agreement between the
taxpayer and the BIR to extend the period to a
So, if it is substantial, what is the effect sa prescriptive date certain, within which the latter could still
period? Mauusog yung prescriptive period natin. Of assess or collect taxes due.
course, kapag nausog ang prescriptive period natin, it’s
now from due date, actual filing, or amending, EXAMPLE:
whichever is the latest among the three. So, if nagkaroon ng waiver, instead na January 1,
2025—extend natin hanggang March 31, 2025. Tapos
Syempre kailangan mo bigyan ng panahon si BIR, nag- lumipas ang March 31, 2025, hindi nakapag issue ng
amend ka eh (substantial), so mababago investigation. FAN and FLD si CIR. Umakyat ng CTA. Sabi ni CIR,
taxpayer you cannot allege prescription because may
Q: Kailan ba pwede mag-amend? waiver ka. Of course, that is not proper. It’s not a waiver
A: of the right to invoke the defense of prescription but
rather extension lang. Dahil di mo pa rin nafifile sa
Amended Return extension, di ka pa rin nakapag issue ng FAN/FLD, the
taxpayer may still invoke the defense of prescription
When: within 3 years from the date of such filing, the doon sa extended period pursuant to the waiver.
return may be modified, changed, or amended.
Q: Bakit ba nagwawaiver?
XPN: Notice for audit or investigation of such return, A: Normally, the waiver is actually si for the benefit of
statement or declaration has been actually served the taxpayer. Taxpayer ang nagrerequest na mag
upon the taxpayer. execute ng waiver of the statute of limitations. Kasi ang
daming demand ng BIR sa documents and it would take
Section 6(A), National Internal Revenue Code time for the taxpayer to produce these documents.
Normally kakamadali ng BIR, time-pressured ang BIR
Atty. Manuel: kasi malapit na pumatak ang 3-year period to issue the
FAN/FLD. Therefore, mammressure ang BIR na i-
Except if napadalhan ka na ng LOA, hindi ka na pwede release mo yan unless FAN/FLD na agad. Of course
mag-amend. Yun na talaga return mo, di na pwede i- sasabihin ni taxpayer na wala pa documents and
amend belatedly. therefore ipapa-extend ang deadline. Sasabihin ni BIR
na hindi kasi mag pprescribe na 3 years. Counter offer
Q: Can we extend prescription? ni taxpayer na mag execute ng waiver of the statute of
A: Yes. With a waiver. limitations.
Q: Can an agreement shorten the prescriptive period?

WAIVER OF THE STATUTE OF LIMITATIONS A: No. The CIR cannot validly agree to reduce the
prescriptive period to less than that granted by law
The CIR or her DAR and the taxpayer or its because it would result to the detriment of the State.
authorized representative may agree in writing as to
a specific future date within to assess the taxpayer Summary of Agreement:
for internal revenue taxes for a given taxable period,
before the expiration of the period to assess taxes. 1. Shorten the prescriptive period – NO
2. Extend the prescriptive period – YES
Atty. Manuel: The waiver must be in:
1. Writing Atty. Manuel:
2. Specific future date must be indicated
3. Before the expiration of the period to assess Hanggang extension lang ang pwede. Hindi pwedeng
taxes shorten the prescriptive period kasi it would result to the
detriment of the State.
EXAMPLE:
Dun sa example natin—January 1, 2022 expiration, The taxpayer’s waiver of statue of limitation does not
January 1, 2025 prescribed na. if magwawaiver ka ng cover taxes already prescribed. (Republic v. Lim
prescription. Lampas na ng January 1, 2025, February De Yu, G.R. No. L-17438, 30 April 1964)
na, wala ka na iwawaive because the period to collect
taxes has already prescribed. Wala ka na ieextend Atty. Manuel:
because the prescriptive period has already prescribed.
Kailangan the waiver must be executed before the Kapag lumipas na ang panahon, wala ka na i-wawaive
expiration of the period to assess taxes. pa, wala ka na i-eextend pa. Actually hindi siya waiver
talaga, but rather an extension.
Take note that the effect of the waiver is not:
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GUIDELINES ON PROPER EXECUTION OF it is the taxpayer who is in charge. But there are many
WAIVERS cases too na mali yung waiver of the defense of
prescription—mali sa form—but since tinanggap ni BIR,
the BIR was held responsible for such, hindi na nakapag
The Waiver of the Statute of Limitations shall be
assess si BIR, nagging prescribed na.
executed before the expiration of the period to
assess or to collect taxes.
The waiver may or may not be notarized. It is
The date of execution shall be specifically indicated sufficient that the waiver is in writing.
in the waiver.
Q: Can there be multiple waivers?
Atty. Manuel: A: Yes. Walang limit as to the number of waivers. Kung
gusto mong mag-extend nang mang-extend, go lang.
Ilalagay dapat date of execution sa waiver kasi of
course, para malaman that it was executed before the Before the expiration of the period set on the
expiration of the period to assess. Since a waiver is an
previously executed waiver, the period earlier set
agreement between the BIR and the taxpayer, of course
may be extended by subsequent written waiver.
the waiver must likewise be:
The waiver shall be signed by the taxpayer himself

or his duly authorized representative. The taxpayer:
Atty. Manuel: - Submits its duly executed waiver to the CIR
or pertinent officers who shall then indicate
We also need to have the date of expiry date—kung acceptance by signing the same.
hanggang saan inextend yung waiver ng prescription.
- Retains a copy of the accepted waiver.
The expiry date of the period agreed upon to
assess/collect the tax after the regular period of
prescription should be indicated.
CIR v. Next Mobiline
G.R. No. 212825
Effect of failure to conform to the requirements of

waiver of statute of limitations: It is invalid and
ineffective to extend the prescriptive period to assess
taxes.
Therefore, masusunod pa rin ‘yung original three-year

prescriptive period as if there was no extension at all.
SUSPENSION OF STATUTE OF LIMITATIONS
Q: Can prescription be suspended?

A: Yes. It may be suspended when:
Atty. Manuel:
GR: When the taxpayer cannot be located in the
Yung date of execution and date of expiry, ang tawag address given by him in the Return.
natin sa dalawang yun ay—material dates. Failure to
indicate one of the dates, that invalidates the defense of
prescription.
XPN: CIR is informed of the change in address.
The taxpayer is charged with the burden of ensuring
that the waivers are validly executed by its authorized
representative. When the taxpayer is out of the Philippines.
Atty. Manuel:
and cannot be served by any Assessment Notice.
Why? Because normally it’s for the taxpayer’s benefit.
Siya ang nagrerequest niyan. Sakanya nagsisimula ang When the Warrant of Distraint/Levy (WDL) is duly
waiver of the defense of prescription. Siya ang served upon the taxpayer, his authorized
nagsesend sa BIR ng kanyang signed copy. Therefore,
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representative or a member of his household with First requisite: GROUNDS:

sufficient discretion and no property is located.
- Tax is erroneously or illegally assessed or
collected;
Atty. Manuel: - Penalty is imposed without authority; or
- Sum collected is excessive or in any manner
If walang property na mahagilap, the prescriptive period wrongfully collected.
(only to collect) is suspended. Syempre, kapag may
WDL na, it presupposes na tapos na ‘yung assessment Atty. Manuel:
diyan.
Karamihan ng §229 refund cases would go this way:
Where the CIR is prohibited from assessing or Nagbayad si taxpayer ng tax tapos narealize niya
beginning distraint of levy or a proceeding in court later on na sobra ang compute niya or mali ‘yung tax
for 60 days thereafter, such as where there is a na binayaran niya (e’g’ maling rate). Therefore, he
pending petition for review in the CTA from the would apply for a claim for refund.
decision on the protested assessment. (Republic vs.
Requisites for §229 Refund:
Ker & Co., GR No. L-21609)
Atty. Manuel: Second requisite: CLAIM:

If legally prohibited si CIR from proceeding with the - There must be a written claim for refund
collection (like when the CTA issues a suspension of filed by the taxpayer with the CIR.
collection of payment), then the Statute of Limitations
shall also be interrupted.
Third requisite: PERIOD:
When the taxpayer Requests for Reinvestigation
- Must be filed within 2 years from date of
which is granted by the CIR payment of the tax or penalty regardless of
any supervening cause that may arise after
payment. No suit or proceeding shall be
TAX REFUNDS instituted after the expiration of such period.
Q: Ano ang natatanggap natin by way of tax refunds? - NB: The 2-year period is jurisdictional. May
A: be extended or may be waived.
1. Tax refund - actual reimbursement of tax
(Sec 204(C), NIRC) Atty. Manuel:
- ini-issuehan tayo ng cheke galing sa
BIR galing sa Bureau of Treasury The 2-year period includes both the administrative
2. Tax credit - the government issues a Tax claim (with the BIR) and the judicial claim (petition
Credit Certificate (TCC) which may be for review before the CTA) for refund.
applied against any internal revenue tax,
excluding withholding taxes, for which the Illustration of 2-Year Period for §229 Refund:
taxpayer is directly liable. (Sec. 204(C))
3 Kinds of Refund under the NIRC
1. Sec. 229 - Refund of taxes erroneously or

illegally collected
2. Sec. 112(A) - Refund of input VAT
attributable to zero-rated sale
3. Sec. 112(B) - Refund of input VAT on
cancellation of registration
1. Erroneously or illegally collected taxes

Atty. Manuel:
Requisites for §229 Refund: Year 1 and Year 2 are both from the date of payment.
That is the reckoning period.
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Nagbayad ako on Dec. 31, 2020. Nagfile ako ng Only proof of withholding; Proof of remittance is not
administrative claim for refund on April 2022. Mage- required.
expire ang 2-year period ng Dec. 31, 2022. Therefore,
any time before Dec. 31, 2022, I can file my judicial
claim for refund. Atty. Manuel:
If you filed a claim for refund, it presupposes that you
This is assuming that there is INACTION on the part of paid for the same.
the CIR. Because if there is DENIAL, from receipt of the
denial (of the administrative claim), within 30 days, dun Banco De Oro (BDO) v. Republic
tayo magfa-file ng petition for review with the CTA G.R. No. 198756, 16 August 2016
(judicial claim).
Atty Manuel:
But assuming there is inaction by the CIR, then I can file On withholding tax, only proof of withholding is required.
my judicial claim for refund any time as long as it is Di kailangan patunayan ng isang taxpayer that
within the 2-year prescriptive period which ends on Dec. remittance was paid by the withholding agent.
31, 2022.
Q: What if ang mangyayari ay dumikit yung EXAMPLE:

Administrative Claim of Refund sa Judicial Claim of Ako ay isang empleyado na mag-fifile ng claim for
Refund? The 2-year period expires on December 31, refund kasi sobra yung pagkakakaltas sa sweldo ko ng
2022. Of course, the date of payment is December 31, employer ko, halos kalahati ang nabawas. I filed a claim
2020. I filed my Administrative Claim for Refund on for refund before the BIR. BIR told me that they can’t
December 27, 2022. Therefore, nung nag-file ako ng grant the refund because I did not present any proof that
Administrative Claim for Refund, 4 days na lang paso the employer has actually remitted the tax that has been
na yung period to file a Judicial Claim of Refund before withheld from me. Ang alam ko lang nabawasan ako ng
the CTA. Can I file immediately on December 31, 2022? tax. Hindi ko alam kung ang tax na yon ay napunta sa
BIR.
A: YES. Kahit nga umaga i-file yung Administrative
Claim for Refund tapos hapon yung Judicial Claim for Sabi ng SC, hindi ko kailangan patunayan na napunta
Refund, we can already file before the CTA a petition for sa BIR yung tax na yon. Ang importante lang ay
review. Ang importante parehas pasok sa 2-year period maipakita ko sa korte na nabawasan ako ng tax.
yung BIR Claim and yung CTA Claim.
CIR v. Goodyear Philippines, Inc. Requisites for Sec. 229 Refund

G.R. No. 216310, 03 August 2016
Fifth requisite:
Atty Manuel: Filed by the proper party.
The CIR alleges that it is improper that in such a short
time, (i.e. two days) after filing BIR claim, the taxpayer
immediately filed a petition for review before the CTA.
BIR was not able to decide. Baka hindi pa ng nakita Proper Party in Refund
yung BIR claim, diretso CTA agad? Pwede ba yon?
YES. If the taxpayer would wait for BIR to decide, the The “taxpayer” is the person entitled to claim a tax
taxpayer would lose the right to appeal considering that refund. He is the “party adversely affected” who is
if he will wait for the BIR to decide, it will already exceed given the right to appeal the decision or ruling of the
the 2-year prescriptive period within which to file his CIR.
petition for review before the CTA. Thus, no matter how
close the filing of the administrative claim for refund Statutory taxpayer: to whom the tax is imposed by
before the BIR is to the expiration of the 2-year law.
prescriptive period, pwedeng immediately after, you file
a petition for review before the CTA as long as mag-
eexpire na yung 2-year prescriptive period. Q: Who is the proper party?
GR: The taxpayer. If it is income tax, whoever earned

the income. If VAT, whoever is the seller. If donor’s tax,
Requisites for Sec. 229 Refund it is the donor.
Atty. Manuel:
Fourth requisite: As to statutory taxpayer, sino ba ang nagfifile ng return?
Taxpayer must present proof of payment. Sino ba ang pwedeng makulong sa di pagbabayad ng
tax kung sya ang statutory taxpayer natin.
On withholding tax:
XPN:
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A: Either the taxpayer or the withholding agent may file

a claim for refund.
Proper Party in Refund
CIR v. Smart Communications, Inc.
G.R. Nos. 179045-46, 25 August 2010
Doctrine: The person entitled to claim a tax refund is

the taxpayer. However, in case the taxpayer does not
file a claim for refund, the withholding agent may file the
claim.
TEXT:
Where the tax has been shifted:
the taxpayer Respondent is a domestic corporation duly registered
with the Board of Investments. It entered into three
Agreements for Programming and Consultancy
Atty. Manuel: Services with Prism, a Malaysian corporation.
Let’s take for instance, VAT. Si seller nagbenta kay
buyer. Sa pagbenta kay buyer, alam natin na tax is an Prism billed respondent in the amount of
indirect tax and therefore may tax-shifting na US$547,822.45. Thinking that these payments
nagaganap wherein the economic burden of VAT is constitute royalties, respondent withheld 25% of the
passed from the seller to the buyer. amount as royalty tax under the RP-Malaysia Tax
Treaty. Within the two-year period, Smart filed a claim
Q: Can the buyer file a claim for refund? for refund of the above-mentioned amount.
A: NO. Where the tax has been shifted, it is still the

taxpayer i.e., the seller. The seller is still the taxpayer
because he is the one who files the return. Even if the Payment under Protest
buyer bears the incidence of taxation, the person
statutorily liable (ang pwedeng makulong sa hindi GR: Payment under protest is not a requirement.
pagbabayad ng VAT), is still the seller because he is the
one required under Secs. 105,106,107, and 108 to file XPNs:
for VAT returns. Thus, seller is still the proper party to 1. Refund for real property taxes (Sec. 252,
file for refund in such case. LGC)
2. Refund of customs duties (Sec. 2308,
CMTA)
Proper Party in Refund
Atty. Manuel:
Protest, sometimes, is essentially a claim for refund in
the abovementioned instances.
In relation to 1, if we would like to protest an assessment

of RPT, bayad muna bago protest. Essentially, a protest
under the RPT is a claim for refund.
On withholding taxes: In relation to 2, the same is true – bayad muna bago

the taxpayer or the withholding agent protest.
Atty. Manuel: Liability of Government for Interest

Nagbenta si Seller kay Buyer tapos of course, may
payment si Buyer kay Seller. However, the transaction GR: No interest on refund of tax.
is subject to a withholding tax. Therefore, binawasan ni
Buyer yung payment kay Seller and a certain XPNs:
percentage was given to the BIR. 1. If interest is authorized by law;
2. Arbitrariness in the collection of tax;
Q: Sino ang proper party for the claim of refund? Is it 3. Withholding tax on wages.
the withholding agent-buyer (nag-remit kay BIR) or the
taxpayer-seller (nakaltasan ng bayad)?
Atty. Manuel:
In relation to 1, walang instance na ganyan.
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negative ka parin, hindi mo na pwedeng irefund yung

In relation to 2, by virtue of equity, the government may nacarry over mo last year.
impose interest especially if the taxpayer resisted
payment. Q: Can the refund be carried over? Why?
A: YES. The Irrevocability Rule applies only to the
In relation to 3, sa mga agrabyadong empleyado, may option to carry-over. Yung narefund pwedeng icarry
interest na 6% per annum. over. Provided, That the taxpayer first withdraws his
application/claim for refund. If na-grant na yung claim
for refund, tapos icarry over mo pa, kairita ka. Sampalan
Liability of Government for Interest nalang. Nakuha mo na yung cheke ng refund eh.
Any excess of the taxes withheld over the tax due

from the taxpayer shall be returned or credited REFUND OF INPUT VAT
within 3 months from April 15.
Refunds or credits made after such time shall earn 1. SEC. 112(A) – Refund of input VAT attributable to
interest at the rate of 6% per annum. zero-rated sale
2. SEC. 112(B) – Refund of input VAT on cancellation
(Sec, 79(C), NIRC) of registration.
2. Refund of Input VAT attributable to

GOVERNMENT LIABILITY FOR INTEREST Zero-Rated Sale
Any excess of the taxes withheld over the tax due Who files: any VAT-registered person, whose sales
from the taxpayer shall be returned or credited are zero-rated or effectively zero-rated
within three (3) months from the fifteenth (15th)
day of April. Refunds or credits made after such time Reason for refund:
shall earn interest at the rate of six percent (6%) per
annum, starting after the lapse of the three-month ZERO-RATING V. EXEMPT
period to the date the refund of credit is made. [Sec. In both instances of zero rating, there is total relief for
79(C)(2), NIRC] the purchaser from the burden of the tax. But in an
exemption there is only partial relief, because the
purchaser is not allowed any tax refund of or credit for
Q: What is the rate of interest under Sec. 79(C)(2)? input taxes paid. [Commissioner of Internal Revenue v.
A: The interest is 6% per annum if the excess is not Seagate Technology (Philippines), G.R. No. 153866, 11
returned or credited within 3 months from 15 April. February 2005]
IRREVOCABILITY RULE
If the quarterly tax payments exceed the total tax due

on the entire taxable income of that year, the
corporation shall either:
1. Carry-over the excess credit; or
2. Be credited (tax credit certificate or TCC); or
3. Refunded with the excess amount paid (actual tax
refund).
NOTE: Once the option to carry-over has been made,

such option shall be considered irrevocable for that
taxable period. Once we have carried over, irrevocable
na sya. Hindi na pwede irefund subsequently yung
nacarry over na amount.
DISCUSSION:
No application for cash refund or issuance of a TCC
shall be allowed therefor. [Sec. 76, NIRC]
Jihyo purchased merchandise for a price of
P1,000,000. She was able to subsequently sell it for
EXAMPLE:
P1,200,000. How much is the VAT payable
In 2022, na negative balance in income tax payable
assuming:
(excess credit) wala na akong babayaran tapos may
(a) The sale is an export sale.
carry over pa. I carry-over ko na lang. Kung next year,
(b) The sale is a VAT-exempt sale.
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Medyo mahaba yang [period] Unlike sa Sec. 229 na 2

Atty. Manuel: years from date of payment (date of payment plus 2
If you recall our discussion sa VAT, napagusapan years = yun na yung prescriptive period. Pero dito [sa
natin na kapag zero-rated, it is still a VAT-subject 112A], bumili ka ng materyales today, July 11. Tapos
transaction. Ang hindi subject sa VAT ay VAT- anong nangyari? Binenta mo ng October 2022 yung
exempt sale. Bakit VAT-subject pa eh zero-rated sale materyales na binili mo. Zero-rated yung pagkakabenta.
na nga. Ano ang importance nun?
Kelan yung deadline for the filing for a claim for refund?
Ang importance nun ay yung claiming ng input VAT Ang deadline is of course, alamin natin kung kelan yung
natin. Sa pagclaim ng input VAT, alam natin na only sale. October 2022. Plus 2 years. October 2024 ba ang
VAT-able transactions can claim input VAT sa sale deadline? The answer is NO. Hindi October 2024
na may input VAT attributable thereto because “it is two years after the close of the taxable
quarter when the sales were made.” Since the sale was
If input VAT or passed on VAT attributable to VAT- made in October 2022, anong quarter sya? 4th quarter.
exempt sale, alam nating we cannot claim the input At the close of the 4th quarter – December 31 ang close
VAT passed to us. Hindi natin maibabawas sa ating of the quarter. Therefore, December 31, 2022 plus 2
tax. Pero kapag zero-rated, since it is VAT-subject years … Ang deadline of the filing of the claim for refund
transaction, any passed on VAT attributable to zero- of input VAT doon sa sale mo nung October ay
rated sale, may be claimed as input tax credit. So December 21, 2024, two years after the close of the
halimbawa, kay Jihyo, output VAT less input tax, yan taxable quarter when the sales were made.
ang computation ng VAT payable natin.
Amount: to the extent that such input tax has not
What if zero-rated yung transaction? Export sale. been applied against output tax
Alam nating zero-rated sale yan—actual sale and
actual shipment of goods to a foreign country paid for Atty. Manuel: Eto yung hindi mo nagamit na input tax.
in acceptable foreign currency in accordance with the Yung negative balance parin after deducting input from
rules and regulations of the BSP. Ano ang output.
mangyayari? Meron tayong input VAT na P120,000.
San galing? P1,000,000 x 12% VAT. At dahil zero- Any input tax attributable to zero-rated sales by a
rated sya dahil export sale, P1,200,000 x 0, ang VAT-registered person may at his option be
sagot ay zero output VAT. Therefore, may VAT refunded or applied for a tax credit certificate which
payable tayo na negative (-P120,000). If negative may be used in the payment of internal revenue
balance ang payable, hindi ikaw ang may utang. taxes. [Section 4.110 7, Revenue Regulations No.
Sayo pa may pagkakautang. Instead of having 16-2005, as amended by Revenue Regulations No.
something to pay, you have something to receive. 02-2007]
BIR pa may utang sayo? The answer is YES,
because that is the effect of a zero-rated sale. Kaya
sabi ni Seagate, total relief kasi yung napasang VAT 3. Refund of Input VAT on cacnellation of
sayo, dahil zero-rated sales are still VAT-subject registration
transactions, you can still claim that particular input
VAT. Pero pag nagmultiply ka ng output VAT, wala
kang lalabas na output VAT jan. In effect, negative Who can claim: A person whose registration has
yung magiging VAT payable mo. You have been cancelled due to retirement from or cessation
something to be refunded. Kaya Sec. 112(A) of business, or due to change in or cessation of
provides that a VAT-registered person engaged in
status. (Section 112 (B), National Internal Revenue
zero-rated sale or effectively zero-rated sale can
Code)
claim refund of input tax, unlike exempt. Pag exempt,
wala syang output VAT. Dahil exempt, it is outside
the coverage of the VAT system—walang output, Atty. Manuel:
walang input. Not applicable yung input VAT, walang Kapag na-cancel yung registration due to retirement
pakialam pag VAT-exempt transaction. from or cessation of business at meron pa siyang
natitirang hindi nagamit na Input VAT.
Which is more advantageous? Zero rated, compared
with exempt transaction. Kaya sa Seagate, zero- If meron pa siyang natitirang hindi nagamit na Input VAT
rated—total relief. Pag exempt—partial relief lang. at magsasara na siya ng negosyo, puwede niya applyan
Yan ang ating reason kung bakit Sec. 112(A) allows ng claim for refund.
refund of input VAT attributable to zero-rated sale.
When: within two (2) years from the date of
When to file: within two (2) years after the close of
cancellation (Section 112 (B), National Internal
the taxable quarter when the sales were made
Revenue Code)
Atty. Manuel:
Period to decide: the CIR shall [decide] a refund for
creditable input taxes within 90 days from the
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submission of the OR/invoices and other documents in Atty. Manuel:

support of the application filed. (Section 112(C), CTA case lang ito though. Hindi siya binding, hindi siya
National Internal Revenue Code) stare decisis material. CTA lang kasi nag-decide.
Atty. Manuel:
Marami kayong nababasa na 120 [days] but that’s Per CTA, the lapse of the 90-day period is deemed a
because 90 [days] na, as amended by Tax Reform for denial so puwede ka na mag-appeal within 30 days from
Acceleration and Inclusion (TRAIN Law). the lapse of the 90-day period. But of course, since bago
pa lang ang batas (TRAIN), medyo wala pa
Before TRAIN Law or before January 1, 2018 (the nakakatungtong ng Supreme Court or nade-decide
effectivity of TRAIN), 120 siya. yung Supreme Court regarding jurisdiction sa 90-day
period.
Form of denial: the CIR must state in writing the legal
and factual basis for the denial. (Section 112 (C), EXAMPLE:
National Internal Revenue Code) Let’s say the admin claim for refund was filed March
2022 (Year 1). Again December 31, 2020 yung close of
Atty. Manuel: the quarter when the zero-rated sale was made and
Wala nang inaction. Inalis sa Section 112 yung denial therefore December 31, 2022 yung taning ng 2 years
by inaction. Upon the lapse of the 120 days, automatic natin.
puwede na i-elevate sa CTA.
Admin claim for refund was filed on March 2022. We
Ang sabi lang under Section 112, “failure to decide have to observe 90 + 30 days before we could file the
within the 90-day period, the concerned officer will be judicial claim for refund. Take note, this Year 2 is from
dealt with administratively”. Na parang may penalty the close of taxable quarter when zero-rated sale
yung officer na hindi magde-decide within 90 days. was made.
But walang sinabi kung pwede na ba mag-appeal

papuntang CTA kapag nag-expire yung 90-day period.
That failure on the part of any official, agent, or

employee of the BIR to act on the application within the
ninety (90)-day period shall be punishable under
Section 269 of this Code. (Section 112 (C)(2), National
Internal Revenue Code).
In the event that the 90-day period has lapsed without

having the refund released to the taxpayer-claimant, the
VAT refund claim may still continue to be processed
administratively. (Section 4, 112-1, RR No. 16-2005, as
amended by RR No. 26-2018)
Kanina under Sec. 229, nung inusog yung admin claim
for refund, sagad na yung judicial claim for refund. Hindi
Atty. Manuel:
na aandar yung judicial claim for refund. Under Sec.
Pwedeng tuloy-tuloy lang. Puwede mo iwanan sa BIR
229, yung judicial claim for refund ay pasok sa 2-year
yung iyong claim for refund at hintayin mo sila mag-
period.
decide. Puwede yun under RR. No. 26-2019.
Under Section 112, what if umusog yung admin claim
Remedy in case of denial: within 30 days from the for refund, uusog din si judicial claim for refund because
receipt of the decision denying the claim appeal the the 90 and 30 day periods are jurisdictional in nature.
decision with CTA. (Section 112 (C), National Internal Ang kailangan lang pumasok within the 2-year period is
Revenue Code). the admin claim for refund. Hindi kailangan pumasok si
judicial claim for refund within the 2 year period.
Mitsuba Philippines Technical Center Corp. v. CIR
C.T.A Case No. 10025, 6 October 2021 Section 229 Section 112 (A) and (B)
Doctrine: However, the said 90-day period lapsed 2-year period
without any action from respondent. Given the
prevailing rule that inaction on the part of the CIR is Both BIR claim and Only the admin claim
deemed a denial, petitioner’s claim is considered CTA Petition for for refund is needed to
“deemed denied” as early as 26 December 2018 or the Review must be filed be filed within the 2-year
expiration of the 90-day (previously 120-day) waiting within the 2-year period. period.
period. Thus, petitioner had 30 days or until 25 January
2019, to appeal such inaction to the Court. Reckoning Point
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112 (A) – from the close First ground: A reasonable doubt as to the validity
of the quarter when the of the claim against the taxpayer exists.
zero-rated sale was
made. EXAMPLES:
From date of payment 1. Jeopardy assessment na minadali lang
2. No factual and legal basis
3. Nag-rule na ang CTA against the BIR
112 (B) – from the date of
cancellation of
Second ground: The financial position of the taxpayer
registration demonstrates a clear inability to pay the assessed tax.
Being in the nature of a claim for exemption, refund is EXAMPLES:

construed in stricissimi juris against the entity claiming 1. Deficit na matatagpuan sa retained earnings
the refund and in favor of the taxing power. 2. Negative balance na yung retained earnings
3. 50% ang negative balance
4. Total liabilities exceed total assets
FORFEITURE OF REFUND OR CREDIT
5. Nag-cease na ng operations
6. Insolvent na yung ating taxpayer. If insolvent na
1. Tax Refund – When a refund check or warrant yung taxpayer, puwede na mag apply ng
remains unclaimed or uncashed within 5 years compromise for financial incapacity.
from date of mailing or delivery.
2. Tax Credit – a Tax Credit Certificate which Requisites for financial incapacity as ground for
remains unutilized after 5 years from date of compromise settlement:
issue, shall be invalid, unless revalidated.
1. Clear inability to pay the tax; and
2. The taxpayer must waive in writing his privilege
COMPROMISE AND ABATEMENT of the secrecy of bank deposit, which shall
constitute as the CIR’s authority to inquire into
said bank deposits. (Sec. 6(F), NIRC)
COMPROMISE
Compromise Rate
Compromise is the contract between the government
and the taxpayer to settle the liability.
Doubtful validity – 40% of basic tax assessed
Financial incapacity – 10% of basic tax assessed
Atty. Manuel:
Napag-usapan nila na puwedeng konti nalang yung (Sec. 204, NIRC)
babayaran na tax under certain grounds.
Approval of Compromise
Compromise as amount of paid by the taxpayer to
settle his tax liability is different from compromise The CIR is allowed to enter into a compromise only if
penalty which is the amount paid by the taxpayer to
the basic tax involved does not exceed P1M and the
compromise tax violation and paid in lieu of criminal
prosecution. settlement offered is not less than the prescribed
percentages. (Sec. 204(A), NIRC)
Atty. Manuel:
Instead na kasuhan ka for a criminal violation, you will Offers of compromise of assessments issued by the
instead pay the compromise penalty, which is a civil
Regional Offices involving basic deficiency taxes of
penalty.
P500,000 or less and for minor criminal violations
Compromise is an agreement na babaan yung tax. discovered by the Regional and District Offices shall
be subject to the approval of the Regional
Requisites [before entering into a compromise]: Evaluation Board (REB). (Revenue Regulations No.
30-2002)
1. Tax liability of the taxpayer;
2. An offer of the taxpayer of an amount to be paid
When Compromise Made
by him; and
3. The acceptance (the CIR of the taxpayer) of
the offer in the settlement of the claim. Criminal Cases
Grounds for Compromise
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It must be entered into prior to the institution of the

criminal action arising out of a violation of the NIRC. Atty. Manuel:
Roviro v. Amparo, G.R. No. L-5482, 05 May 1982) Surcharge is a civil administrative sanction because you
failed to pay the tax, nag-effort pa ang gobyerno na
singilin at imbestigahan ka, siyempre kailangan na
Once Information has been filed before the Court, hindi mareimburse ang gobyerno for such expenses of
na puwedeng icompromise kapag criminal cases ang investigation and loss of time.
pinag-uusapan.
Two Kinds of Surcharge
Civil Cases
25% Surcharge
Before litigation or at any stage of the litigation, even
during appeal. 50% Surcharge
For Civil cases (i.e. assessment, collection) at wala 25% surcharge (Sec. 248 (A), NIRC)
namang criminal case, it may be compromised at any 1. If there is failure to file return and the tax due
stage of the litigation. thereon;
Refusal to Follow Compromise 2. Filing a return with an internal revenue officer

other than those with whom the return is
If there is refusal to follow compromise, just like any required to be filed;
other contract, you may: -Mali ang venue for filing.
a. Enforce the Compromise; or 3. Failure to pay the deficiency tax within the time
-Ask for specific performance and enforce the prescribed for its payment in the notice of
compromise na bayaran ang napag-agreehan. assessment; or
b. Rescind the Compromise.
-You may ask for rescission and enforce the 4. Failure to pay the full or part of the amount of
original assessment of the BIR prior to the tax shown on any return required to be filed, or
Compromise. the full amount of tax due for which no return is
required to be filed, on or before the date
Prescriptive Period to Enforce prescribed for its payment.
-You filed a return, but the amount
10 years. (Art. 1144, Civil Code) indicated therein was not paid.
Basically, nagkamali tayo kaya 25% ang surcharge.

A Compromise is still a written contract; therefore 10
years is still the prescriptive period. 50% surcharge (Sec. 248(B), NIRC)
Hindi lang tayo nagkamali, sinadya nating magkamali.

ADDITIONS TO TAX Tinago natin ang ating pagkakamali.
1. Willful neglect to file the return within the period

These are our Civil Penalties. prescribed; or
2. False or fraudulent return is willfully made, in
Additions to Tax case any payment has been made on the basis
of such return before the discovery of the falsity
1. Surcharge or fraud. The following are prima facie evidence
2. Interest of a false or fraudulent return:
3. Compromise Penalties a. Substantial under-declaration of
taxable sales, receipts or income –
Failure to report sales, receipts or
Surcharge income in an amount exceeding 30% of
that declared per return, or
Surcharge b. Substantial overstatement of
deductions – A claim of deductions in
A surcharge is a civil administrative sanction an amount exceeding 30% of the actual
provided as a safeguard for the protection of the deductions.
State revenue and to reimburse the government for
the expenses of investigation and the loss resulting Interest
from the taxpayer’s fraud.
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There shall be assessed and collected on any unpaid Non-resident: he shall be deported immediately
amount of tax, interest at the rate of double the legal after serving the sentence without further
interest rate for loans or forbearance of any money proceedings. (Sec. 253(C), NIRC)
as set by the BSP. (Sec. 249(A), NIRC)
Aside from fine and imprisonment, deportation din
Interest is imposed at 12%. Automatic kapag late ang immediately after serving the sentence.
bayad natin.
If the offender:
Compromise Penalty
Public officer or employee: the maximum penalty
It is a certain amount of money which the taxpayer prescribed for the offense shall be imposed and, in
pays to compromise a tax violation. addition, he shall be dismissed from the public
service and perpetually disqualified from holding
any public office, to vote and to participate in any
election. (Sec. 253(C), NIRC)
It is imposed only with a showing that the taxpayer
consented thereto.
If the offender:
This is in lieu of criminal prosecution. Kaysa kasuhan Certified Public Accountant: his certificate as a
ka, automatic magbayad ka na lang ng compromise CPA shall, upon conviction, be automatically revoked
penalty. or cancelled. (Sec. 253(C), NIRC)
May only be imposed if the taxpayer consented thereto
considering that it requires the agreement of the Q: What if the offender is a lawyer?
taxpayer. A: There is no provision in the NIRC.
Juridical Persons
CRIMES UNDER THE NIRC In the case of associations, partnerships or

corporations, the penalty shall be imposed on the
partner, president, general manager, branch
GENERAL PRINCIPLES manager, treasurer, officer-in-charge, and the
employees responsible for the violation. (Sec.
253(D), NIRC)
Any person convicted of a crime penalized by the
NIRC shall, in addition to being liable for the payment
of the tax, be subject to the penalties imposed Prescription of Crimes
herein. (Sec. 253(A), NIRC)
5 years from the day of the commission of the
violation of the law. (Sec. 281, NIRC)
Q: Ano ba ang mga criminal penalties?
A: Fine and imprisonment.
Atty. Manuel:
Payment of the tax due after the apprehension shall
not constitute a valid defense in any prosecution Kailangan makasuhan na, of course from the date of the
for violation of the NIRC or in any action for the filing of the Information yan.
forfeiture of untaxed articles. (Sec. 253(A), NIRC)
If the same be not known at the time, from the
discovery thereof and the institution of judicial
For example, Information for tax evasion has been filed proceedings for its investigation and punishment.
tapos nagbayad ka, you cannot ask for the dismissal of (Sec. 281, NIRC)
the case. Payment of the tax due after apprehension is
not a valid defense. The fact remains that you evaded
the payment of tax, you intended to defraud the Informer’s Rewards
government. Therefore, tuloy ang kaso laban sa iyo.
Amount: 10% of the revenues, surcharges or fees
Special Offenders recovered and/or fine or penalty imposed and
collected or FMV of smuggled and confiscated
If the offender: goods.
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Limit: P1,000,000
Tax: 10% FWT Atty. Manuel:

Patanao was acquitted sa kasong tax evasion. He was
wrong in his contention that he may not be liable for the
Atty. Manuel: payment of his defiency taxes due to his acquittal. The
rationale behind this is that an acquittal in criminal cases
10% ng makukulekta ng BIR ay mapupunta sa atin. is not tantamount to exoneration from any civil liability.
Example: Nakakolekta ang BIR ng P2M at ako ang Gaw, Jr. v. CIR
nagsumbong, 10% sa akin – P200,000.00. G.R. No. 222837
Kung ang nasingil ng BIR ay P2B, hindi mapupunta sa Doctrine: The civil action filed to question the FDDA is
akin ang P200M kasi may limit na P1M. It would also be not deemed instituted with the criminal case for tax
subject to 10% FWT. evasion.
Principles in Tax Crimes
Atty. Manuel:
CIR v. Pascor Realty & Development Corp. We all know that there are some civil actions deemed
G.R. No. 128315, 29 June 1999 instituted in the criminal action. It is different in criminal
cases for tax evasion. Hindi deemed instituted yung civil
Assessment is not necessary before the filing of a action for assessment. Under the Rules of Court,
criminal complaint. particularly Rule 111, ang deemed instituted lang ay
civil liability from the crime itself. However, the civil
Atty. Manuel: liability for payment of taxes arises from a different
source of obligation.
Sabi ni Pascor Realty, wala namang final and executory
assessment which is an element of the crime of tax Ungab v. Cusi, Jr.
evasion. Therefore the criminal charge should be G.R. No. L-41919
dismissed.
Doctrine: Criminal information for tax evasion may be
Sabi ng SC, the assessment is not necessary before the filed notwithstanding pendency of administrative protest
filing of a criminal complaint. Hindi iyan action for of assessment with the BIR.
collection or civil action na kailangan ng assessment.
Kasi before the assessment is issued, may LOA, PAN,
FAN, etc. Atty. Manuel:
Hindi tinuturing na prejudicial question ang pendency of
Pero kapag criminal charge, diretso iyan, DOJ. It is the an administrative protest for deciding whether guilty for
BIR Crime Investigation Unit filing with the DOJ a tax evasion ang isang taxpayer.
recommendation na magfile ng Information. Iba ang
process na sinusundan kapag criminal cases. So hindi
kailangan ng assessment.
JUDICIAL REMEDIES
Republic v. Patanao
G.R. No. L-22356, 21 July 1967
The acquittal in criminal cases cannot operate to THE JUDICIARY

discharge the defendant from the duty of paying the
taxes which the law requires to be paid, since that duty
is imposed by statute prior to and independently of any 1987 CONSTITUTION
attempts by the taxpayer to evade payment. ARTICLE VIII
JUDICIAL DEPARTMENT
SECTION 1. The judicial power shall be vested in one

PRINCIPLES IN TAX CRIMES Supreme Court and in such lower courts as may be
established by law.
Republic v. Patanao
G.R. No. L-22356
Doctrine: The acquittal in criminal cases cannot operate

to discharge defendant from the duty of paying taxes
which the law requires to be paid, since that duty is
imposed by statute prior to and independently of any
attempts by the taxpayer to evade payment.
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• Inaction by the CIR in cases involving

disputed assessments, refunds of taxes, fees
or other charges, penalties in relation
thereto, or other matters arising under the
NIRC or ther laws administered by the BIR;
• Decisions, orders or resolutions of the RTC

in local tax cases originally decided or
resolved by them;
• Decisions of the CBAA in the exercise of its

appellate jurisdiction over cases involving the
assessment and taxation of real property
originally decided by the LBAA;
• Decisions of the Commissioner of

Atty. Manuel: Customs in cases involving liability for
Quick rundown of hierarchy of courts. We all know that customs duties, fees or other money
there is the first level courts – Metropolitan Trial Court, charges, seizure, detention of release of
Municipal Trial Court an Municipal Circuit Trial Court. property affected, fines, forfeitures or other
Above them is the Regional Trial Court. Then we have penalties in relation thereto, or other matters
the Court of Appeals, Sandiganbayan and for purposes arising under the Customs Law or other laws
of our discussion, the Court of Tax Appeals. Above them administered by the BoC;
is the Supreme Court.
• Decisions of the Secretary of Finance on
customs cases elevated to him
THE COURT OF TAX APPEALS automatically for review from decisions of the
CoC which are adverse to the Government
under Section 2315 of CMTA;
THE COURT OF TAX APPEALS
• Same level as the Court of Appeals • Decisions of the Secretary of Trade and
• Shall consist of a Presiding Justice and eight Industry and Secretary of Agriculture
Associate Justices. commodity or article involving dumping and
• Divided into three divisions countervailing duties under Section 301 and
• Justices shall be appointed by the 302, CMTA and safeguard measures under
President and upon the nomination by the RA No. 8800;
Judicial and Bar Coucil.
• The Justices shall hold office during good • Criminal offenses
behavior, until they reach the age of 70, or o Appeals from judgments, resolutions
become incapacitated to discharge the or orders of the RTC in tax cases
duties of their office. originally decided by them
o Petition for Review of judgments,
Section 1, Republic Act No. 1125 as amended by resolutions or orders of the RTC in the
Republic Act No 9282 and 9503 exercise of their appellate jurisdiction
over tax cases originally decided by
Quorum: the MeTC, MTC and MCTC.
• Five (5) Justices for sessions en banc
• Two (2) Justices for sessions of a Division • In tax collection cases
o Appeals from judgments, resolutions
or orders of the RTC in tax collection
JURISDICTION OF THE CTA cases originally decided by them
o Petition for Review of judgments,
1. Exclusive appellate jurisdiction resolutions or orders of the RTC in the
2. Exclusive original jurisdiction exercise of their appellate jurisdiction
over tax collection cases decided by
EXCLUSIVE APPELLATE JURISDICTION the MeTC, MTC and MCTC.
• Decisions of the CIR in cases involving

disputed assessments, refunds of taxes, fees
or other charges, penalties in relation EXCLUSIVE ORIGINAL JURISDICTION
thereto, or other matters arising under the
NIRC or other laws administered by the BIR;
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Atty. K: May exclusive original jurisdiction na hindi o Exception: With respect to the
dadaan ng anumang korte, hindi dadaan ng anumang decisions or rulings of the CBAA and
quasi-judicial agency; diretso file na agad sa CTA. RTC in the exercise of its appellate
jurisdiction, appeal shall be made by
filing a petition for review under a
EXCLUSIVE ORIGINAL JURISDICTION procedure analogous to that provided
for under Rule 43. The CTA shall hear
● Criminal offenses the case en banc.
o All criminal offenses arising from
violations of the NIRC, CMTA, and
other laws administered by the ● Manner of Decision
BIR/BOC o Decisions of the Court shall be in
writing, stating clearly and distinctly
the facts and the law on which they are
o Provided that, offenses or felonies based, and signed by the Justices
where the principal amount of taxes concurring therein.
and fees, exclusive of charges and
penalties, claimed is less than
P1,000,000 or where there is no ● Decision of CTA Division
specified amount claimed shall be tried o Two (2) members of a Division shall
by the regular Courts and the be necessary for the rendition of a
jurisdiction of the CTA shall be decision or resolution in the Division
appellate. Level.
● In tax collection cases o A party adversely affected by a ruling,

o Tax collection cases involving final order, or decision of a Division of the
and executory assessments for CTA may file a motion for
taxes, fees, charges, and penalties. reconsideration or new trial before
the same Division of the CTA within
fifteen (15) days from notice thereof.
o Provided that, offenses or felonies
where the principal amount of taxes
and fees, exclusive of charges and o In cases falling under the exclusive
penalties, claimed is less than appellate jurisdiction of the Court en
P1,000,000 or where there is no banc, the petition for review of a
specified amount claimed shall be tried decision or resolution of the Court in
by the regular Courts and the Division must be preceded by the
jurisdiction of the CTA shall be filing of a timely motion for
appellate. reconsideration or new trial with the
Division.
● Period of Appeal
o Any party adversely affected by a o A party adversely affected by a
decision, ruling, or inaction of the CIR, resolution of a Division of the CTA on
CoC, SoF, STI, SoA, CBAA, or RTC a motion for reconsideration or a new
may file an appeal with the CTA within trial, may file a petition for review with
thirty (30) days. the CTA en banc.
o Reckoning point: ● Decision of CTA en banc

1. Receipt of such decision or ruling; or o A simple majority of the Justices
2. After the expiration fixed by law for present is necessary to promulgate a
action. resolution or decision.
● Mode of Appeal
o Appeal shall be made by filing a
petition for review under a procedure o The affirmative votes of five (5)
analogous to that provided for under members of the Court en banc shall be
Rule 42 with the CTA. necessary to reverse a decision of a
Division.
o A Division of the CTA shall hear the

appeal.
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Atty Manuel: Atty. Manuel:

Mahirap magreverse ng Decision ng Division. Hindi If isususpend ang collection, the Court may require the
pwede iinhibit yung mga justices na nagdecide ng taxpayer to deposit the amount claimed or file a surety
Decision sa Division. bond para in case adverse ang Decision kay taxpayer,
may masingil parin ang BIR.
Once may Decision na CTA En Banc, what’s next?
Appeal to Supreme Court. An interested party may file a motion for the
suspension of the collection of the tax liability.
It may be filed together with the petition for review or
APPEAL TO SC
with the answer, or in a separate motion filed by the
interested party at any stage of the proceedings.
A party adversely affected by a decision or ruling of (Sections 2 and 3, Rule 10, Revised Rules of the
the CTA en banc may file with the Supreme Court a Court of Tax Appeals)
verified petition for review on certiorari pursuant to
Rule 45 of the 1997 Rules of Procedure. (Section 19,
R.A. No. 1125 as amended by Republic Act No. Atty. Manuel:
9282) Para masuspend ang collection of payment, kailangan
may Motion for suspension of the collection of payment.
The petition for review on certiorari shall be filed
within 15 days from notice of the judgment or final
NOTES ON THE CTA
order or resolution appealed from, or of the denial of
the petitioner’s motion for new trial or
reconsideration. (Section 2, Rule 45, Revised Rules The CTA has no power to assess.
on Civil Procedure, Rules of Court)
The CTA can also hear tax cases between two
government agencies.
EFFECT OF APPEAL TO COLLECTION
Atty. Manuel:
No appeal taken to the CTA shall suspend the The CTA has no power to assess. Hindi naniningil ang
payment, levy, distraint, and/or sale of any property CTA.
of the taxpayer for the satisfaction of his tax liability.
(Section 11, R.A. No. 1125 as amended by R.A. No. EXAMPLE:
9282) Ang issue sa FDDA ay income tax. Inappeal sa CTA,
biglang Decision ng CTA, you’re liable in Income tax
and VAT. That’s improper, because VAT is not being
Atty. Manuel: assessed. Therefore, it becomes the CTA assessing
So tuloy parin ang collection notwithstanding pendency VAT for the first time. Assessment is a function of the
of an appeal sa CTA, due to the principle of lifeblood executive department, particularly the BIR. Tagadecide
doctrine. lang ang ating CTA or Courts in general. Therefore, the
CTA has no power to assess. It can only determine the
When in the opinion of the Court the collection may proper category of taxes. (Air Canada v. CIR)
jeopardize the interest of the Government and/or
the taxpayer, the Court at any stage of the Atty. Manuel:
proceeding may suspend the said collection. The CTA can also hear tax cases between two
(Section 11, R.A. No. 1125 as amended by R.A. No. government agencies. Kasi the CIR likewise collects
9282) taxes from other government agencies if allowed. Under
PD 242, kapag conflict or cases between two
government agencies, it’s the Secretary of Justice
Atty. Manuel: which has jurisdiction. However, kapag tax cases,
However, exception to the no injunction rule, the CTA exception sa rule ng PD 242 na SOJ ang may
may suspend collection at any stage of the proceeding jurisdiction. CTA in specialized court, siya ang may
if it will jeopardize the interest of the Government and jurisdiction dyan.
the taxpayer.
The CTA is a highly specialized body specifically
The Court may require the taxpayer either to: created for the purpose of reviewing tax cases.
1. Deposit the amount claimed, or Because of this recognized expertise, the findings of
2. File a surety bond for not more than double the CTA will not ordinarily be reviewed absent a
the amount with the Court. showing of gross error or abuse on its part.
(Section 11, R.A. No. 1125 as amended by R.A. No. (Philippine Refining Co. v. Court of Appeals, G.R.
9282) No. 118794, 8 May 1996)
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Atty. Manuel:
In upholding the supremacy of CTA in deciding tax case,
the CTA is a highly specialized body specifically created
for the purpose of reviewing tax cases. Because of this
recognized expertise, the findings of the CTA will not
ordinarily be reviewed absent a showing of gross error
or abuse on its part.
SUMMARY OF JUDICIAL REMEDIES
Atty. Manuel:
May mga kaso na dumederetso ng CTA En Banc. With
respect to decisions or rulings of the CBAA and RTC in
the exercise of its appellate jurisdiction, appeal shall be
made by filing a petition for review under a procedure
analogous to that provided for under Rule 43. Deretso
na sa CTA En Banc within a period of 15 days.
Atty. Manuel:
Decisions or Inaction of the CIR are appealable sa CTA
Division. Period is within 30 days.
Decisions of the Commissioner of Custom, Secretary of

Finance, Secretary of Agriculture, and Secretary of
Trade and Industry are appealable to CTA Division
within 30 days.
Decisions of RTC in its original jurisdiction appealable

within 30 days to CTA Division. If at least one million
pesos, CC meaning Criminal Cases, or Collection
Cases, pwede na tayong dumeretso sa CTA Division.
Atty. Manuel:
Similarly, for CBAA, since palaging appellate yan,
magsisimula sa Local Board of Assessment Appeals
(LBAA), 30 days to appeal to the Central Board of
Assessment Appeals (CBAA). Then, 15 days, under
Rule 43, deretso na tayong CTA En Banc.
Atty. Manuel:
Once na may Decision na tayo ng CTA Division, wag
muna dumeretso ng En Banc. File muna Motion for
Reconsideration or Motion for New Trial. That’s
mandatory and jurisdictional within 15 days from receipt
of Decision.
After MR or MNT, if adversely affected by a resolution

of a Division of the CTA, a party may file a petition for
review before the CTA En Banc. Period is 15 days from
the receipt of the adverse Resolution sa MR or MNT. Atty. Manuel:
After CTA En Banc Decision, petition for review on
certiorari na to the SC, 15 days.
Mock Bar 2022 | 57

Atty. Manuel:
Color Code of Arrows:
Blue – Rule 42, 30 days
Red – Rule 43, 15 days
Orange – Revised Rules of CTA, 15 days
Purple – Rule 45, 15 days
Green – LGC, 30 days
GOOD LUCK, BATCH 2023!
Mock Bar 2022 | 58


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TAXATION LAW REVIEWER

UST FACULTY OF CIVIL LAW | Atty. Kenneth Manuel

Mock Bar 2022

Table of Contents GUIDELINES ON PROPER EXECUTION OF WAIVERS......... 43

Mock Bar 2022

for public use. This stems from the Regalian Doctrine

GENERAL PRINCIPLES OF TAXATION Lifeblood Doctrine

CIR v. Court of Appeals, G.R. No. 106611, 21 July

Atty. Manuel: SIMILARITIES OF THE INHERENT POWERS

The Benefits-Received Theory is also known as the TAXATION BEING ENFORCED

It states that the rule of taxation shall be uniform

Manifestations of administrative feasibility a. Minimum wage earners

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income that exceeds said

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LIMITATIONS TO THE POWER TO TAX

So, ayan ang sabi ni Justice Bernas sa kanyang libro. If

1. Public purpose So, of course pag-usapan natin, dahil nasa public

Abakada Guro Party List v. Ermita

1. Public Purpose Let’s talk of the purposes of taxation. Malamang primary

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Other Purposes of Taxation

2. LGU – local taxes (Art. X, Sec. 5, 1987 Constitution Atty. Manuel:

3. Administrative agencies Under Tax 1, napagaralan natin ang de minimis benefits

Taxation is an act of sovereignty, the power to tax is

Atty. Manuel: However, we have 2 exceptions,

Q: Ano ang mga intraterritoriality exceptions?

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Zero-Rated Sale of Goods

Goods sold to persons or entities whose exemption

Section 4.106-5 RR No. 16-2005, as amended by RR

Atty. Manuel: United Nations, ADB, IRRI by virtue of

A: Kasi halimbawa for resident citizen, they are deemed

Q: Nakibugbugan si Pacquiao abroad. Kumita siya,

A: Yes, because nevertheless Pacquiao is abroad, he

Atty. K: However, for the rest of the taxpayers, less na

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A Tax Treaty is an agreement entered into between

Doctrine of Sovereign Equality Two (2) kinds of Double Taxation:

Foreign governments are exempt from Philippine 1. Direct double taxation

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a. on the same subject matter, 2. Indirect double taxation

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MCIT, in the CREBA case, was upheld as valid

Chamber of Real Estate and Builders' Association, 1. Procedural due process

REQUISITES FOR VALID CLASSIFICATION ARTICLE III

However, we have these cases, the Peralta (Peralta v.

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Yung mga ating churches, mosque, and other places of

A poll tax is one levied on persons who are residents

3 kinds of tax according to subject:

What is unique with tax legislation?

original jurisdiction of the Commissioner, subject to

NATIONAL INTERNAL REVENUE CODE

POWERS OF THE COMMISSIONER

NATIONAL INTERNAL REVENUE CODE

ORGANIZATION AND FUNCTION OF THE

SECTION 4. Power of the Commissioner to

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promulgated by the Secretary of Finance, • Although these are internal instructions,

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Section 5(A), National Internal Revenue Code