TAXATION LAW 2

COURSE SYLLABUS

Marion P. Allam
Second Semester / SY 2020-2021

1. TRANSFER TAXES

1.1. Situs of transfer taxes (Sec. 104, NIRC)

1.1.1. Exemption of intangible personal property based on reciprocity (Sec.
104, NIRC)
Case: Collector v. Fisher, 1 SCRA 93

1.1.2. Intangible properties considered situated in the Philippines (Sec. 104,

NIRC)
1.1.2.1. Mobilia sequuntur personam
1.1.2.2. Doctrine of business situs

Case: Wells Fargo Bank vs. Collector (70 Phil. 505)

1.2. ESTATE TAXES (Sections 84-97, RA 8424)

1.2.1. Bases of estate taxation

Lorenzo v. Posadas, G.R. No. 43082, June 18, 1937

1.2.2. Composition/Valuation of Gross Estate (Sec. 85)
1.2.2.1. Decedent’s interest in property
1.2.2.2. Transfers in contemplation of death

Cases:
i. Vidal de Roces vs. Posadas (58 Phil. 108)
ii. Dizon vs. Posadas (57 Phil. 465)

1.2.2.3. Revocable transfers

1.2.2.4. Property passing under general power of appointment
1.2.2.5. Proceeds of life insurance
1.2.2.6. Prior interests
1.2.2.7. Transfers for insufficient consideration

1.2.3. Deductions from the gross estate (Sec. 86), requisites

1.2.3.1. Claims against the estate
1.2.3.2. Claims against insolvent persons
1.2.3.3. Unpaid mortgages
1.2.3.4. Casualty losses
1.2.3.5. Property previously taxed (vanishing deduction)
1.2.3.6. Transfers for public use
1.2.3.7. Family home
1.2.3.8. Standard deduction
1.2.3.9. Amount received by heirs under R.A. 4917
1.2.3.10. Deductions allowed to nonresident estates

1.2.4. Exemptions and exclusions

 1.2.4.1. Property excluded from gross estate
1.2.4.2. Exemption of certain acquisitions and transmissions (Sec. 87)
1.2.4.3. Capital of the surviving spouse

1.2.5. Administrative provisions on estate taxes (Sec. 89-97, NIRC)

Cases:
i. Marcos II vs. Court of Appeals 273 SCRA 47
ii. Dizon vs. Court of Tax Appeals GR No. 140944, April 20, 2008

1.3. DONOR’S TAXES (Sections 98-104, RA 8424)

1.3.1. Purpose of donor’s tax
1.3.2. Imposition of gift tax (Sec. 98, RA 8424)
1.3.3. Computation of donor’s tax (Sec. 99, RA 8424)
1.3.3. Invalid donations (Art. 739, Art. 748-749 New Civil Code, Art. 87, Family Code,
Sec. 36[9] Corporation Code)
1.3.4. Political contributions (Abello v. CIR, GR No. 120721, February 23, 2005)
1.3.5. Condonation of debt (Sec. 50, RR 02-40)
1.3.6. Renunciation of an heir and accretion (RR 2-2003)
1.3.7. Transfer for less than adequate and full consideration (Sec. 100, NIRC)
1.2.3. Exempt donations (Sec. 101)
1.2.4. Tax credit
1.2.5. Tax return (time of filing and payment)

2. VALUE ADDED TAX (Sec. 105-Sec. 112 as amended by RA 9337)

2.1. Objectives of VAT
2.2. Characteristics of VAT and Philippine VAT System

Cases:
i. Abakada Guro Party List vs. Ermita GR No. 168730, September 1, 2005
ii. CIR vs. Magsaysay Lines G.R. No. 146984, July 28, 2006
iii. CIR vs. Toshiba Information Equipment PHils, GR No. 150154, August 9, 2005

2.3. Purposes and objectives of VAT

2.4. Persons and transactions subject to VAT (Sec. 105, NIRC)
2.4.1. Sale, barter
2.4.2.
2.4.3. Importation of goods
2.4.4. Transactions deemed sale – Sec. 106(B), NIRC
2.4.5. VAT registration requirement
2.5. VAT Tax rates and Tax bases
2.5.1. Actual zero rating
2.5.2. Effectively zero-rated transactions

Cases:
i. CIR vs. Manila Mining Corporation G.R. No. 153204, August 31, 2005
ii. CIR vs. Sekisui Jushi Philippines, inc. G.R. No. 149671, July 21, 2006
iii. CIR vs. American Express International G.R. NO. 152609, June 29, 2005

2.6. VAT-exempt transactions

2.7. VAT-exempt entities
2.8. Difference between zero-rated and VAT-exempt transactions
2.9. Input tax credits
2.9.1. Sources of input tax credits
2.9.2. Presumptive input-tax credits
 2.9.3. Transitional input VAT
2.9.4. Unutilized input tax credits
2.10. Withholding VAT
2.11. VAT compliance requirements

3. TAX REMEDIES (Sections 202-285, RA 8424)

3.1. Assessments and assessment process
3.1.1. Audit notice
3.1.1.1. Letter of Authority, requisites of a valid LOA
3.1.1.2. Letter Notice
3.1.1.3. Tax verification notice
Cases: Sony Philippines vs. Commissioner CTA Case No. 6185, Oct. 26, 2004.
CIR vs. Sony Philippines, GR No. 178697, November 17, 2010
3.1.2. Tax audit
3.1.2.1. Best evidence obtainable (Sec. 6(B), NIRC)
Case: CIR v. Hantex Trading Co. Inc., GR 136975 dated March 31, 2005

3.1.2.2. Authority of CIR to inquire into Bank Deposits (Sec. 6(F), NIRC),
RA 1405 (Secrecy of Bank Deposits Law)
3.1.2.3. Net worth method
3.1.3. Preliminary assessment notice (PAN)
3.1.3.1. Requisites of na valid PAN
3.1.3.2. Instances when PAN is not required (Sec. 228, NIRC)
Cases:
a. CIR v. Menguito, GR No. 167560, September 17, 2008
b. CIR v. Metro Star Superama, INc, GR No. 183371,
December 8, 2010
c. CIR v. Avon Products Manufacturing, Inc. GR Nos. 201398-
99 &201418-19, October 3, 2018)
3.1.4. Final Assessment Notice (FAN)
Cases:
i. CIR vs. Enron Subic Power Corporation GR No. 166387,
January 19, 2009
ii. Republic vs. CA and Nielson & Co. April 30, 1987
iii. (Estate of the late Juliana Diez vda. De Gabriel v.
CIR, G.R. No. 155541, January 1, 2004).

3.1.5. Administrative Protest

Cases:
i. Standard Chartered Bank vs. CIR, CTA Case No. 5696, August 16,
2001)
ii. Estate of Gabriel vs. Commissioner, GR 155541, 01/01/2004
iii. Bank of Philippine Islands vs. Commissioner

3.1.6. Administrative Appeal

3.1.7. Commissioner’s Decision on the Protest
Cases:
i. Allied Banking Corp. v Commisioner of Internal Revenue (G.R. 175097,
February 5, 2010)
ii. CIR v. Isabela Cultural Corp, July 11, 2001
iii. Surigao Electric Co., Inc. v. Court of Tax Appeals, et al., 57 SCRA 523
iv. Commissioner v. Ayala Securities Corporation, 70 SCRA 204
 v. Commissioner of Internal Revenue v. Union Shipping Corporation, 185
SCRA 547
vi. Yabes v Flojo (GR 46954, July 20, 1982)
vii. BIR v Union Shiping Corp. (GR 6160, May 21, 199

3.2. Collection
3.2.1. Administrative
3.2.1.1. Warrant of distraint/garnishment
3.2.1.2. Levy
3.2.2. Judicial
3.3. Period of limitation upon assessment and collection (Sec. 203, NIRC)

Cases:
i. Philippine Journalists Inc. vs. CIR, GR No. 162852, December 16, 2004)
ii. BPI vs. Commissioner, GR No. 139736, October 17, 2005
iv. Republic vs. Acebedo, 22 SCRA 135
vi. Republic vs. Salud Hizon, GR No. 130430, December 13, 1999

3.3.1. Exceptions to the 3-year prescriptive period of assessment (Sec. 222,

NIRC)
3.3.2. Instances where running of the prescriptive period is suspended (Sec.
223, NIRC)

Cases:
ii. Republic vs. Ker & Co., 25 SCRA 208
iii. BPI vs. CIR, G.R. No. 139736, October 17, 2005 (reversing CIR vs. Wyeth
Suaco Laboratories, Inc. 202 SCRA 125)

3.4. Jurisdiction of the Court of Tax Appeals

Cases:
i.Ursal vs. Court of Tax Appeals, 101 Phil. 209
ii. CIR vs. Manila Electric Company, G.R. No. 121666, October 10, 2007
ii. CIR vs. Manila Mining Corporation, G.R. No. 153204, August 31, 2005
iv. Asia International Auctioneers, Inc. vs. Parayno Jr. G.R. No. 103445, December
18, 2007

3.5. Other remedies of the taxpayer

3.5.1. Compromise - Sec. 7 (C), NIRC; Sec. 204(A), NIRC; RR No. 30-
2002; RR 7- 2001

Compromise penalty. CIR v. First Express Pawnshop Company, Inc.,

GR Nos. 172045-46, 16 June 2009

3.5.2. Abatement – (Sec. 204(B), NIRC;

3.5.3. Claim for refund (Sec. 204(C), Sec. 229, Sec. 230, NIRC)
CIR v. Meralco, GR No. 181459, June 9, 2014)

3.6. Remedies of the government

3.6.1. Forfeiture
3.6.2. Distraint and levy
3.6.3. Civil action
 3.6.4. Criminal action
3.6.5. Compromise

4. CUSTOMS DUTIES AND TARIFFS (PD 1464)

4.1. Flexible tariff clause
4.2. Regular customs duties
4.3. Special customs duties
4.3.1. Anti-dumping duties
4.3.2. Countervailing duties
4.3.3. Marking duties
4.3.4. Discriminatory duties
4.3.5.
Cases:
3.4.1. Southern Cross Cement Corporation vs. The Philippine Cement
Manufacturers Corp. G.R. No. 158540, July 8, 2004

4.4. Customs declaration procedures

Cases:
i. Jardeleza vs. People, G.R. No. 165265, February 6, 2006

4.5. Tax remedies under the Tariff and Customs Code

Cases:
i. Yaokasin vs. Commissioner, GR No. 84111, December 22, 1989
ii. Nestle Phils, Inc. vs. Commissioner of Customs, G.R. No. 134114, 2001
iii. Transglobe International, Inc. vs. Court of Appeals, G.R. No. 126634,
January 25, 1999

4.6. Jurisdiction of Collector of Customs

4.6.1. Doctrine of hot pursuit
4.6.2. Doctrine of primary jurisdiction or doctrine of exclusive customs
jurisdiction

Cases:
i. R.V. Marzan Freight, Inc. vs CA, GR No. 128064, March 4, 2004
ii. Commisioner vs. Makasiar, GR No. 79307, August 29, 1989
iii. Jao vs. Court of Appeals, 249 SCRA 35

4.7. Properties subject to forfeiture (Section 2530, TCC)

4.8. Exemptions from customs duties

5. LOCAL TAXATION (Sections 128-383, RA 7160)

5.1. Fundamental principles of local taxation

Cases:
i. PLDT vs. City of Davao, G.R. No. 143867, August 22, 2001
ii. Philippine Ports Authority vs. City of Iloilo, G.R. No 109791, July 14
2003

5.2. Common limitations

5.3. Fundamental principles of real property taxation

Cases:
 i. Allied Banking Corporation vs. Quezon City Government, G.R. No.
154126, October 11, 2005
6. REAL PROPERTY TAXATION