RECOLETOS LAW CENTER PRE-WEEK NOTES IN TAXATION LAW Bar Exam 2021 ‘Aity RaeganL. Cape GENERAL PRINCIPLES Concept of Taxation ‘The power of taxation, being an essential and inherent attribute of sovereignty, belongs, ‘5 a matter of righ, to every independent government, and needs no express conferment by the people before it can be exercised. It is purely legislative and, thus, cannot be delegated tothe exccutive and judicial branches of government without running afoul to the theory of separation of power. 2. Theories of Taxation 1 Lifeblood Theory ‘Taxes are the lifeblood of the government, being such, their prompt and certain availability is an imperious need. Without taxes, the goverment would be paralyzed for lack of motive power to activate and operate i ‘b. Necessty Theory ‘Taxes proceed upon the theory that the existence of the government is a necessity; ‘that it cannot continue without the means to pay its expenses; and that for those means, it has the right to compe all citizens and properties within is limits to contribute & Benefits Protection Theory ‘The basis of taxation isthe reciprocal duty of protection between the state and its inhabitants. In retum for the contributions, the taxpayer receives the general advantages and protection which the government affords the taxpayer and his property d. Favorable Business Climate Theory Domestic corporations owe their corporate existence and their privilege to do business to the government. They also benefit from the efforts ofthe government to improve the financial market and to ensure a favorable business climate. It is ‘therefore fair forthe government to require them to make a reasonable contribution to the public expenses. (Chamber of Real Estate and Builders? Association vs Romulo, GR. 160756, March 9, 2010) 3. Principles of Sound Tax System a Fiscal Adequacy - The sources of tax revenue should coineide with and ‘approximate the needs of government expenditure. Neither an excess nor a deficiency of revenue vis-i-vis the needs of government would be in keeping with the principle. b. Administrative Feasibiliy - Tax laws should be capable of convenient, just and effective administration ‘© Theoretical Justice- The tax burden should be in proportion tothe taxpayers ability to pay. This is also known as the ability to pay theory. The 1987 Constitution requires taxation tobe equitable and uniform,‘Any violation ofthe first two priniples will nt render the law invalid because they have ‘no constitutional basis unlike the principle of theoretical justice. The determination ofthe wisdom, expediency and necessity ofthe tax-measure belongs tothe law-making body of the State 4, Double Taxation ‘Double taxation means taxing the same property twice when it should be taxed only once; that is, "taxing the same person twice by the same jurisdiction for the same thing "It is ‘obnoxious when the taxpayer is taxed twice, when it should be but once. Otherwise described as “diroet duplicate taxation,” the two taxes must be imposed on the same subject matter, forthe same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period; and the taxes must be of the same kind oF character. (Commissioner of Internal Revenue v. Bank of Commerce. GR, No, 149636, June 8, 205) '. Eliminating Double Taxation ‘a. Exemption Method Credit Method Tax Treaty 6 Compensation and Set-OfT GENERAL RULE: Taxes are not subject to sctoff or legal compensation. The ‘goverment and the taxpayer are not creditors and debtors or cach other. Obligations in the nature of debis are due to the goverament in its corporate capacity, while taxes are duc to the government in its sovereign capacity. (Philex Mining Corporation ¥s. ‘Commissioner of Internal Revenue, 294 SCRA 687) EXCEPTION: Where both the claims ofthe government and the taxpayer against each ‘other have already become due and demandable as wel as fully liquated. ‘Requisites of Compensation in Taxation 1. The tax assessed and the claim against the govemment be fully liquidated. 2. The tax aceeseed and the claim against the government is due and demandable. 3. The goverment had already appropriated funds for the payment of the claim. (Domingo vs. Garltos,L-18904, June 29, 1963) 7. Tax Avoidance and Tax Evasion ‘Tax avoidance and tax evasion are the two most common ways used by taxpayers in cscaping from taxation. Tax avoidance is the tax saving device within the means sanctioned by law. This method should be used by the taxpayer in good faith and st arm's length. Tax evasion, on the other hand, is a scheme used outside of those lawful means usually subjects the taxpayer to futher or additional civil or 8 Elements of Tax Evasion 1 The end to be achieved, i. the payment of less than that known by the texpayer to be legally due, or the non-payment of tax when its shown that a taxis due: 2. An accompanying state of mind which is described as being evil, in bad faith, willful o deliberate and not accidental; and3. A course of action or failure of action which is unlawful. (Commissioner of Internal Revenue vs. The Estate of Benigno P. Toda, Jr, G.R. No, 147188, ‘September 1d, 2004) 9. Distinction between Tax Amnesty and Tax Exemption EL Tax Amnesty Tax Exemption janakes of an absolute forgiveness or | The grant of immunity to particular persons ‘waiver by the Government ofits right to | or corporations of a particular clas from a Collect what otherwise would be due it|tax of which persons and corporations land. in this sense, prejudicial thereto, | generally within the same state or taxing particularly to tax evaders who wish to | district are obliged to pay. felent and are willing to reform are given, ‘chance o do s0 and therefore become 3 part ofthe society with a clean Immunity I ‘administrative liabilities arising from non- | ayiment of taxes ‘Applies enly to past tax periods, hence | Prospective aplication | retroactive appliation oo "There is revenue loss since there were | None, because there was no actual taxes luxcr actually due’ but collection “was | due as the person or transaction is protected | waived by the government by tax exemption. "Never favored nor presumed in law, and is granted by statute, The terms of the amnesty ‘or exemption must be strictly construed against the taxpayer and liberally in favor ofthe | government. civil and | amunity fom civil liability only 10, Tax Laws “The rule of statutory construction is that tx laws should be interpreted liberally in favor fof the taxpayer and strictly against the Government, except in the matter of tax ‘exemptions, in which case the rule is reversed. (The Collector of Internal Revenue v: Swpor Consolidated Mining Company. et.al G.R. No. L-11527, November 25, 1958) INCOME TAXATION 11, Distinguish Schedular Tax System, Global Tax System and Semi-Schedular or ‘Semi-Global System ‘Schedular tax system or approach is system employed where the income tax treatment Varies and made to depend on the kind or category of taxable income ofthe taxpayer. [A global tax system or approsch is «system where the tax treatment views indifferently the tax base and generally teats in common all categories of taxable income of the taxpayer. (Rufino R. Tan vs. Ramon R. Del Rosario, Jr, G.R No. 109289, October 3, 1994) ‘Semi-schedular of Semi-Global System is the system used in the Philipines. A system ‘where the compensation, business or professional income, capital gain and passive income not subject to final tax, and other income are added together to arrive atthe gross income, and after deducting the sum of allowable deductions from business or professional income, capital gain and passive income not subject to final tax, and other Income, inthe case of corporations, as well as personal and additional exemptions, in the ‘ase of individual txpayers, the taxable income is subjected to one set of graduated tax ‘ates; method of taxation under the lew12, Distingust ‘Capital from Income “The essential difference between capital and income is that capital is a fund; income is a flow. A fund of property existing at an instant of ime is called capital. A flow of services rendered by that capital by the payment of money from it or any ther benefit rendered by ‘fund of capital in relation to such fund through a perio of time is called an income. Capital is wealth, while income is the service of wealth. (Vicente Madrigal vs. James Rafferty, GR. No, 1-12287, August 7, 1918) 13, What is“AILEvents Test” in recognizing an income? ‘The all-events test requires the right 19 income or libilty be Fixed, and the amount of such income or liability be determined with reasonable accuracy. However, the test dacs not demand that the amount of income or liability be known absolutely, only that a taxpayer has at his disposal the information necessary to compute the amount with reasonable accuracy. The all-cvens test is satisfied where computation remains uncertain, if its basis is unchangeable the test is satisfied where a computation may be unknown, but is not as much as unknowable, within the taxable yea. The amount of liability does not have to be determined exact; it must be determined with “reasonable accuracy.” ‘Accordingly. the term “reasonable accuracy” implies something less than an exact oF completely accurate amount. ‘The propricty of an accrual must be judged by the facts that a taxpayer knew, or could reasonably be expected to have know, at the closing ofits books forthe taxable year. ‘Accrual method of accounting presents largely a question of fact; such thatthe taxpayer bears the burden of proof of establishing the acrual ofan item of income or deduction. (Commissioner of Internal Revenue vs. Isabela Cultural Corporation, G.R. No. 172231, February 12, 2007) 14. Types of Personsl Income Earner Purely Compensation Income Earner = Purely compensation income camer is an individual whose source of income is purely derived from an employer-employee relationship. Section 2(b), Revenue Regulation No. 8-2018) b. Self-Employed Individual/Professional- Self-employed is a sole proprictor or an independent contractor who reports income earned from self-employment. Sihe controls who she works for, how the work is done and when itis done. It includes those hired under a contract of service or job order, and professionals whose income is derived purely from the practice of profession and not under an employer - employee relationship Professional, on the other hand, is a person formally certified by a professional body belonging toa specific profession by virtue of having completed a required examination of course of studies and/or practice, whose competence can usually be measured against an established set of standards. It also refers to a person who engages in some art or sport for money, as a means of livelihood, rather than as 2 hobby. It includes but is not limited to doctors, lawyers, engineers, architects, CPAs, professional entertainers, artists, professional athletes, directors, producers, insurance agents, insurance adjusters, management and technical consultants, bookkeeping agents, and other recipients of professional, promotional and talent fees, (Section 2(n), Revenue Regulation No. 8-2018) 6 Mixed Income Earner ~ Mixed Income Eamer is an individual caring ‘compensation income from employment, and income from business, practice of profession andor other sources aside from employment. (Section 2(j), Revenue Regulation No. 8-2018)15. Tax of Purely Compensation Income Earner Schedular rate as follows effective January 1, 2018: Net Taxable Income ro ‘Over _| But Not Over ie Rate 250,000 | 0% 250,000 | 400,000 | 20% of excess aver 250,000 “} 400,000 | 804,000 | 30,000 +25% of excess over 400,000 $800,000 | 2,000,000 | 130,000 + 30% of excess over 800,000 2,000,000 | 8,000,000 | 490,000 + 32% of excess over 2.000.000 8,000,000 2.410.000 + 38% of excess over 800,000 16. Tax of Self-Employed I Gross Sales Receipts and Other [Non-Operating Income | ‘Not Exeseding P3,000,000 | Options TE Schedular Rate of 0% - 35% 2. 8% of gross sales/receipts and other non-operating income in excess of P250,000 Exceeding P3(000,000 ‘Schedular Rate 7] vidual Professionals ad | 17. Tax of Mixed Income Earner Type ofincome [Tax Liailixy [Compensation Income ‘[Sehedular Rate of 0% - 359% Tncome from business or practice of profession Gross salesreceipts and other ‘Non-operating income 4. not execeding P3,000,000 | Options: 1. Schedular Rate of 0% - 35% 2. $% of gross slevecips and other now-opeaing | 'b. excoeding P3,000,000__| Schedule Rate of 0%-35% [Rules on Election of 8% Income Tax Rate ‘The individual taxpayer is considered as having availed of the graduated rates unless the taxpayer signifies his intention to elect the 8% income tax rate in the Ist Quarter Percentage andior Income Tax Return, or on the initial quarter return of the taxable year after the commencement of a new business/pactice of profession. Such election shall be irevocable, and no amendment of option shall be made forthe said taxable yea 19. The option to be tated at 8% income tax rate, however, is not available to the following individuals: 1. Purely compensation income eamers; b. A VAT-registered taxpayer, regardless of the amount of gross sales/eccipts and ‘other non-operaing income;©. Non-VAT taxpayers whose gross sale/eceipts and other non-operating income exceeded the P3 000,000.00 VAT threshold: 4. A taxpayer who is subject to Other Percentage Taxes under Title V of the Tax Code, as amended, except those subject under Section 116 of the same Title; ©. A partner of a General Professional Partnership (GPP) by virue of thei ‘distributive share from GPP which is already net of cst and expences; and Individual enjoying income tax exemption such as those registered under the Barangay Micro Business Enterprises (BMBEs), etc, since taxpayers are not allowed to avail of double or multiple tax exemptions under different laws, unless specifically provided by law. (Section 3(C), Revenue Regulation No. 8-2018; Revente Memorandum Circular No. 50-2018) 20, Automatic Graduated Rates [Even if @ taxpayer initially chose the 8% income tax rate, he shall automatically be subject to the graduated rates when taxpayer's gross salevreceipts and other non- ‘operating income exceeded P3,000,000.00. In such case, his income tax shall be ‘computed under the graduated income tax rates and shall be allowed a tax credit for the previous quarterls income tax payments under the 8% income tax rate option, 21, Final Withholding Tax (FWT) vs Creditable Withholding Tax (CWT) EWT cwr ‘The amount of income tax withheld [a Taxes withheld on certain income by the withholding agent is | payments are intended to equal of at ‘constituted a full and final payment | least approximate the tax due of the ‘of the income tax due from the payee | payee on said income. 1 the said incom . The liability for payment of the tax [b, Payee of income ie required to report rests primarily on the payor as a| the income andior pay the difference withholding agent between the tax withheld and the tax ‘due on the income. The payee also has the right to ask for a refund if the tax withheld is more than the tax due ‘6. The payee is not required to file an |e. The income recipient i still required to income tax return for the particular | — file an income tax return, as prescribed income in See. $1 and Sec. $2 of the NIRC, a5 smended 22, Irrevocability Rule ‘Under the new law, in case of overpayment of income taxes, the remedies are still the same; and the availment of one remedy still precludes the other. But unlike Section 69 of the ald NIRC, the carry-over of excess income tax payments is no longer limited to the sueceeding taxable year. Unutilized excess income tax payments may now be cartied ‘over tothe succeeding taxable years until flly utilized. In addition, the option to earry- ‘over excess income tax payments is now irevocable. Hence, unullized excess income tax payments may no longer be refunded. (Belle Corporation vs. Commissioner of Internal Revenue, GR. No. 181298, January 10, 2011) 23, Summary of Tax Rules for Educational Institution Proprietary Educational | Non-Stock, Non-Profit Educational stitution institution Tncome Tax Subject to 10% preferential Exempt from income tax provided the ‘corporate rate if income from | income and revenues are actual Tax 62s, . Does a withholding agent is unrelated activites i not more than $0% of its income, ‘otherwise regular corporate income tax of 30% (See. 27(B), IRC) ‘direcily and exclusively used for ‘educational purposes An. XIV, See. 43), 1987 Constiaution, Commissioner of Internal Revenue vs. De La Salle University, G.R. 196596, November 9, 2016) a Bequest, devise, legacies or tansfers to educational institution, whether proprietary or non-stock, non-profit, are subicct to estate tax. Section 87(d) of the NIRC only exempts bequest, devises, legacies or transfers to social welfare, cultural and charitable institutions fom estate tax, Educational institution isnot included. sare subject 10 | Donations are exempt from donor's ‘donor's tax tax provided the following ‘eqirement are met 1. Not more than thirty percent (G0%) of the said gift should be used for administrative purposes; 2. The donce should be governed by trustees who do not receive any ‘compensation; 3. The donee should not be authorized to receive dividends: and 4, The donee devotes all its income tothe accomplishment and promotion of its purpose. (See. OIA), NIRC) VAT Educational services by private educational institutions (proprietary or ‘non-stack, non-profit) duly accredited by DepEd, CHED or TESDA are exempt from VAT. (See. 109(1)(H), NRO) [Donors Tax Real Exempt from real property tax provided the property is actually, directly Property | and exclusively used for educational purposes. Tax ‘The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution. is also held that the r a ‘reasonably necessary for the accomplishment of the main purposs. (Commissioner of Internal Revenue vs. De La Salle University, G.R. No, 196596, ember 6, 2016) .vem egal personality to file a written claim for refund? YES, with legal personality. Withholding agent is not only an ageat of the government, Dut also an agent ofthe taxpayer with regard to fling of return and payment of the tax Withholding agent is technically considered as taxpayer, therefore has the personality 10 file a writen claim of refund. (Commissioner of Internal Revenue vs. Wander Philippines, G.R. No. L-68375, April IS, 1988) OMe International Aiclne is subject to Corporate Income Tax ‘The general rule is that resident foreign corporations shall be taxed at 30% on their income from within the Philipines, except for resident foreign corporation that are international carters that derive income from cartiage of persons, excess baggAEE, c&rgO 7‘and mail originating in the Philippines which shall be taxed at 2 14% of their gross Philippine billings ‘fan international air carrier maintains flights to and from the Philippines, it shall be taxed at 214% of ite gross Philippine billings, while international air carirs that do not hhave flights to and from the Philippines but nonetheless eam income from other activities in the Philippines will be taxed at the rate of 30% (South African Airways vs Commissioner of Internal Revenue G.R. No, 180356, February 16, 2010) 126, Other Changes under the TRAIN Law Particular NRC TRAN ‘PCSO and Loto Winnings | Exempt regardless of | P10,000 or less ~ Exempt ‘amount Final Withholding Tax Interest Income from 13% [Expanded Foreign Currency Deposit Units | Sale of Shares of Stock of | First P100,000 3% | Flat rat of 15% regarless Domestic Corporation Not | In Excess of P100,000 - 10% | of amount of net capital Traded in Local Stock ai Exchange | Applicable only to: (Citizen and Resident | individuals and domestic corporations [No change in CGT rate for: Resident and Non-resident foreign corporations ‘Sales of Listed Shares W of 1% of the GSP oF the | 6/10 of 1% ofthe GSP or the {47055 value in money of the | gross value in money ofthe shares sold shares sold Professional Partnership carPs) partners comprising the | partnership Philippine ‘Charity | Exempt from Income Tax | Exemption is removed Sweepiakes Office ESTATE AND DONOR’S TAX ‘The proceeds of lfe insurance are included inthe gross estate under the following rules 'b. The insurance policy is life insurance. «che insurance policy was taken out by the decedent himself upon his own life 4. The designated beneficiary is estate, executor, or administrator regardless of the designation whether revocable or irrevocable. Ifthe designated beneficiary is other than the estate, executor, or administrator, the proceeds of life insurance is included in the gross estate ifthe designation is revocable. If the designation is irevocable, the proceeds of life insurance excluded ffom the gross estate. (See. 87(E), NIRC)28, Exemption of Certain Acquisitions and Transmissions ‘The following shall not be taxed ‘2 The merger of usufruct in the owner ofthe naked tile . The transmission or delivery ofthe inheritance or legacy by the fiduciary heir legatee tothe fideicommissary; The transmission fom the first heir, legatee or donee in favor of another beneficiary, in accordance withthe deste of the predecessor, and 4. All bequests, devises, legacies or transfers to social welfare, cultural and charitable institutions, no part ofthe net income of which inurs tothe benefit of any individual: Provided, however, that not more than thirty percent (30%) of the said bequests, devises, legacies or transfers shall be used by such institutions for ‘administration purposes. (Se. 87, NIRO) 29. Property Previously Taxed or Vanishing Deductions Requisite ‘2 The present decedent died within five years from reccipt ofthe property through tuitous transfer, either by donation or succession The property previously taxed must be included in the gross estate of the present decedent. The property from which a vanishing deduction is being claimed must be located inthe Philippines. An estate tax or donor's tax must have been actually paid on such property. Mere ing of return is not sufficient ‘The property on which vanishing deduction is being claimed must be identified as the one received from the prior decedent or donor, and No similar deduction must have boen allowed forthe same property in the estate ofthe prior decedent 30, Should the No located outside of the Philippines? Sec. 86(D) Miscellaneous Provisions. - No deduction shall be allowed in the case of nonresident nota ctizen ofthe Philippines, unless the executor, adminsratr, or anyone ofthe hers, asthe case may be, inhudss inthe rtum required tobe filed under Section 90 the value atthe time of his ath of tha prt ofthe goss esate af the nanmsident nat situate in the Philippines, ‘31. Cancellation/Forgiveness of Indebtedness ‘The cancellation and forgiveness of indebtedness may amount toa payment of income, to 1 gift, or toa capital transaction, dependent upon the circumstances. If, for example, an individual performs services fora creditor, who, in consideration thereof cancels the deb, income to that amount is realized by the debior as compensation for his services. If, however, a ereitor merely desires to benefit a debtor and without any consideration therefor cancels the debt, the amount of the debt is agit from the creditor to the debtor ‘and need not be included inthe latter's gross income. If corporation to which a stockholder is indebted forgives the deb, the transaction has the effet of the payment of a dividend (Sec. 50, RR 2-1940)32, Renunciation of Inheritance/Hereditary Estate or Share in the Conjugal Partnership/Absolute Community ‘A renunciation by an ir, including the surviving spouse, of histher share in the ‘hereditary estate left by the decedent isnot subject to donor's tax ifthe renunciation is @ ‘general renunciation. If the renunciation is special, it is subject to donor's tax. [Renunciation is special if itis specifically and categorically done in favor of identified haeics to the exclusion or disadvantage ofthe other co-heirs in the hereditary estate. Renunciation by the surviving spouse of hivher share in the sonjugal partnership or absolute community after the dissolution of the mariage in favor of the hers of the deceased spouse oF any other person/s is subject to donor's tax, regardless whether the renunciation is general or special. (See. 1, par.d, RR 2-2003) ‘33, Transfer for Less Than Adequate and Full Consideration ‘Where property. other than real propery refered to in Section 24(D), is transfered for Jess than an adequate and full consideration in money or money's wort, then the amount bby which the fair market value of the property exceeded the value ofthe consideration, shal, forthe purpose of the tax imposed by this Chapter, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year. (See. 100) {34 Other Changes under the TRAIN Law Pasticul NIRC TRAN Estate Tax Rate raduated Tax Rates Flat rate of 6% based on the 5% 10-20% based on value | valve ofthe net exate of the net esate over 200,000 Funeral Expense Aca Forel apni o| Reno gos esate ‘whichever is Tower but not tore than P200,000 | Tdi Expense NoLinit Removed Merial Expose Upto Ps00000 [Removed [Fail Home Up to P1,000.000 ‘Inreased io TO(000.000 Standard Looe ooo Tneeased to S.000000 Expenses of ‘Non-Resident | Allowed bul proportional | Replaced by standard ‘len dsdution of 500.000 ‘otis of Dah Haqured pow vabe of Removed ‘estate exezeds P20,000 Within 2 months after ace decedent dea Filing of Estate Tax Return | Required if gross value of | No more threshold estate excsedsP200,000 Cenification bya CPA ——|Gross value of estate | Gross value of est ‘exceeds P2,000,000 ‘Time of Filing of Estate Tax | Within 6 months fom Rem decedent's death ‘Withdrawal of Bank Deposit | Withdrawal of bank deposit ‘of the decedent without BIR Certification is allowed up to 20,000 only ‘There is no more limit on the amount of withdrawal of ‘bank deposit ofthe decedent provided the bank will ‘withhold 6% of the amount withdrawn and withdrawal 10stall only be made within ‘one yea from date of death of decedent Payment of Estate Tax by | No provision | Allowed within 2 years from installment statutory date without ‘penalty and interest VALUE-ADDED TAX 35. Destination Principle/Cross-Border Doctrine ‘According to the Destination Principe, goods and services are taxed only in the country ‘where these are consumed. In connection with the said principe, the Cross Border Doctrine mandates that no VAT shall be imposed to form part ofthe cost of the goods destined for consumption outside the territorial border of the taxing authority. Hence, actual export of goods and services from the Philippines to a foreign country must be free ‘of VAT, while those destined for use or consumption within the Philippines shall be ‘imposed with 10% VAT. Export processing zones are to be managed as a separate customs teritory from the rest of the Philippines and, thus, for tax purposes, are effectively considered as foreign teritory. For this reason, sales by persons from the Philippine customs territory to those inside the export processing zones ae already taxed. ‘a exports. (Atlas Consolidated Mining and Development Corporation ¥% ‘Commissioner of Internal Revenue, G.R. No. 141104148763, June 8, 2007) 36, Profits not» consideration o be subject to VAT. [E]ven a non-stock, non-profit, organization or government entity, is liable to pay VAT. ‘on the sale of goods or services. VAT isa tax on transactions, imposed at every stage of the distribution process on the sal, barter, exchange of goods oF property, and on the performance of services. even in the absence of profit attributable thereto. The tem “in, the course of trade or business" requires the regular conduct or pursuit ofa commercial oF iy. regardless of whether or not the entity i pofit-orented. ‘Hence, itis immaterial whether the primary purpose of a corporation indicates that it receives payment for services rendered to its affiliates on a reimbursement-on-cost basis. ‘only, without realizing profit, for purposes of determining ability for VAT on services rendered. As long as th entity provides service fora fe, remuneration or consideration, then the service rendered is subject to VAT. (Commissioner of Internal Revenue vs. Commonwealth Management and Services Corporation, G.R. No. 125355, March 30, 2000) 37, Monies or receipts specially earmarked not subject to VAT [G)ross receipts subject to tax under the Tax Code do not include monies or receipts ‘entrusted to the taxpayer which do not belong to them and do not redound to the taxpayer's benefit; and it is not necessary that there must be a law or regulation which ‘would exempt such monies and receipts within the meaning of gross receipts under the Tax Code. Parenthetically, the room charges entrusted by the foreign travel agencies to the private respondent do ot form part ofits gross receipts within the definition of the Tax Code. ‘The said receipts never belonged tothe private respondent. The private respondent never ‘benefited from their payment tothe local hotels. As stated earlier, this arrangement was, u38. 3. 40. only to accommodate the foreign travel agencies. (Commissioner of Internal Revenue % Tours Specialists, Inc, G.R. No, L-66416, March 21, 1990) ‘The Mandatory 120 days + 30 days ‘Section 112(D) of the 1997 Tax Code states the time requirements for fling judicial claim for the refund or tax credit of input VAT. The legal provision speaks of two periods: the period of 120 days, which serves asa waiting period to give time for the CIR. {e act on the administrative claim fora refund or credit ad the period of 30 days, which refers tothe period for filing a judicial claim with the CTA. Iis the 30-day period that is. at issue in this ease, ‘The landmark case of Commissioner of Internal Revenue v. San Roque Power Corporation has interpreted Section 112 (D). The Court held that the taxpayer can file an appeal in one of two ways: (1) file the judicial claim within 30 days after the ‘Commissioner denies the claim within the 120-day waiting period, or (2) file the judicial claim within 30 days from the expiration of the 120-day period ifthe Commissioner docs not at within that period. In this cas, the facts are not up for debate. On 11 December 2000, petitioner filed with the BIR an application forthe refund or credit of accumulated unutilized creditable input taxes. Thus, the CIR had a period of 120 days from 11 December 2000, or until 10 April 2001, to act on the claim. It failed to do so, however. Rohm Apollo should then have tucated the CIR’s inaction as a denial of its claim. Petitioner would then have had 30 days, or until 10 May 2001, to file a judicial claim with the CTA. But Rohm Apolo filed ' Petition for Review withthe CTA only on 11 September 2002. The judicial claim was thus filed late. (Rohm Apollo Semiconductor Philippines vs. Commissioner of Internal Revenue, GR. No, 168950, January 14, 2015) ‘The Aichi Doctrine In Commissioner of Internal Revenue . Aichi Forging Company of Asia, Inc. the Supreme Court held that Section 112 of the National Internal Revenue Code of 1997 (NIRC) provides that in case of denial of his claim for tax eredit or refund or failure of the CIR to act on the application within 120 days, the taxpayer may, within 30 days from the receipt af the notice of denial or after the expiration ofthe 120-day period, appeal the decision or unacted claim with the CTA. It was emphasized that compliance with the ‘aforesaid 120- and 30-day periods is crucial in filing an appeal before the CTA. Exception to Aichi Doctrine (On February 12, 2013, the Supreme Court decided the consolidsted cases of Commissioner of Internal Revenue v. San Roque Power Corporation. Taganito Mining Corporation ¥. Commissioner of Internal Revenue, and Philex Mining Corporation ¥. Commissioner of Imernal Revenue. In San Roque-Taganito, the Supreme Court recognized the effectivity of BIR Ruling No. DA-4889-03, which expressly stated thatthe “taxpayer-claimant need not wait fr the lapse of the 120-day period before it could sock judicial relief withthe CTA by way of Petition for Review: “There is no dispute that the 120day period is mandatory and jurisdictional, and that the CTA does not acquire jurisdiction over a judicial claim tht is filed before the expiration ofthe 120-day period. ‘There are, however, two exceptions ¢o this rule, The first exception, ixif_the Commissioner, throweh specific ruling. misleads a articular taxpaver to prematurely file a judicial claim with the CTA. The second exception is where the Commissioner, through a‘eeneral interpretative rule issued under Section 4 of the Tax Code, mminkcads all taxpavers into filing prematurely judicial claims with the CTA, In there cases, the Commsioner cannot be allowed to llet ‘on question the CTA’s assumption of jurisdiction over such elaim since ‘ietable extoppel has et in as expreasly authorized under Section 246 ofthe Tax Code” In finding thatthe said BIR ruling is a general interpretative rule, which is an exception to the doctrine laid dovn in Aichi, Supreme Court held that taxpayers ating in good faith should not be made to suffer for adhering to general interpretative rules of the CIR interpreting tax laws, should such interpretation later tun out to be erroncous and be reversed by the CIR or this cour. Thus, Supreme Court carified that strict 41. 1s BIR Ruling No. DA-489.03 isa general interpretative rule and thus, all taxpayers may rely BIR Ruling No, DA-489-03 isa general interpretative rule because it was a response to a ‘query made, not by 2 particular taxpayer, but by a goverment agency tasked with ‘Processing tax refunds and credit, that is, the One Stop Shop Inter-Agency Tax Credit ‘and Drawback Center of the Department of Finance. This government agency is also the ‘addressee, or the entity responded to, in BIR Ruling No. DA-489.03, Thus, while this ‘government agency mentions in its query to the Commissioner the administrative claim ‘of Lazi Bay Resources Development, Inc., the agency was in fact asking the ‘Commissioner what to do in cases like the tx claim of Lazi Bay Resources Development, Inc, where the taxpayer didnot wait for the lapse ofthe 120-day period. ‘Clearly, BIR Ruling No, DA-489-03 isa general interpretative rule. Thus, all taxpayers ‘can ely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010, where this Court held thatthe 120+30 day periods are mandatory and jurisdictional. (Commissioner of Internal Revenue vs. Mindanao II Geothermal Partnership, G.R. No. 191498, January 15, 2014) 42, Additional VAT Exempt Transactions 1, Sale or ease of goods and services to Senior Citizens and Person with Disabilities 2. Transfer of property pursuant to Section 40(C)X2) ofthe NIRC 3. Associations dues, membership fes, and other assessments and charges collected by homeowners” associations and condominium corporations: 4, Sale of gold to the Banko Sentral ng Pilipinas; 5. Sale of drugs and medicines prescribed for diabetes, high cholesterol, and hypertension beginning January 1,2019 43, Enhanced VAT Refus System Period within which Refund or Tax Credit of Input Taxes shall be Made. ~ In proper cases, the Commissioner shall grant a refund for creditable input txes within dlacumsns in suport ofthe aplication filed in accordance with Subsections (A) and (B) hereof: Provided, That should the Commissioner find thatthe grant of refund is_not ‘peapr. the Commissioner must state in writing the legal and factual basis forthe denial, B44, Other Changes under the TRAIN Law Particular NIRC TRAN ‘VAT Threshold PI.919.500, 3,000,000 Foreign ‘Currency % 12% VAT Denominated Sale ‘Sale of Gold to Bangko om ‘VAT-Exempt Sentral ng “Transport of passengers and wm Revised: cargo y Air or Sea Vessels “Transport of passengers fiom the Philippines to a and cargo by DOMESTIC Foreign Country air or sea vessel from the Philipines ta foreign Sale of electicity by 1% VAT ‘generation, transmission by ‘any entity, and distribution ‘companies ‘Sale of evidential lot as | Exempt Exempt up to P1,500,00 defined by the Urban Development and Housing Exemption removed stating ‘Act of 1992. amounting. 10 1 anuary 2021 1,919,500 and below ‘Sale of house and lot and | Exempt Exempi up to P2500,00 ther residential dwelling amounting to P3,199,200 Exempt up to P2,000,000, and below beginning | January 2021 ‘Sale of real property for Tow | Exempt Only socialized housing is ‘cost and socialized housing ‘exempt beginning I January 2021 [Lease of Residential Unit | Exempt if monthly rent docs | Exempt if monthly rent docs not exceed P12,800 not exceed PIS,000 REMEDIES 45. Violation of Due Process Requirements Invalidates the Assessment. ‘Tax assessments issued in violation of the due process rights of a taxpayer are null and ‘void, While the government has an interest inthe swift collection of taxes, the Bureau of Internal Revenue and its officers and agents cannot be overreaching in thie efforts, but ‘must perform their duties in aceordance with law, with their own rules of procedure, and always with regard to the basi tenets of due process. ‘The 1997 National Internal Revenue Code, also known as the Tax Code, and revenue ‘regulations allow a taxpayer to file a reply or otherwise to submit comments or arguments. ‘with supporting documents at each stage inthe assessment process. Due process requires the Bureau of Intemal Revenue to consider the defenses and evidence submitted By the taxpayer and to render a decision based on these submissions. Failure to adhere to these requirements constitutes adenial of due process and tants the administrative proceedings with invalidity. (Commissioner of Internal Revenue vs. Avon Products Manufacturing, Ine, GR. Nos. 201398-99, October 3, 2018) 46. Can the President compromise taxes?'No. The National Intemal Revenue Cade vests in the Commissioner of Intemal Revenue the power and authority to compromise tax liability. (Section 204, NERC) 47. Compromise of Civil Liability ‘As a general rule, the civil liability cannot be compromised. There are only two ‘exceptions. First, when the assessment is of doubtful validity, in which case, the Commissioner can ‘compromise to not less than 40% of the basic assessed tax. And second, when the taxpayer is financially incapable 10 pay the liability, in which case, it ean be ‘compromised to not less than 10% of the basic assessed tax. ‘The law allows compromises lower than-the-above rates but the approval of a collegial board called the National Evaluation Board composed of the four deputy commissioners ‘and the commissioner is required. The same is true forall eompromises, where the basic tax involved exceeds PI million. (Section 204, NIRO) 48. Compromise of Criminal Liability ‘The general rule i all criminal liabilities can be compromised. There are only two exceptions Le. fist, when a case is already filed in court and, second, wien the case involves fraud. (Section 204, NIRC) 49. Distinguish Compromise from Abatement ‘A compromise is an agreement between two oF more persons who, to void a lawsuit, ‘amicably settle their differences on such terms as they ean agree on. A compromise by its very nature implies mutual agreement by the parties in regard to the thing or subject ‘matter which is to be compromised. A tax compromise is an agreement whereby the taxpayer offers to pay something less than what is duc and the government accepts it a a fall settlement of his tax liability. Abatement is the cancollation of a tax lability, when (1) the tax or any portion thereof ‘appears to be unjustly or excessively assessed; or the administration and collection costs involved do not justify the collection ofthe amount duc. (Section 204(B), NIRC) ‘50, What isa Letter of Authority (LOA)? ‘A Letter of Authority (LOA) isthe authority given tothe appropriate revenue officer to ‘examine the books of account and other accounting records of the taxpayer in order 10 ‘determine the taxpayer's correct infernal revenue liabilities and for the purpose of collecting the correct amount of tax, in accordance with Section S ofthe Tax Code, which gives the CIR the power o obtain information, to summonexamine, and take testimony fof persons. The LOA commences the audit process and informs the taxpayer that it i under audit for possible deficiency tax assessment. (Commissioner of Internal Revenue 1, De La Salle University, Inc, GR. No. 196596, November 9, 2016) Validity of Letter of Authority which contains “fr: verified years” ‘A Letier of Authority (LOA) should cover a taxable period not exceeding one taxable year. The practice of issuing LOA covering audit of unverified prior yeas is hereby prohibited. Ifthe audit ofa taxpayer shall inelude more than one taxable perio, the other periods or years shall be specifically indicated inthe LOA.What this provision clearly prohibits isthe practice of issuing LOAs covering audit of unverified prior years. RMO 43-90 does not say that a LOA which contains unverified Prior years is void. It merely prescribes that ifthe audit includes more than one taxable period, the other periods or years must be specified. The provision read as a whole requires that if'a taxpayer ie audited for more than one taxable yer, the BIR must specify cach taxable yea or taxable period on separate LOAS. In the present case, the LOA issued to DLSU is for Fiscal Year Ending 2003 and Unverified Prior Years. The LOA does not strictly comply with RMO 43-60 because it includes unverified prior years. This does not mean, however, tha the entre LOA is void, ‘As the CTA correctly held the assessment for taxable year 2003 is valid because this taxable period is specified in the LOA. DLSU was fully apprised that it was being audited for taxable year 2003. Corollarly, the assessments for taxable years 2001 and 2002 are void for having been unspecified on separate LOAS as required under RMO No. 43-00, (Commissioner of Internal Revenue vs. De La Salle University, Inc GR. No. 196596, November 9, 2016) ‘52, What isa Letter Notice? ‘The Letter Notice shall serve asa discrepancy notice to taxpayer similar to a Notice for Informal Conference to the concemed taxpayer. '53, May a Letter Notice be a substitute to Letter of Authority ‘A Letter Notice (LN) cannot be a substitu 10 Letter of Authority (LOA). ‘Absence of an LOA, makes the assessment unauthorized and thus, void, This is despite the prior issuance of a LN. The BIR's filure to issue an LOA constituted a violation of ‘due process and was considered fatal tothe tax audit. BIR must issue an LOA prior to issuing a Preliminary Assessment Notice (PAN), @ FinalFormal Assessment Notice (FAN), of a Final Decision on Disputed Assessment (FDDA) to the taxpayer; otherwise, the assessment is rendered void for lack of due process. (Medicard Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 222743, April §, 2017) ‘54, What isan assessment? ‘An assessment is a formal notice to the taxpayer stating that the amount thereon is duc as ‘tax and containing a demand forthe payment thereof. An assessment contains not only ‘a computation of tax liabilities bu also a demand for payment within a prescribed period (Alhambra Cigar and Cigarette Mfg. Co, vx, Collector, 1959) ‘55. What is Jeopardy Assessment? “Jeopardy assessment” shall refer to tax assessment which was assessed without the ‘benefit of complete or partial audit by an authorized revenue officer, who has reason to believe that the assessment and collection of a deficiency tax wll be jeopardized by delay because ofthe taxpayers failure to comply with the audit and investigation requirements to present his books of accounts andior pertinent reconds, orto substantiate all or any of the deductions, exemptions, or credits claimed in his return. (Sec. 3, Revenue Regulation No, 30-2002) ‘56, Requirements of Valid Assessment‘Section 228 of the NIRC provides thatthe taxpayer shall be informed in writing of the law and the facts on which the assessment is made, Otherwise, the assessment is void. To ‘implement the provisions of Section 228 ofthe NIRC, RR No, 12-99 was enacted Section 3.14 of the revente regulation reads: 3.14, Formal Leter of Demand and Astessment Notice. The formal leter of ‘demand and assessment notice shall be issued by the Commissioner ot his ‘duly authorized representative, The letter of demand calling for payment paver’ ns of taxes shall state the fx , ‘oules_and regulations, or jurisprudence on which the assessment is based, othermise, the formal letter of demand and assessment notice shall be void, The same shall be sent to the taxpayer only by registered mail fr by personal delivery. (Commissioner of Internal Revenue vs. Enron Subic Power Corporation, G.R. No. 166387, January 19, 2009) ‘57. When isan assessment deemed made? ‘An assessment is deemed made only when the collector of intemal revenue releases, Imails or sends such notice to the taxpayer. (Commissioner of Internal Revenue vs. Pascor Realty and Development Corporation, G.R. No. G.R. No. 128318. June 29, 1999) ‘58. Taxpayer has three options to dispute a 1. IF the protest is wholly or partially denied by the CIR or his authorized representative, then the taxpayer may appeal to the CTA within 30 days from receipt of the whole or partial denial ofthe protest, 2. Ifthe protest is wholly or partially denied by the CIR's authorized representative, then the taxpayer may appeal to the CIR within 30 days from receipt of the whole oF partial denial of the protest; 3. Ifthe CIR or his authorized representative failed to act upon the protest within 180, days from submission ofthe required supporting documents, then the taxpayer may appeal to the CTA within 30 days from the lapse ofthe 180-day period. 459. Assessment not necessary before filing of erimis aint ‘The issuance of an assessment must be distinguished from the fling of a comple Before an assessment is ised, there is, by practice, a pre-assessment notice Sent to the taxpayer, The taxpayer is then given a chance to submit postion papers and documents to prove that the assessment is unwarranted. If the commissioner is unsatisfied, an assessment signed by him of her is then sent to the taxpayer informing the later specifically and clearly that an assessment has been made against him or her. In contrast, the criminal charge need not go through all these. The criminal charge is filed directly with the DOJ. Thereafter, the taxpayer is notified that a criminal case had been filed ‘against him, not thatthe commissioner has issued an assessment. It must be stressed that ‘criminal complaint is instituted not to demand payment, but to penalize the taxpayer for violation of the Tax Code. (Commissioner of Internal Revenue vs. Pascor Really and Development Corporation, G.R. No. G.R. No. 128315. June 29, 1999) (60. A motion for reconsideration ofthe denial of administrative protest does not tll the ‘30-day period to appeal (othe Court of Tax Appeals In the case at bar, petitioners administrative protest was denied by Final Decision on Disputed Assessment dated August 2, 2005 issued by respondent and which petitioner 7received on August 4, 2005. Under the above-quoted Section 228 ofthe 1997 Tax Code, Peltioner had 30 days to appeal respondent's denial of its protest tothe CTA, Since petitioner received the denial ofits administrative protest on August 4, 2005, it had ‘until September 3, 2005 to flea petition for review before the CTA Division. It filed one, hhowever, on October 20, 2008, hence, it was filed out of time. For a motion for reconsideration of the denial of the administrative protest doesnot toll the 30-day period to appeal to the CTA. (Fishwealth Canning Corporation vs. Commissioner of Internal Revenue, GR. No, 179343, January 21, 2010) (61, Remedies of taxpayer in case of inaction of the Commissioner of Internal Revenue ‘or lapse of the 180-day period to decide, {Als in Section 228, when the law provided for the remedy to appeal the inaction of the CIR, it di not intend to limit itt a single remedy of filing ofan appeal after the lapse of the 180-day prescribed period. Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide either positively or negatively. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on the protested ‘assessment. More s0, because the law and jurisprudence have always contemplated a scenario where the CIR will decide on the protested assessment, 11 must be emphasized, however, that in case of the inaction ofthe CIR on the protested ‘assessment, while we reiterate ~ the taxpayer has two options, ether: 1) flea petition for review with the CTA within 30 days after the expiration ofthe 180-dlay period: or (2) ‘avait the final decision of the Commissioner on the disputed assessment and appeal such final decision to the CTA within 30 days after the receipt of a copy of such decision, these options are mutually exclusive and resort to one bars the application of the other. ‘Accordingly, considering that Lascona opted to await the final decision of ‘the ‘Commissioner on the protested assessment, it then has the right to appeal such final decision to the Court by filing a petition for review within thirty days after receipt of a copy of such decision oF ruling, even after the expiration ofthe 180-day period fixed by law forthe Commissioner of Internal Revenue to act on the disputed assessments. Thus, Lascona, when it filed an appeal on April 12, 1999 before the CTA, after its receipt ofthe Letter dated March 3, 1999 on March 12, 1999, the appeal was timely made as it was filed within 30 days ater receipt ofthe copy ofthe decision. (Lascona Land Co, Inc. rs. Commissioner of Internal Revenue, G.R. No. 171251, March $, 2012) ©.Can a Ta taxes? mayer claim a refund or tax credit for erroneously or illegally collected: ‘Yes, he can. The Taxpayer may file such a claim with the Commissioner of Intemal Revenue (See.229, NIRC), within two (2) years from the payment of the tax or penalty sought to be refunded. Failure of the Taxpayer fo file such a claim within this preseribed period shall result in the Forfeiture of his right tothe refund or tax credit. 63.10 a Taxpayer has filed a claim for refund and the Bureau has yet to render a ‘decision on this claim, can the Taxpayer clevate his claim to the CTA? ‘Yes, he can if the two (2) year period stated above is about to end, and the Commissioner has yet to fender a decision on the claim. (Gibbs v. Collector, L-13453, February 29, 1960. (64, The ruling ofthe Secretary of Fi ‘Tax Appeals nce under the NIRC is appealable to the Court of‘Admittedly, there is no provision inlaw that expressly provides where exactly the ruling fof the Secretary of Finance under the adverted NIRC provision is appealable to. However, We find that Sec. 7(a)1) of RA 1125, as amended, addresses the seeming gap in the law as it vests the CTA, albeit impliedly, with jurisdiction over the CA petition as. “other matters" arising under the NIRC or othe laws administered by the BIR. As stated: ‘See. 7, Jurisdiction.- The CTA shall exercise: 1. Exclusive appellate jurisdiction to review by appeal, as herein provided: 1. Decisions ofthe Commissioner of Internal Revenue in cass involving disputed sssesements, refunds of internal revenue taxes, feet or other charges, penalties in relation thereto, or ether matters arising under the National Internal Revenue or cothcr laws administered by the Burcau of Intemal Reven, Even though the provision suggests that it only covers rulings ofthe Commissioner, We hold that itis, nonetheless sufficient enough to include appeals from the Secretary's review under Sec. 4 of the NIRC. tie axiomatic that laws should be given a reasonable interpretation which does not defeat the very purpose for which they were passed. Courts should not follow the letter of a statute when to do so would depart from the true intent of the legislature or would ‘otherwise yield conclusions inconsistent with the purpose of the act. This Court has, in ‘many eases involving the construction of statutes, cautioned against narrowly interpreting statute as to defeat the purpose of the legislator and rejected the literal interpretation of statutes ifto do so would lead to unjust or absurd results Indeed, to leave undetermined the mode of appeal from the Secretary of Finance would bbe an injustice to taxpayers prejudiced by his adverse rulings. To remedy this situation, ‘We imply from the purpose of RA 1125 and its amendatory laws that the CTA is the ‘proper forum with which to institute the appeal. This isnot, and should not, in any way, bbe taken asa derogation ofthe power of the Office of President but merely as recognition that matters calling for technical knowledge should be handled by the agency or quasi judicial body with specialization over the controversy. AS the specialized quasi-judicial ‘agency mandated to adjudicate tax, customs, and assessment cases, there can be no other ‘cour of appellate jurisdiction that can decide the isues raised in the CA petition, which involves the tax treatment of the shares of stocks sold. (The Philippine American Life and General Insurance Company vs. Secretary of Finance, G.R. No. GR. No. 210987, November 24, 2014) . Tax Treaty prevails over a Revenue Memorandum Order ‘Our Constitution provides for adherence to the general principles of international law as par of the law of the land. The time-honored intemational principle of pacta sunt ‘ervanda demands the performance in good faith of treaty obligations on the pat of the states that enter into the agreement. Every teaty in free is binding upon the parties, and ‘obligations under the treaty must be performed by them in good faith, More importantly, treaties have the force and effect of law in this jurisdiction. ‘The obligation to comply with a tx treaty must take precedence over the objective of RMO No. 1-2000. Logically, noncompliance with tax treaties has negative implications fon interational relations, and unduly discourages. foreign investors. While the ‘consequences sought to be prevented by RMO No, 1-2000 involve an administrative procedure, these may be remedied through other system management processes, c.g. the 19‘imposition of a fine or penslty. But we cannot totally deprive those who are entitled to the benefit of a treaty for failure to strictly comply with an administrative issuance requiring prior application for tax treaty relie. (Deutsche Bank AG Manila Branch vs. Commissioner of Internal Revenue, G.R. No. 188550, August 19, 2013) LOCAL TAXATION (66. Power to Levy Other Taxes, Fees or Charges Local government units may exercise the power to levy taxes, fees or charges on any base ‘or subject not otherwise specifically enumerated herein or taxed under the provisions of the National Intemal Revenue Code, as amended, or other applicable laws: Provided, ‘That the taxes, fees, or charges shall not be unjust, excessive, oppressive, confisctory oF contrary to declared national policy: Provided, further, That the ordinance levying such taxes, fes or charges shall not be enacted without any prior pubic hearing conducted for the purpose. (Section 186, RA 7160) (67, Public hearing is mandatory t ot tax ordin In Figuerres vs. Court of Appeals, where the municipality failed to conduct public hearings prior to enacting the revisions on the schedule of fair market values and ‘cscssment level of classes of real estate properties, the Court said: “Petitioner is right in contending that public hearings are required to be conducted prior tothe enactment of an ‘ordinance imposing real property taxes. R.A. No. 7160, See. 186, provides that an ordinance levying taxes, fees, oF charges shall not be enacted without any prior public hearing conducted for the purpose.” (Antonio Reyes vs. Secretary of Justice, GR. No. 118233. December 10, 1999) (68. Challenging 9¢ validity and legality of «tax ordinance CCeatly, the law requires that the dissatisfied taxpayer who questions the validity or legality ofa tax ordinance must file his appeal tothe Secretary of Justice, within 30 days fiom effectivity thereof. In case the Seeretary decides the appeal, a period also of 30 days is allowed for an aggrieved party to goto cour. Bu if the Secretary does not act thereon, after the lapse of 60 days, a party could already proceed to seck relief in court. These three separate periods are clearly given for compliance as a prerequisite before secking redress in a competent court. Such statuory periods are set to prevent delays as well as enhance the orderly and speedy discharge of judicial functions. For this reason the courts construe these provisions of statutes as mandatory. (Antonio Reyes vs. Secretary of Justice, GR. No. 118233. December 10, 1999) at does not impose tax cannot be challenged before the Court of Tax Considering thatthe fees in Ordinance No. 18 are notin the nature of local taxes, and ‘Smart is questioning the consitutionality of the ordinance, the CTA correctly dismissed the petition for lack of jurisdiction. Likewise, Section 187 of the LGC, which outlines the procedure for questioning the consttutionality of a tax ordinance, is inapplicable, rendering unnecestary the resolution of the issue on non-ethaustion of administrative remedies. (Smart Communications, Inc. vs. Municipality of Matvar, Batangas. G.R. ‘No, 204429, February 18, 2014) 0tow Reattstote | Spec teeLand| Puc Works “yet eauciontond Province Sa on FP con ot nant et eceaing re Cost ncpany SSNS ‘uric ‘71, Exemptions from Real Property Tax ‘The following are exempted from payment ofthe real property tx: (2) Real property owned by the Republic of the Philippines or any of its politcal subdivisions except when the beneficial use thereof has been granted, for consideration or otherwie, toa taxable person; (©) Charitable institutions, churches, parsonages or convents appurtenant thersto, mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actully, directly, and exclusively used for religious, charitable or ‘educational purposes: (©) All machineries and equipment that are actully, directly and exclusively used by local water districts and government owned or controlled corporations engaged in the supply and distribution of water andlor generation and transmission of electric power: (2) All real property owned by duly registered cooperatives as provided for under RA. No, 6938; and (©) Machinery and equipment used for pollution controt and environmental protection. ‘72. Beneficial Use Doctrine ‘Section 234(a) of Republic Act No. 7160 states that properties owned by the Republic of the Philippines are exempt from real property tax “except when the beneficial use thereof hha been granted, for consideration of otherwise, to taxable person.” Thus, the portions ‘of the properties not leased to taxable entities are exempt from real estate tax while the portions of the properties leased to taxable entities are subject to realestate tax. The law Jimposes the liability 10 pay real estate tax on the Republic of the Philippines for the portions of the properties leased to taxable entities. I is, of course, assumed that the Republic of the Philippines passes on the realestate tax as part ofthe rent tothe lessees. In Government Service Insurance System . City Treasurer of the City of Manila, the Court held: x x x The tax exemption the property of the Republic or its instrumentalites caries cases only if, as stated in Sec. 234) of the LGC of 1991, "beneficial use thereof has bbeen granted, for a consideration or otherwise, to a taxable person." CSIS, as a govemment instrumentality, is not a taxable juridical person under Sec. 133(0) of the LGC. GSIS, however, lost in a sense that status with respect to the Katighak property ‘when it contacted its beneficial use to MHC, doubtless a taxable person. Thus, the real state tax assessment of Php $4,826,599.37 covering 1992 to 2002 over the subject Katighak property is valid insofar as eaid tax delinquency ie concemed as assessed over suid property. aIn Manila International Airport Authority v. Court of Appeals, the Court held Xxx Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption only if the "beneficial use thercof has been granted, {for consideration or otherwise, to a taxable person.” MIAA, as a government instrumentality is not a taxable person under Section 133(0) ofthe local Government ‘Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties subject to realestate tax However, portions of the Airport Lands and Buildings that MIAA leases to private cntties are not exempt from Fel estate tax. For example, the land area occupied by hhangars that MIAA leases to private corporations is subject fo realestate tax. In such a case, MIA has granted the beneficial use of such land arca for a consideration to & taxable person and therefore such land arcais subject to realestate ta. In Lung Center of the Philippines v. Quezon City the Court held: x x x While portions of the hospital are used for the treatment of patients and the dispensation of medical services to them, whether paying or non-paying, other portions thereof are being leased to private individuals for their clinics and a canteen, Further, & portion of the land is being leased to private individual for her business enterprise under the business name "Elliptical Orchids and Garden Cente.” Indeed, the petitioner's evidence shows that it collected P1,136,483.45 as rentals in 1991 and P1,679.999.28 for 1992 from the said lessees. ‘Accordingly, we hold that the portions of the land leased to private entities as well as those parts ofthe hospital leased to private individuals are not exempt from such taxes. (On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying of non-paying, are exempt from real ‘propery taxes. (Ciy of Pasig vs. Republic of the Philippines, G.R. No. 185023, August 24,2011) 73. Power ofthe Local Board of Assessment Appeal (BAA) In laying down the powers of the Local Board of Assessment Appeals, RA. 7160 provides in Se. 229 (b) that "(the proceedings of the Board shall be conducted solely for the purpose of ascertaining the facts... It follows that appeals to this Board may be fruitful only where questions of fact are involved. Again, the protest contemplated under See. 252 of R.A. 7160 is needed where there ita question as tothe reasonableness of the amount assessed. Hence, ia taxpayer disputes the reasonableness of an increase ina real estate tax assessment, he is required to "ist pay the tax” under protest. Otherwise the City or municipal treasurer will not act on his protest. Inthe case at bench however, the petitioners are questioning the very authority and power of the assessor, acting solely and. Independently, to impose the assessment and of the treasurer to collect the tax. These are ‘not questions merely of amounts of the increase in the tax but attacks on the very validity of any increase, (Alejandro B. Ty vs. Hon. Aurelio C. Trampe, G.R. No. 117577, December 1, 1995) 4.7 yer's Remedies-Local Tax 2TAXPAYER'S REMEDIES 7 jm ote ot ent yh el Wes we we Tis wines tn wn @ dom He ee (nett ope non ee cout rho tan ‘reso dn epi ne aap. aoe ‘Sine cur teameenenpredeton win 175. Taxpayer's Remedies-Real Property T: once ot Aenean by re toeaTrewmer |} Py te Tens under Protest na wihin 39 erro avert the protest than ear recite potest. ‘cas of dene lap te Oda period. appa othe ocal Bows of sesmert Appa! BAA) 0 dys tom rec of eniaor ape! th The LAA hs 120 gas tom ate of receipt to cece eee eee Incase of derilr lapel te 120dny pred poe) ‘othe Cera! Bourdot sessment Aspe! (CBA) ‘sin 36 ys tom recto Gril pve the ‘nase Sei appealt the Cou Tx Appeals Incase of deni appealtothe Supreme Court peed 2B