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2021 PRE-BAR MATERIALS

IN TAXATION LAW
By: Atty. Carmencita Caluntad-Dabu

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PART I. GENERAL PRINCIPLES OF TAXATION
A. CONCEPT, PURPOSE AND NATURE:
TAXATION - process or means of raising revenue to defray the necessary
expenses of the government
- one of the three inherent powers of the government
- attribute of sovereignty
- exercised by the lawmaking body
(Sec. of Finance vs. Ilarde, 458 SCRA 213)

B. TAXATION VS. POLICE POWER V. EMINENT DOMAIN

1. As to purpose: T – for revenue; PP – regulation;

ED- take private property for public use
2. As to benefits received: T- protection ; PP – general welfare’
ED- just compensation
3. As effect of non-payment: T- civil and criminal liability; PP –renders business
illegal

4. As to basis of amount- T- tax law; PP-expenses for regulation; ED-fair market

value

C. THEORY AND BASIS OF TAXATION

1. Lifeblood theory
2. Necessity theory
3. Benefits-received theory

Phil. GuarantyCo., Inc. vs. CIR, G.R. No. L-22074, April 4, 1965:
The power to tax is an attribute of sovereignty emanating from necessity.
It is a necessary burden to preserve to preserve the State’s sovereignty and
means to give the citizenry an army to resist an aggression, a navy to defend its
shores from invasion, a corps of civil servants to serve, public improvements
designed for the enjoyment of the citizenry and those which come within the
State’s territory, and facilities and protection which a government is supposed to
provide.

• Lifeblood theory
Republic vs. Caguioa, 536 SCRA, 193 :
Taxes are the lifeblood of the government. Without taxes, the
government cannot fulfill its mandate to promoting the general welfare and well-
being of the people.
^ Symbiotic Theory
CIR vs. Algue, Inc. , G.R. No. L-28896, Feb. 17, 1988 –
 Taxation is described as a symbiotic relationship whereby in exchange of
the
benefits and protection that the citizens get from the government, taxes are paid
for.

D. PRINCIPLES OF A SOUND TAX SYSTEM -

F – Fiscal adequacy
A – Administrative Feasibility
T - Theorical Justice
Applying the said principles, can you say that the Philippine tax system
is a sound one?

E, LIMITATIONS ON TAXATION
a. Inherent limitations -PLITE
P - public purpose
L - legislative function
I - international comity
T - territoriality
E - exemption of the government

b. Constitutional limitations – constitutional provisions relating to or

affecting the exercise of the power to tax.

Important constitutional limitations on the exercise of the power to tax:

1. Due Process clause - The requirements of due process apply not only to the
national legislature but also to the legislative bodies of local government units or
the local Sanggunians. However, while the local legislative bodies are required
to conduct public hearings, prior to the enactment of tax ordinances and revenue
measures, the national legislature has the discretion as to whether or not to
conduct public hearings before the enactment of tax laws.

2. Art. VI, Sec. 28 (3), 1987 Constitution -Tax exemption of properties actually,
directly and exclusively used for charitable, religious or educational purposes –
applies only to real property tax

3. Equal protection clause – taxpayers of equal footing should be treated alike,

both as to privileges conferred and liabilities imposed.

Ormoc Sugar Central vs. CIR, 22 SCRA 603:

If the ordinance is intended to apply to a specific taxpayer and to no one
else regardless of whether or not other entities belonging to the same class are
established in the future, it is a violation of the equal protection clause; but if it is
to apply also to similar entities, which may be established in the future, then the
tax ordinance is valid even if in the meantime, it applies to only one entity or
taxpayer for the simple reason that there is so far only one member of the class
subject to the tax measure .

CREBA vs. The Hon. Executive Secretary Alberto Romulo,

G.R. NO. 160756, March 9, 2010:
The taxing power has authority to make reasonable classification for purposes of
taxation. Inequalities resulting from a singling out of one particular class for taxation or
exemption do not infringe any constitutional limitation. The real estate industry is, by
itself, a class and can be validly treated differently from other business enterprises.
4. Non-Delegation Of The Power To Tax:
Abacada Guro Party List vs. Ermita, 469 SCRA 1 –
While the power to tax cannot be delegated to executive agencies, details
as to the enforcement and administration of an exercise of such power may lft to
them, includingthe power to determine the existence of facts on which its
operation depends, the rationale being that the preliminary ascertainment of facts
as basis for the enactment of legialation is not of itself a legislative function but
simply ancillary to legislation.

5. The President has the power to fix tariff rates.

May the delegated power of the President to fix tariff rates be exercised by his
department secretaries?

Southern Cross Cement Corp. Vs. Cement Manufacturers Association of

the Philippines, 465 SCRA 532-
The power delegated to the President under Sec.28 (2), Article VI may be
exercised in accordance with legislative sanction, by the alter egos of the
President, such as department secretaries – for purposes of the President’s
exercise of power to impose tariffs. Generally, the Sec. of Finance acts as his
alter ego. The President or the alter egos may be properly deemed as agents of
Congress to perform an act that inherently belongs as a matter of right to
Congress.

F. ASPECTS/STAGES OF TAXATION
1. Levying or Imposition
2. Collection
3. Payment

G. DOCTRINES IN TAXATION

1. Prospectivity of lax laws –

Exception: when the law provides retroactive effect
-- not political – law of occupied territory
-- not penal; hence “ex post facto” rule does not apply;
except on penalty (not interest) imposed

2. Imprescriptibility - unless otherwise provided by the law itself, taxes are

imprescriptible.

To safeguard taxpayers from any unreasonable examination or investigation or

assessment, our tax law provides statute of limitations on the collection and
enforcement of taxes.

3. Double Taxation- not being forbidden by our Constitution, it is not a valid

defense against the validity of a tax measure.

International Juridical Double Taxation – imposition of comparable taxes in

two or more states on the same taxpayer in respect of the same subject matter
and for identical periods. (CIR vs. SC Johnson and Son, Inc.. G.R. No.
127105, 25 June 1999, 309 SCRA 87)

Remedies of double taxation:

 1) Tax sparing provision - provision in some tax treaties which provides that
the state of residence allows as credit the amount that would have been paid, as
it no reduction has been made.
2) Tax credit - tax paid on income from foreign source by a resident citizen
is a tax credit on his total tax payable from all sources.
3) exemption method –
4) treaties – reciprocity provision

4 Escape from Taxation

a. Shifting of tax burden
b. Tax sparing provision in treaties
c. Tax avoidance vs. tax evasion

5. Tax Laws and Tax Exemption; Rules, Regulations and BIR Ruling
a. Tax Laws: Kindss;
1) laws imposing taxes
* construed in favor of taxpayer and against the government
* prospective effect

2) tax exemption laws

a) construed in favor of the government and against the taxpayer;
b) enjoyed only by the grantee; non-transferrable
c) burden of proof is on the one who claims exemption
d) cannot be the subject of a contractual stipulation

.RCPI vs. Provincial Assessor of South Cotabato, 456 SCRA 1; CIR VS.
Philippine American Accident Insurance Company, Inc., 453 SCRA 668
“x x x – It is the taxpayer’s duty to justify the exemption by words too plain
to be mistaken and too categorical to be misinterpreted
Implied Tax Exemption:No tax by silence, but where the law levies a tax,so also
must the tax exemption be explicit in the law.

BDO vs. Republic G. R. No. 198756, Jan. 13, 2015, 745 SCRA 361-
Tax statutes must be reasonably construed as to give effect to the
whole act. Their constituent provisions must be read together, endeavoring to
make every part effecttive, harmonious and sensible; that construction which
leave every word operative will be favored over one that leaves some word,
clause or sentence meaningless and insignificant.

Contractual Tax Exemption is agreed in contracts lawfully entered into by the

government and the taxpayer under enabling laws; not to be construed with tax
exemption under the franchise.
Tax exemption under a franchise is not a contract; hence, not within the
purview of the infringement clause of the constitution.

CONTRACTUAL VS. EXEMPTION UNDER

TAX EXEMPTION A FRANCHISE

1. gov’t sheds cloak of authority - special privilege conferred by

and waives gov’t immunity gov’t authority

2. covers matters that are not - essentially gov’t in nature

 essentially gov’t. in nature;

3. may not be revoked without

compromising the obligation - in case of revocation, no violation of
of contracts; non-impairment clause of the Const.

NOTE: A legislative franchise partakes of the nature of a contract

May Congress enact a law withdrawing a tax exemption?

Flowing from the basic precept of constitutional law that no law is
irreparable, Congress, in the legitimate exercise of its lawmaking powers, can
enact a law withdrawing a tax exemption.(Republic vs. Caguiao, 536 SCRA
193).

b. Tax Rules and Regulations; BIR Rulings

1) Requisites for validity:- consistent and in harmony with the law

- reasonable
- useful and necessary
- published in Official Gazette

2) Revenue regulations have the force and effect of a law; issued by Sec. of
Finance upon the recommendation of the Commissioner.

3) Revocation, modification, reversal of BIR rules and regulations shall not

be given retroactive effect if the same is prejudicial to the taxpayer.
4) BIR Rulings may be given retroactive effect :
i) when the taxpayer deliberately misstates oromits material facts.
ii) when the facts subsequently gathered by the BIR are materially
different from the facts on which the ruling is based
iii) taxpayer acted in bad faith.

6. Equitable Recoupment- Is this applicable in the Philippines?

7. Set-off or compensation
General Rule: Tax is not subject to set-off or compensation
Exception: when the following requisites are present:
a) when both obligations are due and demandable; and
b) when the amounts are fully liquidated or determined

8. Power to Tax Involves the Power to Destroy; the power to tax is

Not the power to destroy while this court sits.

9. Tax Pyramiding – imposition of a tax on a tax

It has no legal basis in fact or in law. It has been reject since 1922 by the
Supreme Court, the legislature and our tax authorities. (People
vs.Sandiganbayan, 467 SCRA 137)

10. Compromise -
a. Commissioner of Internal Revenue has the sole authority to
compromise
Internal revenue tax liabilities. (Sec 7 (c), 204(A) and 290 NIRC)

b. Cases which may be compromised:

- Delinquent account
 - Pending protest with the BIR
- Civil tax cases being dispute before the court (MTC, RTC, CTA, SC)
- Criminal violations
except those filed in court or those involving criminal fraud
- with pre-assessment notice where Taxpayer does not agree to the
findings

c. Cases which cannot be compromised

- withholding tax cases;

- Criminal tax fraud cases;
- Criminal violations filed in court
- Delinquent accounts with approved schedule of installment payment;
- Where final reports of reinvestigation or reconsideration have been
issued
and the original assessment was reduced;and the TP agreed thereto
- With final and executor judgment of a court.

d. Basis for acceptance of compromise by Commissioner:

a) Doubtful validity of assessment - applies to delinquent account or

disputed assessment-
minimum compromise rate – 40% of the basic tax assssed
- lower rate may be requested by taxpayer subject to approval
of NEB and request must be in writing setting forth
legal and factual bases for such request.

b) Financial Incapacity of the taxpayer-

1) minimum compromise rate is 20% of the basic tax assessed
for:
(i) Dissolved corporations
(ii) Non-operating companies for less than 3 years
(iii) Earnings deficit resulting to impairment in
original capital by at least 50%
2) other taxpayers – 10% of the basic tax assessed

Note: The said rates shall apply to compromise of solely increments (surcharge,
interest, penalties) based on the total amount assessed. (RR 7-2001, July 31, 2001)
e. In case the taxpayer reneged in his commitments in the compromise
agreement, the CIR HAS THE OPTION to collect the balance under the
agreement, plus applicable interests; or to disregard the agreement and collect
the assessed tax (original amount) less payments made.

11. Tax amnesty and tax abatement

a. Tax amnesty v. tax abatement --****
b. Grounds for tax abatement or cancellation of internal revenue liabilities
(i) the tax or any portion thereof appears to be unjustly or
excessively assessed;
a) filing of return or payment of the tax was made at wrong venue;
b) taxpayer’s mistake in payment of the tax is due to erroneous
written official advise of a revenue officer;
c) taxpayer fails to file the return and pay the tax on time due to
circumstance beyond his control or due to substantial losses
from prolonged labor dispute (more than 6 months), force
majeure, business reverses ( but abatement applies only
 to surcharge and compromise penalty, not to interest
imposed under Sec. 249.
d) late payment was due to meritorious circumstances;
(ii) the administration and collection costs involved do not justify the
collection of the amount due.

a) abatement of penalties confirmed by lower court but appealed

by taxpayer to higher court;
b) abatement of penalties reduced after reinvestigation; but
taxpayer is still contesting the assessment;

12. Power of Taxation as an implement of police power and eminent

domain-
Taxation is no longer envisioned as a measure merely to raise revenue to
support the existence of the government. Taxes may be levied with a regulatory
purpose to provide means for the rehabilitation and stabilization of a threatened
industry which is affected with public interest as to be within the police power of
the State. (Planters Committee vs. Arroyo, G.R. No. 79310, 14 July 1989;
Caltex Phil. Inc. Vs. COA, G.R. No. 92385, 8 May 1992; CIR vs. Central
Luzon Drug Corporation, 456 SCRA 414)

13. Taxpayer’s Suit – the case directly involves the illegal disbursement of public
funds derived from taxation.
Asia Pacific Planters vs. City of Urdaneta, 566 SCRA 219 --- A city acquires
ownership of the money loaned to it, making the money public funds.

Jumamil vs. Café, 470 SCRA 475 – A taxpayer need not be a party to the
contract to challenge its validity. Parties suing as taxpayer must prove
sufficient interest in preventing illegal expenditure of money raised by
taxation.

14. Estoppel -
GENERAL RULE: The government is not estopped by the mistakes or errors
of its agents, erroneous application and enforcement of law by public
officers do not bar the subsequent correct application of statutes.
(E. Rodriguez, Inc. vs. Collector, L-23041, July 31, 1969; CIR vs. Manila
Bankers Life Ins. Co., G.R. No. 169103. March 16, 2011)

EXCEPTION: In the interest of justice and fair play, as where injustice

will result to the taxpayer.

15. Injunction –
On internal revenue taxes – Injunction does not lie against the
government in the enforcement and collection of internal revenue taxes.
Regular courts cannot issue injunction..
Exception: The Court of Tax Appeals may issue Injunction in the
exercise of its appellate jurisdiction, provided the taxpayer will suffer
irreparable injury; and must comply with Rule 58 of the Rules of Court .

On local and real property taxes - the LGC does not contain the same
provision; hence, regular courts may issue injunction in the collection of local and
real property taxes provided, taxpayer will suffer irreparable injury and comply
with Rule 58.
16. Doctrine of Situs of Taxation - No state may tax anything not within its
jurisdiction without violating the due process clause of the constitution. The
taxing power of a state does not extend beyond its territorial limits,.

H. TAX AND OTHER IMPOSITIONS; CLASSIFICATION OF TAXES

1. Tax vs. other impositions:

- toll
- penalty
- special assessment
- debt
- license fee

2. Classification Of Taxes - (SBAPS-G)

a. As to subject matter -
b.Who bears the Burden -
c. Determination of the Amount –
d. Purpose -
e. Scope -
f. Graduation –

11. SITUS of TAXATION – place of taxation

Factors that determine situs –

a. Kind or classification of the tax levied
b. Place/location of the thing/property taxed
c. Source of the income taxed
d. Place where privilege, business or occupation
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TRANSFER TAXES

A. Nature of Transfer Taxes: excise/privilege tax

*** privilege of passing ownership of property upon death – estate tax
*** inter vivos gratuitous transfer – donation

B. Governing law –
Estate tax – law existing at the time of death of decedent
Donation inter vivos – date of effectivity of Donation

C. Situs of transfer taxes: *combination of 3 doctrines: a) nationality

b)domiciliary
c) location
I. ESTATE TAX

A. When estate tax accrues – upon death; . Tax base – net estate

B. Computation of Estate Tax:

1. Formula: collate properties comprising gross estate

less deductions and exclusions or exemptions = NET ESTATE
2. Estate Tax – 6% of Net Estate – residents or non-residents

3. GROSS ESTATE AND ALLOWABLE DEDUCTIONS:

a. Filipinos and resident aliens

 Gross Estate– all properties, real and personal, tangible and intangible
wherever situated, including the following:

1) Decedent’s interest – at the time of death;

2) transfer in contemplation of death- transfer where decedent retained
the ownership for his life or such period which does not end before his
death:
(i) possession or enjoyment of the right to the income from the
property;
(ii) the right, alone or with another, to designate such person who
shall possess or enjoy the property or any income therefrom;
Exception: bonafide sale for an adequate and full consideration in
money or money’s worth.
3) Revocable transfer- transfer where the enjoyment thereof was subject
at his death or the power to alter, modify, revoke or terminate or where
such power is relinquished in contemplation of his death.
4) property passing under Gen power of attorney – by will or deed under
GPA
5) proceeds of life insurance – amount receivable by the decedent,
executor, administrator or estate, under policies taken out by the decedent
upon his own life; whether designation is revocable or irrevocable; or
receivable by such amount receivable by any beneficiary whose
designation is revocable.
6) transfer for insufficient consideration - only the excess of the FMV at
the time of his death; shall form part of the gross estate

Allowable Deductions:
a. Standard deduction - Php5M
b. Claims against the estate
(i) indebtedness must be included in the gross estate
(ii) document must be notarized at thetime of indebtedness
(iii) contracted within 3 years before the death – submit a statement
showing how the proceeds was disposed of.
(iv) notarized certification as to balance from the creditor.
(v) existing at the time of death and reasonably certain in amount
(vi). Valid and legally enforceable
(vii). Not condoned by the creditor and not prescribed
c. Claims against insolvent persons – included in gross estate
d. Unpaid mortgages or indebtedness – to the extent contracted bona
fide and for full and adequate consideration;
(losses during the settlement of the estate from fie, storm,
shipwreck,
or other casualties, robbery, theft, embezzlement, when not
compensated for by insurance or otherwise and such loss have not been
claimed as a deduction for income tax purposes; and such loss was
incurred not later than the last day for the payment of estate tax.
e. property previously taxed –vanishing deduction
 f. Family Home- FMV but not to exceed Php10M
 g. Transfer for public use – to national or local government for public use
 h. Benefits received by heirs under RA 4917 – provided included in gross
estate

b. Non-resident alien:

Gross estate – real and personal property located within

the Phil.
Allowable deductions:
a. Standard deduction –P500,000
b. claims against the estate
c. unpaid mortgages
d.transfer for public use
e. claims against insolvent debtor
f. property previously taxed- vanishing deduction

Exclusion – 1. net share of surviving spouse in the conjugal partnership

2. estate tax paid in foreign country

D. Filing of Estate tax return and payment of estate tax

1. Filing of estate tax return under oath required:

a) in all cases or
b) regardless of value if estate consists of registrable property
If the value of gross estate exceeds P5M – return must be accompanied
by Certification of CPA

2. Time for filing of estate tax return – one year from decedent’s death
3. Payment at the time of filing; extension may be granted by CIR,
if it would impose undue hardship upon the heirs – extension of
payment”
a) if subject of court proceedings – 5 years
b) if not = 2 years
Effect of extension to pay – statute of limitations is suspended
Installment payment - within 2 years from statutory date of
payment w/o civil penalty and interest
4. No distribution unless estate tax is paid by executor or administrator;
Non-payment -heirs are subsidiarily liable.

II. DONOR’S TAX

a. Tax base – total gifts for the calendar year less P250,000 = tax rate 6%
b. Taxpayer – donor ; due date – 30 days from date of donation
c. Sec. 99 of the Tax Code was amended, and the provision on “stranger” was
deleted.
d. Methods used in computing and payment of donor’s tax: cumulative or split
method
e. Transfer in contemplation of death -
sale, transfer or exchange of property made in the ordinary course of
business (bona fide, at arm’s length, and free from donative intent)
considered made in full and adequate consideration in money or money’s
worth.

f. Exemption of certain gifts made by residents

a. to national gov’t or agency not conducted for profit, or LGU
b. in favor of educational or charitable, religious, cultural, NGO, provided not
more than 30% thereof is used for admin. Purposes

Exemption of gifts made by NRA – same as (a) and (b)

Tax credit – pay in foreign country – donor is citizen or resident
Valuation if gift is property – personal property – FMV
Real property – zona Or FMV (higher)
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LOCAL AND REAL PROPERTY TAXATION
Local Government Taxation
A.Scope of Taxing Power of Local Government Units:
The taxing power of local government units is conferred by the
Constitution. The LGC has invested the LGU with increased power to tax,
thereby empowering them with a wider authority to raise their own revenues
within their respective territorial jurisdiction. LGUs have the power to impose
taxes, fees and charges.

It includes the power to prescribe penalties for violations of tax provisions

(Sec. 516); and to grant tax exemptions (SEC. 192). Tax exemptions shall be
conferred through the issuance of tax exemption certificate which shall not be
transferable. It also include the power to adjust the rates but not oftener than
once every 5 years. (Sec. 191) not offener than once every 5 years.

While Sanggunians may grant tax exemptions, tax incentives or reliefs,

such grant shall not apply to regulatory fees which are levied under the police
power of the LGU.

B. Basis of the taxing power of LGU

1. Sec. 5, Art. X, 1987 Const. –Each local government unit shall have the
power to create its own source of revenue and to levy taxes, fees and charges
subject to such guidelines and limitations as Congress may provide consistent
with the basic policy of local autonomy. Such taxes, fees and charges shall
accrue exclusively to the local govt

2. Sec. 129, RA 7160 –LGC.

C. Fundamental Principles in the exercise of the taxing power of LGUs (Sec.

130) PIE CUP UP
1. P- Taxes, fees, charges and other impositions levied and collected
for public purpose;
2. I - the revenue collected shall inure to the benefit of and be subject to
disposition by the LGUs levying it, unless specifically provided herein
3. E - Taxes, fees, charges and other impositions levied and collectedshall be
equitable and based on the taxpayer’s ability to pay’
4. C - Taxes, fees, charges and other impositions levied and collected shall not
be contrary to law, public policy, national economic policy or in
restraint of trade;
5. U - Taxation shall be uniform in each LGU.
6. P - collection shall not be let to any private person;
7. U - Taxes, fees, charges and other impositions levied and collected shall not
be unjust, excessive, oppressive, nor confiscatory
8, P - Each LGU shall evolve a progressive system of taxation.

CITY GOV’T OF SAN PABLO, LAGUNA V. REYES, GR NO. 127708, MARCH

25, 1999 - Since the power to tax may be exercised by LGU no longer by valid
delegation of said power by Congress, but by direct authority conferred by Sec. 5
Art. X of the Const., in interpreting statutory provisions on local taxing powers,
doubts will have to be resolved in favor of the LGU.
PEPSI COLA BOTTLING CO OF THE PHILS. vs. MUN. OF TANAUAN – L-
31156, Feb. 27, 1976 - an increase in the tax alone would not support the claim
that the tax is oppressive, unjust or confiscatory.

D. Common Limitations on Taxing Power – Section 133 of the LGC, which

enumerates the taxes, fees and charges which LGU’s cannot levy/impose.

E. TAX EXEMPTION PRIOR TO LGC:

General Rule: Tax exemptions, incentives granted to, or presently
enjoyed by all persons, whether natural or juridical, including GOCC, are already
withdrawn upon the effectivity of the LGC. (Sec. 193)
Exception: (Sec. 234) – despite the effectivity of LGC of 1991, the tax
exemption of the following entities are not withdrawn:

F. RESIDUAL TAXING Power (Sec. 186) - LGU can impose other taxes,
provided:
a) not unjust, oppressive, excessive, confiscatory or contrary to declared
national policy
b) there must be public hearing
c) subject to the following limitations: 1. constitutional limitations
2. common limitations (Sec. 133)

G. PRINCIPLE OF PREEMPTION OR EXCLUSIONARY RULE—an instance

wherein the national gov’t . elects to tax a particular area, impliedly
withholding from the local gov’t the delegated power to tax the same
field. This doctrine principally rests upon the intention of Congress.

Victoria Milling Co, Inc. vs. Mun of Victorias, Neg. Or.

L-21183 Sept. 27, 1968 - Municipality was seeking to impose a tax on the output
of sugar produced by the Sugar central annually. The NIRC imposed a
percentage tax on the sale of sugar. There is no preemption, hence, Mun. of
Victorias can impose said tax.

Prov. Of Bulacan v. Court of Appeals –GR 126232 Nov. 27, 1998-

The provincial Govt of Bulacan had no authority to levy on stones, sand, gravel,
earth and other quarry resources, The NIRC levies tax on all quarry resources
regardless of origin, whether extracted from private of public land.Thus the
province may not ordinarily impose taxes on stones, gravel, sand earth and other
quarry resources. The province may, however, impose a tax on stones, gravel,
sand, earth and other quarry resources extracted from public land because it is
expressly empowered to do so under the LGC. (Sec. 133 LGC; Sec. 151 NIRC)

MUN. OF SAN FERNANDO, LA UNION V. STA. ROMANA, L-30159, 3/31/87 -

Inasmuch as the sand and gravel tax is a tax levied by provinces, a municipality
cannot make the payment of the tax by another municipality as a condition for
granting to the latter the right to extract sand and gravel from its territory, but it
may require that such tax be paid to the province before the desired extraction
may be made.

Northern Philippine Tobacco Corp. v. Mun. of Agoo, L-26447, Jan. 30,

1970)- Municipality of Agoo levies a tax on tobacco redrying plants based on
the quantity of leaf tobacco being redried therein. This is not a percentage tax.
Thus, any sales tax that the NIRC might impose on the redried tobacco will not
give rise to pre emption due to the fact
that the levies are on 2 different subjects.

Note: There is preemption in percentage tax. Under Sec. 116 NIRC,- any
person whose sales or receipts are exempt under Sc. 109 (x) from the payment
of VAT and who is not a VAT-registered person shall pay a tax equivalent to 3%
of his gross quarterly sales or receipts; provided that cooperatives shall be
exempt. So that even w/o Sec. 133 this tax cannot be imposed by LGU. LGU can
impose the graduated fixed tax on the privilege to engage in a particular business. Pre-
emption does not apply-

H. LOCAL TAX ORDINANCES:

Requirements:
1. The procedure on local government ordinances also apply to tax ordinances;
(quorum, submission to local chief executive for approval; matter of
veto
and overriding the same, publication and effectivity –Secs. 54, 55 and
59
2. public hearing is required before any local tax ordinance can be enacted.
3. within 10 days after their approval, certified copies of local ordinances or
revenue measures are published in full for 3 consecutive days in a
newspaper of local
Circulation; (if no newspaper – posted in at least 2 conspicuous and
public accessible places (188)
4. copies of which shall be furnished the respective local treasurers for public
dissemination. (Sec. 189)

Cases: 1. Coca Cola Bottlers Phils., Inc. vs. City of Manila, 493 SCRA 279;
June 27, 2006.
2. City of Manila vs. Coca Cola Bottlers Phils. Inc. 595 SCRA 299,
August 4, 2009

I. SPECIFIC TAXING POWERS OF LGU

A. PROVINCES
Professional tax –professional who passed the required examination, except
those employed in the government.

Amusement tax –tax on proprietors, lessees or operators places of amusement

at a rate of not more than 30% of the gross receipt from admission fees.

Exempt from amusement tax – holding of operas, concerts, drama, recitals,

painting and art exhibitions, flower shows, musical programs, literary and
oratorical presentations; except pop rock or similar concerts. )

NOTE: There is pre-emption in local setting – taxes w/c provinces can levy
cannot be levied by municipalities (142); cities may levy taxes levied by
provinces (151)

CITIES - those which the province may levy

MUNICIPALITIES: business tax –

Retailers are liable for local tax of 1% or 2% and VAT if sales exceed P550,000;
or local tax of 1% or 2% and 3% percentage tax if not vatable.

BARANGAYS:
a) exclusive power to tax retailers whose gross sales does not exceed P50,000 if
located in cities; P30,000.00 if located in municipalities- rate is 1% of
gross sales;
b) service fees or charges - for services rendered in regulation or the use of
barangay-owned properties or service facilities;
c) barangay clearance - reasonable fee.

d) other fees/charges –
commercial breeding of fighting cockfights and cockpits;
recreation places which charge admission fees ;
billboards, signboards, neon signs and outdoor ads.

Metro Manila – rate shall not exceed 50% of the maximum rates prescribed for
other municipalities.

NOTE: Incidental activities relative to the business are not taxable.

K. COMMON REVENUE RAISING POWERS OF LGUs

a. reasonable fees and charges –

b. for operation of public utilities owned by lgu;
c. toll fees for the use of public road, pier of bridges, etc.
except - enlisted men of AFP and PNP on mission,
post office personnel delivering mails
physically handicapped and disabled citizens 65 years old

d. Community tax – cities and municipalities authorized to levy

Kinds : 1. individuals a. basic – P5.00 ; additional (B) –P1.00 for every P1,000
of income or value of property but not exceed P5,000.00
2. corporate (C ) – juridical persons - P2.00 for every P5,000 worth
of property owned; and P2.00 for every P5,000 gross receipts.

L. COLLECTION OF LOCAL TAXES:

1. Tax Period –CALENDAR YEAR.

2. Time of Payment – within the 1st 20 days of January of each year; or
subsequent quarter. Sanggunian may extend payment up to 6 months
only.
3. Surcharges and penalties— not exceeding 25% of the amount of TFC.
4. Interest – 2% per month but not more than 36 months.

M. REMEDIES OF THE GOVERNMENT:

A. Civil remedies:
1. LG lien – superior to all lien (173)
2. administrative: a. distraint of personal property
b. levy on real property- before, simultaneous of after
distraint
3. Who is authorized to compromise local taxes, fees and charges – whoever is
authorized per the ordinance on compromise of local taxes.
B. Judicial remedies:
1. court action –civil or criminal
2. declaratory relief
3. injunction

B. REAL PROPERTY TAXATION

1. Fundamental principles
M a) appraised at its current and fair market value;
A b) classified based on its ACTUAL USE;
U c) assessed based on UNIFORM classification
L d) appraisal, assessment, levy and collection shall not be LEFT to any
private person;
E e) appraisal and assessment shall be EQUITABLE.

2. Nature of real property tax – tax on real property; direct tax; ad valorem;
local tax; local tax; progressive system
Case: Sta. Lucia Realty Corp. vs. City of Pasig, G.R. No. 166838 June 15,
2011
3. Appraisal and assessment of real property tax
a) appraisal of real property - at fair market value and based on actual use
b) Declaration of real property –
a) duty of assessor to list all real property located within the territory of the
LGU; and machineries, exempt or not exempt from real property tax
;
b) registered owners
c) assessor shall declare property if owner refuses or fails to do so

4 Classes of real property

C – commercial
R - residential
A - agricultural
M – mineral
I - industrial
T – timberland
S – special classes –exempt from the real propertytax
5. Collection of real property tax
a) Date of accrual of real property tax – 1st day of January
b) Collection and assessment of real property tax
c) Statute of Limitations for collection of real property tax - 5 years fromdue
date.
d) Payment of real property tax – accrues every 20th day of January; payable
quarterly
e) Interests on unpaid real property tax -2% per month up to 36 months
f) Collection of back taxes – up to 10 years back taxes only
6. Remedies of the government for the collection of real property tax
(i Local government’s lien
(ii) Distraint of personal property and levy of real property
(iii) Levy on real property
7. Taxpayer’s remedies
a) Contesting/Protesting an assessment of value of real property
1. Payment of real property under protest – OR with stamp “payment under
protest
(i) File protest with local treasurer
(ii) Appeal to the Local Board of Assessment Appeals
(iii) Appeal to the Central Board of Assessment Appeals
(iv) Appeal to the CTA
(v) Appeal to the Supreme Court

2. Tax Refund/Tax Credit - 2 years from payment

3. declaratory relief

PART IV. THE COURT OF TAX APPEALS

1. RA 1125 – created the Court of Tax Appeals - a specialized court

- Then composed only of 3 justices – 1 Presiding Justice
2 Associate Justices
The 3 justices hear and decide cases as a collegiate court
The decisions, resolutions were appealable to the Court of Appeals
No exclusive original jurisdiction on civil and criminal cases involving
taxes

2. RA 9282 (April 23, 2004)- amended RA 1125 – expanding the jurisdiction of

the CTA
- with exclusive original jurisdiction on civil and criminal cases where the
principal\
Tax due is P1.0 M or more.

3. RA 9503 (July 5, 2008) –

a. Structure -enlarged –9 justices – 1 Presiding justice ;

8 Associate Justices
b. Sit En Banc or in Division –
3 divisions – with 2 members each; chairman – most senior justice
Pres. Justice – chairman of 1 division

c. quorum – division – 2 members

En Banc – 5 members

d. Same level as the Court of Appeals; decision appealable to Supreme

Court

e. CTA Justices have same benefits, privileges and qualifications as CA

Justices.
4. JURISDICTION OF THE CTA
In Division:

A. Exclusive original or appellate jurisdiction to review by appeal---

1. Decisions or inaction of the CIR on :
a) disputed assessments,
b) refunds of internal revenue taxes, fees and charges andpenalties,
c) other matters under the NIRC
c) other laws administered by the BIR
2. RTC Decisions on local tax cases
3. Decisions of the Com. Of Customs on:
a) customs duties, fees, etc.
b) seizure, forfeiture
c) other matters under the TCCP and other laws administered By the
BOC;
4. Decisions of Sec. of Finance on customs cases elevated for automatic review
under Sec. 215 of TCCP, as amended by CMTA.
5. Decisions. Of the Sec. of Trade on non-agri, and the Sec. of Agriculture on
agri products involving dumping and countervailing duties (Sec. 301 and
302) and safeguard measures under RA 8800;

B. Exclusive jurisdiction on criminal offenses–

1. Original –all criminal offenses for violations of the NIRC, TCCP and
other laws administered by the BIR and BOC –principal
amount of taxes and fees involved in P1.0 M or more;

2. Appellate – appeals from judgments, resolutions or orders of the RTC (in

their original jurisdiction) –
a) principal amount - less than P1 M
b) no specific amount claimed;

C. Exclusive jurisdiction – tax collection cases

1 Original – tax collection cases - principal amount is P1.0 M or more;
2. Appellate – appeals from judgments, resolution or orders of the RTC in
tax collection cases originally decided by them;

EN BANC JURISDICTION.

1. Decisions, resolutions on MRecon or new trial of a division (CTA) in the

exercise of its appellate jurisdiction;
a. from administrative agencies—BIR, BOC, Dept. of Finance Dept. of
Trade, Dept. of Agriculture;
b. Decisions, resolutions of RTC:

i) local tax cases decided

ii) tax collection cases involving final and executory assessments
iii) Decision orders on MRecon/New trial in the exercise of its
exclusive original Jurisdiction;
2. Decision on MRecon/New Trial of the court in division in the exercise of its
exclusive original jurisdiction – NIRC, TCCP (CMTA)
3. CTA (division) decision in the exercise of its exclusive appellate jurisdiction
on criminal cases mentioned above.
4. Decision of RTC in the exercise of their appellate jurisdiction over criminal
cases mentioned above