Updates on Taxation Law Under TRAIN Act

Updates and Critical Areas in
Taxation Law
General Principles
Tax Treaties:
The obligation to comply with a tax treaty must take precedence over
the objective of the BIR’s requirement of a prior treaty relief
application to avail of the lower tax treaty rate. The BIR must not
impose additional requirements that would negate the availment of
the reliefs provided for under international agreements. More so,
when the tax treaty does not provide for any pre-requisite for the
availment of the benefits under said agreement. (Deutsche Bank AG
Manila Branch vs. CIR, GR No. 188550 dated August 19, 2013; CBK
Power Company Limited vs. CIR, GR No. 193383-84 dated January 14,
2015)
General Principles
Taxes vs. Fees:
An ordinance imposing fees based on project cost whose purpose is to

regulate certain construction activities of the identified special
projects, which includes "cell sites" or telecommunications towers, is
not a tax because the fees imposed in the said ordinance are primarily
regulatory in nature, and not primarily revenue-raising. (Smart vs.
Municipality of Malvar, Batangas, GR No. 204429 dated February 18,
2014.)
General Principles
Tax Rulings:
1. Tax rulings are official positions of the Bureau of Internal Revenue on

inquiries of taxpayers who request clarification on certain provisions of
the National Internal Revenue Code, other tax laws, or their
implementing regulations. (CIR vs. CTA and Petron, GR No. 207843
dated February 14, 2018)
General Principles
Tax Rulings:
2.a. The revocation, modification and reversal of a tax ruling shall not
be given retroactive effect if the revocation, modification and reversal
will be prejudicial to the taxpayers, except in the following cases:
(a) Where the taxpayer deliberately misstates or omits material facts

from his return or any document required of him by the BIR;
(b) Where the facts subsequently gathered by the BIR are materially
different from the facts on which the ruling is based; or
(c) Where the taxpayer acted in bad faith. (Sec. 246 of the NIRC)
General Principles
Tax Rulings:
2.b. Under Sec. 246 of the NIRC, the revocation, modification and
reversal of a ruling cannot be given retroactive effect, if it will be
prejudicial to the taxpayer. The BIR is precluded from adopting a
contrary position to one previously taken where injustice would result
to the taxpayer. (CIR vs. Philippine Healthcare Providers, Inc., GR No.
168129 dated April 24, 2007)
General Principles
Tax Rulings:
2.c. Under Section 246, taxpayers may rely upon a rule or ruling issued
by the Commissioner from the time the rule or ruling is issued up to its
reversal by the Commissioner or this Court. The reversal is not given
retroactive effect. This, in essence, is the doctrine of operative fact.
There must, however, be a rule or ruling issued by the Commissioner
that is relied upon by the taxpayer in good faith. (CIR vs. San Roque
Power Corporation, GR No. 187485 dated October 8, 2013)
General Principles
Tax Rulings:
2.d. In order for Section 246 to apply, the ruling must be issued to the
taxpayer invoking the same. (CIR vs. Filinvest Development
Corporation, GR No. 163653 dated July 19, 2011)
But, if the ruling issued is a general interpretative rule, all taxpayers

may rely on the ruling and invoke Sec. 246, if proper. (CIR vs. San Roque
Power Corporation, GR No. 187485 dated October 8, 2013)
General Principles
Tax Rulings:
2.e. Section 246 is not limited to a reversal only by the Commissioner

because this Section expressly states, "Any revocation, modification or
reversal" without specifying who made the revocation, modification or
reversal. Hence, a reversal by the Supreme Court is covered under
Section 246. (CIR vs. San Roque, GR No. 187485 dated February 12,
2013)
General Principles
Tax Rulings:
3. Commissioner’s Ruling:
a. Rulings of first impression; and,

b. Rulings which reverse, revoke or modify any existing ruling of the
BIR. (Sec. 7(B) of the NIRC)
General Principles
How to contest a ruling of the BIR?
1.a. File a request for ruling review with the Secretary of Finance
(“SOF”) within thirty (30) days from receipt of the CIR’s ruling. (DOF
Department Order No. 23-2001 dated October 25, 2001)
Sec. 4 of the NIRC provides that the power to interpret the provisions
of the NIRC and other tax laws is under the exclusive and original
jurisdiction of the CIR, subject to review by the SOF.
General Principles
How to contest a ruling of the BIR?
1.b. Appeal to the SOF is in compliance with the rule on exhaustion of

administrative remedies. Thus, appeal to the SOF may be dispensed
with if any of the exceptions to the rule on exhaustion of
administrative remedies is present. The exceptions, among others, are
the following:
(1) exhaustion would be futile – The SOF requesting a ruling from the
CIR and later on adopting the ruling as his own;
(2) issue is purely legal – Tax implications of the PEACe Bonds; and,
(3) when there are circumstances indicating the urgency of judicial
intervention – impending maturity of the PEACe Bonds. (BDO vs.
Republic, GR No. 198756 dated January 13, 2015)
General Principles
How to contest a ruling of the CIR?
3. Next Remedy RTC or CTA?

General Principles
CIR vs. CTA and Petron, GR No. 207843 dated February 14, 2018:
Thus, in conjunction with the Banco De Oro ruling that the CTA has
jurisdiction to resolve all tax matters (which includes the validity of the
CIR's interpretation and consequent imposition of excise tax on
alkylate), the Court finds it proper to reconsider its decision.
1. Within the judicial system, the law intends the Court of Tax Appeals
to have exclusive jurisdiction to resolve all tax problems;
2. Hence, the determination of the validity of these issuances clearly
falls within the exclusive appellate jurisdiction of the Court of Tax
Appeals under Section 7(a)(1) of Republic Act No. 1125, as amended,
subject to prior review by the Secretary of Finance, as required under
Republic Act No. 8424. – “other matters arising under the NIRC or
other laws administered by the BIR.”
General Principles
BDO vs. Republic, GR No. 198756 dated August 16, 2016:
1. The Court of Tax Appeals has undoubted jurisdiction to pass upon

the constitutionality or validity of a tax law or regulation when raised
by the taxpayer as a defense in disputing or contesting an assessment
or claiming a refund. It is only in the lawful exercise of its power to
pass upon all matters brought before it, as sanctioned by Section 7 of
Republic Act No. 1125, as amended.
This Court, however, declares that the Court of Tax Appeals may
likewise take cognizance of cases directly challenging the
constitutionality or validity of a tax law or regulation or administrative
issuance (revenue orders, revenue memorandum circulars, rulings).
General Principles
2. Section 7 of Republic Act No. 1125, as amended, is explicit that,

except for local taxes, appeals from the decisions of quasi-judicial
agencies (Commissioner of Internal Revenue, Commissioner of
Customs, Secretary of Finance, Central Board of Assessment Appeals,
Secretary of Trade and Industry) on tax-related problems must be
brought exclusively to the Court of Tax Appeals.
In other words, within the judicial system, the law intends the Court of
Tax Appeals to have exclusive jurisdiction to resolve all tax problems.
Petitions for writs of certiorari against the acts and omissions of the
said quasi-judicial agencies should, thus, be filed before the Court of
Tax Appeals.
General Principles
3. Republic Act No. 9282, a special and later law than Batas Pambansa
Blg. 129 provides an exception to the original jurisdiction of the
Regional Trial Courts over actions questioning the constitutionality or
validity of tax laws or regulations. Except for local tax cases, actions
directly challenging the constitutionality or validity of a tax law or
regulation or administrative issuance may be filed directly before the
Court of Tax Appeals.
Income Tax
TRAIN Law Amendments – 8% Tax:
1.a. Individuals earning income purely from self-employment and/or

practice of profession whose gross sales/receipts and other non-
operating income does not exceed P3,000,000.00 shall have the option
to be taxed:
a. The graduated rates under Section 24(A)(2)(a) of the Tax Code, as

amended; OR
b. An eight percent (8%) tax on gross sales or receipts (net of
returns and cash discounts) and other non-operating income in
excess of two hundred fifty thousand pesos (P250,000.00) in lieu of
the graduated income tax rates under Section 24(A) and the
percentage tax under Section 116 all under the Tax Code, as
amended.
Income Tax
1.b. Individuals Earning Income Both from Compensation and from

Self-employment (business or practice of profession):
a. Compensation Income – graduated rates; and,

b. Income from business or practice of profession - gross
sales/receipts and other non-operating income does not exceed
P3,000,000.00 shall have the option to be taxed either at the
graduated rates or the 8% tax.
Income Tax
2. Not Qualified for the 8% tax based on gross sale and/or receipts:
1. Purely compensation income earners;

2. VAT registered taxpayers;
3. Non-VAT taxpayers whose gross receipts/sales exceed
P3,000,000.00;
4. Taxpayers subject to other percentage taxes except Sec. 116;
5. Partners of General Professional Partnerships;
6. Individuals enjoying income tax exemption such as those registered
with Barangay Micro Business Enterprise since taxpayers are not
allowed to avail of double or multiple tax exemptions under different
tax laws unless specifically provided by law.
Income Tax
3. Important Rules:
1. The 8% income tax rate shall be based on the gross sales/receipts

and other non-operating income, net of returns and cash discounts, in
excess of P250,000.00.
Income Tax
3. Important Rules:
2. Taxpayer must signify his intention to avail of the 8% income tax rate
in the 1st Quarter ITR / Percentage Tax Return, or on the initial quarter
return of the taxable year after the commencement of a new
business/practice of profession. Otherwise, taxpayer is considered to
have availed of the graduated rates.
3. Such election shall be irrevocable and no amendment of option shall

be made for the said taxable year.
Income Tax
3. Important Rules:
4. The option to be taxed at 8% gross income tax rate is not available to

a VAT-registered taxpayer, regardless of the amount of gross
sales/receipts, and to a taxpayer who is subject to Other Percentage
Taxes under the Tax Code except Sec. 116.
5. Partners of a General Professional Partnership (“GPP”) by virtue of

their distributive share from GPP which is already net of cost and
expenses cannot avail of the 8% income tax rate option.
Income Tax
3. Important Rules:
6. The Financial Statements is not required to be attached in filing the

final income tax return. However, existing rules and regulations on
bookkeeping and invoicing/receipting shall still apply.
Income Tax
3. Important Rules:
7. The P250,000.00 exemption for those subject to the 8% tax is not

applicable to mixed income earners since it is already incorporated in
the first tier of the graduated income tax rates applicable to
compensation income. Under the said graduated rates’ the excess of
the P250,000.00 over the actual taxable compensation income is not
deductible/creditable against the taxable income from
business/practice of profession under the 8% income tax rate option.
Income Tax
3. Important Rules:
8.a. A taxpayer shall automatically be subject to the graduated rates

under Section 24(A)(2)(a) of the Tax Code, as amended, even if the flat
8% income tax rate option is initially selected, when taxpayer's gross
sales/receipts and other non-operating income exceeded the VAT
threshold during the taxable year. 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 quarter/s income tax payment/s under the
8% income tax rate option.
Income Tax
3. Important Rules:
8.b. The taxpayer is required to update his/her registration

immediately within the month following the month s/he exceeded the
VAT threshold. S/he shall be liable to VAT prospectively starting on the
first day of the month following the month when the threshold is
breached. The taxpayer shall pay the required percentage tax covering
the sales/receipts and other non-operating income, from the
beginning of the taxable year or commencement of business/practice
of profession until the time the taxpayer becomes liable for VAT,
without imposition of penalty if timely paid on the immediately
succeeding month/quarter.
Income Tax
8% Tax Exercises:
1.a. Juan, a non-VAT taxpayer, is a free lance architect. By the end of

2018, he had gross receipts of P1,000,000.00.
May Juan avail of the 8% income tax rate? How much will be the
taxable income subject to the 8% tax?
Income Tax
8% Tax Exercises:
1.b. Juan, a non-VAT taxpayer, is a free lance architect. His 1st to 3rd
Quarter Income Tax Returns (“ITRs”) for the year 2018, showed that he
paid income tax based on the graduated rates. By the end of 2018, he
had gross receipts of P1,000,000.00.
a) May Juan opt to pay 8% income tax in his annual ITR for the year
2018?
b) May Juan amend his quarterly ITRs and avail of the 8% income
tax?
Income Tax
8% Tax Exercises:
2. Juan, a VAT taxpayer, is a free lance architect. By the end of 2018, he

had gross receipts of P1,000,000.00.
May Juan avail of the 8% income tax rate?

Income Tax
8% Tax Exercises:
3.a. Juan, a non-VAT taxpayer, is a free lance architect. He is also

employed as a part time professor. During the year 2018, he had the
following gross receipts:
free lance architect – P1,000,000.00;

part time professor - P 500,000.00.
a) How much taxable income will be subject to 8% tax?

b) How much taxable income will be subject to the graduated rates?
Income Tax
8% Tax Exercises:
3.b. Juan, a non-VAT taxpayer, is a free lance architect. He is also


part time professor - P 100,000.00.

Income Tax
8% Tax Exercises:
3.c. Juan, a non-VAT taxpayer, is a free lance architect. He is also


part time professor - P5,500,000.00.

Income Tax
8% Tax Exercises:
Income Tax
8% Tax Exercises:
5. In 2018, Greg owns a nightclub and videoke bar, with gross

sales/receipts of P2,500,000.00. His cost of sales and operating
expenses are P1,000,000.00 and P600,000.00, respectively, and with
non-operating income of P100,000.00.
Is Greg entitled to avail of the 8% income tax rate?

Income Tax
8% Tax Exercises:
6. Willie owns a farm, with gross sales of P3,500,000.00. His cost of

sales and operating expenses are P1,000,000.00 and P600,000.00,
respectively, and with non-operating income of P100,000.00.
Is Willie entitled to avail of the 8% income tax rate?

Income Tax
TRAIN Law Amendments – Exemptions and Deductions:
1. Sec. 34(M) on Deduction for Premium Payment on Health and/or

Hospitalization Insurance for Individuals – Deleted by the TRAIN Law.
2. Sec. 35 on Personal and Additional Exemption – Deleted by the

TRAIN Law.
3. 13th Month Pay and Other Benefits – P90,000.00.

Income Tax
TRAIN Law Amendments – Optional Standard Deduction:
1. TRAIN Law Provision:
“xxx. Provided, further, That a general professional partnership and the

partners comprising such partnership may avail of the optional
standard deduction only once, either by the general professional
partnership or the partners comprising the partnership: xxx.”
Income Tax
2. New Rules for General Professional Partnerships (“GPP”) under RR

No. 8-2018:
a. The GPP is not a taxable entity for income tax purposes since it is
only acting as a “pass-through” entity wherein its income is ultimately
taxed to the partners comprising it. As such, a GPP may claim either
the itemized deductions allowed under Sec. 34 or in lieu thereof, it can
opt to avail of the OSD allowed to corporations.
Income Tax

No. 8-2018:
b. The share in the net income of the partnership, actually or

constructively received, shall be reported as taxable income of each
partner. The partners comprising the GPP can no longer claim further
deduction from their distributive net income of the GPP and are not
allowed to avail of the 8% income tax option since their distributive
share from the GPP is already net of cost and expenses.
Income Tax

No. 8-2018:
c. If the partner also derives other income from trade, business or

practice of profession apart and distinct from the share in the net
income of the GPP, the deduction that can be claimed from the other
income would either be the itemized deductions or OSD.
Income Tax
OSD Exercises:
1. Taxpayer is a prominent independent contractor who offers

architectural and engineering services. Taxpayer’s total gross receipts
amounted to P1,000,000.00 for taxable year 2018. Taxpayer recorded
cost of service and operating expenses were P250,000.00 and
P100,000.00, respectively. Taxpayer opted to avail of the 40% OSD.
a) If Taxpayer is an individual, wow much taxable income should

Taxpayer declare in her ITR?
b) Would your answer be the same if Taxpayer was a domestic
corporation?
Income Tax
OSD Exercises:
2. Jojo is a partner of AMBS & Co., a general professional partnership,

and owns 50% interest. The gross receipts of AMBS & Co. amounted to
P2,000,000.00 for taxable year 2018. The recorded cost of service and
operating expenses of AMBS & Co. were P200,000.00 and
P150,000.00, respectively. Jojo incurred expenses related to his
practice of profession of P500,000.00.
a) How much is the taxable income of AMBS & Co. and Jojo?
b) Will your answer be the same if Jojo has additional gross sales
from his part time business amounting to P1,000,000.00 with
expenses of P100,000.00.
Income Tax
TRAIN Law Amendments – Final Tax Rates:
1. Capital Gains Tax on Unlisted Shares of Stock of a Domestic

Corporation - 15% for all individuals and DC;
2. Stock Transaction Tax on Listed Shares of a Domestic Corporation –

6/10 of 1%;
3. PCSO and Lotto Winnings of P10,000.00 and below exempt. More

than P10,000.00 subject to 20% – only for RC, NRC and RA.
4. Interest on Foreign Currency Deposit Units – 15% for RC, RA and DC.
Income Tax
TRAIN Law Amendments – Final Tax Rates:
5. Fringe Benefits Tax – 35%;

Income Tax
TRAIN Law Amendments – Others:
1. Creditable Withholding Tax Rates: Begining January 1, 2019 not less

than 1% not more than 15%; (Sec. 57(B) of the Tax Code)
2. Substituted Filing - Individual taxpayers receiving purely

compensation income, regardless of amount, from only one employer
in the Philippines for the calendar year, the income tax of which has
been withheld correctly by the said employer (tax due equals tax
withheld) shall not be required to file an annual income tax return. The
certificate of withholding filed by the respective employers, duly
stamped ‘received’ by the BIR, shall be tantamount to the substituted
filing of income tax returns by said employees. (Sec. 51-A of the Tax
Code)
Income Tax
3.a. Individual Tax Returns - Maximum of four (4) pages in paper form
or electronic form, and shall only contain the following information:
(A) Personal profile and information;

(B) Total gross sales, receipts or income from compensation for
services rendered, conduct of trade or business or the exercise of a
profession, except income subject to final tax as provided under this
Code;
(C) Allowable deductions under this Code;
(D) Taxable income as defined in Section 31 of this Code; and
(E) Income tax due and payable.
Income Tax
3.b. Deadline for Individual ITR:
Annual – April 15
1st Quarter – May 15
2nd Quarter – August 15
3rd Quarter – November 15 (Secs. 74(A) and (B) of the Tax Code)
Income Tax
3.c. Payment by Installment of Income Tax for Individuals:
a. Tax due is more than Two Thousand Pesos (P2,000.00);

b. Two equal installments:
1. 1st installment - at the time the return is filed;
2. 2nd installment – October 15;
if any installment is not paid on or before the date fixed for its
payment, the whole amount of the tax unpaid becomes due and
payable together with the delinquency penalties. (Sec. 56(A)(2) of the
Tax Code)
Income Tax
4. Corporate ITR: The ITR shall consist of a maximum of four (4) pages
in paper form or electronic form, be filed by the president, vice
president or other principal officer, shall be sworn to by such officer
and by the treasurer or assistant treasurer, and shall only contain the
following information:
(1) Corporate profile and information; (2) Gross sales, receipts or

income from services rendered, or conduct of trade or business,
except income subject to final tax as provided under this Code; (3)
Allowable deductions under this Code; (4) Taxable income as defined in
Section 31 of this Code; and, (5) Income tax due and payable.
Income Tax
De Minimis Benefits:
a) Monetized unused vacation leave credits of private employees not

exceeding ten (10) days during the year and the monetized value of
leave credits paid to government officials and employees;
b) Monetized value of vacation and sick leave credits paid to
government officials and employees;
c) Medical cash allowance to dependents of employees not exceeding
P1,500.00 per employee per semester or P250.00 per month;
d) Rice subsidy of P2,000.00 or one (1) sack of 50-kg. rice per month
amounting to not more than P2,000.00;
Income Tax
e) Uniform and clothing allowance not exceeding P6,000.00 per

annum;
f) Actual yearly medical benefits not exceeding P10,000.00 per annum;
g) Laundry allowance not exceeding P300.00 per month;
h) Employee achievement awards, e.g., for length of service or safety
achievement, which must be in the form of a tangible personal
property other than cash or gift certificate, with an annual monetary
value not exceeding P10,000.00 received by the employee under an
established written plan which does not discriminate in favor of highly
paid employees;
Income Tax
e) Uniform and clothing allowance not exceeding P6,000.00 per

annum;
f) Actual yearly medical benefits not exceeding P10,000.00 per annum;
g) Laundry allowance not exceeding P300.00 per month;
h) Employee achievement awards, e.g., for length of service or safety
achievement, which must be in the form of a tangible personal
property other than cash or gift certificate, with an annual monetary
value not exceeding P10,000.00 received by the employee under an
established written plan which does not discriminate in favor of highly
paid employees;
Income Tax
i) Gifts given during Christmas and major anniversary celebrations not

exceeding P5,000.00 per employee per annum;
j) Daily meal allowance for overtime work not exceeding twenty-five
percent (25%) of the basic minimum wage; and,
k) Benefits received by an employee by virtue of a collective bargaining
agreement (“CBA”) and productivity incentive schemes provided that
the total annual monetary value received from both CBA and
productivity incentive schemes combined do not exceed ten thousand
pesos (P10,000.00) per employee per taxable year.
Income Tax
Rule on excess De Minimis Benefits:
The benefits given in excess of the maximum amount allowed as "de

minimis" benefits shall be included as part of "other benefits" which is
subject to the P90,000.00 ceiling. Any amount in excess of the
P90,000.00 shall be subject to income tax, and consequently, to the
withholding tax on compensation.
Income Tax
Rule on excess De Minimis Benefits:
Example: Anne received annual clothing allowance amounting to

P10,000.00 Her 13th month pay is P80,000.00. No other benefits were
received for the entire year. In this case, since the prescribed maximum
amount for clothing allowance is only P6,000.00 the excess of
P4,000.00 shall be added to the 13th month pay, thereby the entire
benefits received amounted to P84,000.00 In this scenario, the same
shall still be exempt from income tax since the ceiling amount for these
other benefits is P90,000.00.
Income Tax
Rule on Minimum Wage Earners:
1. Minimum wage earners as defined in Section 22(HH) of this Code

shall be exempt from the payment of income tax on their taxable
income: Provided, further, That the holiday pay, overtime pay, night
shift differential pay and hazard pay received by such minimum wage
earners shall likewise be exempt from income tax. (Sec. 24(A)(1) of the
Tax Code)
Income Tax
Rule on Minimum Wage Earners:
2. Rule under Secs. 1 and 3 of Revenue Regulations No. 10-2008 dated

July 8, 2008:
Provided, however, that an employee who receives/earns additional

compensation such as commissions, honoraria, fringe benefits,
benefits in excess of the allowable statutory amount of ₱30,000.00
(now P90,000.00), taxable allowances and other taxable income other
than the SMW, holiday pay, overtime pay, hazard pay and night shift
differential pay shall not enjoy the privilege of being a MWE and,
therefore, his/her entire earnings are not exempt from income tax, and
consequently, from withholding tax.
Income Tax
Soriano vs. Secretary of Finance, GR No. 184450 dated January 24,
2017:
Whether Sections 1 and 3 of RR 10-2008 are consistent with the law

in declaring that an MWE who receives other benefits in excess of the
statutory limit of ₱30,000.00 (now ₱90,000.00) (and other
compensation in addition to the statutory minimum wage) is no
longer entitled to the exemption provided by R.A. 9504, is consistent
with the law?
Income Tax
2017:
1. Sections 1 and 3 of RR No. 10-2008 add a requirement not found in

the law by effectively declaring that an MWE who receives other
benefits in excess of the statutory limit of ₱30,000.00 (now
₱90,000.00) (and other compensation in addition to the statutory
minimum wage) is no longer entitled to the exemption provided by
R.A. 9504.
Nowhere in the provisions of R.A. 9504 would one find the

qualifications prescribed by the assailed provisions of RR No. 10-2008.
The provisions of the law are clear and precise; they leave no room for
interpretation - they do not provide or require any other qualification
as to who are MWEs.
Income Tax
2017:
2. The amendment is silent on whether compensation-related benefits

exceeding the ₱30,000 (now ₱90,000.00) threshold would make an
MWE lose exemption. R.A. 9504 has given definite criteria for what
constitutes an MWE, and R.R. 10-2008 cannot change this. An
administrative agency may not enlarge, alter or restrict a provision of
law. It cannot add to the requirements provided by law. To do so
constitutes lawmaking, which is generally reserved for Congress.
Income Tax
New Rules under RR No. 11-2018:
1. Statutory Minimum Wage (“SMW”), Holiday Pay, Overtime Pay,

Night Differential Pay and Hazard Pay are exempt from income and
withholding tax.
2. Additional compensation such as commissions, honoraria, fringe

benefits, benefits in excess of the allowable statutory amount of
P90,000.00, taxable allowances, and other taxable income given to an
MWE by the same employer other than those which are expressly
exempt from income tax shall be subject to income and withholding
tax.
Income Tax
3. MWEs receiving other income from other sources in addition to

compensation income, such as income from other concurrent
employers, from the conduct of trade, business or practice of
profession, except income subject to final tax, are subject to income
tax only to the extent of income other than SMW, holiday pay,
overtime pay, night shift differential pay, and hazard pay earned
during the taxable year.
Income Tax
4. Any reduction or diminution of wages for purposes of exemption

from income tax shall constitute misrepresentation and therefore, shall
result to the automatic disallowance of expense, i.e. compensation
and benefits account, on the part of the employer. The offenders may
be criminally prosecuted under existing laws.
Income Tax
Deposit Substitutes – Taxation of bonds:
1.a. Under Sec. 22(Y) of the NIRC, the term “deposit substitutes” shall
mean an alternative form of obtaining funds from the public (the term
“public” means borrowing from twenty (20) or more individual or
corporate lenders at any one time) xxx.
Income Tax
1.b. A BIR ruling stating that all government bonds regardless of the
number of lenders/purchasers are deposit substitutes is invalid
because it disregards the 20-lender rule.
Income Tax
1.c. A BIR ruling stating that the 20-lender rule is determined only at
the time of origination is invalid. The phrase “at any one time” for
purposes of determining the 20-lender rule would mean every
transaction executed in the primary or secondary market in connection
with the purchase or sale of securities.
Income Tax
2.a. In relation to bonds, the bondholder may derive two (2) types of
income. Interest income and, gains from the sale of bonds prior to
maturity or redemption of the bonds at maturity.
Income Tax
2.b. If the bonds are considered deposit substitutes following the 20-
lender rule, the interest income is generally subject to a 20% Final
Withholding Tax.
Take note that for individuals, in general, the interest income from
long-term deposits or placements made with banks in the form of
deposit substitutes (maturity of 5 years or more) is exempt from
income and withholding tax.
Income Tax
2.c. If the bonds are not considered deposit substitutes following the
20 lender rule, the interest income is subject to the regular income tax
rates.
Income Tax
2.d. The gains from the sale of the bonds or redemption at maturity is
subject to the regular income tax rates.
However, if the bonds have a maturity of more than five (5) years, the
gains are exempt from income tax under Sec. 32(B)(7)(g) of the NIRC.
(BDO vs. Republic, GR No. 198756 dated January 13, 2015 and
resolution on the Motion for Reconsideration dated August 16, 2016)
Income Tax
Capital Gains Tax:
1. Sale of machineries by a corporation is not subject to the 6% capital

gains tax. Rather, the gain forms part of gross income and is subject to
the regular corporate income tax. (SMI-ED Philippines Technology
Corporation, Inc. vs. CIR, GR No. 175410 dated November 12, 2014)
2. The transfer of property through expropriation proceedings is a sale

or exchange within the meaning of Sections 24(D) and 56(A)(3) of the
NIRC, and profit from the transaction constitutes capital gain. Since
capital gains tax is a tax on passive income, it is the seller, or
respondents in this case, who are liable to shoulder the tax. (Republic
vs. Spouses Salvador, GR No. 205428 dated June 7, 2017)
Income Tax
CIR vs. St. Luke’s Medical Center, Inc., GR No. 203514 dated February
13, 2017:
St. Luke’s is a non-stock non-profit hospital. It accepts paying and non-

paying patients. During taxable year 1998, it had the following data:
Revenues from Paying Patients: P1,730,000,000.00
Net Income From Paying Patients: P334,000,000.00 (100%)

Free Services (Charity Ward): P218,000,000.00 (65%)
Net Income, Net of Free Services: P116,000,000.00 (35%)
Other Income P 17,000,000.00
Total Net Income P133,000,000.00
Income Tax
13, 2017:
1. Is St. Luke’s exempt from income tax on its income from paying
patients on this basis of Sec. 30(E) of the NIRC as a Charitable
Institution?
Income Tax
13, 2017:
1.a. No. In order to be exempt from income tax as a Charitable

Institution under Sec. 30(E) of the NIRC, the non-stock non-profit
hospital must be “organized and operated exclusively” for charitable
purposes.
It cannot be disputed that a hospital which receives approximately

P1.73 billion from paying patients is not an institution "operated
exclusively" for charitable purposes. Thus, insofar as its as its
revenues from paying patients are concerned, St. Luke’s is not
“operated exclusively” for charitable purposes.
Income Tax
13, 2017:
2. St. Luke’s charity expenditure of P218,000,000.00 is 65.00% of its

operating income in 1998, will this fact entitle it to income tax
exemption?
Income Tax
13, 2017:
2.b. St. Luke’s claims that its charity expenditure of P218,000,000.00 is

65.00% of its operating income in 1998. However, if a part of the
remaining 35.00% of the operating income is reinvested in property,
equipment or facilities used for services to paying and non-paying
patients, then it cannot be said that the income is “devoted or used
altogether to the charitable object which it is intended to achieve.”
The income is plowed back to the corporation not entirely for
charitable purposes, but for profit as well.
Income Tax
13, 2017:
3. Assuming that St. Luke’s uses and devotes 100% of its income on
services, property and facilities relative to non-paying patients, will its
income from paying patients now be exempt from income tax?
Income Tax
13, 2017:
3.a. No. Services to paying patients are activities conducted for profit.
They cannot be considered any other way. There is a “purpose to make
profit over and above the cost” of services.
The last paragraph of Sec. 30 of the NIRC provides: “income of

whatever kind and character of the foregoing organizations from any of
their properties, real or personal, or from any of their activities
conducted for profit regardless of the disposition made of such
income, shall be subject to income tax.”
Income Tax
13, 2017:
4. If a charitable Institution has income from activities conducted for

profit and income from not-for-profit activities, will it lose its tax
exemption on its income from not-for-profit activities?
Income Tax
13, 2017:
4.a. No. A charitable institution under Sec. 30(E) is nevertheless

allowed to engage in “activities conducted for profit” without losing its
tax exempt status for its not-for-profit activities. If it earns income
from its for-profit activities, such income from for-profit activities is
taxable under the last paragraph of Sec. 30.
Income Tax
13, 2017:
5. Since St. Luke’s is subject to income tax on its income from paying
patients, what is the correct income tax rate applicable?
Income Tax
13, 2017:
5.a. 10% imposed on taxable income under Sec. 27(B).
St. Luke’s fails to meet the requirements under Sec. 30(E) to be

completely tax exempt from all its income. However, it remains a
proprietary non-profit hospital under Sec. 27(B) as long as it does not
distribute any of its profits to its members and such profits are
reinvested pursuant to its corporate purposes. St. Luke’s, as a
proprietary non-profit hospital, is entitled to the preferential tax rate
of 10% on its net income from its for-profit activities.
Income Tax
Income tax of schools:
1.a. A proprietary educational institution is subject to a preferential

rate of 10% provided that its income from unrelated trade, business or
activity does not exceed 50% of its income from all sources. (Sec. 27(B)
of the Tax Code)
Income Tax
1.b. Proprietary educational institution entitled to the reduced rate of

10% corporate income tax if:
a. The proprietary educational institution is nonprofit; and,

b. Its gross income from unrelated trade, business or activity does not
exceed 50% of its total gross income. (CIR vs. De La Salle University, GR
No. 196596 dated November 9, 2016)
Income Tax
2. All revenues and assets of non-stock, non-profit educational

institutions used actually, directly, and exclusively for educational
purposes shall be exempt from taxes and duties. (Sec. 4(3), Art. XIV of
the Constitution)
Income Tax
3. Charitable institutions, churches and personages or convents

appurtenant thereto, mosques, non-profit cemeteries, and all lands,
buildings, and improvements, actually, directly, and exclusively used for
religious, charitable, or educational purposes shall be exempt from
taxation – does not cover income tax. Covers only property taxes.
(Sec. 28 Art. VI of the Constitution)
Income Tax
4. Exempt under the NIRC:
Sec. 30 (H) - A nonstock and nonprofit educational institution;

Sec. 30 (I) - Government educational institution;
“Notwithstanding the provisions in the preceding paragraphs, the

income of whatever kind and character of the foregoing organizations
from any of their properties, real or personal, or from any of their
activities conducted for profit regardless of the disposition made of
such income, shall be subject to tax imposed under this Code.” – Last
paragraph of Sec. 30.
Income Tax
5. Revenues derived from and assets used in the operations of

cafeterias/canteens, dormitories, bookstores are exempt from taxation
provided they are owned and operated by the educational institution
as ancillary activities and the same are located within the school
premises. (DOF Order No. 137-87 dated December 15, 1987)
Income Tax
6.a. The last paragraph of Section 30 of the Tax Code is without force
and effect with respect to non-stock, non-profit educational
institutions, provided, that the non-stock, non-profit educational
institutions prove that its assets and revenues are used actually,
directly and exclusively for educational purposes.
The tax-exemption constitutionally-granted to non-stock, non-profit

educational institutions, is not subject to limitations imposed by law.
Income Tax
6.b. The tax exemption granted by the Constitution to non-stock, non-

profit educational institutions is conditioned only on the actual, direct
and exclusive use of their assets, revenues and income for educational
purposes.
Income Tax
6.c. A plain reading of the Constitution would show that Article XIV,
Section 4(3) does not require that the revenues and income must have
also been sourced from educational activities or activities related to
the purposes of an educational institution. The phrase all revenues is
unqualified by any reference to the source of revenues. Thus, so long
as the revenues and income are used actually, directly and exclusively
for educational purposes, then said revenues and income shall be
exempt from taxes and duties.
Income Tax
6.d. To avail of the exemption, the taxpayer must factually prove that it
used actually, directly and exclusively for educational purposes the
revenues or income sought to be exempted. (CIR vs. De La Salle
University, GR No. 196596 dated November 9, 2016)
Income Tax
Perlas School of Law had the following incomes during the year:
Tuition Fees: P1,000,000.00

Interest Income – BPI Dollar Account: P2,000,000.00
Rental Income: P 500,000.00
Total: P3,500,000.00
Income Tax
International Carriers:
1. An international air carrier without landing rights in the Philippines

is not subject to the 2.5% Gross Philippine Billings Tax (“GPBT”) under
Section 28(A)(3) of the Tax Code. The 2.5% GPBT attaches only when
the carriage of persons, excess baggage, cargo, and mail originated
from the Philippines in a continuous and uninterrupted flight,
regardless of where the passage documents were sold.
Income Tax
International Carriers:
2. If the international air carrier does not have landing rights in the
Philippines but it sells tickets in the Philippines, it is nonetheless liable
for 30% Regular Corporate Income Tax since it is considered a Resident
Foreign Corporation. We follow the activity test.
3. If there is an applicable tax treaty, the same must be taken into

consideration to determine the proper tax rate. Under the RP-Canada
Tax Treaty, an international air carrier could only be taxed at a
maximum of 1½% of gross revenues. (Air Canada vs. CIR, GR No.
169507 dated January 11, 2016)
Income Tax
Withholding Tax:
1. In this case, the CIR insists that EBCC was liable to pay the final
withholding tax on interest from the date of the execution of the
contract on January 5, 2000, not from the date of the first payment on
June 1, 2002.
Under RR No. 2-98, the obligation of EBCC to deduct or withhold tax

arises at the time an income is paid or payable, whichever comes first,
and considering further that under the said RR, the term "payable"
refers to the date the obligation becomes due, demandable or legally
enforceable. Thus, EBCC had no obligation to withhold any taxes on
the interest payment for the year 2000 as the obligation to withhold
only commenced on June 1, 2002. (Edison (Bataan) Cogeneration Corp.
vs. CIR, GR No. 201665 & 201668 dated August 30, 2017)
Income Tax
Withholding Tax:
2. If the taxpayer claims bonuses as a deduction in its income tax

return, the withholding tax on the said bonuses should be withheld
and remitted to the BIR in the year of accrual and not during the year
of payment. The obligation of the payor/employer to deduct and
withhold the related withholding tax on bonuses arises at the time the
income was paid or accrued or recorded as an expense in the
payor’s/employer’s books, whichever comes first. (ING Bank N.V. vs.
CIR, GR No. 167679 dated July 22, 2015)
Income Tax
Fringe Benefits Tax:
1.a. The Fringe Benefits Tax (“FBT”) is treated as a final income tax on
the employee that shall be withheld and paid by the employer on a
calendar quarterly basis. As such, PAGCOR is a mere withholding agent
inasmuch as the FBT is imposed on PAGCOR's employees who receive
the fringe benefit. PAGCOR's liability as a withholding agent is not
covered by the tax exemptions under its Charter.
Income Tax
1.b. The car plan extended by PAGCOR to its qualified officers is

evidently considered a fringe benefit as defined under Section 33 of
the NIRC. To avoid the imposition of the FBT on the benefit received by
the employee, and, consequently, to avoid the withholding of the
payment thereof by the employer, PAGCOR must sufficiently establish
that the fringe benefit is required by the nature of, or is necessary to
the trade, business or profession of the employer, or when the fringe
benefit is for the convenience or advantage of the employer.
Income Tax
1.c. PAGCOR asserted that the car plan was granted "not only because
it was necessary to the nature of the trade of PAGCOR but it was also
granted for its convenience." The records are lacking in proof as to
whether such benefit granted to PAGCOR's officers were, in fact,
necessary for PAGCOR's business or for its convenience and advantage.
Accordingly, PAGCOR should have withheld the FBT from the officers
who have availed themselves of the benefits of the car plan and
remitted the same to the BIR.
Income Tax
2.a. The payment of membership dues and fees is not considered a

fringe benefit that is subject to FBT:
PAGCOR derives business from its customers who play at the casinos.
In furtherance of its business, PAGCOR usually attends its VIP
customers, amenities such as playing rights to golf clubs. The
membership of PAGCOR to these golf clubs and other organizations are
intended to benefit respondent's customers and not its employees.
Aside from this, the membership is under the name of PAGCOR, and as
such, cannot be considered as fringe benefits because it is the
customers and not the employees of PAGCOR who benefit from such
memberships.
Income Tax
2.b. Considering that the payments of membership dues and fees are
not borne by PAGCOR for its employees, they cannot be considered as
fringe benefits which are subject to FBT under Section 33 of the NIRC.
Hence, PAGCOR is not liable to withhold FBT from its employees. (CIR
vs. Secretary of Justice and PAGCOR, GR No. 177387 dated November
9, 2016; PAGCOR vs. CIR, GR Nos. 210689-90 dated November 22,
2017)
Income Tax
Dividends:
Goodyear Tire and Rubber Company (“GTRC”), a US Company owns

100% of the preferred shares of Goodyear Philippines, Inc. (“GPI”).
Subsequently, the preferred shares were redeemed by GPI above its
par value which resulted in a “net capital gain” on the part of GTRC.
Is the “net capital gain” from the redemption of the preferred shares
considered dividends subject to Final Withholding Tax?
Income Tax
Dividends:
1. Section 73 (A) of the Tax Code which provides that "[t)he term
'dividends' xxx means any distribution made by a corporation to its
shareholders out of its earnings or profits and payable to its
shareholders, whether in money or in other property."
In light of the foregoing, the Court therefore holds that the redemption
price representing the amount of P97,732,314.00 received by GTRC
could not be treated as accumulated dividends in arrears that could be
subjected to 15% FWT. Verily, respondent's AFS covering the years
2003 to 2009 show that it did not have unrestricted retained earnings,
and in fact, operated from a position of deficit. Thus, absent the
availability of unrestricted retained earnings, the board of directors
of respondent had no power to issue dividends.
Income Tax
Dividends:
2. It is also worth mentioning that one of the primary features of an

ordinary dividend is that the distribution should be in the nature of a
recurring return on stock which, however, does not obtain in this case.
As aptly pointed out by the CTA En Banc, the amount of
P97,732,314.00 received by GTRC did not represent a periodic
distribution of dividend, but rather a payment by respondent for the
redemption of GTRC's 3,729,216 preferred shares. (CIR vs. Goodyear
Philippines, Inc., GR No. 216130 dated August 3, 2016)
Remedies
TRAIN Law Amendment:
Sec. 249. Interest:
1. Interest rate is double the legal interest rate for loans or forbearance
of any money in the absence of an express stipulation as set by the
Bangko Sentral ng Pilipinas.
2. No simultaneous imposition of deficiency and the delinquency
interest.
3. Deficiency interest shall start to run from deadline date per law or
regulation until deadline date per Final Assessment Notice.
Remedies
Audit Process/Letter of Authority:
1. Letter of Authority (“LOA”) - is the authority given to the appropriate

revenue officer assigned to perform assessment functions. It
empowers or enables said revenue officer to examine the books of
account and other accounting records of a taxpayer for the purpose of
collecting the correct amount of tax. (CIR vs. Sony Philippines, Inc., GR
2. The Letter of Authority commences the audit process and informs

the taxpayer that it is under audit for possible deficiency tax
assessment. (CIR vs. De La Salle University, Inc., GR No. 196596 dated
November 9, 2016)
Remedies
3. SEC. 6. Power of the Commissioner to Make Assessments and

Prescribe Additional Requirements for Tax Administration and
Enforcement. –
(A)Examination of Returns and Determination of tax Due. – After a

return has been filed as required under the provisions of this Code, the
Commissioner or his duly authorized representative may authorize the
examination of any taxpayer and the assessment of the correct
amount of tax: Provided, however, That failure to file a return shall not
prevent the Commissioner from authorizing the examination of any
taxpayer. x x x [Emphases supplied]
Remedies
4. Section C of Revenue Memorandum Order No. 43-90 dated

September 20, 1990, the pertinent portion of which reads:
“A Letter of Authority should cover a taxable period not exceeding

one taxable year. The practice of issuing L/As covering audit of
"unverified prior years is hereby prohibited. If the audit of a taxpayer
shall include more than one taxable period, the other periods or years
shall be specifically indicated in the L/A.”
Remedies
CIR vs. Sony Philippines, Inc., GR No. 178697 dated November 17,
2010:
a. The period covered by the Letter of Authority provides: "the period

1997 and unverified prior years."
b. Assessment issued was for deficiency VAT and was based on records
from January to March 1998.
Is the assessment valid?

Remedies
2010:
1. The VAT assessment is not valid because the revenue officers went
beyond the scope of their authority.
Clearly, there must be a grant of authority before any revenue officer

can conduct an examination or assessment. Equally important is that
the revenue officer so authorized must not go beyond the authority
given. In the absence of such an authority, the assessment or
examination is a nullity.
Remedies
2010:
2. The coverage of LOA 19734, particularly the phrase "and unverified

prior years," violated Section C of Revenue Memorandum Order No.
43-90 dated September 20, 1990, the pertinent portion of which
reads:
“A Letter of Authority should cover a taxable period not exceeding

one taxable year. xxx.”
Remedies
CIR vs. De La Salle University, Inc., GR No. 196596 dated November 9,
2016:
a. The period covered by the Letter of Authority provides: “Fiscal Year

Ending 2003 and Unverified Prior Years."
b. Assessments were issued for Income Tax and VAT for taxable years
2001, 2002 and 2003.
Is the LOA valid? Are the assessments valid?

Remedies
2016:
1.a. The LOA does not strictly comply with RMO No. 43-90 but it is not
entirely void. What RMO No. 43-90 clearly prohibits is the practice of
issuing LOAs covering audit of unverified prior years but it does not say
that an LOA which contains unverified prior years is void.
Remedies
2016:
1.b. RMO No. 43-90 requires that if the 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 is audited for
more than one taxable year, the BIR must specify each taxable year or
taxable period on separate LOAs. This is to inform the taxpayer of the
extent of the audit and scope of the revenue officer’s authority.
Without this rule, a revenue officer can unduly burden the taxpayer by
demanding random accounting records from random unverified years,
which may include documents from as far back as 10 years in cases of
a fraud audit.
Remedies
2016:
2. The assessment for taxable year 2003 is valid because this taxable
period was specified in the LOA. DLSU was fully apprised that it was
being audited for taxable year 2003.
On the other hand, the assessments for taxble years 2001 and 2002
are void for having been unspecified on separate LOAs as required
under RMO No. 43-90.
Remedies
Medicard Philippines, Inc. vs. CIR, GR No. 222743 dated April 5, 2017:
Is an assessment based on a Letter Notice without prior issuance of a

Letter of Authority valid?
Remedies
1. Sec. 6(A) is clear that unless authorized by the CIR himself or by his
duly authorized representative, through an LOA, an examination of the
taxpayer cannot ordinarily be undertaken. The circumstances
contemplated under Section 6 where the taxpayer may be assessed
through best-evidence obtainable, inventory-taking, or surveillance
among others has nothing to do with the LOA. These are simply
methods of examining the taxpayer in order to arrive at the correct
amount of taxes. Hence, unless undertaken by the CIR himself or his
duly authorized representatives, other tax agents may not validly any
of these kinds of examinations without prior authority.
Remedies
2.a LOA vs. Letter Notice (“LN”):
First, an LOA addressed to a revenue officer is specifically required

under the NIRC before an examination of a taxpayer may be had while
an LN is not found in the NIRC and is only for the purpose of notifying
the taxpayer that a discrepancy is found based on the BIR's RELIEF
System.
Second, an LOA is valid only for 30 days from date of issue while an LN
has no such limitation.
Remedies
2.b. LOA vs. Letter Notice (“LN”):
Third, an LOA gives the revenue officer only a period of 180 days (now
120 days) from receipt of LOA to conduct his examination of the
taxpayer whereas an LN does not contain such a limitation.
Simply put, an LN is entirely different and serves a different purpose

than an LOA. Due process demands, as recognized under RMO No. 32-
2005, that after an LN has serve its purpose, the revenue officer should
have properly secured an LOA before proceeding with the further
examination and assessment of the petitioner. Unfortunately, this was
not done in this case.
Remedies
3. Contrary to the ruling of the CTA en banc, an LOA cannot be

dispensed with just because none of the financial books or records
being physically kept by MEDICARD was examined. To begin with,
Section 6 of the NIRC requires an authority from the CIR or from his
duly authorized representatives before an examination "of a taxpayer"
may be made. The requirement of authorization is therefore not
dependent on whether the taxpayer may be required to physically
open his books and financial records but only on whether a taxpayer is
being subject to examination.
Remedies
4. Not having authority to examine MEDICARD in the first place, the

assessment issued by the CIR is inescapably void.
Remedies
CIR vs. Lancaster Philippines, Inc., GR No. 183408 dated July 12, 2017:
In 1999, the Bureau of Internal Revenue (BIR) issued Letter of

Authority (LOA) No. 00012289 authorizing its revenue officers to
examine Lancaster's books of accounts and other accounting records
for all internal revenue taxes due from taxable year 1998 to an
unspecified date. The LOA reads:
“The bearer(s) hereof xxx is/are authorized to examine your books of

accounts and other accounting records for all internal revenue taxes
for the period from taxable year, 1998 to __, 19_.”
Remedies
1. The audit process normally commences with the issuance by the CIR
of a Letter of Authority. The LOA gives notice to the taxpayer that it is
under investigation for possible deficiency tax assessment; at the same
time it authorizes or empowers a designated revenue officer to
examine, verify, and scrutinize a taxpayer's books and records, in
relation to internal revenue tax liabilities for a particular period.
Remedies
2.a. Even though the date after the words "taxable year 1998 to" is
unstated, it is not at all difficult to discern that the period of
examination is the whole taxable year 1998. This means that the
examination of Lancaster must cover the FY period from 1 April 1997
to 31 March 1998. It could not have contemplated a longer period. The
examination for the full taxable year 1998 only is consistent with the
guideline in Revenue Memorandum Order (RMO) No. 43-90, dated 20
September 1990, that the LOA shall cover a taxable period not
exceeding one taxable year. In other words, absent any other valid
cause, the LOA issued in this case is valid in all respects.
Remedies
2.b. Nonetheless, a valid LOA does not necessarily clothe validity to an

assessment issued on it, as when the revenue officers designated in
the LOA act in excess or outside of the authority granted them under
said LOA.
Remedies
3. The present case is no different from Sony in that the subject LOA
specified that the examination should be for the taxable year 1998
only but the subsequent assessment issued against Lancaster involved
disallowed expenses covering the next fiscal year, or the period ending
31 March 1999.
The taxable year covered by the assessment being outside of the

period specified in the LOA in this case, the assessment issued against
Lancaster is, therefore, void.
Remedies
Assessment:
1. An assessment contains not only a computation of tax liabilities, but

also a demand for payment within a prescribed period. It also signals
the time when penalties and protests begin to accrue against the
taxpayer. To enable the taxpayer to determine his remedies thereon,
due process requires that it must be served on and received by the
taxpayer. (CIR vs. Pascor Realty, GR No. 128315 dated June 29, 1999)
Remedies
Assessment:
2. The term "assessment" refers to the determination of amounts due

from a person obligated to make payments. In the context of national
internal revenue collection, it refers to the determination of the taxes
due from a taxpayer under the National Internal Revenue Code of
1997. (SMI-ED Technology Corporation, Inc. vs. CIR, GR No. 175410
dated November 12, 2014)
Remedies
CIR vs. Fitness By Design, GR No. 215957 dated November 9, 2016:
Part of the assessment reads as follows:
“The complete details covering the aforementioned discrepancies

established during the investigation of this case are shown in the
accompanying Annex 1 of this Notice. The 50% surcharge and 20%
interest have been imposed pursuant to Sections 248 and 249(B) of the
[National Internal Revenue Code], as amended. Please note, however,
that the interest and the total amount due will have to be adjusted if
paid prior or beyond April 15, 2004.”

Remedies
The assessment is not valid. It lacks the definite amount of tax liability
for which respondent is accountable. It does not purport to be a
demand for payment of tax due, which a final assessment notice
should supposedly be. Although the disputed notice provides for the
computations of respondent's tax liability, the amount remains
indefinite. It only provides that the tax due is still subject to
modification, depending on the date of payment.
Remedies
Part of the Assessment reads as follows:
“In view thereof, you are requested to pay your aforesaid deficiency

internal revenue tax liabilities through the duly authorized agent bank
in which you are enrolled within the time shown in the enclosed
assessment notice.”

Remedies
Assessment is not valid. There are no due dates in the Final

Assessment Notice. This negates petitioner's demand for payment.
Petitioner's contention that April 15, 2004 should be regarded as the
actual due date cannot be accepted. The last paragraph of the Final
Assessment Notice states that the due dates for payment were
supposedly reflected in the attached assessment. However, based on
the findings of the Court of Tax Appeals First Division, the enclosed
assessment pertained to remained unaccomplished.
Remedies
Other Assessment and Collection Doctrines:
1. In case there is failure to notify the BIR in writing relative to a

taxpayer’s change in address, in order for the prescriptive period under
Sec. 223 to be suspended, the BIR must be unaware of the
whereabouts of the taxpayer. (CIR vs. BASF Coating + Inks Phils., GR No.
198677 dated November 26, 2014)
Remedies
2. Failure to submit relevant supporting documents during the 60-day

period does not render the assessment final and executory. The BIR
cannot demand what type of supporting documents should be
submitted. Otherwise, a taxpayer will be at the mercy of the BIR, which
may require the production of documents that a taxpayer cannot
submit. (CIR vs. First Express Pawnshop, GR Nos. 172045-46 dated June
16, 2009)
The 60-day period to submit documents only applies to a request for

reinvestigation. (Revenue Regulations No. 18-2013 dated November 28,
2013)
Remedies
3. Prior issuance of a Preliminary Assessment Notice is mandatory

(except if Sec. 228 applies), otherwise the Final Assessment Notice
becomes null and void. (CIR vs. Metro Star Superama, Inc., GR No.
185371 dated December 8, 2010)
Remedies
4. If the BIR does not render a decision within the 180-day period, the
taxpayer has two options, either:
a) File a petition for review with the CTA within 30 days after the
expiration of the 180-day period; or
b) Await 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. (Lascona
Land vs. CIR, GR No. 171251 dated March 5, 2012; RCBC vs. CIR, GR No.
168498 dated April 24, 2007)
Remedies
5. Administrative appeal with the Commissioner is allowed if the Final

Decision on the Disputed Assessment (“FDDA”) is signed by the CIR’s
duly authorized representative. It is in the form of a request for
reconsideration only. (Revenue Regulations No. 18-2013 dated
November 28, 2013)
Remedies
6. An FDDA must state the facts and law on which it is based to provide
the taxpayer the opportunity to file an intelligent appeal. An FDDA
which contains a taxpayer’s supposed tax liabilities, without providing
any details on the specific transactions which gave rise to its supposed
tax deficiencies is void. The FDDA differs from the Final Assessment
Notice (“FAN”). The nullity of the FDDA does not extend to the FAN.
(CIR vs. Liquigaz Phils. Corporation, GR No. 215534 dated April 18,
2016)
Remedies
PAGCOR vs. BIR, GR No. 208731 dated January 27, 2016:
Factual Circumstances:
1. The BIR Regional Director issued a FAN against PAGCOR.

2. PAGCOR filed a protest with the Regional Director against the FAN.
3. Without any decision on the part of the Regional Director, PAGCOR
elevated its protest with the CIR.
Was the remedy availed by PAGCOR the correct remedy?

Remedies
Following the verba legis doctrine, the law must be applied exactly as

worded since it is clear, plain, and unequivocal. A textual reading of
Section 3.1.5 of RR No. 12-99 (“Section 3.1.5”) gives a protesting
taxpayer like PAGCOR only three options:
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 of the
protest.
Remedies
2. If the 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 or partial denial of the protest.
3. If the CIR or his authorized representative failed to act upon the

protest within 180 days from submission of the required supporting
documents, then the taxpayer may appeal to the CTA within 30 days
from the lapse of the 180-day period.
Remedies
To further clarify the three options: A whole or partial denial by the

CIR's authorized representative may be appealed to the CIR or the CTA.
A whole or partial denial by the CIR may be appealed to the CTA. The
CIR or the CIR's authorized representative's failure to act may be
appealed to the CTA. There is no mention of an appeal to the CIR from
the failure to act by the CIR's authorized representative.
Remedies
10 year prescriptive period under Sec. 222(a):
1. A false return simply involves a "deviation from the truth, whether

intentional or not" while a fraudulent return "implies intentional or
deceitful entry with intent to evade the taxes due.” (Aznar vs. CTA, GR
No. L-20569 August 23, 1974)
2. Fraud is a question of fact that should be alleged and duly proven.

“xxx the fraudulent intent to evade the payment of taxes, considering
that the same is accompanied by legal consequences, cannot be
presumed." Fraud entails corresponding sanctions under the tax law.
Therefore, it is indispensable for the CIR to include the basis for its
allegations of fraud in the assessment notice. (CIR vs. Fitness By
Design, GR No. 215957 dated November 9, 2016)
Remedies
3. While the filing of a fraudulent return necessarily implies that the

act of the taxpayer was intentional and done with intent to evade the
taxes due, the filing of a false return can be intentional or due to
honest mistake. (CIR vs. Philippine Daily Inquirer, GR No. 213943 dated
March 22, 2017)
Remedies
4.a. Under Section 248(B) of the NIRC, failure to report sales, receipts
or income in an amount exceeding thirty percent (30%) of that
declared per return, and a claim of deduction in an amount exceeding
thirty (30%) of actual deductions, shall constitute prima facie evidence
of false or fraudulent return.
Remedies
4.b. A prima facie evidence is one which that will establish a fact or

sustain a judgment unless contradictory evidence is produced. In other
words, when there is a showing that a taxpayer has substantially
underdeclared its sales, receipt or income, there is a presumption that
it has filed a false return. As such, the CIR need not immediately
present evidence to support the falsity of the return, unless the
taxpayer fails to (has) overcome the presumption against it. Failure of
the taxpayer to refute the presumption warrants the application of the
ten (10)-year prescriptive period for assessment under Section 222 of
the NIRC. (CIR vs. Asalus Corporation, GR No. 221590 dated February
22, 2017)
Remedies
Factual Circumstances:
Taxpayer understated its sales by more than 30%. FAN and FDDA did
not state that the extraordinary prescriptive period of 10 years applies.
However, the PAN stated that the extraordinary period of 10 years
applies.
Issue:
Does the 10 year prescriptive period apply?

Remedies
1. Yes, the FAN and FDDA made reference to the PAN which
categorically stated that "[t]he running of the three-year statute of
limitation as provided under Section 203 of the 1997 NIRC is not
applicable xxx but rather to the ten (10) year prescriptive period
pursuant to Section 222(A) of the Tax Code xxx.“
2. In Samar-I Electric Cooperative vs. CIR, the Supreme Court held that
it is sufficient that the taxpayer was substantially informed of the legal
and factual bases of the assessment enabling him to file an effective
protest.
Remedies
3. Thus, substantial compliance with the requirement as laid down

under Section 228 of the NIRC suffices, for what is important is that the
taxpayer has been sufficiently informed of the factual and legal bases
of the assessment so that it may file an effective protest against the
assessment. In the case at bench, Asalus was sufficiently informed that
with respect to its tax liability, the extraordinary period laid down in
Section 222 of the NIRC would apply. This was categorically stated in
the PAN and all subsequent communications from the CIR made
reference to the PAN. Asalus was eventually able to file a protest
addressing the issue on prescription, although it was done only in its
supplemental protest to the FAN. (CIR vs. Asalus Corporation, GR No.
221590 dated February 22, 2017)
Remedies
Requisites of a valid waiver:
1. The waiver must be in the proper form prescribed by RMO No. 20-
90. The phrase "but not after ______ 19 ___", which indicates the
expiry date of the period agreed upon to assess/collect the tax after
the regular three-year period of prescription, should be filled up; - Not
necessarily in the form prescribed by RMO 20-90 as amended by
RDAO 05-01. Expiry date still necessary.
Remedies
2. The waiver must be signed by the taxpayer himself or his duly

authorized representative. In the case of a corporation, the waiver
must be signed by any of its responsible officials. In case the authority
is delegated by the taxpayer to a representative, such delegation
should be in writing and duly notarized; - Authority in writing
requirement deleted. The taxpayer has the burden to ensure that the
waiver is validly executed by its authorized representative. The
waiver cannot thereafter be invalidated on the ground that the
taxpayer’s representative who participated in the conduct of the
audit is not authorized to sign the waiver.
Remedies
3. The waiver should be duly notarized; - Notarization is optional.
4. The CIR or the revenue official authorized by him must sign the
waiver indicating that the BIR has accepted and agreed to the waiver.
The date of such acceptance by the BIR should be indicated. However,
before signing the waiver, the CIR or the revenue official authorized by
him must make sure that the waiver is in the prescribed form, duly
notarized, and executed by the taxpayer or his duly authorized
representative; - Group supervisor in the LOA may now sign the
waiver. Date of Acceptance need not be indicated.
Remedies
5. Both the date of execution by the taxpayer and date of acceptance

by the Bureau should be before the expiration of the period of
prescription or before the lapse of the period agreed upon in case a
subsequent agreement is executed; and,
Remedies
6. The waiver must be executed in three copies, the original copy to be

attached to the docket of the case, the second copy for the taxpayer
and the third copy for the Office accepting the waiver. The fact of
receipt by the taxpayer of his/her file copy must be indicated in the
original copy to show that the taxpayer was notified of the acceptance
of the BIR and the perfection of the agreement. – No longer a
requirement. Now, the taxpayer shall have the duty to retain a copy
of the accepted waiver. (CIR vs. Stanley Works (Phils.) Incorporated, GR
No. 187859 dated December 3, 2014) With updates under RMO No.
14-2016 dated April 4, 2016.
Remedies
(New) Requisites of a valid waiver per RMO No. 14-2016 dated April
4, 2016:
1. Must be executed and accepted before the expiration of the period

to assess or collect taxes (or before the lapse of the period agreed
upon in case a subsequent agreement is executed);
2. The waiver must be signed by the taxpayer himself or his duly

authorized representative. In the case of a corporation, the waiver
must be signed by any of its responsible officials;
3. The expiry date of the period agreed upon to assess/collect the tax
after the regular three-year period of prescription should be indicated;
Remedies
(New) Requisites of a valid waiver per RMO No. 14-2016 dated April
4, 2016:
4. Waiver of prescriptive period to collect must indicate the particular

taxes assessed. Waiver of prescriptive period to assess may simply
state “all internal revenue taxes;”
5. Two material dates must appear on the waiver:

a) The date of execution; and,
b) The expiry date of the period the taxpayer waives the statute of
limitations.
Remedies
Waiver Cases:
1.a. The waiver of the statute of limitations is not a waiver of the right
to invoke the defense of prescription. It is an agreement between the
taxpayer and the BIR that the period to issue an assessment and
collect the taxes due is extended to a date certain. (Philippine
Journalists, Inc. vs. CIR, GR No. 162852 dated December 16, 2004)
Remedies
Waiver Cases:
1.b. Similar to the case of Standard Chartered Bank, the waivers in this
case did not specify the kind of tax and the amount of tax due. It is
established that a waiver of the statute of limitations is a bilateral
agreement between the taxpayer and the BIR to extend the period to
assess or collect deficiency taxes on a certain date. Logically, there can
be no agreement if the kind and amount of the taxes to be assessed
or collected were not indicated. Hence, specific information in the
waiver is necessary for its validity. (CIR vs. Systems Technology
Institute, Inc., GR No. 220835 dated July 26, 2017)
Remedies
Waiver Cases:
2.a. Doctrine of Estoppel not applicable, as a rule, to validate a

defective waiver. Failure to strictly comply with the requirements of a
valid waiver invalidates the waiver and does not extend the
prescriptive period to assess or collect.
Remedies
Waiver Cases:
2.b. CIR’s argument: “Taxpayer is now estopped from claiming

prescription since by executing the waivers, it was the one which asked
for additional time to submit the required documents.”
SC: The BIR cannot hide behind the doctrine of estoppel to cover its
failure to comply with RMO No. 20-90 and RDAO No. 05-01, which the
BIR itself issued. Having caused the defects in the waivers, the BIR
must bear the consequence. It cannot shift the blame to the taxpayer.
To stress, a waiver of the statute of limitations, being a derogation of
the taxpayer’s right to security against prolonged and unscrupulous
investigations, must be carefully and strictly construed. (CIR vs. Kudos
Metal, GR No. 178087 dated May 5, 2010; CIR vs. Systems Technology
Institute, Inc., GR No. 220835 dated July 26, 2017)
Remedies
Waiver Cases – Estoppel Applied – RCBC Case:
2.c. Partial payment of an assessment which is covered by a defective

waiver. RCBC, through its partial payment of the assessment impliedly
admitted the validity of those waivers. Had RCBC truly believed that
the waivers were invalid and that the assessments were issued beyond
the prescriptive period, then it should not have paid the reduced
amount of taxes in the revised assessment. RCBC’s subsequent action
effectively belies its insistence that the waivers are invalid. (RCBC vs.
CIR, GR No. 170257 dated September 7, 2011)
Remedies
Waiver Cases – Estoppel Applied – Next Mobile Case:
2.d.1 Factual Considerations:
1. Next Mobile executed five (5) waivers without presenting the

notarized written authority of the signatory of the waivers;
2. In fact, in its Letter Protest to the BIR, respondent did not even
question the validity of the Waivers or call attention to their alleged
defects.
3. After enjoying benefits of the Waiver, Next Mobile challenged the
validity of the Waivers when the consequences thereof were not in its
favor. In other words, Next Mobile's act of impugning these Waivers
after benefiting therefrom and allowing petitioner to rely on the same
is an act of bad faith.
Remedies
Waiver Cases – Estoppel Applied – Next Mobile Case:
2.d.2. When the application of estoppel would promote the

administration of the law, prevent injustice and avert the
accomplishment of a wrong and undue advantage. In this case, the
taxpayer executed five Waivers and delivered them to the BIR, one
after the other. It allowed the BIR to rely on them and did not raise any
objection against their validity until the BIR assessed taxes and
penalties against it. Moreover, the application of estoppel is necessary
to prevent the undue injury that the government would suffer because
of the cancellation of petitioner's assessment of respondent's tax
liabilities. (CIR vs. Next Mobile, Inc., GR No. 212825 dated December 7,
2015)
Remedies
Waiver Cases – Estoppel Applied – Transitions Optical Case:
2.e.1. Transitions Optical never raised the invalidity of the Waivers at

the earliest opportunity, either in its Protest to the PAN, Protest to the
FAN, or Supplemental Protest to the FAN. It thereby impliedly
recognized these Waivers' validity and its representatives' authority to
execute them. Respondent only raised the issue of these Waivers'
validity in its Petition for Review filed with the CTA. In fact,
respondent's Protest to the FAN clearly recognized the validity of the
Waivers.
Remedies
Waiver Cases – Estoppel Applied – Transitions Optical Case:
2.e.2. Transitions Optical did not dispute the BIR’s assertion that it
repeatedly failed to comply with petitioner's notices, directing it to
submit its books of accounts and related records for examination by
the BIR. Respondent also ignored the BIR's request for an Informal
Conference to discuss other "discrepancies" found in the partial
documents submitted. The Waivers were necessary to give
respondent time to fully comply with the BIR notices for audit
examination and to respond to its Informal Conference request to
discuss the discrepancies. Thus, having benefitted from the Waivers
executed at its instance, respondent is estopped from claiming that
they were invalid and that prescription had set in. (CIR vs. Transitions
Optical Phils., GR No. 227544 dated November 22, 2017)
Remedies
Refunds in General:
1. The taxpayer must file a written claim for refund with the CIR prior
to filing a judicial claim for refund with the CTA. (Sec. 204(C) of the Tax
Code)
The primary purpose of filing an administrative claim is to serve as a

notice of warning to the CIR that court action would follow unless the
tax or penalty alleged to have been collected erroneously or illegally is
refunded. (Metrobank vs. CIR, GR No. 182582 dated April 17, 2017)
Remedies
Refunds in General:
2.a. Both the administrative claim for refund with the CIR and the
judicial claim for refund with the CTA must be filed within 2 years from
the date of payment. (Secs. 204(C) and 229 of the Tax Code)
Notably, both the administrative and judicial claims for refund should
be filed within the two (2)-year prescriptive period indicated therein,
and that the claimant is allowed to file the latter even without waiting
for the resolution of the former in order to prevent the forfeiture of its
claim through prescription. (Metrobank vs. CIR, GR No. 182582 dated
April 17, 2017)
Remedies
Refunds in General:
2.b. In P.J. Kiener Co., Ltd. v. David (“Kiener”), it was held that in no
wise does the law, i.e., Section 306 of the old Tax Code (now, Section
229 of the NIRC), imply that the Collector of Internal Revenue (now
Commissioner) first act upon the taxpayer's claim, and that the
taxpayer shall not go to court before he is notified of the Collector's
action. In Kiener, the Court went on to say that the claim with the
Collector of Internal Revenue was intended primarily as a notice of
warning that unless the tax or penalty alleged to have been collected
erroneously or illegally is refunded, court action will follow. (CIR vs.
CBK Power Company Ltd., vs, CIR, GR Nos. 193407-08 dated January
14, 2015)
Remedies
Refunds in General:
When is the last day to file the judicial claim for refund in the following
instances?
Filing of Annual Date of Filing of Decision
ITR for calendar Claim with the denying the
year 2015 BIR claim for refund
1. 4/15/2016 2/14/2017 3/1/2018
2. 4/10/2016 12/20/2017 4/1/2018
3. 4/20/2016 9/1/2017 4/25/2018
Remedies
Refunds in General:
3. A written claim for refund is not necessary if:
a) Tax return filed shows an overpayment; [Sec. 204(C)] or,

b) The face of the return upon which payment was made, such
payment appears clearly to have been erroneously paid. [Sec. 229]
Remedies
Refunds in General:
4.a. The period to file a claim for refund under Sec. 229 is two (2)
years counted from the date of payment regardless of any supervening
event and not from the date of discovery of the erroneous payment.
4.b. In the case of erroneously paid withholding taxes, the six (6) year
prescriptive period under Art. 1145 of the Civil Code on solutio indebiti
is not applicable because the first requisite of solutio indebiti is not
present, i.e., payment is made when there exists no binding relation
between the payor, who has no duty to pay, and the person who
received the payment. Also, the provisions of the Tax Code, being a
special law prevails over the provisions of the Civil Code, being a
general law. (CIR vs. Meralco, GR No. 181459 dated June 9, 2014)
Remedies
Refunds in General:
5.a. As aptly put in CIR v. TMX Sales, Inc., "payment of quarterly

income tax should only be considered [as] mere installments of the
annual tax due. These quarterly tax payments which are computed
based on the cumulative figures of gross receipts and deductions in
order to arrive at a net taxable income, should be treated as advances
or portions of the annual income tax due, to be adjusted at the end of
the calendar or fiscal year. x x x Consequently, the two-year
prescriptive period x x x should be computed from the time of filing
of the Adjustment Return or Annual Income Tax Return and final
payment of income tax."
Remedies
Refunds in General:
5.b. Final withholding taxes are considered as full and final payment of
the income tax due, and thus, are not subject to any adjustments.
Thus, the two (2)-year prescriptive period commences to run from the
time the refund is ascertained, i.e., the date such tax was paid, and not
upon the discovery by the taxpayer of the erroneous or excessive
payment of taxes. (Metrobank vs. CIR, GR No. 182582 dated April 17,
2017)
Remedies
Refunds in General:
6. Even if the two (2)-year prescriptive period, if applicable, had

already lapsed, the same is not jurisdictional and may be suspended
for reasons of equity and other special circumstances. (CIR vs. PNB, GR
No. 161997 dated October 25, 2005).
Remedies
Refunds in General:
7. In claims for refund, the CTA may determine whether there are taxes
that should have been paid in lieu of the taxes paid. Determining the
proper category of tax that should have been paid is not an
assessment. It is incidental to determining whether there should be a
refund.
Any liability in excess of the refundable amount, however, may not be

collected in a case involving solely the issue of the taxpayer’s
entitlement to refund. (SMI-ED Technology Corporation, Inc. vs. CIR, GR

Remedies
Refunds in General:
8. If the employee alleges that the employer over-withheld and over-

remitted withholding tax on compensation income, the employee has
no cause of action for a tax refund against the employer. The claim for
refund should be filed with the BIR. (Honda Cars Philippines, Inc. vs.
Honda Cars Technical Specialist Supervisors Union, GR No. 204142
Remedies
Mitsubishi Corporation-Manila Branch vs. CIR, GR No. 175772 dated
June 5, 2017:
On June 11, 1987, the governments of Japan and the Philippines

executed an Exchange of Notes, whereby the former agreed to extend
a loan amounting to Forty Billion Four Hundred Million Japanese Yen
(¥40,400,000,000) to the latter through the then Overseas Economic
Cooperation Fund (OECF, now Japan Bank for International
Cooperation) for the implementation of the Calaca II Coal-Fired
Thermal Power Plant Project (Project). In Paragraph 5 (2) of the
Exchange of Notes, the Philippine Government, by itself or through its
executing agency, undertook to assume all taxes imposed by the
Philippines on Japanese contractors engaged in the Project.
Remedies
June 5, 2017:
Pursuant to RMC No. 42-99, in cases where income taxes were

previously paid directly by the Japanese contractors or nationals, the
corresponding cash refund shall be recovered from the government
executing agencies upon the presentation of proof of payment by the
Japanese contractors or nationals.
Remedies
June 5, 2017:
1. Case law explains that an exchange of notes is considered as an

executive agreement, which is binding on the State even without
Senate concurrence. To "assume" means "[t]o take on, become bound
as another is bound, or put oneself in place of another as to an
obligation or liability." This means that the obligation or liability
remains, although the same is merely passed on to a different person.
In this light, the concept of an assumption is therefore different from
an exemption, the latter being the "[f]reedom from a duty, liability or
other requirement" or "[a] privilege given to a judgment debtor by
law, allowing the debtor to retain [a] certain property without
liability." Thus, contrary to the CTA En Banc's opinion, the
constitutional provisions on tax exemptions would not apply.
Remedies
June 5, 2017:
2.a. In this case, it is fairly apparent that the subject taxes in the
amount of P52,612,812.00 was erroneously collected from petitioner,
considering that the obligation to pay the same had already been
assumed by the Philippine Government by virtue of its Exchange of
Notes with the Japanese Government.
Remedies
June 5, 2017:
2.b.1. As above-stated, the NIRC vests upon the CIR, being the head of
the BIR, the authority to credit or refund taxes which are erroneously
collected by the government. This specific statutory mandate cannot
be overridden by averse interpretations made through mere
administrative issuances, such as RMC No. 42-99, which — as argued
by the CIR — shifts to the executing agencies (particularly, NPC in this
case) the power to refund the subject taxes.
Remedies
June 5, 2017:
2.b.2. A revenue memorandum circular is an administrative ruling

issued by the CIR to interpret tax laws. It is widely accepted that an
interpretation by the executive officers, whose duty is to enforce the
law, is entitled to great respect from the courts. However, such
interpretation is not conclusive and will be disregarded if judicially
found to be incorrect. Verily, courts will not tolerate administrative
issuances that override, instead of remaining consistent and in
harmony with, the law they seek to implement, as in this case. Thus,
Item B(3) of RMC No. 42-99, an administrative issuance directing
petitioner to claim the refund from NPC, cannot prevail over Sections
204 and 229 of the NIRC, which provide that claims for refund of
erroneously collected taxes must be filed with the CIR.
Remedies
Proper Party to File Claim for Refund:
1.a. A withholding agent has a legal right to file a claim for refund for
two reasons: (a) He is considered a taxpayer under the NIRC as he is
personally liable for the withholding tax as well as for deficiency
assessments, surcharges, and penalties, should the amount of the tax
withheld be finally found to be less than the amount that should have
been withheld under law. (b) As an agent of the taxpayer, his authority
to file the necessary income tax return and to remit the tax withheld to
the government impliedly includes the authority to file a claim for
refund and to bring an action for recovery of such claim.
Remedies
Proper Party to File Claim for Refund:
1.b. It is however significant to add that while the withholding agent

has the right to recover the taxes erroneously or illegally collected, he
nevertheless has the obligation to remit the same to the principal
taxpayer. As an agent of the taxpayer, it is his duty to return what he
has recovered; otherwise, he would be unjustly enriching himself at
the expense of the principal taxpayer from whom the taxes were
withheld, and from whom he derives his legal right to file a claim for
refund. (CIR vs. Smart Communications, Inc., GR Nos. 179045-46 dated
August 25, 2010)
Remedies
Diageo Phils., Inc. vs. CIR, GR No. 183553 dated November 12, 2012:
1. Sec. 130 (D) Credit for Excise tax on Goods Actually Exported.- When
goods locally produced or manufactured are removed and actually
exported without returning to the Philippines, whether so exported in
their original state or as ingredients or parts of any manufactured
goods or products, any excise tax paid thereon shall be credited or
refunded upon submission of the proof of actual exportation and upon
receipt of the corresponding foreign exchange payment: Provided,
That the excise tax on mineral products, except coal and coke, imposed
under Section 151 shall not be creditable or refundable even if the
mineral products are actually exported.
Remedies
2.a. A reading of the foregoing provision, however, reveals that

contrary to the position of Diageo, the right to claim a refund or be
credited with the excise taxes belongs to its supplier. The phrase "any
excise tax paid thereon shall be credited or refunded" requires that the
claimant be the same person who paid the excise tax. In Silkair
(Singapore) Pte, Ltd. v. CIR, the Court has categorically declared that
"[t]he proper party to question, or seek a refund of, an indirect tax is
the statutory taxpayer, the person on whom the tax is imposed by law
and who paid the same even if he shifts the burden thereof to
another.
Remedies
2.b. Pursuant to the foregoing, the person entitled to claim a tax

refund is the statutory taxpayer or the person liable for or subject to
tax. In the present case, it is not disputed that the supplier of Diageo
imported the subject raw alcohol, hence, it was the one directly liable
and obligated to file a return and pay the excise taxes under the Tax
Code before the goods or products are removed from the customs
house. It is, therefore, the statutory taxpayer as contemplated by law
and remains to be so, even if it shifts the burden of tax to Diageo.
Consequently, the right to claim a refund, if legally allowed, belongs to
it and cannot be transferred to another, in this case Diageo, without
any clear provision of law allowing the same.
Remedies
PAL vs. CIR, GR No. 198759 dated July 1, 2013:
1. Based on these rulings, it may be observed that the propriety of a

tax refund claim is hinged on the kind of exemption which forms its
basis. If the law confers an exemption from both direct or indirect
taxes, a claimant is entitled to a tax refund even if it only bears the
economic burden of the applicable tax. On the other hand, if the
exemption conferred only applies to direct taxes, then the statutory
taxpayer is regarded as the proper party to file the refund claim.
Remedies
PAL vs. CIR, GR No. 198759 dated July 1, 2013:
2. In other words, in view of PAL’s payment of either the basic

corporate income tax or franchise tax, whichever is lower, PAL is
exempt from paying: (a) taxes directly due from or imposable upon it
as the purchaser of the subject petroleum products; and (b) the cost of
the taxes billed or passed on to it by the seller, producer, manufacturer,
or importer of the said products either as part of the purchase price or
by mutual agreement or other arrangement. Therefore, given the
foregoing direct and indirect tax exemptions under its franchise, and
applying the principles as above-discussed, PAL is endowed with the
legal standing to file the subject tax refund claim, notwithstanding
the fact that it is not the statutory taxpayer as contemplated by law.
Remedies
Illustration of the Creditable Withholding Tax System:
Lease contract with a monthly lease of P10,000.00, withholding tax

rate is 5%:
Particulars ITR of the Lessor
Sales 120,000.00
Cost of Sales 80,000.00
Gross Income 40,000.00
Allowable Deductions 100,000.00
Taxable Income (60,000.00)
Tax Rate 30%
Tax Due -
Creditable Withholding Tax 6,000.00
Tax Payable (6,000.00)
Remedies
Doctrines:
1. Requisites of claim for refund of excess Creditable Withholding Tax

(“CWT”): (a) The claim must be filed with the CIR within the two-year
period from the date of payment of the tax; (b) It must be shown on
the return that the income received was declared as part of the gross
income; and, (c) The fact of withholding must be established by a copy
of a statement (BIR Form 2307) duly issued by the payor to the payee
showing the amount paid and the amount of the tax withheld. (CIR vs.
Cebu Holdings, Inc., GR No. 189792 dated June 20, 2018).
Remedies
Doctrines:
2.a. Actual remittance of CWT need not be proven. Under the Tax
Code, it is the payor-withholding agent, and not the payee-refund
claimant, who is vested with the responsibility of withholding and
remitting income taxes. BIR Form 2307 may be presented before the
CTA. Cases filed in the CTA are litigated de novo. (CIR vs. PNB, GR No.
180290 dated September 29, 2014; PAL vs. CIR, GR Nos. 206079-80 &
Remedies
Doctrines:
2.b. In refunds of erroneously paid CWT, while perhaps it may be

necessary to prove that the taxpayer did not use the claimed
creditable withholding tax to pay for his/its tax liabilities, there is no
basis in law or jurisprudence to say that BIR Form No. 2307 is the only
evidence that may be adduced to prove such non-use. (PNB vs. CIR, GR
No. 206016 dated March 18, 2015)
Remedies
Irrevocability Rule:
1.a. Section 76. Final Adjustment Return. - Every corporation liable to

tax under Section 27 shall file a final adjustment return covering the
total taxable income for the preceding calendar or fiscal year. If the
sum of the quarterly tax payments made during the said taxable year is
not equal to the total tax due on the entire taxable income of that year,
the corporation shall either:
(A)Pay the balance of tax still due; or

(B)Carry-over the excess credit; or
(C)Be credited or refunded with the excess amount paid, as the case
may be.
Remedies
Irrevocability Rule:
1.b. In case the corporation is entitled to a tax credit or refund of the

excess estimated quarterly income taxes paid, the excess amount
shown on its final adjustment return may be carried over and credited
against the estimated quarterly income tax liabilities for the taxable
quarters of the succeeding taxable years. Once the option to carry-
over and apply the excess quarterly income tax against income tax
due for the taxable quarters of the succeeding taxable years has been
made, such option shall be considered irrevocable for that taxable
period and no application for cash refund or issuance of a tax credit
certificate shall be allowed therefor.
Remedies
Irrevocability Rule – Doctrines:
1. Under the cited law, there are two options available to the
corporation whenever it overpays its income tax for the taxable year:
(1) to carry over and apply the overpayment as tax credit against the
estimated quarterly income tax liabilities of the succeeding taxable
years (also known as automatic tax credit) until fully utilized (meaning,
there is no prescriptive period); and (2) to apply for a cash refund or
issuance of a tax credit certificate within the prescribed period. Such
overpayment of income tax is usually occasioned by the over-
withholding of taxes on the income payments to the corporate
taxpayer. (University Physicians Services, Inc. vs. CIR, GR No. 205955
dated March 7, 2018)
Remedies
2.a. The phrase "for that taxable period" merely identifies the excess
income tax, subject of the option, by referring to the taxable period
when it was acquired by the taxpayer.
The phrase "for that taxable period" is not a prescriptive period for the
irrevocability rule. This construal effectively renders nugatory the
irrevocability rule. The evident intent of the legislature, in adding the
last sentence to Section 76, is to keep the taxpayer from flip-flopping
on its options and avoid confusion and complication as regards said
taxpayer's excess tax credit. The interpretation of the Court of Appeals
only delays the flip-flopping to the end of each succeeding taxable
period.
Remedies
Irrevocability Rule – Illustration:
2010 ITR of 2011 ITR of the 2012 ITR of the

Particulars
the Lessor Lessor Lessor
Gross Income 20,000.00 30,000.00 45,000.00
Allowable Deductions 100,000.00 100,000.00 100,000.00
Taxable Income (80,000.00) (70,000.00) (55,000.00)
Tax Rate 30% 30% 30%
Tax Due - - -
Prior Year CWT - 5,000.00 5,000.00
Current Year CWT 5,000.00 10,000.00 7,000.00
Tax Payable (5,000.00) (15,000.00) (12,000.00)
Remedies
3.a. Presentation of the Quarterly Income Tax Return of the succeeding

taxable year is not necessary to prove non-carry over. What Section 76
requires, just like in all civil cases, is to prove the prima facie
entitlement to a claim, including the fact of not having carried over the
excess credits to the subsequent quarters or taxable year. It does not
say that to prove such a fact, succeeding quarterly ITRs are absolutely
needed. (Winebrenner & Inigo Insurance Brokers, Inc. vs. CIR, GR No.
Remedies
3.b. When the taxpayer was able to establish prima facie its right to
the refund by testimonial and object evidence, the BIR should have
presented rebuttal evidence to shift the burden of evidence back to
the BIR. Indeed, the BIR ought to have its own copies of the taxpayer’s
quarterly returns on file, on the basis of which it could rebut the
taxpayer's claim that it did not carry over its unutilized and excess
creditable withholding taxes for the immediately succeeding quarters.
The BIR's failure to present such vital document during the trial in
order to bolster the BIR's contention against the taxpayer's claim for
the tax refund was fatal. (Republic vs. Team (Phils.) Energy Corporation,
GR No. 188016 dated January 14, 2015)
Remedies
4. Where, however, the corporation permanently ceases its operations

before full utilization of the tax credits it opted to carry over, it may
then be allowed to claim the refund of the remaining tax credits. In
such a case, the remaining tax credits can no longer be carried over
and the irrevocability rule ceases to apply. (Systra Phils. Inc. vs. CIR (GR
No. 176290, September 21, 2007)
Remedies
ITRs in the University Physicians Case:
Particulars 2010 ITR 2011 ITR 2012 ITR - Original 2012 ITR - Amended
Gross Income 20,000.00 30,000.00 40,000.00 40,000.00
Allowable Deductions 100,000.00 100,000.00 100,000.00 100,000.00
Taxable Income (80,000.00) (70,000.00) (60,000.00) (60,000.00)
Tax Rate 30% 30% 30% 30%
Tax Due - - - -
Prior Year CWT - 5,000.00 15,000.00 5,000.00
Current Year CWT 5,000.00 10,000.00 4,000.00 4,000.00
Tax Payable (5,000.00) (15,000.00) (19,000.00) (9,000.00)
Choice Carryover Refund - P10,000 Carryover Carryover
Filed a claim for refund of P10,000.00 for the year 2011.
Remedies
Irrevocability Rule – Does it Apply to the Option to Refund?
1.a. We cannot subscribe to the suggestion that the irrevocability rule

enshrined in Section 76 of the National Internal Revenue Code (NIRC)
applies to either of the options of refund or carry-over. Our reading of
the law assumes the interpretation that the irrevocability is limited
only to the option of carry-over such that a taxpayer is still free to
change its choice after electing a refund of its excess tax credit. But
once it opts to carry over such excess creditable tax, after electing
refund or issuance of tax credit certificate, the carry-over option
becomes irrevocable. Accordingly, the previous choice of a claim for
refund, even if subsequently pursued, may no longer be granted.
Remedies
1.b. A perfunctory reading of the law unmistakably discloses that the

irrevocable option referred to is the carry-over option only. There
appears nothing therein from which to infer that the other choice, i.e.,
cash refund or tax credit certificate, is also irrevocable. If the intention
of the lawmakers was to make such option of cash refund or tax credit
certificate also irrevocable, then they would have clearly provided so.
Law and jurisprudence unequivocally support the view that only the
option of carry-over is irrevocable.
Remedies
2. The CTA was correct in considering UPSI-MI to have constructively

chosen the option of carry-over, for which reason, the irrevocability
rule forbade it to revert to its initial choice. It does not matter that
UPSI-Ml had not actually benefited from the carry-over on the ground
that it did not have a tax due in its 2007 short period. Neither may it
insist that the insertion of the carry-over in the 2007 FAR was by mere
mistake or inadvertence. As we previously laid down, the
irrevocability rule admits of no qualifications or conditions.
(University Physicians Services, Inc. vs. CIR, GR No. 205955 dated
March 7, 2018)
Remedies
Jursidiction of the CTA in Civil Cases:
1. Decisions of the CIR in cases involving disputed assessments,

refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the National Internal
Revenue or other laws administered by the Bureau of Internal
Revenue;
2. Inaction by the CIR in cases involving disputed assessments, refunds

of internal revenue taxes, fees or other charges, penalties in relations
thereto, or other matters arising under the National Internal Revenue
Code or other laws administered by the Bureau of Internal Revenue,
where the National Internal Revenue Code provides a specific period of
action, in which case the inaction shall be deemed a denial;
Remedies
3. Decisions, orders or resolutions of the Regional Trial Courts in local

tax cases in the exercise of their original jurisdiction;
4. Decisions of the Central Board of Assessment Appeals in the exercise

of its appellate jurisdiction over cases involving the assessment and
taxation of real property originally decided by the provincial or city
board of assessment appeals;
Court of Tax Appeals
5. Exclusive original jurisdiction in tax collection cases involving final

and executory assessments for taxes, fees, charges and penalties,
where the principal amount of taxes and fees, exclusive of charges and
penalties, claimed is One million pesos (P1,000,000.00) or more.
Jurisdiction of the CTA in Criminal Cases:
1. The CTA has exclusive original jurisdiction over all criminal offenses
arising from violations of the National Internal Revenue Code or Tariff
and Customs Code and other laws administered by the Bureau of
Internal Revenue or the Bureau of Customs where the principal
amount of taxes and fees, exclusive of charges and penalties, claimed
is One million pesos (P1,000,000.00) or more.
Jurisdiction of the CTA in Criminal Cases:
2. In cases within the jurisdiction of the CTA, the criminal action and
the corresponding civil action for the recovery of civil liability for taxes
and penalties shall be deemed jointly instituted in the same
proceeding. The filing of the criminal action shall necessarily carry with
it the filing of the civil action. No right to reserve the filing of such civil
action separately from the criminal action shall be allowed or
recognized. (Sec. 11, Rule 9 of the CTA Rules)
Cases directly filed with the CTA En Banc:
1. Decisions by the Central Board of Assessment Appeals in Real

Property Tax Cases;
2. Decisions by the Regional Trial Court in the exercise of its appellate
jurisdiction in local tax cases;
jurisdiction in tax collection cases; and,
jurisdiction in criminal cases.

Doctrines:
1. Cases under “other matters” arising under the NIRC or other laws
administered by the BIR:
a) Whether or not the BIR was able to collect the deficiency tax within
the 5-year period to collect under Sec. 222(c). (CIR vs. Hambrecht &
Quist Philippines, Inc., GR No. 169225 November 17, 2010)
b) Validity of a waiver of the statute of limitations. (Philippine

Journalists, Inc. vs. CIR, GR No. 162852 dated December 16, 2004)
Doctrines:
c) Whether or not the CIR may be compelled to issue an assessment.

(Meralco Securities Corporation, Inc. vs. Savellano, GR No. L-36181
dated October 23, 1982)
d) Unfavorable BIR Rulings/Decision of the SOF on appeals of BIR

Rulings. (Philamlife vs. SOF, GR No. 210987 dated November 24, 2014)
Doctrines:
e) Whether the revenue officers who had conducted the examination

on Lancaster exceeded their authority pursuant to LOA No. 00012289
may be considered as covered by the terms "other matters" under
Section 7 of R.A. No. 1125 or its amendment, R.A. No. 9282. The
authority to make an examination or assessment, being a matter
provided for by the NIRC, is well within the exclusive and appellate
jurisdiction of the CTA. (CIR vs. Lancaster Philippines, Inc., GR No.
183408 dated July 12, 2017)
Doctrines:
f) Cases asking for the cancellation and withdrawal of a warrant of

distraint and/or levy. (CIR vs. BPI, GR No. 224327 dated June 11, 2018)
Doctrines:
2.a. General Rule: No appeal taken to the CTA shall suspend the
payment, levy, distraint, or sale of any property of the taxpayer for the
satisfaction of his tax liability.
Exception: The CTA may order suspension of collection by the BIR if

collection may jeopardize the interest of the Government and/or the
taxpayer. Taxpayer must file a bond with the CTA. Amount of Bond: (a)
cash bond = amount claimed; (b) surety bond = amount not more than
double the amount (claimed). Amount claimed = principal amount of
taxes excluding penalties, interests and surcharges.
Doctrines:
2.b. Bond should be dispensed with:
a) If prescription has already set in; or,

b) Whenever it is determined by the courts that the method employed
by the Collector (Commissioner) of Internal Revenue in the collection
of tax is not sanctioned by law.
Doctrines:
2.c. The purpose of the rule is not only to prevent jeopardizing the
interest of the taxpayer, but more importantly, to prevent the absurd
situation wherein the court would declare “that the collection by the
summary methods of distraint and levy was violative of law, and then,
in the same breath require the petitioner to deposit or file a bond as a
prerequisite for the issuance of a writ of injunction.” (Spouses Pacquiao
vs. The CTA, GR No. 213394 dated April 6, 2016)
Doctrines:
2.d. If the taxpayer raises the illegality of the assessment, the CTA
should conduct a preliminary hearing in order to determine whether
the required surety bond should be dispensed with or reduced.
(Tridharma Marketing Corporation vs. CTA, GR No. 215950 dated June
20, 2016)
Doctrines:
3. The original period for filing the petition for review may be extended
for a period of fifteen (15) days, which for the most compelling
reasons, may be extended for another period not exceeding fifteen
(15) days. The CTA rules does not explicitly sanction extensions to file a
petition for review with the CTA, the same rules provides that in the
absence of any express provision in the CTA rules, Rules 42, 43, 44 and
46 of the Rules of Court may be applied in a suppletory manner.
(Metro Manila Shopping Mecca Corp. vs. Toledo, GR No. 190818 dated
June 5, 2013)
Doctrines:
4. In civil cases, in order for the CTA En Banc to take cognizance of an

appeal, a timely motion for reconsideration or new trial must first be
filed with the CTA Division. Failure to do so is a ground for the dismissal
of the appeal. The foregoing rule also applies to an amended decision.
An amended decision is a different decision and is a proper subject of a
motion for reconsideration. Thus, if an amended decision is rendered
by the CTA Division disposing of the motions for reconsideration filed
by the taxpayer and the CIR, the amended decision must also be
contested by way of a motion for reconsideration before any appeal
can be made to the CTA En Banc. (CIR vs. Asiatrust Development Bank,
GR Nos. 201680-81 dated April 19, 2017)
Doctrines:
5. No decision of the CTA division may be elevated to the Supreme

Court under Rule 45 of the 1997 Rules of Civil Procedure without
passing through the CTA en banc. (Duty Free Phils. vs. BIR, GR No.
197228 dated October 8, 2014)
Doctrines:
6. The decision or resolution of the CTA Division relative to a motion

for reconsideration is appealable to CTA En Banc via a Petition for
Review under Rule 43. A Petition for Certiorari under Rule 65 filed with
the Supreme Court is not the proper remedy. A writ of certiorari is not
a substitute for a lost appeal. When an appeal is available, certiorari
will not prosper especially if the appeal was lost because of one's own
negligence or error in the choice of remedy, even if the ground is grave
abuse of discretion. Under the Rules of Court, the remedy against a
final judgment or order is an appeal. (BIR vs. Acosta, GR No. 195320
dated April 23, 2018)
Ignacio vs. Office of the City Treasurer of Quezon City, GR No.
September 11, 2017:
Allegedly, Ignacio’s real property was sold at public auction for non-
payment of Real Property Tax to the Spouses Dimalanta without notice
of the levy and auction sale proceedings, thereby depriving her of said
property without due process of law. Ignacio filed a Complaint with
the RTC for Annulment of Warrant of Levy, Public Auction Sale, Sheriff's
Certificate of Sale, Recovery of Ownership and Possession, and
Damages (“Annulment Complaint”). Eventually, the RTC rendered a
decision dismissing the case. Ignacio appealed to the Court of Appeals.
Respondent opposed the appeal arguing that the Court of Tax
Appeals has jurisdiction over Ignacio’s appeal.
September 11, 2017:
1.a. Sec 7(a)(3) of RA No. 9282 provides that the CTA shall exercise:
exclusive appellate jurisdiction to review by appeal, over Decisions,
orders or resolutions of the Regional Trial Courts in local tax cases
originally decided or resolved by them in the exercise of their original
or appellate jurisdiction.
September 11, 2017:
1.b. Based on the above-cited provision of law, it is apparent that the

CTA's appellate jurisdiction over decisions, orders, or resolutions of the
RTCs becomes operative only when the RTC has ruled on a local tax
case.
September 11, 2017:
2. Cases decided by the RTC which involve issues relating to the power
of the local government to impose real property taxes are considered
as local tax cases, which fall under the appellate jurisdiction of the CTA.
To note, these issues may, inter alia, involve the legality or validity of
the real property tax assessment; protests of assessments; disputed
assessments, surcharges, or penalties; legality or validity of a tax
ordinance; claims for tax refund/credit; claims for tax exemption;
actions to collect the tax due; and even prescription of assessments.
September 11, 2017:
3. In this case, a reading of the Annulment Complaint shows that

Teresa's action before the RTC is essentially one for recovery of
ownership and possession of the property, with damages, which is
not anchored on a tax issue, but on due process considerations. In
other words, the Annulment Complaint's allegations do not contest the
tax assessment on the property, as Ignacio only bewails the alleged
lack of due process which deprived her of the opportunity to
participate in the delinquency sale proceedings. As such, the RTC’s
ruling thereon could not be characterized as a local tax case over
which the CTA could have properly assumed jurisdiction on appeal. In
fine, the case was correctly elevated to the CA.
Salva vs. Magpile, GR No. 220440 dated November 8, 2017:
1. The CA correctly asserted its jurisdiction in this case. Here, the

dispute arose from the alleged non-compliance of the respondents
with the pertinent provisions of the LGC on tax delinquency sale. A
plain reading of Magpile's petition before the RTC would show that he
did not assail the legality or validity and reasonableness or
correctness of the real property tax assessment and collection. In
fact, he categorically and repeatedly admits in his pleadings that he
failed to pay the real property tax from 1998 up to 2006. As the CA
ruled, what he is questioning is the alleged denial of due process in
the levying of his property.
Salva vs. Magpile, GR No. 220440 dated November 8, 2017:
2. Basic is the rule that the allegations in the complaint and the
character of the relief sought determine the nature of an action. In
order for the trial court to resolve Magpile's petition, the issues
regarding the legality/validity or reasonableness/correctness of the
real property tax assessment and collection need not be dealt with.
At bar, the issue of the validity and legality of the tax sale is not
essentially related to the issue of the demandability of the real
property tax. Therefore, the non-dismissal of Magpile's appeal by the
CA was in order.
Does the CTA have Certiorari Jurisdiction over local tax cases decided
by the RTC?
1. Indeed, in order for any appellate court to effectively exercise its

appellate jurisdiction, it must have the authority to issue, among
others, a writ of certiorari. In transferring exclusive jurisdiction over
appealed tax cases to the CTA, it can reasonably be assumed that the
law intended to transfer also such power as is deemed necessary, if not
indispensable, in aid of such appellate jurisdiction. There is no
perceivable reason why the transfer should only be considered as
partial, not total.
by the RTC?
2.a. If this Court were to sustain petitioners' contention that

jurisdiction over their certiorari petition lies with the CA, this Court
would be confirming the exercise by two judicial bodies, the CA and
the CTA, of jurisdiction over basically the same subject matter –
precisely the split-jurisdiction situation which is anathema to the
orderly administration of justice. Thus, the Court agrees with the
ruling of the CA that since appellate jurisdiction over private
respondents' complaint for tax refund is vested in the CTA, it follows
that a petition for certiorari seeking nullification of an interlocutory
order issued in the said case should, likewise, be filed with the same
court.
by the RTC?
2.b. To rule otherwise would lead to an absurd situation where one

court decides an appeal in the main case while another court rules on
an incident in the very same case.
by the RTC?
3. It is more in consonance with logic and legal soundness to conclude

that the grant of appellate jurisdiction to the CTA over tax cases filed
in and decided by the RTC carries with it the power to issue a writ of
certiorari when necessary in aid of such appellate jurisdiction. The
supervisory power or jurisdiction of the CTA to issue a writ of certiorari
in aid of its appellate jurisdiction should co-exist with, and be a
complement to, its appellate jurisdiction to review, by appeal, the final
orders and decisions of the RTC, in order to have complete supervision
over the acts of the latter. (City of Manila vs. Grecia-Cuerdo, GR No.
175723 dated February 4, 2014)
BIR vs. Government Agency (PSALM Case):
1.a. Under Presidential Decree No. 242 (PD 242) as amended by the

Revised Administrative Code, all disputes and claims solely between
government agencies and offices, including government-owned or
controlled· corporations, shall be administratively settled or
adjudicated by the Secretary of Justice or the Solicitor General,
depending on the issues and government agencies involved.
But, the the procedure shall not apply to disputes involving the
Congress, the Supreme Court, the Constitutional Commissions, and
local governments.
1.b. The use of the word "shall" in a statute connotes a mandatory

order or an imperative obligation. xxx. Thus, under PD 242, it is
mandatory that disputes and claims "solely" between government
agencies and offices, including government-owned or controlled
corporations, involving only questions of law, be submitted to and
settled or adjudicated by the Secretary of Justice.
1.c. The law is clear and covers "all disputes, claims and controversies
solely between or among the departments, bureaus, offices, agencies
and instrumentalities of the National Government, including
constitutional offices or agencies arising from the interpretation and
application of statutes, contracts or agreements." When the law says
"all disputes, claims and controversies solely" among government
agencies, the law means all, without exception.
2.a. It is only proper that intra-governmental disputes be settled

administratively since the opposing government offices, agencies and
instrumentalities are all under the President's executive control and
supervision. Section 17, Article VII of the Constitution states
unequivocally that: "The President shall have control of all the
executive departments, bureaus and offices. ”
2.b. This power of control vested by the Constitution in the President

cannot be diminished by law. xxx. This constitutional power of control
of the President cannot be diminished by the CTA. Thus, if two
executive offices or agencies cannot agree, it is only proper and
logical that the President, as the sole Executive who under the
Constitution has control over both offices or agencies in dispute,
should resolve the dispute instead of the courts. The judiciary should
not intrude in this executive function of determining which is correct
between the opposing government offices or agencies, which are
both under the sole control of the President. Under his constitutional
power of control, the President decides the dispute between the two
executive offices. The judiciary cannot substitute its decision over
that of the President.
3.a. Furthermore, under the doctrine of exhaustion of administrative

remedies, it is mandated that where a remedy before an
administrative body is provided by statute, relief must be sought by
exhausting this remedy prior to bringing an action in court in order to
give the administrative body every opportunity to decide a matter
that comes within its jurisdiction.
3.b. A litigant cannot go to court without first pursuing his

administrative remedies; otherwise, his action is premature and his
case is not ripe for judicial determination. PD 242 (now Chapter 14,
Book IV of Executive Order No. 292), provides for such administrative
remedy. Thus, only after the President has decided the dispute
between government offices and agencies can the losing party resort
to the courts, if it so desires. Otherwise, a resort to the courts would
be premature for failure to exhaust administrative remedies. Non-
observance of the doctrine of exhaustion of administrative remedies
would result in lack of cause of action, which is one of the grounds for
the dismissal of a complaint.
4.a. SEC 4. Power of the Commissioner to Interpret Tax Laws and to

Decide Tax Cases. - The power to interpret the provisions of this Code
and other tax laws shall be under the exclusive and original jurisdiction
of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds in internal

revenue taxes, fees or other charges. penalties imposed in relation
thereto, or other matters arising under this Code or other laws or
portions thereof administered by the Bureau of Internal Revenue is
vested in the Commissioner, subject to the exclusive appellate
jurisdiction of the Court of Tax Appeals. (Emphasis supplied)
4.b. The second paragraph of Section 4 of the 1997 NIRC, providing for
the exclusive appellate jurisdiction of the CTA as regards the CIR's
decisions on matters involving disputed assessments, refunds in
internal revenue taxes, fees or other charges, penalties imposed in
relation thereto, or other matters arising under NIRC, is in conflict with
PD 242. Under PD 242, all disputes and claims solely between
government agencies and offices, including government-owned or
controlled corporations, shall be administratively settled or
adjudicated by the Secretary of Justice, the Solicitor General, or the
Government Corporate Counsel, depending on the issues and
government agencies involved.
4.c. To harmonize Section 4 of the 1997 NIRC with PD 242, the

following interpretation should be adopted: (1) As regards private
entities and the BIR, the power to decide disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the NIRC or other laws
administered by the BIR is vested in the CIR subject to the exclusive
appellate jurisdiction of the CTA, in accordance with Section 4 of the
NIRC; and (2) Where the disputing parties are all public entities (covers
disputes between the BIR and other government entities), the case
shall be governed by PD 242.
5. Since the amount involved in this case is more than one million
pesos, the DOJ Secretary's decision may be appealed to the Office of
the President in accordance with Section 70, Chapter 14, Book IV of EO
292 and Section 552 of PD 242. If the appeal to the Office of the
President is denied, the aggrieved party can still appeal to the Court of
Appeals under Section 1, Rule 43 of the 1997 Rules of Civil Procedure.
(Power Sector Assets and Liabilities Management vs. CIR, GR No.
198146 dated August 8, 2017)
Local Taxation
Local Government Unit’s Power to Tax:
Each local government unit shall have the power to create its own
sources of revenues and to levy taxes, fees and charges subject to such
guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local governments. (Sec. 5, Art. X, 1987
Constitution)
Each local government unit shall exercise its power to create its own
sources of revenue and to levy taxes, fees, and charges subject to the
provisions herein, consistent with the basic policy of local autonomy.
Such taxes, fees, and charges shall accrue exclusively to the local
government units. (Sec. 129)
Local Taxation
Are Secs. 13 and 14 of RA 9167 constitutional?
1. The Amusement Tax Reward system granted to “graded films” under

Secs. 13 and 14 of RA No. 9167 violates the local fiscal autonomy
provision under Sec. 5 Art. X of the Constitution which provides that:
“Each local government unit shall have the power to create its own
sources of revenues and to levy taxes, fees and charges subject to such
guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local governments.”
Local Taxation
Are Secs. 13 and 14 of RA 9167 constitutional?
2. The same is echoed in Sec. 130(d) of the LGC which provides that
“The revenue collected xxx shall inure solely to the benefit of, and be
subject to the disposition by, the local government unit levying the
tax, fee, charge or other imposition unless otherwise specifically
provided herein x x x. (Film Development Council of the Philippines vs.
Colon Heritage Realty Corporation, GR No. 203754 dated June 16,
2015)
Local Taxation
Common Limitations:
1. An LGU cannot impose business tax on the sale of petroleum

products. Sec. 133(h) of the LGC provides that the taxing powers of
LGUs shall not extend to taxes fees and charges on petroleum
products. (Petron Corp. vs. Tiangco, GR No. 158881 dated April 16,
2008)
2. An LGU cannot impose business tax on common carriers. Sec. 133(j)

of the LGC provides that the taxing powers of LGUs shall not extend to
taxes on gross receipts of transportation contractors and persons
engaged in the transportation of passengers or freight by hire and
common carriers. (City of Manila vs. Colet, GR No. 120051 etc. dated
December 10, 2014)
Local Taxation
Common Limitations:
3. By express mandate of the LGC, LGUs cannot impose any kind of tax
on national government instrumentalities like the MIAA [Sec. 133(o)].
The taxing powers of local governments do not extend to the national
government, its agencies and instrumentalities, "[u]nless otherwise
provided in this Code" as stated in the saving clause of Section 133.
The saving clause refers to Section 234(a) on the exception to the
exemption from real estate tax of real property owned by the Republic.
(MIAA vs. CA, GR No. 155640 dated July 20, 2006)
Local Taxation
Common Limitations:
4. An LGU cannot impose percentage tax subject to certain exceptions.

One exception is Amusement Tax which is considered a percentage tax.
(Pelizloy Realty Corp., vs. Province of Benguet, GR No. 183137, April 10,
2013)
Local Taxation
Franchise Tax:
1. Under the Local Government Code, a municipality is bereft of

authority to levy and impose franchise tax on franchise holders within
its territorial jurisdiction. That authority belongs to provinces and cities
only. A franchise tax levied by a municipality is, thus, null and void. The
nullity is not cured by the subsequent conversion of the municipality
into a city. (City of Pasig vs. Meralco, GR No. 181710 dated March 7,
2018)
Local Taxation
Franchise Tax:
2. Since franchise tax partakes the nature of an excise tax, the situs of

taxation is the place where the privilege is exercised (the taxpayer’s
principal office and from where it operates) regardless of the place
where its services or products are delivered. (City of Iriga vs.
Camarines Sur III Electric Cooperative, Inc., GR No. 192945, September
5, 2012)
Local Taxation
Franchise Tax:
3.a. Whether ABS-CBN is liable for local franchise tax despite its
charter under Republic Act No. 7966 effective May 3, 1995 stating that
it shall pay a franchise tax equivalent to three percent (3%) of all gross
receipts of the radio/television business transacted under this
franchise by the grantee, its successors or assigns, and the said
percentage tax shall be in lieu of all taxes on this franchise or earnings
thereof?
Local Taxation
Franchise Tax:
3.b. ABS-CBN is liable for Local Franchise Tax (“LFT”) because its
exemption from the LFT is not express. The right to exemption from
the LFT must be clearly established and cannot be made out of
inference or implications but must be laid beyond reasonable doubt.
Verily, the uncertainty in the "in lieu of all taxes" provision should be
construed against ABS-CBN. ABS-CBN has the burden to prove that it is
in fact covered by the exemption so claimed. ABS-CBN miserably failed
in this regard.
Local Taxation
Franchise Tax:
3.c. The "in lieu of all taxes" clause in the franchise of ABS-CBN has
become functus officio with the abolition of the franchise tax on
broadcasting companies with yearly gross receipts exceeding
P10,000,000.00. ABS-CBN is subject to the payment of VAT. It does not
have the option to choose between the payment of franchise tax or
VAT since it is a broadcasting company with yearly gross receipts
exceeding P10,000,000.00. The clause "in lieu of all taxes" does not
pertain to VAT or any other tax. It cannot apply when what is paid is a
tax other than a franchise tax. Since the franchise tax on the
broadcasting companies with yearly gross receipts exceeding ten
million pesos has been abolished, the "in lieu of all taxes" clause has
now become functus officio, rendered inoperative. (Quezon City vs.
ABS-CBN Broadcasting Corporation, GR No. 166408 dated October 6,
2008)
Local Taxation
Amusement Tax:
1. Under Sec. 140 of the LGC, the Amusement Tax may be imposed on
proprietors, lessees, or operators of theaters, cinemas, concert halls,
circuses, boxing stadia, and other places of amusement.
2. Sec. 131 (c) defines "Amusement Places“ as to include theaters,

cinemas, concert halls, circuses and other places of amusement where
one seeks admission to entertain oneself by seeing or viewing the
show or performances.
3. Criteria of Amusement Places in PBA vs. CA – “artistic expression”

has been modified by the LGC.
Local Taxation
Amusement Tax:
4. Resorts, swimming pools, bath houses, hot springs and tourist spots
do not belong to the same category or class as theaters, cinemas,
concert halls, circuses, and boxing stadia. It follows that they cannot be
considered as among the “other places of amusement” contemplated
by Section 140 of the LGC and which may properly be subject to
amusement taxes.
5. Must primarily be a venue for their proprietors or operators to

actively display, stage or present shows and/or performances. (Pelizloy
Realty Corp., vs. Province of Benguet, GR No. 183137, April 10, 2013)
Local Taxation
Amusement Tax:
6. An LGU cannot impose amusement tax on an operator of a golf

course. In order to be subject to amusement tax, the venue must be an
amusement place where one seeks admission to entertain oneself by
seeing or viewing a show or performance. People do not enter a golf
course to see or view a show or performance. The proprietor or
operator of the golf course does not actively display, stage, or present
a show or performance. People go to a golf course to engage
themselves in a physical sport activity, i.e., to play golf. (Alta Vista Golf
and Country Club vs. The City of Cebu, GR No. 180235 dated January
20, 2016)
Local Taxation
Business Tax:
If a business is already paying business tax as a retailer under Sec.

143(a) of the Local Government Code (“LGC”), it is no longer liable to
pay business tax on businesses subject to VAT and Percentage Tax
under Sec. 143(h) of the LGC. Sec. 143(h) of the LGC may invoked by
the Local Government Unit if the business is not otherwise specified in
the preceding paragraphs (Secs. 143(a) to (g) of the LGC). (Nursery
Care Corporation vs. Acevedo, GR No. 180651 dated July 30, 2014)
Local Taxation
Remedies:
1. Section 187 of the LGC which outlines the procedure for questioning

the constitutionality of a tax ordinance, is inapplicable, if what is
imposed by the ordinance is a mere regulatory fee and not a local tax.
(Smart vs. Municipality of Malvar, Batangas, GR No. 204429 dated
February 18, 2014.)
2. The Regional Trial Court, in deciding an appeal taken from a denial of

a protest by a local treasurer under Section 195 of the Local
Government Code, exercises "original jurisdiction”. (Yamane vs. BA
Lepanto – GR No 154992, October 25, 2005)
Local Taxation
Remedies:
3. Procedure in Protest Cases:
a. Treasurer issues a notice of assessment against the taxpayer.

b. File protest within 60 days from receipt of the protest. Otherwise,
the assessment becomes final and executory.
c. Treasurer decides within 60 days from receipt of the protest.
d. The taxpayer shall have 30 days from the receipt of the denial of the
protest or from the lapse of the 60-day period in No. 3 within which to
an appeal with the MTC/RTC, otherwise, the assessment becomes
conclusive and unappealable. (Sec. 195)
Local Taxation
Remedies:
4. Mandamus cannot be a substitute for the requirement of filing a

written protest against the assessment. (San Juan vs. Castro, GR No.
174617 dated December 27, 2007)
Local Taxation
Remedies:
4.a. Refund Provision:
Section 196. Claim for Refund of Tax Credit. - No case or proceeding

shall be maintained in any court for the recovery of any tax, fee, or
charge erroneously or illegally collected until a written claim for refund
or credit has been filed with the local treasurer. No case or proceeding
shall be entertained in any court after the expiration of two (2) years
from the date of the payment of such tax, fee, or charge, or from the
date the taxpayer is entitled to a refund or credit.
Local Taxation
Remedies:
4.b. Refund Provision:
A perusal of Section 196 of the LGC reveals that in order to be entitled

to a refund/credit of local taxes, the following procedural requirements
must concur: first, the taxpayer concerned must file a written claim for
refund/credit with the local treasurer; and second, the case or
proceeding for refund has to be filed within two (2) years from the
date of the payment of the tax, fee, or charge or from the date the
taxpayer is entitled to a refund or credit. (Metro Manila Shopping
Mecca Corp. vs. Toledo, GR No. 190818 dated June 5, 2013)
Local Taxation
City of Manila vs. Cosmos Bottling Corporation, GR No. 196681 dated
June 27, 2018:
What is the proper procedure if the taxpayer receives an assessment

for local business tax, pays it under protest and then asks for a refund?
Local Taxation
June 27, 2018:
1. There is nothing to prevent the taxpayer from paying the tax under
protest or simultaneous to a protest. There are compelling reasons
why a taxpayer would prefer to pay while maintaining a protest against
the assessment. For instance, a taxpayer who is engaged in business
would be hard-pressed to secure a business permit unless he pays an
assessment for business tax and/or regulatory fees. Also, a taxpayer
may pay the assessment in order to avoid further penalties, or save
his properties from levy and distraint proceedings.
Local Taxation
June 27, 2018:
2.a. Procedure:
1. File written protest within 60 days from receipt of assessment. The

written protest will be considered the written claim for refund in
compliance with Sec. 196.
2. File an appeal with the court of competent jurisdiction within 30

days from receipt of decision or inaction. Otherwise, the assessment
becomes final, executory and unappelable.
Local Taxation
June 27, 2018:
2.b. Even though the suit is seemingly grounded on Section 196, the
taxpayer could not avail of the full extent of the two-year period within
which to initiate the action in court.
The reason is obvious. This is because an assessment was made, and if

not appealed in court within thirty (30) days from decision or inaction
on the protest, it becomes conclusive and unappealable. Even if the
action in court is one of claim for refund, the taxpayer cannot escape
assailing the assessment, invalidity or incorrectness, the very
foundation of his theory that the taxes were paid erroneously or
otherwise collected from him illegally.
Real Property Taxation
General Principles/Assessment of Real Property Tax:
1.a. Transformers, electric posts, transmission lines, insulators and

electric meters owned and used by Meralco may be considered as
machineries subject to real property tax.
Under Sec. 199 (o) of the LGC, machinery, to be deemed real property
subject to real property tax, need no longer be annexed to the land or
building as these "may or may not be attached, permanently or
temporarily to the real property," and in fact, such machinery may
even be "mobile."
1.b. The same provision requires that the machinery: (a) must be
actually, directly, and exclusively used to meet the needs of the
particular industry, business, or activity; and (b) by their very nature
and purpose, are designed for, or necessary for manufacturing, mining,
logging, commercial, industrial, or agricultural purposes. Therefore, in
determining whether machinery is real property subject to real
property tax, the definition and requirements under the Local
Government Code (not the Civil Code) are controlling. (Meralco vs. The
City Assessor and City Treasurer of Lucena City, GR No. 166102 dated
August 5, 2015)
2. Submarine or undersea communications cables are akin to electric

transmission lines and are considered as machinery subject to real
property tax. There is no reason to distinguish between submarine
cables used for communications and aerial or underground wires or
lines used for electric transmission, so that both pieces of property do
not merit a different treatment in the aspect of real property taxation.
(Capitol Wireless, Inc. vs. The Provincial Treasurer of Batangas, GR No.
180110 dated May 30, 2016)
3.a. The road equipment owned and used by Filipinas Palm Oil in its
Palm Oil business are real properties subject to real property tax.
3.b. Under the definition provided in Sec. 199(o) of the LGC, the road
equipment and the mini haulers are classified as machinery, thus:
"Machinery" . . . includes the physical facilities for production, the

installations and appurtenant service facilities, those which are
mobile, self-powered or self propelled, and those not permanently
attached to the real property which are actually, directly, and
exclusively used to meet the needs of the particular industry, business
or activity and which by their very nature and purpose are designed
for, or necessary to its manufacturing, mining, logging, commercial,
industrial or agricultural purposes.
3.c. The phrase pertaining to physical facilities for production is

comprehensive enough to include the road equipment and mini
haulers as actually, directly, and exclusively used by respondent to
meet the needs of its operations in palm oil production. Moreover,
"mini-haulers are farm tractors pulling attached trailers used in the
hauling of seedlings during planting season and in transferring fresh
palm fruits from the farm [or] field to the processing plant within the
plantation area." The indispensability of the road equipment and mini
haulers in transportation makes it actually, directly, and exclusively
used in the operation of respondent's business. (Provincial Assessor of
Agusan del Sur vs. Filipinas Palm Oil Plantation, Inc., GR No. 183416
dated October 5, 2016)
4.a. Under Sec. 223 of the LGC, when real property is assessed for the
first time or when an existing assessment is increased or decreased,
the assessor shall within thirty (30) days give written notice of such
new or revised assessment to the person in whose name the property
is declared.
4.b. A notice of collection is not the same as a notice of assessment.

For failure to issue the notice of assessment, the appraisal and
assessment of the transformers, electric posts, transmission lines,
insulators, and electric meters of MERALCO not being in compliance
with the LGC, are attempts at deprivation of property without due
process of law and, therefore, null and void. (Meralco vs. The City
Assessor and City Treasurer of Lucena City, GR No. 166102 dated
August 5, 2015)
Exemption from Real Property Taxation – Sec. 234(a):
1. Real property owned by the Republic of the Philippines or any of its

political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person.
If Sec. 234(a) is in issue correlate with Sec. 133(o) of the LGC and Art.
420 of the Civil Code, if applicable.
2. In order to be exempt from execution sales, the property owned by

the Republic must be considered property of public dominion. (City of
Pasig vs. Republic, GR No. 185023 dated August 24, 2011)
Exemption from Real Property Taxation – Sec. 234(a):
3. Under the beneficial use doctrine, the unpaid tax attaches to the
property and is chargeable against the taxable person who had actual
or beneficial use and possession of it regardless of whether or not he is
the owner. Thus, the beneficial user or the taxable entity having
beneficial use of the leased property is the one who should pay the
real property tax. (GSIS vs. City of Manila, GR No. 186242 dated
December 23, 2009)
Exemption from Real Property Taxation – Sec. 234(b):
Charitable institutions, churches, parsonages or convents appurtenant

thereto, mosques, non-profit or religious cemeteries and all lands,
buildings, and improvements actually, directly, and exclusively used for
religious, charitable or educational purposes.
What if machineries are owned by a non-stock non-profit educational

institution?
Exemption from Real Property Taxation – Sec. 234(c):
To successfully claim exemption under Section 234(c) of the LGC, the

claimant must prove two elements: (a) the machineries and equipment
are actually, directly, and exclusively used by local water districts and
government-owned or controlled corporations; and, (b) the local water
districts and government-owned and controlled corporations claiming
exemption must be engaged in the supply and distribution of water
and/or the generation and transmission of electric power. (NPC vs.
Province of Quezon, GR No. 171586 dated July 15, 2009)
Exemption from Real Property Taxation – Sec. 234(d):
1.a. Under Section 133(n) of the Local Government Code, the taxing
power of local government units shall not extend to the levy of taxes,
fees, or charges on duly registered cooperatives under the Cooperative
Code. In addition Sec. 234(d) provides that all real property owned by
duly registered cooperatives as provided for under R.A. No. 6938 shall
be exempt from real property tax.
1.b. Section 234 of the Local Government Code exempts all real
property owned by cooperatives without distinction. Nothing in the
law suggests that the real property tax exemption only applies when
the property is used by the cooperative itself. Similarly, the instance
that the real property is leased to either an individual or corporation is
not a ground for withdrawal of tax exemption.
2.a. Also, the roads that the lessee built should not be assessed with
real property tax. The roads that respondent constructed became
permanent improvements on the land owned by the NGPI-NGEI
(cooperative) by right of accession under Arts. 440 and 445 of the Civil
Code.
2.b. Article 440. The ownership of property gives the right by accession
to everything which is produced thereby, or which is incorporated or
attached thereto, either naturally or artificially.
Article 445. Whatever is built, planted or sown on the land of another

and the improvements or repairs made thereon, belong to the owner
of the land.
2.c. Despite the land being leased by respondent when the roads were
constructed, the ownership of the improvement still belongs to NGPI-
NGEI. As provided under Article 440 and 445 of the Civil Code, the land
is owned by the cooperatives at the time respondent built the roads.
Hence, whatever is incorporated in the land, either naturally or
artificially, belongs to the NGPI-NGEI as the landowner. Therefore,
NGPI-NGEI, as owner of the roads that permanently became part of
the land being leased by respondent, shall be liable for real property
taxes, if any. However, by express provision of the Local Government
Code, NGPI-NGEI is exempted from payment of real property tax.
(Provincial Assessor of Agusan del Sur vs. Filipinas Palm Oil Plantation,
Inc., GR No. 183416 dated October 5, 2016)
How to contest a real property assessment? Is payment under protest
always necessary?
1. In disputes involving real property taxation, the general rule is to

require the taxpayer to first avail of administrative remedies and pay
the tax under protest before allowing any resort to a judicial action,
except when the assessment itself is alleged to be illegal or is made
without legal authority. For example, prior resort to administrative
action is required when among the issues raised is an allegedly
erroneous assessment, like when the reasonableness of the amount is
challenged, while direct court action is permitted when only the
legality, power, validity or authority of the assessment itself is in
question.
How to contest a real property assessment? Is payment under protest
always necessary?
2. Stated differently, the general rule of a prerequisite recourse to

administrative remedies applies when questions of fact are raised, but
the exception of direct court action is allowed when purely questions
of law are involved. (Capitol Wireless, Inc. vs. The Provincial Treasurer
of Batangas, GR No. 180110 dated May 30, 2016)
Once an assessment has been issued, what is the proper remedy of
the taxpayer?
1. Once an assessment has already been issued by the assessor, the

proper remedy of a taxpayer depends on whether the assessment was
erroneous or illegal.
the taxpayer?
2. An erroneous assessment “presupposes that the taxpayer is subject

to the tax but is disputing the correctness of the amount assessed.”
With an erroneous assessment, the taxpayer claims that the local
assessor erred in determining any of the items for computing the real
property tax, i.e., the value of the real property or the portion thereof
subject to tax and the proper assessment levels. In case of an
erroneous assessment, the taxpayer must exhaust the administrative
remedies provided under the Local Government Code before resorting
to judicial action.
the taxpayer?
3. On the other hand, an assessment is illegal if it was made without

authority under the law. In case of an illegal assessment, the taxpayer
may directly resort to judicial action without paying under protest the
assessed tax and filing an appeal with the Local and Central Board of
Assessment Appeals.
the taxpayer?
4. In the present case, the PEZA did not avail itself of any of the
remedies against a notice of assessment. A petition for declaratory
relief is not the proper remedy once a notice of assessment was
already issued. Instead of a petition for declaratory relief, the PEZA
should have directly resorted to a judicial action. The PEZA should have
filed a complaint for injunction, the "appropriate ordinary civil action”
to enjoin the City from enforcing its demand and collecting the
assessed taxes from the PEZA. After all, a declaratory judgment as to
the PEZA’s tax-exempt status is useless unless the City is enjoined from
enforcing its demand. (City of Lapu-Lapu vs. PEZA, GR No. 184203
Procedure for Payment under Protest/ Erroneous Assessments:
1. Pay under protest; (Sec. 252)

2. File a written protest with the treasurer within 30 days from
payment; (Sec. 252)
3. Treasurer to decide within 60 days; (Sec. 252)
4. If protest is denied or upon lapse of the 60 day period to decide the
protest, file a verified petition with the LBAA within 60 days from
receipt of the written notice of assessment/decision of the treasurer or
from lapse of the 60 day period to decide. (Sec. 226)
5. LBAA to decide the appeal/petition within 120 days from receipt of
the appeal; (Sec. 229)
Procedure for Payment under Protest/ Erroneous Assessments:
6. If the taxpayer is not satisfied with the decision of the LBAA, an

appeal may be taken to the CBAA by filing a notice of appeal within 30
days from receipt thereof. (Sec. 229)
7. From the CBAA, appeal to the CTA EB within 30 days via Petition for
review under Rule 43. (CTA Rules)
8. The decision of the CTA EB is appealable to the SC under Rule 45
raising pure questions of law. (CTA Rules)
Procedure for Illegal Assessments:
1. Taxpayer shall file a complaint for injunction before the Regional

Trial Court to enjoin the LGU from collecting real property taxes;
2. The party unsatisfied with the decision of the RTC shall file an
appeal, not a petition for certiorari, before the CTA, the complaint
being a local tax case decided by the RTC. The appeal shall be filed
within 15 days (should be 30 days); and,
3. Decision of the CTA is appealable to the SC under Rule 45 raising
pure questions of law.
Procedure for Other Scenarios:
1. In case the LGU has issued a notice of delinquency, the taxpayer

may file a complaint for injunction to enjoin the impending sale of the
real property at public auction; (Sec. 254)
2. In case the LGU has already sold the property at public auction, the
taxpayer must first deposit with the court the amount for which the
real property was sold, together with interest of 2% per month from
the date of sale to the time of the institution of action. The taxpayer
may then file a complaint to assail the validity of the public auction;
(Sec. 267)
3. Decisions of the RTC in these cases are appealable to the CTA and
the latter’s decisions appealable before the SC under Rule 45; (City of
Lapu-Lapu vs. PEZA, GR No. 184203 dated November 26, 2014)
Doctrines:
1. Posting of surety bond (instead of payment in cash), may be

considered substantial compliance with Section 252 of the LGC
Government Code for the said bond already guarantees the payment
to the alleged real property tax. (Meralco vs. The City Assessor and City
Treasurer of Lucena City, GR No. 166102 dated August 5, 2015)
Doctrines:
2.a. Claim of exemption? - Like (in the) Olivarez (case), Napocor, by

claiming exemption from realty taxation, is simply raising a question of
the correctness of the assessment. A claim for tax exemption, whether
full or partial, does not question the authority of local assessors to
assess real property tax.
A claim for exemption from payment of real property taxes does not
actually question the assessor's authority to assess and collect such
taxes, but pertains to the reasonableness or correctness of the
assessment by the local assessor, a question of fact which should be
resolved, at the very first instance, by the LBAA. This may be inferred
from Section 206 of RA No. 7160.
Doctrines:
2.b. Sec. 206, by providing that real property not declared and proved
as tax-exempt shall be included in the assessment roll, the above-
quoted provision implies that the local assessor has the authority to
assess the property for realty taxes, and any subsequent claim for
exemption shall be allowed only when sufficient proof has been
adduced supporting the claim.
Therefore, if the property being taxed has not been dropped from the
assessment roll, taxes must be paid under protest if the exemption
from taxation is insisted upon. (NPC vs. Province of Quezon, GR No.
171586 dated July 15, 2009; Camp John Hay vs. CBAA, GR No. 169234,
October 2, 2013)
Doctrines:
2.c. However, in NPC vs. Navotas, GR No. 192300 dated November 24,
2014, a claim of exemption under Sec. 234(c) of the LGC was
considered a legal issue. Thus, direct resort to the RTC was correct and
payment under protest was (impliedly) held as not necessary.
The Supreme Court added that the issue in this particular case is
clearly legal given that it involves an interpretation of the contract
between the parties vis-à-vis the applicable laws, i.e., which entity
actually, directly and exclusively uses the subject machineries and
equipment. The answer to such question would then determine
whether petitioner is indeed exempt from payment of real property
taxes. Since the issue is a question of law, the jurisdiction was correctly
lodged with the RTC.
Doctrines:
2.c. Also, impliedly, in City of Lapu-Lapu vs. PEZA, GR No. 184203 dated
November 26, 2014, which also involved a claim of exemption, the
Supreme Court ruled that it inolved an illegal assessment and the
proper remedy was to directly resort to judicial action (injuction).
Doctrines:
2.d. But under latest jurisprudence, Capitol Wireless, Inc. vs. The
Provincial Treasurer of Batangas, GR No. 180110 dated May 30, 2016
and NPC vs. Benguet, GR No. 209303 dated November 14, 2016, the
Supreme Court considered a claim of exemption as a factual issue
rather than a legal issue and therefore payment under protest is
necessary.
Doctrines:
3. Cases wherein the Supreme Court held that payment under protest
was not necessary. Therefore, the assessment may be questioned with
the Regional Trial Court. Cases considered involving legal issues:
a. If the taxpayer questions the authority of the assessor to make the

assessment and collect the tax. (Ty vs. Trampe, GR No. 117577 dated
December 1, 1995)
b. If the issue is who should pay the tax? (Testa Estate of Concordia Lim
vs. City of Manila, GR No. 90639 dated February 21, 1980)
c. Amount of protest to be paid is huge and the properties were
already levied and to be auctioned-off. In this sense, appeal to the
LBAA is not a plain, adequate and speedy remedy. (Quezon City vs.
Bayan Telecommunications, GR No. 162015 dated March 6, 2006)
Doctrines:
4.a. Who has personality to file a protest? Section 226 of the LGC lists
down the two entities vested with the personality to contest an
assessment: (1) the owner and, (2) the person with legal interest in the
property. A person legally burdened with the obligation to pay for the
tax imposed on a property has legal interest in the property and the
personality to protest a tax assessment on the property.
Doctrines:
4.b. On liability for taxes, the NPC indeed assumed responsibility for
the taxes due on the power plant and its machineries, specifically, "all
real estate taxes and assessments, rates and other charges in respect
of the site, the buildings and improvements thereon and the [power
plant]." At first blush, this contractual provision would appear to make
the NPC liable and give it standing to protest the assessment. The tax
liability we refer to above, however, is the liability arising from law that
the local government unit can rightfully and successfully enforce, not
the contractual liability that is enforceable between the parties to a
contract as discussed below. By law, the tax liability rests on Mirant
based on its ownership, use, and possession of the plant and its
machineries.
Doctrines:
4.c. Contractual stipulation to assume payment of the real property tax

does not clothe the party legal interest for purposes of contesting an
assessment.
Corollary thereto, the local government units can neither be compelled

to recognize the protest of a tax assessment from an entity against
whom it cannot enforce the tax liability. (NPC vs. Province of Quezon,
GR No. 171586 dated July 15, 2009)
Doctrines:
5. A motion for reconsideration of the Provincial Assessor’s decision is

a remedy not sanctioned by law.
The last action of the local assessor on a particular assessment shall be

the notice of assessment; it is this last action which gives the owner of
the property the right to appeal to the LBAA. The procedure likewise
does not permit the property owner the remedy of filing a motion for
reconsideration before the local assessor. (Fels Energy, Inc. vs. Province
of Batangas, GR No. 168557, February 16, 2007)
Doctrines:
6. While it is evident in jurisprudence that the filing of motion for

reconsideration before the LBAA is allowed, this Court finds that,
inevitably, the filing of the appeal before the CBAA through registered
mail on November 16, 2006 was already late. It is settled that the
"fresh period rule" in the case of Domingo Neypes, et al. v. Court of
Appeals, et al. applies only to judicial appeals and not to administrative
appeals. (NPC vs. Provincial Treasurer of Benguet, GR No. 209303
Doctrines:
7. Protest is not a requirement in order that a taxpayer who paid under

a mistaken belief that it is required by law, may claim for a refund.
(Ramie Textile vs. Mathay - 89 SCRA 586)
8. Mandamus does not lie to compel the treasurer to recognize a tax

exemption claimed by a taxpayer. Availment of the remedies under
Sec. 226 is necessary. (Systems Plus Computer College of Caloocan vs.
Local Government of Caloocan, GR No. 146382 dated August 7, 2003)
Doctrines:
9. The CTA has jurisdiction over real property tax cases decided by the
RTC. Basis is: “Decisions, resolutions or orders of the Regional Trial
Courts in local tax cases decided or resolved by them in the exercise of
their original jurisdiction;”
The term "local taxes" in the aforementioned provision should be

considered in its general and comprehensive sense, which embraces
real property tax assessments xxx. (NPC vs. Municipal Government of
Navotas, GR No. 192300 dated November 24, 2014)
Doctrines:
10. When a tax case is pending on appeal with the Court of Tax
Appeals, the Court of Tax Appeals has the exclusive jurisdiction to
enjoin the levy of taxes and the auction of a taxpayer's properties in
relation to that case.
Urgency does not remove the Central Board of Assessment Appeals

decision from the exclusive appellate jurisdiction of the Court of Tax
Appeals. This is particularly true since, as properly recognized by the
Court of Appeals, petitioner could have, and should have, applied for
injunctive relief with the Court of Tax Appeals, which has the power to
issue the preliminary injunction prayed for. (Philippine Ports Authority
vs. Davao, GR No. 190324 dated June 6, 2018)
Real Property Tax
Procedural requirements related to delinquency:
1. Section 254 of the LGC mandates that the notice of delinquency in

the payment of the real property be: (1) posted at the main entrance
of the provincial capitol, or city or municipal hall and in a publicly
accessible and conspicuous place in each barangay of the local
government unit concerned, and (2) published once a week for two (2)
consecutive weeks, in a newspaper of general circulation in the
province, city, or municipality. In Talusan v. Tayag, the Court added
that the notice of delinquency should be sent to the registered owner
of the property subject of a possible tax sale. Cases involving an
auction sale of land for the collection of delinquent taxes are in
personam. Thus, notice by publication, though sufficient in
proceedings in rem, does not as a rule satisfy the requirement of
proceedings in personam.
Remedies
2. Under Section 258 of the LGC, the warrant of levy must be mailed to
or served upon the delinquent owner of the real property or person
having legal interest therein, or in case he is out of the country or
cannot be located, to the administrator or occupant of the property. At
the same time, written notice of the levy with the attached warrant
shall be mailed to or served upon the assessor and the Register of
Deeds of the province, city or a municipality where the property is
located, who shall annotate the levy on the tax declaration and
certificate of title of the property, respectively. The levying officer shall
submit a report on the levy to the sanggunian concerned within ten
(10) days after receipt of the warrant by the owner of the property or
person having legal interest therein.
Remedies
3. Section 260 of the LGC requires that within thirty (30) days after
service of the warrant of levy, the local treasurer shall proceed to
publicly advertise for sale or auction the property or a usable portion
thereof as may be necessary to satisfy the tax delinquency and
expenses of sale. The advertisement shall be effected by: (1) posting a
notice at the main entrance of the provincial, city or municipal
building, and in a publicly accessible and conspicuous place in the
barangay where the real property is located, and (2) publication once a
week for two (2) weeks in a newspaper of general circulation in the
province, city or municipality where the property is located. (Salva vs.
Magpile, GR No. 220440 dated November 8, 2017)
Remedies
Action Assailing Validity of Tax Sale:
1. Section 267. Action Assailing Validity of Tax Sale. - No court shall

entertain any action assailing the validity or any sale at public auction
of real property or rights therein under this Title until the taxpayer
shall have deposited with the court the amount for which the real
property was sold, together with interest of two percent (2%) per
month from the date of sale to the time of the institution of the action.
The amount so deposited shall be paid to the purchaser at the
auction sale if the deed is declared invalid but it shall be returned to
the depositor if the action fails. Neither shall any court declare a sale
at public auction invalid by reason of irregularities or informalities in
the proceedings unless the substantive rights of the delinquent owner
of the real property or the person having legal interest therein have
been impaired.
Remedies
2.a. As worded, Section 267 operates only within the purview of real
property taxation (Title II). The pertinent tax involved is only real
property tax or realty tax. Thus, the reason for the "sale at public
auction of the real property or rights therein" in Section 267 is
obviously because of non-payment of realty tax and no other.
Remedies
2.b. Clearly, the deposit precondition is an ingenious legal device to

guarantee the satisfaction of the tax delinquency, with the local
government unit keeping the payment on the bid price no matter the
final outcome of the suit to nullity the tax sale.
Remedies
3. Deposit is not required or applicable if:
a. The property is current in its realty tax or not realty tax delinquent. It
should not be the subject of a sale at public auction as contemplated in
Section 267. - but there must be competent evidence that the realty
tax due on the property subject of the tax sale has been seasonably
and fully paid.
b. The plaintiff is the government or any of its agencies as it is
presumed to be solvent, and more so where the tax exempt status of
such plaintiff as basis of the suit is acknowledged.
Remedies
4.a. In the present case, the very issue raised in the Petition is the
invalidity of the auction sales on the ground that the subject
properties are not tax delinquent. On the assumption that the subject
two lots are not tax delinquent, then there is no need for the deposit
requirement under Section 267 because the realty taxes due on the
subject two lots have already been paid and there are no tax
delinquencies to be collected or satisfied.
Remedies
4.b. The required deposit under Section 267 becomes jurisdictional

only if there is no dispute that the real property is tax delinquent. In
that instance, the deposit will serve its intended purpose. However,
where the property sold at a public auction sale is not tax delinquent,
then the envisioned purpose becomes irrelevant, if not oppressive.
Remedies
4.c. Thus, the position taken by the RTC, as affirmed by the CA, that
"[s]o long as the plaintiff assails the validity of the tax sale at public
auction then Section 267 is applicable" is unjustified for it disregards
the intended purpose of the deposit requirement, the reason for the
sale at public auction of the subject real property, its realty tax status
and the kind of "taxpayer" contemplated therein. If there is competent
evidence that the realty tax due on the property subject of the tax
sale has been seasonably and fully paid, then the deposit
requirement under Section 267 does not serve its intended purpose
and ceases to be jurisdictional. (Beaumont Holdings vs. Reyes, GR No.
203706 dated August 7, 2017)
Remedies
5. Solco cannot invoke the provision under Section 267 of RA 7160,

requiring the posting of a jurisdictional bond before a court can
entertain an action assailing a tax sale. A simple reading of the title
readily reveals that the provision relates to actions for annulment of
tax sales. The section likewise makes use of terms "entertain" and
"institution" to mean that the deposit requirement applies only to
initiatory actions assailing the validity of tax sales. Again, the suit filed
by Solco was an action for nullity of title and issuance of new title in
lieu thereof; the issue of nullity of the tax sale was raised by the
Megaworld merely as a defense and in no way converted the action to
an action for annulment of a tax sale. (Solco vs. Megaworld
Corporation, GR No. 213669 dated March 5, 2018)
Remedies
6. The first paragraph pertains to the condition precedent of a deposit.

The second paragraph limits the invalidation of tax delinquency sales
on the basis of "irregularities or informalities in the proceedings."
Section 267 permits such invalidations only when "substantive rights . .
. have been impaired." These substantive rights may pertain to "the
delinquent owner of the real property or the person having legal
interest therein." Stated otherwise, a person having legal interest over
such property, even a non-owner, may bring an action under Section
267, for as long as his or her substantive rights have been impaired.
The right to file an action under Section 267 is not barred merely on
account of a plaintiff's not being the owner of the property sold.
(Alvarado vs. Ayala Land, Inc., GR No. 208426 dated September 20,
2017)
Remedies
RPT Refund Provision:
Repayment of Excessive Collections. - When an assessment of basic real

property tax, or any other tax levied under this Title, is found to be
illegal or erroneous and the tax is accordingly reduced or adjusted, the
taxpayer may file a written claim for refund or credit for taxes and
interests with the provincial or city treasurer within two (2) years from
the date the taxpayer is entitled to such reduction or adjustment.
The provincial or city treasurer shall decide the claim for tax refund or
credit within sixty (60) days from receipt thereof. In case the claim for
tax refund or credit is denied, the taxpayer may avail of the remedies
as provided in Chapter 3, Title II, Book II of this Code. (appeal to the
LBAA) [Sec. 253]
Remedies
RPT Refund Provision:
But note, however, that the entitlement to a tax refund does not
necessarily call for the automatic payment of the sum claimed. The
amount of the claim being a factual matter, it must still be proven in
the normal course and in accordance with the administrative
procedure for obtaining a refund of real property taxes, as provided
under the Local Government Code. (Allied Banking Corporation vs. The
City Government of Quezon City, GR No. 154126 dated September 15,
2006 – Motion for Clarification)
In this case, the SC held that: “the claim for refund may be pursued in

accordance with Section 253 of the Local Government Code within Two
(2) Years from the finality of this Decision.”

Updates on Taxation Law Under TRAIN Act

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Updates on Taxation Law Under TRAIN Act

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Updates and Critical Areas in

An ordinance imposing fees based on project cost whose purpose is to

1. Tax rulings are official positions of the Bureau of Internal Revenue on

(a) Where the taxpayer deliberately misstates or omits material facts

But, if the ruling issued is a general interpretative rule, all taxpayers

2.e. Section 246 is not limited to a reversal only by the Commissioner

a. Rulings of first impression; and,

1.b. Appeal to the SOF is in compliance with the rule on exhaustion of

3. Next Remedy RTC or CTA?

1. The Court of Tax Appeals has undoubted jurisdiction to pass upon

2. Section 7 of Republic Act No. 1125, as amended, is explicit that,

1.a. Individuals earning income purely from self-employment and/or

a. The graduated rates under Section 24(A)(2)(a) of the Tax Code, as

1.b. Individuals Earning Income Both from Compensation and from

a. Compensation Income – graduated rates; and,

1. Purely compensation income earners;

1. The 8% income tax rate shall be based on the gross sales/receipts

3. Such election shall be irrevocable and no amendment of option shall

4. The option to be taxed at 8% gross income tax rate is not available to

5. Partners of a General Professional Partnership (“GPP”) by virtue of

6. The Financial Statements is not required to be attached in filing the

7. The P250,000.00 exemption for those subject to the 8% tax is not

8.a. A taxpayer shall automatically be subject to the graduated rates

8.b. The taxpayer is required to update his/her registration

1.a. Juan, a non-VAT taxpayer, is a free lance architect. By the end of

2. Juan, a VAT taxpayer, is a free lance architect. By the end of 2018, he

May Juan avail of the 8% income tax rate?

3.a. Juan, a non-VAT taxpayer, is a free lance architect. He is also

free lance architect – P1,000,000.00;

a) How much taxable income will be subject to 8% tax?

3.b. Juan, a non-VAT taxpayer, is a free lance architect. He is also

free lance architect – P1,000,000.00;

a) How much taxable income will be subject to 8% tax?

3.c. Juan, a non-VAT taxpayer, is a free lance architect. He is also

free lance architect – P1,000,000.00;

a) How much taxable income will be subject to 8% tax?

5. In 2018, Greg owns a nightclub and videoke bar, with gross

Is Greg entitled to avail of the 8% income tax rate?

6. Willie owns a farm, with gross sales of P3,500,000.00. His cost of

Is Willie entitled to avail of the 8% income tax rate?

1. Sec. 34(M) on Deduction for Premium Payment on Health and/or

2. Sec. 35 on Personal and Additional Exemption – Deleted by the

3. 13th Month Pay and Other Benefits – P90,000.00.

1. TRAIN Law Provision:

“xxx. Provided, further, That a general professional partnership and the

2. New Rules for General Professional Partnerships (“GPP”) under RR

2. New Rules for General Professional Partnerships (“GPP”) under RR

b. The share in the net income of the partnership, actually or

2. New Rules for General Professional Partnerships (“GPP”) under RR

c. If the partner also derives other income from trade, business or

1. Taxpayer is a prominent independent contractor who offers

a) If Taxpayer is an individual, wow much taxable income should

2. Jojo is a partner of AMBS & Co., a general professional partnership,

1. Capital Gains Tax on Unlisted Shares of Stock of a Domestic

2. Stock Transaction Tax on Listed Shares of a Domestic Corporation –

3. PCSO and Lotto Winnings of P10,000.00 and below exempt. More

5. Fringe Benefits Tax – 35%;

1. Creditable Withholding Tax Rates: Begining January 1, 2019 not less

2. Substituted Filing - Individual taxpayers receiving purely

(A) Personal profile and information;

3.b. Deadline for Individual ITR:

3.c. Payment by Installment of Income Tax for Individuals:

a. Tax due is more than Two Thousand Pesos (P2,000.00);