Taxation

By Prof. Abelardo T. Domondon GENERAL PRINCIPLES OF TAXATION 1. When may the power to tax in !"#e the power to #e$troy% When i$ exer i$e o& the power to tax not #e$tr" ti' e o& taxp ay e r ($ proper t y% SUGGESTED ANSWER: The power to tax n!l"de# the power to de#troy$ where the tax # a %al d tax. Th # # #o be!a"#e a taxpayer !o"ld not #ee& the n"ll f !at on of the %al d tax #olely "pon the prem #e that the tax w ll mpo%er #h h m. The exer! #e of the power to tax # not de#tr"!t %e of taxpayer'# property where t # an n%al d tax$ wh !h % olate# the nherent or !on#t t"t onal l m tat on#. Th # # #o be!a"#e there # a #ympathet ! !o"rt that #hall !ome to the #"!!or of the taxpayer and de!lare #"!h tax a# n%al d. ). *i$ "$$ the on ep t o& interp r e t a t io n o& tax !aw$ a$ #i&&ere n ti a t e # &rom the on ept o& interp r e t a t io n o& tax exem p t i o n !aw$. SUGGESTED ANSWER: A tax !annot be mpo#ed "nle## t # #"pported by the !lear and expre## lan("a(e of a #tat"te. )Da%ao G"lf *"mber +orporat on %. +omm ## oner of ,nternal Re%en"e$ et al.$ -./ S+RA 01$ 223 ,n #hort$ n !a#e of do"bt$ tax law# m"#t be !on#tr"ed #tr !tly a(a n#t the State and l berally n fa%or of the taxpayer. Th # # be!a"#e taxe#$ a# b"rden# wh !h m"#t be end"red by the taxpayer$ #ho"ld not be pre#"med to (o beyond what the law expre##ly and !learly de!lare#. )* n!oln Ph l pp ne * fe ,n#"ran!e +ompany$ ,n!.$ et!.$ %. +o"rt of Appeal#$ et al.$ -./ S+RA .-$ ..3 4n the other hand$ when a tax # "n5"e#t onably mpo#ed$ a !la m of exempt on form tax payment# m"#t be !learly #hown and ba#ed on lan("a(e n the law too pla n to be m #ta&en. )Da%ao G"lf *"mber +orporat on$ supra 3 N4TES AND +466ENTS: The abo%e !on!ept# are al#o the hold n( n )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ G.R. No. 7807/9$ prom. :ebr"ary -/$ 7...3 Th # # the +EN;4+4 !a#e. :"rthermore$ a re%er#al of a B,R r"l n( fa%orable to a taxpayer wo"ld not ne!e##ar ly !reate a perpet"al exempt on n h # fa%or$ for

after all the (o%ernment # ne%er e#topped from !olle!t n( taxe# be!a"#e of m #ta&e# or error# on the part of t# a(ent#. ) Ibid. 3 +. What #o yo" "n#er$t a n # ,y the inheren t an# on$tit" tion a! !imita tion$ a$ ,einre$tri ti' e o& the other wi$e "n!imit e # an# p!enary power o& taxa tion% SUGGESTED ANSWER: The nherent and !on#t t"t onal l m tat on# to the power of taxat on are #afe("ard# wh !h wo"ld pre%ent ab"#e n the exer! #e of th # otherw #e "nl m ted and plenary power. .. What are the inheren t !imita tion$ to the power o& taxation% SUGGESTED ANSWER: a. PUB*,+ PURP4SE. The tax re%en"e# m"#t be "t l <ed for the benef t of the !omm"n ty n (eneral. An alternat %e mean n( # that tax pro!eed# #ho"ld be "t l <ed only to atta n the ob=e!t %e# of (o%ernment. b. N4 ,6PR4PER DE*EGAT,4N 4: *EG,S*AT,;E AUT>4R,T?. The power of taxat on # exer! #ed by the le( #lat"re who#e member# are the mere dele(ate# of the people. Th # power !o"ld not therefore be dele(ated by the le( #lat"re to other department# of (o%ernment$ l &e the exe!"t %e. !. TERR,T4R,A*,T?. The power to tax #ho"ld be exer! #ed only w th n the terr tor al bo"ndar e# of the tax n( a"thor ty. d. G4;ERN6ENT E@E6PT,4N S>4U*D BE RE+4GN,AED. Th # # #o n order to red"!e the amo"nt of money the (o%ernment # handl n(. There # %er ty n the max m$ B:or the (o%ernment$ exempt on # the r"le and taxat on # the ex!ept on.C e. +46,T?. Re#pe!t #ho"ld be a!!orded to other #o%ere (n nat on#. The power of taxat on # a h (h prero(at %e of #o%ere (nty. The propert e# of other #o%ere (n nat on# w th n the terr tory of the tax n( a"thor ty #ho"ld not be #"b=e!t to taxat on a# a mea#"re of re#pe!t to a !oDe5"al. /. What are the on$tit" tiona! !imita tion$ on the power o& taxation% SUGGESTED ANSWER: a. GENERA* 4R ,ND,RE+T +4NST,TUT,4NA* *,6,TAT,4NS: a. *"e pro e$$ !a"$e E b. E0"a! prote tion !a"$e E !. Free#o m o& the pre$$ E d. Re!i-io"$ &ree#o m1 e. Non2 impair m e n t !a"$e1 f. Law2 ma3in- pro e$$ :

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73 B ll #ho"ld embra!e only one #"b=e!t expre##ed n the t tle thereofE -3 Three )/3 read n(# on three #eparate day#E /3 Pr nted !op e# n f nal form d #tr b"ted three )/3 day# before pa##a(e. (. Pre$i#en ti a! power to -ran t repri e' e$ $ !omm"tat on# and pardon# and rem ttal of f ne# and forfe t"re after !on% !t on by f nal ="d(ment. b. SPE+,:,+ 4R D,RE+T +4NST,TUT,4NA* *,6,TAT,4NS: a. No impri$on m e n t &or non2 payme n t o& a po!! tax E b. Taxation $ha!! ,e "ni&or m an# e0"ita, ! e E !. +on(re## #hall e%ol%e a pro-re$$i'e $y$te m o& taxa ti on E d. A!! approp ri a ti o n 4 re'en " e or tari&& ,i!!$ $ha!! ori-in at e ex !"$i'e! y in the 5o"$e o& Repre$en t a t i ' e$4 b"t the Senate may propo#e and !on!"r w th amendment#E e. The Pre$i#en t $ha!! ha'e the power to 'eto any parti "! ar item or tem# n an appropr at on$ re%en"e$ or tar ff b ll$ b"t the %eto #hall not affe!t the tem or tem# to wh !h he doe# not ob=e!tE f. D e!e-a t e # power o& the Pre$i#en t to impo$e tari&& rate$ $ mport and export 5"ota#$ tonna(e and wharfa(e d"e#: 73 Dele(at on by +on(re## -3 Thro"(h a law /3 S"b=e!t to +on(re## onal l m t# and re#tr !t on# F3 W th n the framewor& of nat onal de%elopment pro(ram. (. Tax exem p t i o n o& harita ,! e in$tit" ti on$4 h"r h e$4 par$ona- e$ an# on'en t$ app"r t e n a n t there to 4 mo$0"e$4 an# a!! !an#$4 ,"i!#in-$ an# impro'e m e n t $ o& a!! 3in#$ a t" a!!y4 #ire t!y an# ex !"$i'e!y "$e# &or re!i-io"$4 harit a, ! e or e#" ationa! p"rpo$e$1 h. No tax exempt on w tho"t the !on!"rren!e of ma=or ty %ote of all member# of +on(re##E . No "#e of p"bl ! money or property for rel ( o"# p"rpo#e# ex!ept f pr e#t # a## (ned to the armed for!e#$ penal n#t t"t on#$ (o%ernment orphana(e or lepro#ar "mE =. 6oney !olle!ted on tax le% ed for a #pe! al p"rpo#e to be "#ed only for #"!h p"rpo#e$ balan!e f any$ to (eneral f"nd#E &. The S"preme +o"rtG# power to re% ew ="d(ment# or order# of lower !o"rt# n all !a#e# n%ol% n( the le(al ty of any tax$ mpo#e$ a##e##ment or toll or the le(al ty of any penalty mpo#ed n relat on to the abo%eE l. A"thori ty o& !o a! -o'ern m e n t "nit$ to reat e their own $o"r e$ o& re'en " e 4 to !e'y taxe$4 &ee$ an# other har-e$ $",6e t to -"i#e!ine$ an# !imita tion$ impo$e# ,y Con-re$$ on$i$ten t with the ,a$i po!i y o& !o a! a"tono m y1 m. A"tom a ti re!ea$e o& !o a! -o'ern m e n t 7$ 6"$t $hare in nationa! taxe$1 n. Tax exem p t ion o& a!! re'en"e$ an# a$$et$ o& non2 $to 34 non2 pro&it e#" ationa! in$tit"tion$ "$e# a t"a!!y4 #ire t!y an# ex !"$i'e!y &or e#" ationa! p"rpo$e$ E o. Tax exem p t ion o& a!! re'en" e$ an# a$$et$ o& propriet a r y or oopera ti' e e#" ationa! in$tit" tion$ $",6e t to !imita tion$ pro'i#e# ,y !aw in !"#inre$tri tion$ on #i'i#en#$ an# pro'i$ion$ &or rein'e$t m e n t o& pro&it$1 p. Tax exem p t ion o& -rant$4 en#ow m e n t$ 4 #onation$ or ontri," tion$ "$e# a t"a!!y4 #ire t!y an# ex !"$i'e!y &or e#" ationa! p"rpo$e$ $",6e t to on#ition$ pre$ ri,e# ,y !aw. 8. Rep",!i A t No. 9))9 reat e # the S",i Spe ia! E onomi :one ;SSE:<4 an# pro'i#e$ that the SSE: $ha!! ,e mana- e # a$ a $epar a t e "$tom$ territory with $" h in enti' e$ a$ tax an# #"ty2 &ree import a t ion$ o& raw mate ri a!$4 apita! an# e0"ipm e n t . It &"rth er pro'i#e$ that =no taxe$4 !o a! an# nationa!4 $ha!! ,e impo$e# within the SSE:>4 ,"t in !ie" thereo&4 +? o& the -ro$$ in ome earne# ,y ,"$ine$$e$ therein $ha!! ,e remit t e # to the Nationa! Go'ern m e n t with 1? ea h to the !o a! -o'ern m e n t "nit$ a&&e te # ,y the #e !ara tion o& the @one in proportion to their pop"!ation area an# other &a tor$. In a##ition4 a #e'e!op m e n t &"n# o& 1? o& the -ro$$ in ome earne# ,y a!! ,"$ine$$e$ within the SSE: $ha!! ,e "ti!i@e# &or the #e'e!op m e n t o& m"ni ipa!itie$ o"t$i#e O!on-apo City an# the A"ni ipa!ity o& S",i an# other m"ni ipa!itie$ onti-"o"$ to the ,a$e area$. On B"ne 1C4 1DD+4 Pre$i#en t Ramo$ i$$"e# Exe "ti' e Or#er No. D9 !ari&yinthat tax an# import #"ty2 &ree import a t ion$ $ha!! app!y on!y to raw mate ria!$4 apita! -oo#$ an# e0"ipm e n t ,ro"-h t in ,y ,"$ine$$ enter pri$e$ in the SSE:. On B"ne 1D4 1DD+4 Pre$i#en t Ramo$ i$$"e# Exe "ti'e Or#er No4 D92 A $pe i&yin- that the $e "re# area$ that $ha!! ,e omp!e t e!y tax an# #"ty2 &ree in the SSE:FP: on$i$t$ o& the =pre$en t! y &en e#2 in &orm er S",i Na'a! Ea$e.> Exe "ti'e No. D92 A i$ ha!!en- e# &or ,ein- 'io!ati' e o& the e0"a! prote tion o& the !aw !a"$e ,e a"$e o& it$ ,ia$ in &a'or o& ,i- in'e$tor$. I$ there merit in the ha!!en-e % Exp!ain ,rie&!y. SUGGESTED ANSWER:

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No. E5"al prote!t on of the law !la"#e # #"b=e!t to rea#onable !la## f !at on. ,f the (ro"p n(# are !hara!ter <ed by #"b#tant al d #t n!t on# that ma&e real d fferen!e#$ one !la## may be treated and re("lated d fferently from another. The !la## f !at on m"#t al#o be (ermane to the p"rpo#e of the law and m"#t apply to all tho#e belon( n( to the #ame !la##. +la## f !at on$ to be %al d$ m"#t )73 rest on substantial distinctions $ )-3 be germane to the purpose of the law $ )/3 not be limited to existing conditions only $ and )F3 apply equally to all members of the same class . ,n ##" n( E.4. No. .0D A del m t n( n!ent %e# w th n the !onf ne# of the former S"b ! m l tary ba#e$ the Pre# dent rea#onably made a !la## f !at on that # (ermane to the p"rpo#e of Rep"bl ! A!t No. 0--0 . The p"rpo#e of Rep"bl ! A!t No. 0--0 # to a!!elerate the !on%er# on of m l tary re#er%at on# nto prod"!t %e "#e#. ,t wa# rea#onable for the Pre# dent to ha%e del m ted the appl !at on of #ome n!ent %e# to the !onf ne# of the former S"b ! m l tary ba#e. The !la## f !at on # therefore (ermane to the p"rpo#e# of the law. There are #"b#tant al d fferen!e# between b ( n%e#tor# be n( ent !ed to the B#e!"red areaC and the b"# ne## operator# o"t# de that are n a!!ord w th the e5"al prote!t on !la"#e that doe# not re5" re terr tor al "n form t y of law#. 4f !o"r#e the o"t# der#$ po##e## n( the re5" # te n%e#tment !ap tal !an alway# a%a l of the #ame benef t# by !hannel n( the r re#o"r!e# or b"# ne## operat on# nto the fen!edD off free port <one. The !la## f !at on #et forth by E.4. No. .0D A doe# not merely apply to ex #t n( !ond t on#. A# la d down n R.A. No. 0--0$ the ob=e!t %e # to e#tabl #h a B#elfD #"#ta n n($ nd"#tr al$ !ommer! al$ f nan! al and n%e#tment !enterC n the area. There w ll$ therefore$ be a lon(D term d fferen!e between #"!h n%e#tment !enter and the area# o"t# de t. The !la## f !at on appl e# e5"ally to al the re# dent nd % d"al# and b"# ne##e# w th n the H#e!"red area.C The re# dent#$ be n( n l &e ! r!"m#tan!e# o !ontr b"t n( d re!tly to the a!h e%ement of the end p"rpo#e of the law$ are not !ate(or <ed f"rther. ,n#tead$ they are # m larly treated$ both n pr % le(e# (ranted and obl (at on# re5" red. )T "$ et al.$ %. +o"rt of Appeal#$ et al.$ G.R. No. 7-0F78$ Ian"ary -8$ 7...3 9. On B"!y 14 1DD+4 or a month a&ter the ena t m e n t an# two #ay$ ,e&ore the e&&e ti'i ty o& Rep",!i A t No. 98/.4 the EIR i$$"e# RAC No. +92 D+ whi h on$i#ere # 5ope L"x"ry4 Premi" m Aore an# Champion i-are t t e $ ,ein- man" &a t " r e # ,y Fort"n e To,a o orpora tio n a$ !o a!!y man" &a t " r e # i-are t t e$ ,earin - a &orei-n ,ran# $",6e t to the hi-her //? ad valore m tax on i-are t t e$ . The &o!!owin- #ay4 on B"!y )4 1DD+4 at a,o"t /F/C p.m.4 the EIR $ent 'ia &ax a opy o& RAC No. +92 D+ to Fort"ne To,a o ,"t wa$ a##re$$e# to no one in parti "!ar. On B"!y 1/4 1DD+ Fort"ne To,a o re ei'e#4 ,y or#inary mai!4 a erti&ie# xerox opy o& RAC No. +92 D+. Fort"ne To,a o now !aim$ that it$ on$tit" tiona! ri-ht to #"e pro e$$ wa$ 'io!at e# ,e a"$e there wa$ no hearin,e&ore EIR i$$"e# RAC No. +92 D+. *o yo"r a-ree % Exp!ain. SUGGESTED ANSWER: ?e#. There wa# a % olat on of :ort"ne Toba!!o'# r (ht to d"e pro!e##. B,R ##"ed R6+ No. /0D ./ for the p"rpo#e of pla! n( >ope *"x"ry$ Prem "m 6ore and +hamp on w th n the #!ope of the amendatory law and #"b=e!t them to the n!rea#ed tax rate. ,n #o do n($ the B,R d d not # mply nterpret the law$ t ##"ed a le( #lat %e r"le wh !h # n the nat"re of #"bord nate le( #lat on$ de# (ned to mplement a pr mary le( #lat on by pro% d n( the deta l# thereof. ,n the #ame way that law# m"#t ha%e the benef t of p"bl ! hear n($ t # (enerally re5" red that before a le( #lat %e r"le # adopted there m"#t be a hear n( and p"bl !at on a# re5" red "nder the Adm n #trat %e +ode. 4n the other hand$ f what # ##"ed # merely an nterpretat %e r"le )wh !h # not the r"le ##"ed n th # !a#e3$no hear n( or p"bl !at on # re5" red # n!e an nterpretat %e r"le # de# (ned merely to pro% de (" del ne# of the law wh !h the adm n #trat %e a(en!y # n !har(e of enfor! n(. )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ -17 S+RA -/1 3 G. It i$ onten# e # that Expan#e# Ha!"e2 A##e# Tax i$ 'io!ati'e o& the on$tit" tion a! r"!e that taxe$ $ho"!# ,e "ni&or m an# e0"ita,!e . It i$ !i3ewi$e a#'an e# that the EHAT i$ =oppre$$i'e4 #i$ rimin a t o r y4 an# "n6"$t. > 5ow were the$e o,6e tion$ #i$po$e# o& in the a$e o& To!entino '. Se ret a r y o& Finan e an# ompanion a$e$4 ).D SCRA 8)G ;1DD/ <% SUGGESTED ANSWER: a. ,t # nherent n the power to tax that the #tate be free to #ele!t the #"b=e!t# of taxat on and t ha# been repeatedly held that ne5"al t e# wh !h re#"lt from a # n(l n( o"t of one part !"lar !la## for taxat on or exempt on nfr n(e no !on#t t"t onal l m tat on. Th"#$ the E;AT on !erta n (ood# and #er% !e# only$ b"t not on other#$ do not % olate the r"le on "n form ty and e5" tablene##. b. E5"al ty and "n form ty of taxat on mean# that all taxable art !le# or & nd# of property of the #ame !la## be taxed at the #ame

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rate. The tax n( power ha# the a"thor ty to ma&e rea#onable and nat"ral !la## f !at on# for p"rpo#e# of taxat on. To #at #fy the re5" rement of "n form t y and e5" tablene##$ t # eno"(h that the #tat"te or ord nan!e appl e# e5"ally to all per#on#$ form# and or(an <at on# pla!ed n a # m lar # t"at on. !. The E;AT # "n form be!a"#e the tax # appl ed # m larly on all (ood# and #er% !e# #old to the p"bl !$ wh !h # not exempt$ at the !on#tant rate of 8J or 78J. d. The E;AT # e5" table be!a"#e t # mpo#ed only on #ale of (ood# and #er% !e# by per#on# en(a(ed n b"# ne## w th an ann"al (ro## #ale a# determ ned by the law. Small !orner #ar D #ar #tore# are !on#e5"ently exempt from t# appl !at on. * &ew #e exempt from the tax are #ale# of farm and mar ne prod"!t#. Th"#$ the !o#t of ba# ! food and other ne!e## t e#$ #pared a# they are from E;AT$ are expe!ted to be relat %ely lower and w th n the rea!h of the (eneral p"bl !. D. On A"-"$t /4 1DDG4 EIR a-en t$ a tin"pon a re-"! ar! y i$$"e# Ai$$ion Or#er exami n e # the ,oo3$ o& a o"nt o& 'ario"$ 6ewe! e r$ en-a- e# in the man" &a t " r e o& 6ewe! ry an# a!!ie# "n#er t a 3 i n -$ were exami n e # an# in'e$ti- a t e # &or ex i$e tax p"rpo$e$. Amon- the$e &irm$ were 5an$4 Ai!a# ay4 Aer e!! e$4 et . S",$e0" en t! y 4 the 6ewe! e r$ an# their a$$o iatio n &i!e# with the Re-iona! Tria! Co"rt a peti tion &or #e !ara t o r y re!ie& prayin- that ertai n pro'i$ion$ o& the NIRC impo$in- )C? ex i$e tax on 6ewe! ry4 pear!$ an# other pre io"$ $tone$4 an# pro'i$ion$ o& the Tari&& an# C"$to m$ Co#e impo$inthree to ten per en t ;+? to 1C?< tari&& an# "$to m$ #"ty on nat" ra! an# "!t"re# pear!$ an# pre io"$ or $emi2 pre io"$ $tone$4 ,e #e !are# "n on$ti t" ti o n a! an# n"!! an# 'oi#. The 6ewe! e r$ !i3ewi$e pre$en t e # an exha"$ti' e $t"#y on the tax rate$ on 6ewe! ry !e'ie# ,y #i&&ere n t A$ian o"ntrie$. The tria! o"rt #e !are # the 0"e$tion e# pro'i$ion$ a$ inoper a ti ' e an# witho" t &or e an# e&&e t in$o&ar a$ the 6ewe! e r$ are on ern e# . The tria! o"rt ma# e the o,$er'a ti o n that in#ee# -o'ern m e n t tax po!i y trea t$ 6ewe! ry a$ non2 e$$en ti a! item$4 an# there &o r e 4 taxe# hea'i!y1 that the pre$en t tari&& an# tax $tr" t" r e in rea$e man" & a t " ri n - o$t an# ren#er$ the !o a! 6ewe! ry man" & a t " r e r$ "n omp e ti ti ' e a-ain$t other o"ntri e$. Wa$ there !e-a! ,a$i$ &or the tria! o"rt7$ #e !ara ti o n % Exp!ain. SUGGESTED ANSWER: No. There wa# no le(al ba# # for the follow n( rea#on#: a. The tr al ="d(e en!roa!hed "pon matter# properly fall n( w th n the pro% n!e of le( #lat %e f"n!t on#. ,n ma& n( the afore#a d ob#er%at on#$ the tr al ="d(e o%erloo&ed the fa!t that #"!h matter# are not for h m to de! de. There are rea#on# why =ewelry$ a nonD e##ent al tem$ # taxed a# t # n th # !o"ntry and the#e rea#on#$ del berated "pon by the le( #lat"re are beyond the rea!h of ="d ! al 5"e#t on n(. b. The tr al !o"rt # not the proper for"m for the %ent lat on of the ##"e# ra #ed by the =eweler#. ,t # the le( #lat"re to wh !h rel ef m"#t be #o"(ht$ be!a"#e w th the le( #lat"re pr mar ly l e# the d #!ret on to determ ne the nat"re )& nd3$ ob=e!t )p"rpo#e3$ extent )rate3$ !o%era(e )#"b=e!t#3 and situs )pla!e3 of taxat on. The ="d ! ary !annot freely del%e nto tho#e matter# wh !h$ by !on#t t"t onal f at$ r (htly re#t on le( #lat %e ="d(ment. !. The tax rate# of other !o"ntr e# #ho"ld not be "#ed a# a yard#t !&$ n determ n n( what may be the proper #"b=e!t# of taxat on n o"r own !o"ntry. ,t #ho"ld be po nted o"t that n mpo# n( the aforement oned taxe# and d"t e#$ the State$ a!t n( tho"(h the le( #lat %e and exe!"t %e bran!he#$ # exer! # n( t# #o%ere (n prero(at %e. ,t # nherent n the power to tax that the State be free to #ele!t the #"b=e!t# of taxat on$ and t ha# been repeatedly held that$ K ne5"al t e# wh !h re#"lt from a # n(l n( o"t of one part !"lar !la## of taxat on$ or exempt on$ nfr n(e no !on#t t"t onal l m tat on.K )+omm ## oner of ,nternal Re%en"e$ et al.$ %. Santo#$ et al.$ -00 S+RA 1703 1C. A &ixe# ann"a! !i en$e &ee on tho$e en-a-e # in the ,"$ine$$ o& -ener a! enterpri$e wa$ a!$o impo$e# on the $a!e o& ,i,!e$ ,y a re!i-io"$ $e t. I$ thi$ 'a!i#% SUGGESTED ANSWER: No$ be!a"#e t % olate# the !on#t t"t onally ("aranteed freedom of the pre##$ and of rel ( on.. A# a l !en#e fee # f xed n amo"nt and "nrelated to the re!e pt# of the taxpayer$ #"!h a l !en#e fee$ when appl ed to a rel ( o"# #e!t # a!t"ally mpo#ed a# a !ond t on for the free exer! #e of rel ( on. A l !en#e fee Bre#tra n# n ad%an!e tho#e !on#t t"t onal l bert e# of pre## and rel ( on and ne% tably tend# to #"ppre## the r exer! #e.C 11. The EHAT Law impo$e$ a HAT re-i$tr a t ion &ee o& P14CC C. C C on non2 HAT enterpri$e$ whi h in !"#e$ amon- other$4 re!i-io"$ $e t$ whi h $e!!$ an# #i$tri," t e$ re!i-io"$ !itera t " r e . I$ thi$ 'io!ati' e o& re!i-io"$ &ree#o m% SUGGESTED ANSWER: No. The P7$888.88 ;AT re( #trat on fee$ altho"(h a f xed amo"nt # not mpo#ed for the exer! #e of a pr % le(e b"t only for the p"rpo#e of defray n( part of the !o#t of re( #trat on.

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The re( #trat on re5" rement # a !entral feat"re of the ;AT #y#tem. ,t # de# (ned to pro% de a re!ord of tax !red t# be!a"#e any per#on who # #"b=e!t to the payment of the ;AT pay# an np"t tax$ e%en a# he !olle!t# an o"tp"t tax on #ale# made or #er% !e# rendered. The re( #trat on fee # th"# more of an adm n #trat %e fee$ one not mpo#ed on the exer! #e of a pr % le(e$ m"!h le## a !on#t t"t onal r (ht. )Tolent no %. Se!retary of : nan!e$ et al.$ and !ompan on !a#e#$ -/9 S+RA 1/83 1). Air!ine$4 In . wa$ -ran t e # a !e-i$!ati'e &ran hi$e to operat e $ he#"! e# &!i-ht $er'i e$ ,etw e e n Aani!a an# Ce," an# 'i e2 'er$a. It wa$ $",6e t to a &ran hi$e tax o& )? 0"a!i&i e# ,y the =ma-i wor#$4 > whi h =$ha!! ,e in !ie" o& a!! taxe$. > S",$e0" en t! y 4 Con-re$$ ena te# Rep",!i A t No. 99184 the Expan# e# Ha!"e2 A##e# Tax ;EHAT< Law whi h impo$e$ a 1C? HAT on a!! $er'i e$ o&&ere# ,y Air!ine$4 In . Air!ine$4 In . a$$ai!$ the 'a!i#ity o& R.A. No. 9918 &or ,ein- 'io!ati' e o& the non2 impair m e n t !a"$e. It ite$ Commi$$ioner o& Intern a! Re'en" e '. Lin-ayen G"!& E!e tri Power Co.4 In .4 et a!.4 18. SCRA )9 ;1DGG < where it wa$ he!# that the impo$ition o& a tax on &ran hi$e ho!#er$ with the =ma-i wor#$> i$ 'io!ati 'e o& the non2 impair m e n t !a"$e. The S"pre m e Co"rt in the Lin-ayen G"!& a$e he!# that hart er$ or $pe ia! !aw$ -ran te # ,y the !e-i$!at" r e are in the nat"re o& pri'at e ontra t$. R"!e on the onten tion o& Air!ine$4 In . SUGGESTED ANSWER: The E;AT doe# not % olate the nonD mpa rment !la"#e. Tolent no %. Se!retary of : nan!e and t# !ompan on !a#e#$ -/9 S+RA 1/8$ -F. S+RA.1-2$ pro% de# the rea#on# why there # no % olat on: a. Art !le @,,$ Se!. 77 of the +on#t t"t on pro% de# that the (rant of a fran!h #e for the operat on of a p"bl ! "t l ty # #"b=e!t to amendment. Alterat on or repeal by +on(re## when the !ommon (ood re5" re#E b. Not only ex #t n( law# b"t al#o the re#er%at on of e##ent al attr b"te# of #o%ere (nty # read nto !ontra!t# a# a po#t"late of the le(al orderE !. +ontra!t# m"#t be "nder#tood a# ha% n( been made n referen!e to the po## ble exer! #e of the r (htf"l a"thor ty of the (o%ernment and no obl (at on of !ontra!t !an extend to defeat that a"thor tyE d. A lawf"l tax on a new #"b=e!t$ or an n!rea#ed tax on an old one$ doe# not nterfere w th a !ontra!t or mpa r# t# obl (at on$ w th n the mean n( of the !on#t t"t on. E%en tho"(h #"!h taxat on may affe!t part !"lar !ontra!t#$ a# t may n!rea#e the debt of one per#on and le##en the #e!"r ty of another$ or may mpo#e add t onal b"rden# "pon one !la## and relea#e the b"rden# of another$ #t ll the tax m"#t be pa d "nle## proh b ted by the !on#t t"t on$ nor !an t be #a d that t mpa r# the obl (at on# of any ex #t n( !ontra!t n t# tr"e and le(al #en#e. 1+. Aera! o wa$ -rant e# a &ran hi$e to opera t e an e!e tri !i-ht an# power $er'i e in Ca!am, a4 La-"na $ometi m e in 1DG+ "n#er P.*. No. //1. In#er the &ran hi$e Aera! o pay$ )? &ran hi$e tax on o& it$ -ro$$ re eipt$ an# =any !aw to the ontra ry notwith$t a n #i n- ,e in !ie" o& a!! taxe$ an# a$$e$$me n t$ o& what e ' e r nat"r e impo$e# ,y any nationa! or !o a! a"thority or earnin-$4 re eipt$4 in ome an# pri'i!e- e o& -enera tion4 #i$tri," tion an# $a!e o& e!e tri "rren t. > P"r$"an t to the Lo a! Go'ern m e n t Co#e4 the pro'in e o& La-"na ena te # an or#inan e impo$in- a &ran hi$e o& /C? o& 1? o& the -ro$$ ann"a! re eipt$ o& ,"$ine$$ en6oyin- a &ran hi$e rea!i@e# #"rin- the pre e#in- a!en#ar year within the pro'in e in !"#in- itie$ !o ate# therein. R"!e on the 'a!i#ity o& the tax or#inan e. SUGGESTED ANSWER: The tax ord nan!e # %al d. Under the now pre%a l n( +on#t t"t on$ where there # ne ther a (rant nor proh b t on by #tat"te$ the tax power m"#t be deemed to ex #t altho"(h +on(re## may pro% de #tat"tory l m tat on# and (" del ne#. The ba# ! rat onale for the !"rrent r"le # to #afe("ard the % ab l ty and #elfD #"ff ! en!y of lo!al (o%ernment "n t# by d re!tly (rant n( them (eneral and broad tax power#. The *o!al Go%ernment +ode expl ! tly a"thor <e# pro% n!e# and ! t e#$ notw th#tand n( Bany exempt on (ranted by any law or other #pe! al lawC to mpo#e a tax on b"# ne##e# en=oy n( a fran!h #e. ,nd !at %e of the le( #lat %e ntent to !arry o"t the !on#t t"t onal mandate of %e#t n( broad tax power# to lo!al (o%ernment "n t#$ the *o!al Go%ernment +ode ha# w thdrawn tax exempt on# or n!ent %e# theretofore en=oyed by !erta n ent t e#. ,n add t on$ the *o!al Go%ernment +ode !onta n# a (eneral repeal n( !la"#e. The phra#e n Bl e" of all taxe#C ha# to ( %e way to the peremptory lan("a(e of the *o!al Go%ernment +ode wh !h #pe! f !ally pro% de# for the w thdrawal of all exempt on#. The +o"rt ha# % ewed t# pre% o"# r"l n(# a# lay n( #tre## on the le( #lat %e ntent of the amendatory law whether the tax exempt on pr % le(e # to be w thdrawn or not rather than on whether the law !an or !annot w thdraw the tax exempt on$ w tho"t % olat n( the !on#t t"t on. )6an la Ele!tr ! +ompany %. Pro% n!e of *a("na$ et al.$ G.R. No. 7/7/9.$ 6ay 9$ 7...3 The *o!al Go%ernment +ode pro% # on# on w thdrawal of tax exempt on# pre#!r be# the (eneral r"le$ % <. the tax exempt on# or n!ent %e# (ranted to or pre#ently en=oyed by nat"ral or

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="r d !al per#on# are w thdrawn w th the effe!t % ty of the *o!al Go%ernment +ode ex!ept w th re#pe!t to tho#e expre##ly en"merated. )+ ty Go%ernment of San Pablo$ *a("na$ et al.$ %. Reye#$ et al.$ G.R. No. 7-0082$ 6ar!h -9$ 7...3 N4TES AND +466ENTS: ,t # po## ble that the Bar 5"e#t on m (ht !ome from one of the follow n( area#: Power o& !o a! -o'ern m e n t $ to tax . *o!al (o%ernment# do not ha%e the nherent power to tax ex!ept to the extent that #"!h power m (ht be dele(ated to them e ther by the ba# ! law or #tat"te. Pre#ently$ "nder Art !le @ of the 7.20 +on#t t"t on a (eneral dele(at on of that power ha# been ( %en n fa%or of lo!al (o%ernment "n t#. Ne%erthele##$ the f"ndamental law d d not ntend the dele(at on to be ab#ol"te and "n!ond t onal$ the !on#t t"t onal ob=e!t %e ob% o"#ly # to en#"re that$ wh le lo!al (o%ernment "n t# are be n( #tren(thened and made more a"tonomo"#$ the le( #lat"re m"#t #t ll #ee to t that: a. the taxpayer w ll not be o%erD b"rdened or #addled w th m"lt ple and "nrea#onable mpo# t on#E b. ea!h lo!al (o%ernment "n t w ll ha%e t# fa r #hare of a%a lable re#o"r!e#E !. the re#o"r!e# of the nat onal (o%ernment w ll be "nd"ly d #t"rbedE and d. lo!al taxat on w ll be fa r$ "n form and ="#t. )6an la Ele!tr ! +ompany %. Pro% n!e of *a("na$ et al.$ G.R. No. 7/7/9.$ 6ay 9$ 7...3 The 6an la Ele!tr ! +ompany !a#e do!tr ne re%er#ed the hold n( n + ty Go%ernment of San Pablo$ *a("na$ et al.$ %. Reye#$ et al.$ G.R. No. 7-0082$ 6ar!h -9$ 7... that m"n ! pal !orporat on# are %e#ted by the +on#t t"t on w th the power to tax. ,t may be exer! #ed by lo!al le( #lat %e bod e#$ no lon(er by % rt"e of a %al d dele(at on a# before$ b"t p"r#"ant to d re!t a"thor ty !onferred by the +on#t t"t on. The non2 impair m e n t !a"$e . J"e$tion a,! e r"!in- . The nonD mpa rment !la"#e !annot be n%o&ed by fran!h #e#$ a# fran!h #e# are alway# #"b=e!t to pol !e power$ a# well a# the power to tax )L3$ wh !h l &e pol !e power !annot be !ontra!ted away )L3. )+ ty Go%ernment of San Pablo$ *a("na$ et al.$ %. Reye#$ et al.$ G.R. No. 7-0082$ 6ar!h -9$ 7...3 The a"thor !on# der# th # r"l n( to be 5"e#t onable be!a"#e the tax n( power # nfer or to the non mpa rment !la"#e. Wh le the +o"rt ha#$ not too nfre5"ently$ referred to tax exempt on# !onta ned n #pe! al fran!h #e# a# be n( n the nat"re of !ontra!t# and a part of the nd"!ement for !arry n( o"t the fran!h #e$ the#e exempt on#$ ne%erthele## far from be n( #tr !tly !ontra!t"al n nat"re. Con$tit" ti o n a! tax exem p t i o n$ $ n the real #en#e of the term and where the nonD mpa rment !la"#e of the +on#t t"t on !an r (htly be n%o&ed$ are tho#e a(reed to by the tax n( a"thor ty n !ontra!t#$ #"!h a# tho#e !onta ned n (o%ernment bond# or debent"re#$ lawf"lly entered nto by them "nder enabl n( law# n wh !h the (o%ernment$ a!t n( n t# pr %ate !apa! ty #hed# t# !loa& of a"thor ty and wa %e# t# (o%ernment mm"n ty. Tr"ly$ tax exempt on# of th # & nd may not be re%o&ed w tho"t mpa r n( the obl (at on# of !ontra!t#. A fran!h #e parta&e# of the nat"re of a (rant wh !h # not beyond the p"r% ew of the nonD mpa rment !la"#e. ,ndeed the 7.20 +on#t t"t on l &e t# pre!"r#or# the 7./9 and the 7.0/ +on#t t"t on# # expl ! t that no fran!h #e for the operat on of a p"bl ! "t l ty #hall be (ranted ex!ept "nder the !ond t on that #"!h pr % le(e #hall be #"b=e!t to amendment$ alterat on or repeal by +on(re## a# and when the !ommon (ood #o re5" re#. )6an la Ele!tr ! +ompany %. Pro% n!e of *a("na$ et al.$ G.R. No. 7/7/9.$ 6ay 9$ 7...3 The reader should take note of the conflicting doctrines espoused by the Manila Electric case and the City Go ernment of !an "ablo# $aguna case. It may interest the reader also to know that the ponente in the Manila Electric case is %ustice %ose &itug# while the ponente in the City Go ernment of !an "ablo# $aguna is %ustice Miner a Gon'aga( )eyes. 1.. What i$ the on ept o& #o",!e taxa tion%

a. 6EAN,NG. ,n t# (ener ! #en#e$ th # mean# tax n( the #ame #"b=e!t or ob=e!t tw !e d"r n( the #ame taxable per od. ,n t# part !"lar #en#e$ t may mean d re!t d"pl !ate taxat on$ wh !h # proh b ted "nder the !on#t t"t on be!a"#e t % olate# the !on!ept of e5"al prote!t on$ "n form ty and e5" tablene## of taxat on. ,nd re!t d"pl !ate taxat on # not anathem <ed by the abo%e !on#t t"t onal l m tat on#. b. E*E6ENTS 4: D,RE+T DUP*,+ATE TA@AT,4N: 73 Same a3 S"b=e!t or ob=e!t # taxed tw !e b3 Tax n( a"thor ty !3 Tax n( p"rpo#e d3 Tax n( per od -3 Tax n( all of the #"b=e!t# or ob=e!t# for the f r#t t me w tho"t tax n( all of them for the #e!ond t me. ,f any of the element# are ab#ent then there # nd re!t d"pl !ate taxat on wh !h # not proh b ted by the !on#t t"t on. N4TES AND +466ENTS: There may be a problem on do"ble taxat on$ n!l"d n( !ompen#at on and #etD off.

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1/. *e&ine taxati o n. intern a t i o n a! 6"ri#i a! #o",!e tax$ altho"(h the amo"nt of tax that may be mpo#ed by the #tate of #o"r!e # l m ted. Se!ond 6ethod : The #tate of #o"r!e # ( %en a f"ll or l m ted r (ht to tax to(ether w th the #tate of re# den!e. ,n th # !a#e$ the treat e# ma&e t n!"mbent "pon the #tate of re# den!e to allow rel ef n order to a%o d do"ble taxat on. Two method# of rel ef are "#ed: 73 The exem p t ion method M the n!ome or !ap tal wh !h # taxable n the #tate of #o"r!e or # t"# # exempted n the #tate of re# den!e$ altho"(h n #ome n#tan!e# t may be ta&en nto a!!o"nt n determ n n( the rate of tax appl !able to the taxpayer'# rema n n( n!ome or !ap tal. -3 The credit method M altho"(h the n!ome or !ap tal wh !h # taxed n the #tate of #o"r!e # #t ll taxable n the #tate of re# den!e$ the tax pa d n the former # !red ted a(a n#t the tax le% ed n the latter. )+omm ## oner of ,nternal Re%en"e %. S.+. Iohn#on and Son$ ,n!.$ et al.$ G.R. No. 7-0789$ prom. I"ne -9$ 7...3 D fferen!e between the exempt on method and the !red t method . The exempt on method fo!"#e# on n!ome or !ap tal t#elf wh le the !red t method fo!"#e# "pon the tax. . )+omm ## oner of ,nternal Re%en"e %. S.+. Iohn#on and Son$ ,n!.$ et al.$ G.R. No. 7-0789$ prom. I"ne -9$ 7...3 19. The RP2 We$t Germa ny Tax Treat y pro'i#e$ a 1C? tax on roya!tie$. ,"t expre$$!y a!!ow$ a-ain$t Germ an in ome an# orpora t e tax o& )C? o& the -ro$$ roya!tie$ pai# "n#er the !aw o& the Phi!ippine$. On the other han# the RP2 IS Tax Treat y #oe$ not pro'i#e &or a $imi!ar tax re#itin-. Th"$4 the tax on roya!tie$ earne# ,y I.S. &irm$ in the Phi!ippine$ may either ,e o& three rate$F )/ per en t o& the -ro$$ amo"n t o& the roya!tie$1 1/ per ent when the roya!tie$ are pai# ,y a orpora tion re-i$ter e # with the Phi!ippine Eoar# o& In'e$t m e n t $ an# en-a-e # in pre&er r e # area$ o& a ti'itie$1 or the !owe$t rate o& Phi!ippine tax that may ,e impo$e# on roya!tie$ o& the $ame 3in# pai# "n#er $imi!ar ir "m$t a n e$ to a re$i#en t o& a thir# $tate. Aay I.S. Corporation$ !aim entit!e m e n t to the =mo$t &a'ore# nation> tax rate o& 1C? on roya!tie$ a$ pro'i#e# in the RP2 IS Tax Trea ty in re!ation to the RP2 We$t Germa ny Tax Treat y% Exp!ain with rea$on$.

SUGGESTED ANSWER: The mpo# t on of !omparable taxe# n two or more #tate# on the #ame taxpayer n re#pe!t of the #ame #"b=e!t matter and for dent !al (ro"nd#. Do"ble taxat on "#"ally ta&e# pla!e when a per#on # a re# dent of a !ontra!t n( #tate and der %e# n!ome from or own# !ap tal n$ the other !ontra!t n( #tate and both #tate# mpo#e tax on that n!ome or !ap tal. )+omm ## oner of ,nternal Re%en"e %. S.+. Iohn#on and Son$ ,n!.$ et al.$ G.R. No. 7-0789$ prom. I"ne -9$ 7... 18. What are the meth o#$ &or a'oi#an e o& #o",!e taxa tio n% Exp!ain ea h ,rie&!y ,"t ompre h e n $i' e! y. SUGGESTED ANSWER: The follow n( are the method# of a%o d n( do"ble taxat on: a. Tax treat e# wh !h exempt fore (n nat onal# from lo!al taxat on and lo!al nat onal# from fore (n taxat on "nder the pr n! ple of re! pro! ty. b. Tax !red t# where fore (n taxe# are allowed a# ded"!t on# from lo!al taxe# that are d"e to be pa d. !. Allow n( fore (n taxe# a# a ded"!t on from (ro## n!ome. N4TES AND +466ENTS: a. P"rpo#e o& tax trea ti e$ . To re!on! le the nat onal f #!al le( #lat on# of the !ontra!t n( part e# n order to help the taxpayer a%o d # m"ltaneo"# taxat on n two d fferent ="r #d !t on#. 6ore pre! #ely$ the tax !on%ent on# are drafted w th a % ew toward# the el m nat on of nternat onal ="r d !al do"ble taxat on. b. Rat onale &or a'oi#in#o",!e taxati o n . To en!o"ra(e the free flow of (ood# and #er% !e# and the mo%ement of !ap tal$ te!hnolo(y and per#on# between !o"ntr e#$ !ond t on# deemed % tal n !reat n( rob"#t and dynam ! e!onom e#. :ore (n n%e#tment# w ll only thr %e n a fa rly pred !table and rea#onable nternat onal n%e#tment !l mate and the prote!t on a(a n#t do"ble taxat on # !r"! al n !reat n( #"!h a !l mate. !. 6ethod# re$orte # to ,y a tax trea t y in or#er to e!imin a t e #o",!e taxa ti onF : r#t 6ethod : ,t #et# o"t the re#pe!t %e r (ht# to tax of the #tate of #o"r!e or # t"# and of the #tate of re# den!e w th re(ard to !erta n !la##e# of n!ome or !ap tal. ,n #ome !a#e#$ an ex!l"# %e r (ht to tax # !onferred on one of the !ontra!t n( #tate#E howe%er$ for other tem# of n!ome or !ap tal$ both #tate# are ( %en the r (ht to

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SUGGESTED ANSWER: No. The ent tlement of the 78J rate by U.S. f rm# de#p te the ab#en!e of a mat!h n( !red t )-8J for royalt e#3 wo"ld dero(ate from the de# (n beh nd the mo#t fa%ored nat on !la"#e to (rant e5"al ty of nternat onal treatment # n!e the tax b"rden la d "pon the n!ome of the n%e#tor # not the #ame n the two !o"ntr e#. The # m lar ty n the ! r!"m#tan!e# of payment of taxe# # a !ond t on for the en=oyment of the mo#t fa%ored nat on treatment pre! #ely to "nder#!ore the need for e5"al ty of treatment. )+omm ## oner of ,nternal Re%en"e %. S.+. Iohn#on and Son$ ,n!.$ et al.$ G.R. No. 7-0789$ prom. I"ne -9$ 7...3 N4TES AND +466ENTS: a. Inten ti o n ,ehin# a#op tion o& pro'i$ion on =re!ie& &ro m #o",!e taxa tion. > The ntent on #ho"ld be !on# dered n the l (ht of the p"rpo#e beh nd the mo#t fa%ored nat on )6:N3 !la"#e wh !h # to (rant to the !ontra!t n( party treatment not le## fa%orable than wh !h ha# been or may be (ranted to the Bmo#t fa%oredC amon( other !o"ntr e#. The 6:N # ntended to e#tabl #h the pr n! ple of e5"al ty of nternat onal treatment by pro% d n( that the ! t <en# or #"b=e!t# of the !ontra!t n( nat on# may en=oy pr % le(e# a!!orded by e ther party to tho#e of the mo#t fa%ored nat on. The e##en!e of the pr n! ple # to allow the taxpayer n one #tate to a%a l of more l beral pro% # on# (ranted n another tax treaty to wh !h the !o"ntry of re# den!e of #"!h taxpayer # al#o a party pro% ded that the #"b=e!t matter of taxat on # the #ame a# that n the tax treaty "nder wh !h the taxpayer # l able. )+omm ## oner of ,nternal Re%en"e %. S.+. Iohn#on and Son$ ,n!.$ et al.$ G.R. No. 7-0789$ prom. I"ne -9$ 7...3 1G. The Expan# e# Ha!"e2 A##e# Tax Law i$ an in#ire t tax whi h may ,e on$i#ere # a$ re-re$$i'e in hara t e r. It i$ a &ixe# tax there &o r e the !ower i$ the in ome the taxe$ that are pai# are proportion a t e ! y hi-her. I$ thi$ 'io!ati' e o& the on$ti t" ti o n whi h man# a t e $ that Con-re$$ $ha!! e'o!'e a pro-re$$i'e $y$te m o& taxa tio n % Exp!ain. SUGGESTED ANSWER: There # no % olat on of the !on#t t"t onal mandate for the follow n( rea#on#: a. The mandate to +on(re## # not to pre#!r be b"t to e%ol%e a pro(re## %e #y#tem of taxat on. 4therw #e$ #ale# taxe# wh !h perhap# are the olde#t form of nd re!t taxe#$ wo"ld ha%e been proh b ted w th the pro!lamat on of the !on#t t"t onal pro% # on. Sale# taxe# are al#o re(re## %e. b. The +on#t t"t on doe# not really proh b t the mpo# t on of nd re!t taxe# wh !h$ l &e the ;AT$ are re(re## %e. The !on#t t"t onal pro% # on mean# # mply that nd re!t taxe# #ho"ld be m n m <ed. !. Re#ort to nd re!t taxe# #ho"ld be m n m <ed b"t not a%o ded ent rely be!a"#e t # d ff !"lt$ f not mpo## ble$ to a%o d mpo# n( #"!h taxe# a!!ord n( to the taxpayer'# ab l ty to pay. ,n the !a#e of ;AT$ the law m n m <e# the re(re## %e effe!t# of th # mpo# t on by pro% d n( for <ero rat n( of !erta n tran#a!t on# wh le (rant n( exempt on# to other tran#a!t on#. The tran#a!t on# wh !h are #"b=e!t to ;AT are tho#e wh !h n%ol%e (ood# and #er% !e# wh !h are "#ed or a%a led of ma nly by h (her n!ome (ro"p#. )Tolent no %. Se!retary of : nan!e and !ompan on !a#e#$ -F. S+RA 1-23 1D. The Con$tit" tion re0"ire$ that a!! re'en" e ,i!!$ $ha!! ori-ina t e ex !"$i'e!y &rom the 5o"$e o& Repre$en t a t i ' e$. Wa$ thi$ 'io!at e# when the EHAT ,i!! that ori-inat e # &rom the 5o"$e #i# not ,e ome the EHAT !aw% Exp!ain. a. The +on#t t"t on # mply mean# that the n t at %e for f l n( re%en"e$ tar ff or tax b ll# m"#t !ome from the >o"#e of Repre#entat %e# on the theory that$ ele!ted a# they are from the d #tr !t#$ the 6ember# of the >o"#e !an be expe!ted to be more #en# t %e to the lo!al need# and problem#. b. ,t # not the law D b"t the re%en"e b ll D wh !h # re5" red by the +on#t t"t on to Bor ( nate ex!l"# %elyC n the >o"#e of Repre#entat %e# be!a"#e a b ll or ( nat n( n the >o"#e may "nder(o #"!h exten# %e !han(e# n the Senate that the re#"lt may be a rewr t n( of the whole$ and a d #t n!t b ll may be prod"!ed. !. To n# #t that a re%en"e #tat"te D not only the b ll wh !h n t ated the le( #lat %e pro!e## !"lm nat n( n the ena!tment of the law D m"#t #"b#tant ally be the #ame a# the >o"#e b ll wo"ld be to deny the Senate'# power not only to B!on!"r w th amendment# C b"t al#o to Bpropo#e amendment. C ,t wo"ld be to % olate the !oe5"al ty of le( #lat %e power of the two ho"#e# of +on(re## and n fa!t ma&e the >o"#e #"per or to the Senate. G %en the power of the Senate to propo#e amendment#$ t !an propo#e t# own %er# on e%en w th re#pe!t to b ll# wh !h are re5" red by the +on#t t"t on to or ( nate n the >o"#e. d. Nor doe# the +on#t t"t on proh b t the f l n( n the Senate of a #"b#t t"te b ll n ant ! pat on of t# re!e pt of the b ll from the >o"#e$ #o lon( a# a!t on by the Senate a# a body # w thheld pend n( re!e pt of the >o"#e b ll. )Tolent no %. Se!retary of : nan!e and !ompan on !a#e#$ -/9 S+RA 1/83 )C. A petition &or ertiora ri an#Kor prohi,ition ha!!en-inthe 'a!i#ity o& Rep",!i A t No. G).C4 amen#inertain pro'i$ion$ o& the NIRC ,y impo$in- $o2 a!!e# L$in taxe$L ;a t"a!!y $pe i&i taxe$< on the man"&a t " r e o& ,eer an# i-are t t e$ .

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Rep. Arroyo har- e$ that ;1< in 'io!atio n o& R"!e HIII4 Se . +/ an# R"!e XHII4 Se . 1C+ o& the r"!e$ o& the 5o"$e o& Repre$en t a t i ' e $4 the Chair4 in $",mit tinthe on&ere n e ommi t t e e report to the 5o"$e4 #i# not a!! &or the yeas and nays# ,"t $imp!y a$3e# &or it$ appro'a! ,y motion in or#er to pre'en t Rep. Arroyo &rom 0"e$tioni n- the pre$en e o& a 0"or" m1 ;)< in 'io!ation o& R"!e XIX4 Se . 11)4 the Chair #e!i,era t e ! y i-nore# Rep. Arroyo7$ 0"e$tion4 LWhat i$ that ... Ar. Spea3er %L an# #i# not repea! Rep. A!,ano7$ motion to appro'e or rati&y1 ;+< in 'io!ation o& R"!e XX4 Se $. 1)12 1))4 R"!e XXI4 Se . 1)+4 an# R"!e XHIII4 Se . 1CD4 the Chair $"$pen # e # the $e$$ion witho" t &ir$t r"!inon Rep. Arroyo7$ 0"e$tion whi h4 it i$ a!!e- e# 4 i$ a point o& or#er or a pri'i!e- e # motion. It i$ ar-"e# that Rep. Arroyo7$ 0"ery $ho"!# ha'e ,een re$o!'e# "pon the re$" mp ti o n o& the $e$$ion on No'e m , e r )G4 1DD84 ,e a"$e the par!ia m e n t a r y $it"ati on at the time o& the a#6o"rn m e n t remai n e # "pon the re$" mp tion o& the $e$$ion. On the $ame #ay4 No'em , e r )14 1DD84 the ,i!! wa$ $i-ne# ,y the Spea3er o& the 5o"$e o& Repre$en t a t i ' e$ an# the Pre$i#en t o& the Senat e an# erti&i e# ,y the re$pe ti 'e $e ret a ri e$ o& ,oth 5o"$e$ o& Con-re$$ a$ ha'in- ,een &orma!!y pa$$e# ,y the 5o"$e o& Repre$en t a t i ' e$ an# he Senate on No'em , e r )14 1DD8. The enro!!e# ,i!! wa$ $i-ne# into !aw ,y Pre$i# en t Ramo$ on No'em , e r ))4 1DD8. It i$ now har- e# that the $e$$ion wa$ ha$ti!y a#6o"rn e # at +F.C p.m. on No'e m , e r )14 1DD8 an# the ,i!! erti&ie# ,y Spea3er #e Hene i a to pre'en t Rep. Arroyo &ro m &orm a!! y ha!!en-i n - the exi$ten e o& a 0"or" m an# a$3in- &or a re on$i# er a t ion. R"!e on the ontro 'er$y. SUGGESTED ANSWER: There # no ba# # for the pro!ed"re be n( br" ted a# ha% n( been % olated. Under the enrolled b ll do!tr ne$ the # (n n( of the b ll by the Spea&er and the Senate Pre# dent and the !ert f !at on by the Se!retar e# of both >o"#e# are !on!l"# %e of t# d"e ena!tment. )Arroyo$ et al.$ %. de ;ene! a$ et al.$ -00 S+RA -123 )1. Aani! a Go!& M Co"ntry C!",4 In . i$ a non2 $to 3 orpora ti o n. It main t ai n$ a -o!& o"r$e an# opera t e$ a !",ho"$e with a !o"n- e4 ,ar an# #inin- room4 ,"t the$e &a i!itie$ are &or the ex !"$i'e "$e o& it$ mem , e r$ an# a omp an i e # -"e$t$4 an# it har- e$ on o$t2 p!"$2 expen$e ,a$i$. The !", now !aim$ that Se tion .) in$ertin - a new Se tion 1D12 A in the Nation a! Intern a! Re'en" e Co#e wa$ 'etoe# ,y the Pre$i#en t. On the other han#4 the EIR main t ai n$ that Se tion .) wa$ not entire!y 'etoe# ,"t mere!y the wor#$ =hote!$4 mote!$4 re$tho"$e$ > on the -ro"n# that it mi-ht re$train the #e'e!op m e n t o& hote!$ whi h i$ e$$entia! to the to"ri$m in#"$try. R"!e on the on&!i tin- onten tion$. SUGGESTED ANSWER: The B,R # !orre!t. The n!l"# on of hotel#$ motel#$ and re#tho"#e# are !on# dered a# B tem# w th n the mean n( of no. )-3$ Se!. -0$ Art. ;, of the 7.20 +on#t t"t on that$ B the Pre# dent #hall ha%e the power to %eto any part !"lar tem or tem# n an appropr at on$ re%en"e$ or tar ff b ll$ b"t the %eto #hall not affe!t the tem or tem# to wh !h he doe# not ob=e!t.C ,n the !a#e of +omm ## oner of ,nternal Re%en"e %. +o"rt of Tax Appeal# and 6an la Golf N +o"ntry +l"b$ G.R. No. F0F-7$ 6ay 7F$ 7..8 t wa# held that Bhotel#$ motel# and re#tho"#e#C are !on# dered a# tem# wh !h the Pre# dent ha# the power to %eto. An B tem C n a re%en"e b ll doe# not refer to an ent re #e!t on mpo# n( a part !"lar & nd of tax$ b"t rather to the #"b=e!t of the tax and the tax rate. ,n the port on of a re%en"e b ll wh !h a!t"ally mpo#e# a tax$ a #e!t on dent f e# the tax and en"merate# the per#on# l able therefore w th the !orre#pond n( tax rate. To !on#tr"e the word B tem C a# referr n( to the whole #e!t on wo"ld t e the Pre# dent'# hand n !hoo# n( e ther to appro%e the whole #e!t on at the expen#e of al#o appro% n( a pro% # on there n wh !h he deem# "na!!eptable or %eto the ent re #e!t on at the expen#e of fore(o n( the !olle!t on of the & nd of tax alto(ether. The e% l wh !h wa# #o"(ht to be pre%ented n ( % n( the Pre# dent the power to d #appro%e tem# n a re%en"e b ll wo"ld be perpetrated render n( that power n"t le. )+ommonwealth ex. rel. El& n %. Barnett$ 7.. Pa. 717$ 99 *RA 22- )7.7/3 )). Ar. Gaer!an i$ the owner o& a /4CCC $0. m. par e! o& !an# !o ate# in the ity !imit$ o& San Fernan#o City. 5e !ea$e# the proper t y &or P/C4CC C . C C a year to a re!i-io"$ on-re- a t ion &or a perio# o& &i&te en ;1/< year$ ;1DD C2 )CC/<. The re!i-io"$ on-re- a t ion ,"i!t on a 14CC C $0. m. portion a $emina ry an# a hape! whi h it "$e# in onne tion with it$ re!i-io"$ a ti'itie$. It on$tr" t e # a ten ;1C< $tory ,"i!#in- on the remainin- .4CC C $0. m. whi h it rente # o"t to 'ario"$ omm e r ia! e$ta,!i$h m e n t $4 the pro ee#$ o& whi h -o to the $"pport o& it$ 'ario"$ $emina ri e$ !o ate# thro"-ho" t the Phi!ippine$. The$e $emina ri e$ are or-ani@e# a$ non2 pro&it an# non2 $to 3 e#" ationa! in$tit"tion$. I$ Ar. Gaer!an exem p t &rom the paym e n t o& rea! proper t y taxe$% What a,o"t the re!i-io"$ on-re- a t ion% Exp!ain.

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I$ the re!i-io"$ on-re- a t i o n exem p t &rom the paym e n t o& in ome taxe$ on the renta! re eip t$% Exp!ain. SUGGESTED ANSWER: 6r. Gaerlan # exempt from the payment of real property taxe# on the 7$888 #5. m. port on of h # 9$888 #5. m. lot$ a# well a# on the rema n n( F$888 #5.m. 4n the other hand the rel ( o"# !on(re(at on #ho"ld pay real property taxe# on the F$888 #5. m. par!el of land and the 78D #tory b" ld n(. 6r. Gaerlan # exempt from real property taxat on$ whether on the 7$888 #5.m. or on the F$888 #5. m. be!a"#e the ba# # for taxat on of real property # "#e and not owner#h p. The rel ( o"# !on(re(at on # exempt from real property taxe# on the 7$888 #5. m. par!el of land a# well a# on the mpro%ement# the !hapel and the #em nary. Th # # #o be !a"#e they are a!t"ally$ d re!tly and ex!l"# %ely "#ed for rel ( o"# p"rpo#e#. The treatment # d fferent w th re(ard to the F$888 #5. m. lot and t# mpro%ement the 78 #torey b" ld n(. Wh le t # tr"e that the pro!eed# are "#ed for the #"pport of t# #em nar e#$ th # # at the mo#t nd re!t "#e$ hen!e not #"b=e!t to the tax exempt on. The rel ( o"# !on(re(at on # #"b=e!t to n!ome taxat on. ):or rea#on#$ refer to 5"e#t on no. -/$ infra 3 Wh le t # tr"e that all the #em nar e# are or(an <ed a# nonD prof t nonD #to!& ed"!at onal n#t t"t on#$ t # not the r n!ome# wh !h # the #"b=e!t of the problem b"t that of the rel ( o"# !on(re(at on wh !h # not a nonD prof t nonD #to!& ed"!at onal n#t t"t on. )+. NACA wa$ e$ta,!i$h e# a$ =a we!&ar e 4 e#" atio n a! an# harit a, ! e non2 pro&it orpora tio n > earn e# an in ome o& P8CC tho"$an # &rom !ea$in- o"t a portion o& it$ premi$e$ to $ma!! $hop owner$4 !i3e re$ta" r a n t$ an antee n operato r$4 an# P.. tho"$an # &ro m par3in - &ee$ o!!e te# &rom non2 mem, e r$. It wa$ $",6e te # to an a$$e$$me n t &or non2 payme n t o& in ome taxe$ on the &ore-oin - in ome. NACA !aim$ that it i$ tax exe mp t !aimin- &or the rea$on that the !ea$in- to $ma!! $hop owner$ an# the opera tio n o& the par3in- !ot are rea$on a, !y ne e$$ary &or the a omp!i$h m e n t o& it$ o,6e ti'e$. It premi$e$ it$ !aim on the pro'i$ion$ o& the 1DG9 Con$tit" tio n . I$ the in ome #eri'e# &ro m ren ta!$ o& the rea! proper t y $",6e t to in ome tax % Rea$on o"t yo"r an$w er. SUGGESTED ANSWER: ?e#$ the n!ome # #"b=e!t to n!ome tax. The N,R+ re!o(n <e# the exempt on from tax of the n!ome# of ! % ! lea("e# or or(an <at on# not or(an <ed for prof t b"t operated ex!l"# %ely for the promot on of #o! al welfare$ a# well a# !l"b# or(an <ed and operated ex!l"# %ely for plea#"re$ re!reat on$ and other nonD prof table p"rpo#e# where no part of the net n!ome n"re# to the benef t of any pr %ate #to!&holder or member. >owe%er$ the tax exempt on #o re!o(n <ed doe# not flow to n!ome of whate%er & nd and !hara!ter of the fore(o n( or(an <at on# from any of the r propert e#$ real or per#onal$ or from any of the r a!t % t e# !ond"!ted for prof t$ re(ardle## of the d #po# t on made of #"!h n!ome$ wh !h #hall be #"b=e!t to n!ome taxe#. :"rthermore$ the !on#t t"t onal tax exempt on# refer only to real property that are a!t"ally$ d re!tly and ex!l"# %ely "#ed for rel ( o"#$ !har table or ed"!at onal p"rpo#e#$ and that the only !on#t t"t onally re!o(n <ed exempt on from taxat on of re%en"e# are tho#e earned by nonD prof t$ nonD #to!& ed"!at onal n#t t"t on# wh !h are a!t"ally$ d re!tly and ex!l"# %ely "#ed for ed"!at onal p"rpo#e#. ?6+A # not an ed"!at onal n#t t"t on embra!ed "nder th # part !"lar !on!ept. )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ -.2 S+RA 2/3 ).. A$ean Oi##ie S hoo!4 In .4 i$ a non2 pro&it4 non2 $to 3 e#" ation a! in$tit" tion. It own$ a one he tar e !ot4 one2 ha!& o& whi h i$ o "pie# ,y the $ hoo! amp"$ an# the other ha!& i$ !ea$e# to A-ri2 Farm$4 In .4 &or "$e a$ a &!ower -ar#en to meet the export re0"ire m e n t $ o& A-ri2 Farm$4 In . The renta!$ o!!e te# &rom A-ri2 Farm$ are "$e# ,y A$ean to pay &or the $a!arie$ o& it$ $ hoo! tea he r$. Anti ipa tin- hi-her expen#i t" r e$ &or opera tin- the $ hoo! #"rin- the $ hoo! year 1DD92 DG4 the $ hoo! in rea$e# it$ t"ition &ee$ an# $tarte # o!!e tin- the in rea$e# &ee$ a$ ear!y a$ Apri! 1DD9. The a#'an e# o!!e tion$ were in the mean ti m e #epo$ite# in a !o a! ,an3 where it earn$ inter e$ t. An intern a t ion a! or-ani@a tion #onate # ISP1C4C C C . C C on the $o!itary on#ition that it $ho"!# ,e "$e# to "p-ra#e the $a!arie$ o& the $ hoo! a#mini$tr a t o r$. The $ hoo! a!$o want$ to import $ome omp"t e r$ &or the "$e o& it$ $t"#en t$. No" are now on$"!te# to exp!ain the tax imp!i ation$ o& the a,o'e an# -i'e yo"r a#'i e. What $ha!! yo" $ay% SUGGESTED ANSWER: a. The #!hool # exempt from the payment of real property taxe# on the oneD half port on of t# one he!tare lot wh !h # be n( "#ed a# the #!hool !amp"#. Th # # #o be!a"#e the #ame # a!t"ally$ d re!tly and ex!l"# %ely "#ed for ed"!at onal p"rpo#e#. A(r D :arm# # #"b=e!t to the payment of real property taxe# on the rema n n( oneD half that t lea#e# from A#ean for the rea#on that the #a d port on # "#ed for !ommer! al p"rpo#e# and not a!t"ally$ d re!tly and ex!l"# %ely for ed"!at onal p"rpo#e#. A#ean'# tax exempt on pr % le(e doe# not flow to A(r D :arm# be!a"#e real property taxat on # ba#ed on "#e and not on owner#h p. Wh le t # tr"e that the rental n!ome # de%oted

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to ed"!at onal p"rpo#e#$ t ha# no bear n( n the !a#e a# t # the land that #ho"ld the a!t"ally$ d re!tly and ex!l"# %ely "#ed for ed"!at onal p"rpo#e#. b. The n!ome der %ed from the t" t on fee# # exempt from the n!ome taxe# a# the#e are to be a!t"ally$ d re!tly and ex!l"# %ely "#ed for ed"!at onal p"rpo#e# be n( de%oted to meet the n!rea#ed #!hool operat onal expend t"re#. !. The pa## %e n!ome n the form of ntere#t# on ban& depo# t# may be exempt from n!ome taxe# and the w thhold n( taxe# of -8J f they are refle!ted on the #!hool'# ann"al nformat on ret"rn# and d"ly a"d ted f nan! al #tatement#$ #"pported by a !ert f !at on from the depo# tory ban& a# to the amo"nt of ntere#t n!ome earned from pa## %e n%e#tment# not #"b=e!t to the -8J f nal w thhold n( tax$ a re#ol"t on of the #!hool'# Board of Tr"#tee# on the propo#ed pro=e!t# to be f"nded o"t of the money depo# ted n the ban&$ and a !ert f !at on of a!t"al "t l <at on of #a d ntere#t n!ome for a!t"al$ d re!t and ex!l"# %e "#e for ed"!at onal p"rpo#e#. ): nan!e Department 4rder No. 7F.D .9$ ##"ed No%ember -F$ 7..9 amend n( Department 4rder No. 7/0D 20 a# amended by Department 4rder No. .-D 223. d. Wh le t # tr"e that the USO78$888.88 # to be "t l <ed for adm n #trat on p"rpo#e#$ and "nder Se!. .F)AD /3 of the N,R+$ may be #"b=e!t to tax$ t # to be noted that Rep"bl ! A!t No. 00.2 wh !h amended B.P. Bl(. -/- pro% de# that$ BTaxe# #hall not be d"e on donat on# to ed"!at onal n#t t"t on#.C ,t # to be noted that exempt on# to ed"!at onal n#t t"t on# are not #"b=e!t to the #oD!alled strictissimi *uris #tr !t nterpretat on a(a n#t the taxpayer and l berally n fa%or of the (o%ernment. e. The !omp"ter# !o"ld be mported$ exempt from the payment of !"#tom# d"t e# and %al"eD added tax a# there # #how n( of the r a!t"al$ d re!t and ex!l"# %e "#e for ed"!at onal p"rpo#e#. )/. Why i$ it import a n t to 3now the #i$tin tion$ ,etw e e n a tax an# a #e,t% What are the #i$tin tio n$ ,etw e e n a tax an# a #e,t% SUGGESTED ANSWER: ,t # mportant to &now the d #t n!t on# be!a"#e nonD payment of a tax )ex!ept a poll tax3 !o"ld #"b=e!t a per#on to mpr #onment wh le no per#on !o"ld be mpr #oned for nonD payment of a debt. :"rthermore$ a debt !o"ld be !ompen#ated by another debt$ b"t a debt or another tax !o"ld not be !ompen#ated for a tax n a!!ordan!e w th the l feblood do!tr ne. D #t n!t on# between a tax and a debt: a. BAS,S. Tax # ba#ed on law W>,*E debt # ba#ed on !ontra!t or ="d(ment. b. :A,*URE T4 PA?. :a l"re to pay a tax )ex!ept a poll tax3 may re#"lt n mpr #onment W>,*E there # no mpr #onment for fa l"re to pay a debt. !. 64DE 4: PA?6ENT. Tax # (enerally payable n money W>,*E debt may be payable n money$ property or #er% !e#. d. ASS,GNAB,*,T?. A tax # not a## (nable W>,*E a debt # a## (nable. e. ,NTEREST. A tax doe# not draw ntere#t "nle## del n5"ent W>,*E a debt draw# ntere#t f #t p"lated or delayed. f. AUT>4R,T?. Taxe# are mpo#ed by p"bl ! a"thor ty W>,*E debt !an be mpo#ed by pr %ate nd % d"al#. (. PRES+R,PT,4N. Pre#!r pt %e per od# for tax are determ ned "nder the N,R+ W>,*E debt$ "nder the + % l +ode.

)8. Are there #i$tin tion$ ,etw e e n a tax an# a !i en$e &ee% Why i$ it import a n t to 3now the #i$tin tion$% SUGGESTED ANSWERS: The follow n( are the d #t n!t on# between a tax and a l !en#e fee: a. PURP4SE: A tax # mpo#ed for re%en"e p"rpo#e# W>,*E a l !en#e fee # mpo#ed for re("latory p"rpo#e#. b. BAS,S: A tax # mpo#ed "nder the power of taxat on W>,*E a l !en#e fee # mpo#ed "nder pol !e power. !. A64UNT: There # no l m t a# to the amo"nt of a tax W>,*E the amo"nt of l !en#e fee that !o"ld be !olle!ted # l m ted to the !o#t of the l !en#e and the expen#e# of pol !e #"r%e llan!e and re("lat on. d. T,6E 4: PA?6ENT: Taxe# are normally pa d after the #tart of a b"# ne## W>,*E a l !en#e fee before the !ommen!ement of b"# ne##. e. E::E+T 4: N4NDPA?6ENT: :a l"re to pay a tax doe# not ma&e the b"# ne## lle(al W>,*E fa l"re to pay a l !en#e fee ma&e# the b"# ne## lle(al. f. SURRENDER: Taxe# be n( the l feblood of the #tate$ !annot be #"rrendered ex!ept for lawf"l !on# derat on W>,*E a l !en#e fee may be #"rrendered w th or w tho"t !on# derat on. ,t # mportant to &now the d #t n!t on# be!a"#e the l m tat on# for one may not be appl ed to the other ex!ept n the n#tan!e where re("latory taxe# are mpo#ed th"#$ the power to tax # exer! #ed !o=o ntly w th the pol !e power. :"rthermore$ exempt on from taxe# doe# not n!l"de exempt on from the payment of l !en#e fee# and % !eD %er#a. N4TES AND +466ENTS: Re!all the d #t n!t on# between the power of taxat on and pol !e power w th re#pe!t to: P"rpo#e$ amo"nt$ !ompen#at on$ property ta&en$

12
what # done w th the property ta&en$ relat on to the nonD mpa rment !la"#e. b. The +o"rt of Tax Appeal# ha# ="r #d !t on o%er de! # on# of the +omm ## oner of +"#tom# o%er: 73 +a#e# n%ol% n(: a3 * ab l ty for !"#tom# d"t e#$ fee# or other money !har(e#$ b3 Se <"re#$ detent on or relea#e of property affe!ted$ !3 : ne#$ forfe t"re# and other penalt e# mpo#ed n relat on theretoE -3 4ther matter# ar # n( "nder: a3 the !"#tom# law$ or b3 4ther law or part of law adm n #tered by the B"rea" of +"#tom# The appeal to the +o"rt of Tax Appeal# m"#t be f led w th n /8 day# from re!e pt of the +omm ## oner'# ad%er#e de! # on. ,f there # no de! # on$ the appeal #ho"ld be d #m ##ed for la!& of ="r #d !t on. !. ,n#tan!e# where the +o"rt of Tax Appeal# wo"ld ha%e ="r #d !t on e%en f there # no de! # on yet of the +omm ## oner of ,nternal Re%en"e: 73 Where the +omm ## oner ha# not a!ted on the d #p"ted a##e##ment after a per od of 728 day# from #"bm ## on of !omplete #"pport n( do!"ment#$ the taxpayer ha# a per od of /8 day# from the exp rat on of the 728 day per od w th n wh !h to appeal to the +o"rt of Tax Appeal#. )la#t par.$ Se!. --2 )e3$ N,R+ of 7..03 -3 Where the +omm ## oner ha# not a!ted on an appl !at on for ref"nd or !red t and the two year per od from the t me of payment # abo"t to exp re$ the taxpayer ha# to f le h # appeal w th the +o"rt of Tax Appeal# before the exp rat on of two year# from the t me the tax wa# pa d. d. ,n#tan!e# where the +o"rt of Tax Appeal# wo"ld ha%e ="r #d !t on e%en f there # no de! # on of the +omm ## oner of +"#tom#: 73 De! # on# of the Se!retary of Trade and ,nd"#try or the Se!retary of A(r !"lt"re n ant D d"mp n( and !o"nter%a l n( d"ty !a#e# are appealable to the +o"rt of Tax Appeal# w th n th rty )/83 day# from re!e pt of #"!h de! # on#. -3 ,n !a#e of a"tomat ! re% ew by the Se!retary of : nan!e n #e <"re or forfe t"re !a#e# where the %al"e of the mportat on ex!eed# P9 m ll on or where the de! # on of the +olle!tor of +"#tom# wh !h f"lly or part ally relea#e# the #h pment #e <ed # aff rmed by the +omm ## oner of +"#tom#.

T5E COIRT OF TAX APPEALS AN* TAX REAE*IES

)9. What i$ the Co"rt o& Tax Appea!$% What i$ the nat"r e o& the Co"rt o& Tax Appea!$% Why wa$ it reat e #% SUGGESTED ANSWER: a. The +o"rt of Tax Appeal# # the #pe! al tax !o"rt !reated "nder Rep"bl ! A!t No. 77-9 !ompo#ed of a Pre# d n( I"d(e and Two A##o! ate I"d(e#$ appo nted by the Pre# dent of the Ph l pp ne# from nom nee# of the I"d ! al and Bar +o"n! l. b. ,t # not a mere adm n #trat %e a(en!y or tr b"nal b"t a re("lar !o"rt %e#ted w th ex!l"# %e appellate ="r #d !t on o%er !a#e# ar # n( "nder the Nat onal ,nternal Re%en"e +ode and the Tar ff and +"#tom# +ode. !. The +o"rt of Tax Appeal# wa# !reated: 73 To pre%ent delay n the d #po# t on of tax !a#e# by the then +o"rt# of : r#t ,n#tan!e )now RT+#3$ n % ew of the ba!&lo( of ! % l$ !r m nal$ and !ada#tral !a#e# a!!"m"lat n( n the do!&et# of #"!h !o"rt#E and -3 To ha%e a body w th #pe! al &nowled(e wh !h ord nary I"d(e# of the then +o"rt# of : r#t ,n#tan!e )now RT+#3$ are not l &ely to po##e##$ th"# pro% d n( for an ade5"ate remedy for a #peedy determ nat on of tax !a#e#. )G. What i$ the 6"ri$#i tion o& the Co"rt o& Tax Appea!$% SUGGESTED ANSWER: a. The +o"rt of Tax Appeal# ha# ="r #d !t on o%er de! # on# of the +omm ## oner of ,nternal Re%en"e o%er: 73 +a#e# n%ol% n(: a3 D #p"ted a##e##ment#E b3 Ref"nd of nternal re%en"e taxe#$ fee# or other !har(e#E !3 Penalt e# mpo#ed n relat on thereto. -3 4ther matter# ar # n( "nder: a3 The Nat onal ,nternal Re%en"e +ode$ or b3 4ther law or part of law adm n #tered by the B"rea" of ,nternal Re%en"e. The appeal to the +o"rt of Tax Appeal# m"#t be f led w th n /8 day# from re!e pt of the +omm ## oner'# ad%er#e de! # on. ,f there # no de! # on$ the appeal #ho"ld be d #m ##ed for la!& of ="r #d !t on.

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)D. On!y Commi$$ioner($ &ina! #e i$ion #enyin - the #i$p"t e i$ $",6e t o& appea! . Word# to the effe!t that the matter wo"ld be referred to the +olle!t on Enfor!ement D % # on for the ##"an!e of a warrant of le%y and d #tra nt # not a f nal de! # on appealable to +TA )Sol d +ement +orporat on %#. +o"rt of Tax Appeal#$ et al.$ +ADGR SP No. //971$ :ebr"ary -2$ 7..93. E'en the a t"a! i$$"an e o& a warran t o& #i$train t an# !e'y in ertain a$e$ $ti!! anno t ,e on$i#er e# a &ina! #e i$ion on a #i$p" te # a$$e$$m en t . ;Com mi$$ion er o& Intern a! Re'en" e '. Inion Shippin- Corp.4 1G/ SCRA /.9< N4TES AND +466ENTS: a. A!t# o& EIR Commi$$ioner on$i#ere # a$ #enia! o& prote$t whi h $er'e a$ ,a$i$ &or appea! to the Co"rt o& Tax Appea!$F 73 : l n( by the B,R of a ! % l #" t for !olle!t on of the def ! en!y tax # !on# dered a den al of the re5"e#t for re!on# derat on. )+omm ## oner of ,nternal Re%en"e %. Un on Sh pp n( +orporat on$ 729 S+RA 9F03 -3 An nd !at on to the taxpayer by the +omm ## oner B n !lear and "ne5" %o!al lan("a(eC of h # f nal den al not the ##"an!e of the warrant of d #tra nt and le%y. What # the #"b=e!t of the appeal # the f nal de! # on not the warrant of d #tra nt. +omm ## oner of ,nternal Re%en"e %. Un on Sh pp n( +orporat on$ 729 S+RA 9F03 /3 A B,R demand letter #ent to the taxpayer after h # prote#t of the a##e##ment not !e # !on# dered a# the f nal de! # on of the +omm ## oner on the prote#t. )S"r (ao Ele!tr ! +o.$ ,n!. %. +o"rt of Tax Appeal#$ et al.$ 90 S+RA 9-/3 F3 A letter of the B,R +omm ## oner re terat n( to a taxpayer h# pre% o"# demand to pay an a##e##ment # !on# dered a den al of the re5"e#t for re!on# derat on or prote#t and # appealable to the +o"rt of Tax Appeal#. )+omm ## oner %. Ayala Se!"r t e# +orporat on$ 08 S+RA -8F3 b. Re5" # te# &or 'a!i#ity o& the Commi$$ioner($ #e i$ion on the #i$p"te . The de! # on of the +omm ## oner or h # d"ly a"thor <ed repre#entat %e #hall )a3 #tate the fa!t#$ the appl !able law$ r"le# and re("lat on#$ or ="r #pr"den!e on wh !h #"!h de! # on # ba#ed$ otherw #e$ the de! # on #hall be %o d$ n wh !h !a#e the #ame #hall not be !on# dered a de! # on on the d #p"ted a##e##mentE and )b3 that the #ame # h # f nal de! # on. )Se!. /.7.1$ Re%. Re(#. 7-D ..3 +C. The EIR Commi$$ioner #i$ o'er e# that a taxpa y e r 3eep$ no re or#$ or that whate ' e r re or#$ 3ept i$ ina#e0" a t e 4 or that there i$ $tron- $"$pi ion that the taxpa y e r ha$ re ei'e# in ome &rom "n#i$ !o$e# $o"r e$4 or that no ret"rn wa$ &i!e# or the ret"rn &i!e# wa$ &a!$e an# &ra"#"!en t . What metho#$ ha'e ,een #e'e!ope # ,y the EIR in or#er to #eter m in e the in ome o& the taxpay e r whi h $ho"!# ,e $",6e t to tax% Exp!ain ea h metho# ,rie&!y ,"t ompre h e n$i' e!y. SUGGESTED ANSWER: The follow n( are the (eneral method# de%eloped by the B"rea" of ,nternal Re%en"e for re!on#tr"!t n( a taxpayer'# n!ome: a. Per!enta(e method . The !omp"ted amo"nt of re%en"e# ba#ed on the per!enta(e !omp"tat on # !ompared to the amo"nt of re%en"e# refle!ted on the ret"rn. The per!enta(e# "#ed may be obta ned from the taxpayer$ nd"#try p"bl !at on$ pr or year'# a"d t re#"lt#$ or th rd part e#. The !ompar #on w ll pro% de an nd !at on on the po## b l ty of re%en"e be n( "nder#tated. Amon( the # (n f !ant rat o# and trend# to be analy<ed are the per!enta(e mar&D "p$ (ro## prof t# rat o or (ro## mar( n per!enta(e$ prof t mar( n$ total a##et# t"rno%er$ and n%entory t"rno%er. b. Net worth method . A method of re!on#tr"!t n( n!ome wh !h # ba#ed on the theory that f the taxpayer'# net worth ha# n!rea#ed n a ( %en year n an amo"nt lar(er than h # reported n!ome$ he ha# "nder#tated h # n!ome for that year. The net worth on a f xed #tart n( date # !ompared w th the net worth on a f xed end n( date. Any n!rea#e n net worth # pre#"med to be n!ome not de!lared for tax p"rpo#e#. The d ff !"lty of e#tabl #h n( the open n( net worth of a tax payer ha# led to the B+ohan R"leC wh !h mean# the "#e e#t mate# or approx mat on# of the amo"nt of !a#h and other a##ert# where the taxpayer la!&# ade5"ate re!ord#. !. Ban& depo# t method . The ban& re!ord# of the taxpayer are analy<ed and the B,R e#t mate# n!ome on the ba# # of the total ban& depo# t# after el m nat n( nonD n!ome tem#. Th # method #tand# on the prem #e that depo# t# repre#ent taxable n!ome "nle## otherw #e expla ned a# be n( nonD taxable tem#. Th # method may be "#ed only where the B,R ha# been le(ally allowed a!!e## to the taxpayer'# ban& re!ord#. d. +a#h expend t"re method . Th # method a##"me# that the ex!e## of a taxpayer'# expend t"re# d"r n( the tax per od o%er h # reported n!ome for that per od # taxable to the extent not d #pro%ed otherw #e. e. Un t and %al"e method. The determ nat on or %er f !at on of (ro## re!e pt#

14
may be !omp"ted by apply n( pr !e and prof t f ("re# to the &nown a#!erta nable 5"al ty of b"# ne## of the taxpayer. :or example$ n order to determ ne the (ro## re!e pt# of a p <<a parlor$ m"lt ply the po"nd# of flo"r "#ed by the n"mber of p <<a# per po"nd wh !h n t"rn wo"ld then be m"lt pl ed by the a%era(e pr !e per p <<a. f. Th rd party nformat on or a!!e## to re!ord# method . The B,R may re5" re th rd part e#$ p"bl ! or pr %ate to #"pply nformat on to the B,R. (. S"r%e llan!e and a##e##ment method . )+hapter @,,,. ,nd re!t Approa!h to ,n%e#t (at on$ >andboo& on A"d t Pro!ed"re# and Te!hn 5"e# M ;ol"me ,$ pp. 12D 0F3 +1. The EIR #i$ o'er e# that E!'ie4 a ,"$ine$$w o m a n 4 #i# not &i!e her in ome tax ret" rn$ &or the taxa,! e year$ 1DDG an# 1DDD. A pre2 a$$e$$me n t noti e &or ,a 3 taxe$ wa$ then i$$"e# in the amo"n t o& P) mi!!ion whi h "!tim a t e ! y mat" r e # into an a$$e$$me n t noti e. The EIR arri'e# at the a##ition a! tax #"e a&ter "$in- the =net worth > metho # an# a e$$ to E!'ie($ p"r ha$e$ &rom her $"pp!ier$ o& raw mate ri a!$. She now #i$p" te$ the a$$e$$me n t &or !a 3 o& !e-a! ,a$i$ ,e a"$e o& the "$e o& the =net worth > whi h i$ not a"thori@e# "n#er the Tax Co#e4 an# &or 'io!atio n o& her on$ti t" ti o n a! ri-ht$ when her p"r h a$e re or#$ were a e$$e# &rom her $"pp!ier$. R"!e on her #i$p" te. SUGGESTED ANSWER: El% e'# !ontent on# are bereft of mer t. S n!e El% e d d not f le her n!ome tax ret"rn#$ wh !h report# are re5" red by law a# a ba# # for a##e##ment$ then the B,R +omm ## oner #hall a##e## the tax on the be#t e% den!e a%a lable. The B,R +omm ## oner # a"thor <ed to #e!"re re!ord# from p"bl ! or pr %ate ent t e# to a## #t h m n the a##e##ment. :"rrthermore$ the B,R may "#e #"!h method a# n the op n on of the +omm ## oner !learly refle!t# the n!ome. N4TES AND +466ENTS: a. General R"le. BThe taxable n!ome #hall be !omp"ted "pon the ba# # of the taxpayer'# ann"al a!!o"nt n( per od )f #!al year or !alendar year$ a# the !a#e may be3 n a!!ordan!e w th the method of a!!o"nt n( re("larly employed n &eep n( the boo&# of #"!h taxpayerE b"t f no #"!h method of a!!o"nt n( ha# been #o employed$ or f the method employed doe# not !learly refle!t the n!ome$ the !omp"tat on #hall be n a!!ordan!e w th #"!h method a# n the op n on of the +omm ## oner !learly refle!t# the n!ome.C )Se!. F/$ N,R+ of 7..03 b. :a l"re to S"bm t Re5" red Ret"rn#$ Statement#$ Report# or 4ther Do!"ment#. B When a report re5" red by law a# a ba# # for the a##e##ment of any nat onal nternal re%en"e tax #hall not be forth!om n( w th n the t me f xed by law# or r"le# and re("lat on# or when there # rea#on to bel e%e that any #"!h report # fal#e$ n!omplete or erroneo"#$ the +omm ## oner #hall a##e## the proper tax on the be#t e% den!e obta nable. ,n !a#e a per#on fa l# to f le a re5" red ret"rn or other do!"ment at the t me pre#!r bed by law$ or w llf"lly or otherw #e f le# a fal#e or fra"d"lent ret"rn or other do!"ment$ the +omm ## oner #hall ma&e or amend the ret"rn from h # own &nowled(e and from #"!h nformat on a# he !an obta n thro"(h te#t mony or otherw #e$ wh !h #hall be prima facie !orre!t and #"ff ! ent for all le(al p"rpo#e#.C PSe!. 1 )B3$ N,R+ of 7..0Q !. Power of the +omm ## oner to 4bta n ,nformat on . B,n a#!erta n n( the !orre!tne## of any ret"rn$ or n ma& n( a ret"rn when none ha# been made$ or n determ n n( the l ab l ty of a per#on for any nternal re%en"e tax$ or n !olle!t n( any #"!h l ab l ty$ or n e%al"at n( tax !ompl an!e$ the +omm ## oner # a"thor <ed: xxx To obta n on a re("lar ba# # from any per#on other than the per#on who#e nternal re%en"e tax l ab l ty # #"b=e!t to a"d t or n%e#t (at on$ or from any off !e or off !er of the nat onal and lo!al (o%ernment#$ (o%ernment a(en! e# and n#tr"mental t e# n!l"d n( the Ban(&o Sentral n( P l p na# and (o%ernmentD owned or M!ontrolled !orporat on#$ any nformat on #"!h a#$ b"t not l m ted to$ !o#t# and %ol"me of prod"!t on$ re!e pt# or #ale# and (ro## n!ome# of taxpayer#$ and the name# $ addre##e#$ and f nan! al #tatement# of !orporat on#$ m"t"al f"nd !ompan e#$ n#"ran!e !ompan e#$ re( onal operat n( head5"arter# or m"lt nat onal !ompan e#$ =o nt a!!o"nt#$ a##o! at on#$ =o nt %ent"re# or !on#ort a and re( #tered partner#h p#$ and the r member#E xxxC PSe!. 9 )B3$ N,R+ of 7..03 +). What i$ a pre2 a$$e$$me n t noti e an# what i$ it$ import a n e% SUGGESTED ANSWER: A preD a##e##ment not !e # a a letter #ent by the B"rea" of ,nternal Re%en"e to a taxpayer a#& n( h m to expla n w th n a per od of f fteen )793 day# from re!e pt why he #ho"ld not be the #"b=e!t of an a##e##ment not !e. A# a (eneral r"le$ the B,R !o"ld not ##"e an a##e##ment not !e w tho"t f r#t ##" n( a preD a##e##ment not !e be!a"#e t # part of the d"e pro!e## r (ht# of a taxpayer to be ( %en not !e n the form of a preD a##e##ment not !e$ and for h m to expla n why he #ho"ld be the #"b=e!t of an a##e##ment not !e. N4TES AND +466ENTS: In$tan e$ where a pre2 a$$e$$m en t noti e i$ not re0"ire# ,e&ore a noti e o& a$$e$$m en t i$ $ent to the taxpay e rF

15
a. When the f nd n( for any def ! en!y tax # the re#"lt of mathemat !al error n the !omp"tat on of the tax a# appear n( on the fa!e of the ret"rnE or b. When a d #!repan!y ha# been determ ned between the tax w thheld and the amo"nt a!t"ally rem tted by the w thhold n( a(entE or !. When a taxpayer opted to !la m a ref"nd or tax !red t of ex!e## !red table w thhold n( tax for a taxable per od wa# determ ned to ha%e !arr ed o%er and a"tomat !ally appl ed the #ame amo"nt !la med a(a n#t the e#t mated tax l ab l t e# for the taxable 5"arter or 5"arter# of the #"!!eed n( table yearE or d. When the ex!e## tax d"e on ex! #able art !le# ha# not been pa dE or e. When an art !le lo!ally p"r!ha#ed or mported by an exempt per#on$ #"!h a#$ b"t not l m ted to %eh !le#$ !ap tal e5" pment$ ma!h ner e# and #pare part#$ ha# been #old$ trade or tran#ferred to nonD exempt per#on#. )Se!. --2$ N,R+ of 7..03 ++. On the ,a$i$ o& a Letter o& A"thori t y4 &or the exami n a t i o n o& the ,oo3$ o& a o"nt$ an# other a o"n ti n - re or#$ o& Pa$ or Rea!ty an# *e'e!op m e n t Corporation ;PR*C<4 EIR exami n e r$ re om m e n # e # the i$$"an e o& an a$$e$$me n t noti e in the amo"n t$ o& P9 mi!!ion an# P + mi!!ion &or the year$ 1DG8 an# 1DG9 re$pe ti' e! y. On Aar h 14 1DD/4 the EIR &i!e# a rimin a! omp! ai n t with the *epar t m e n t o& B"$ti e a-ain$t PR*C4 it$ Pre$i# en t an# Trea$"r e r a!!e-in - e'a$ion o& taxe$ in the tota! amo" n t o& P1C mi!!ion. Thi$ wa$ $"pport e # ,y an a&&i#a'i t 2 report o& the exami n e r$ #etai!in- the omp" t a ti o n o& the a!!e- e# tax e'a$ion. PR*C4 it$ Pre$i#en t an# Trea$" re r &i!e# an Ir-en t Re0"e$t &or Re on$i# era ti o n KRein ' e$ ti - a ti o n #i$p"tinthe tax a$$e$$m en t an# tax !ia,i!ity. On Aar h )+4 1DD/4 PR*C an# it$ Pre$i# en t an# Trea$"r e r re ei'e# a $",poen a in onne tion with the rimin a! omp!ain t &i!e# ,y the EIR a-ain$t them . In a !ette r #ate# Aay 194 1DD/4 the Commi$$ioner #enie# the "r-en t re0"e$t &or re on$i# er a t i o n K r ei n ' e$ ti - a ti o n &i!e# ,y PR*C an# it$ o&&i er$ on the -ro"n# that &orm a! a$$e$$m en t ha$ a$ yet not ,een i$$"e# ,y the Commi$$ion er. *o yo" a-ree with the #e i$ion o& the Commi$$ioner% Exp!ain ,rie&!y. SUGGESTED ANSWER: ?e#$ the aff da% tD report of the exam ner# doe# not !on#t t"te an a##e##ment that may be the #"b=e!t of a mot on for re!on# derat onRre n%e#t (at on. The aff da% tD report merely !onta ned a !omp"tat on of the l ab l t e#. ,t d d not #tate a demand or a per od for payment. ,t wa# not addre##ed to the taxpayer# b"t to the Department of I"#t !e. That the aff da% tD report !onta ned deta l# of the tax l ab l t e# doe# not ipso facto ma&e the #ame an a##e##ment. ,t# p"rpo#e wa# merely to #"pport the !r m nal !ompla nt for a##e##ment. +learly$ t wa# not meant to be a not !e of the tax d"e and a demand for the payment thereof. The fa!t that the !ompla nt t#elf wa# #pe! f !ally d re!ted and #ent to the Department of I"#t !e and not to the taxpayer #how# that the ntent of the B,R wa# to f le a !r m nal !ompla nt for tax e%a# on$ not to ##"e an a##e##ment. Altho"(h the re%en"e off !er# re!ommended the ##"an!e of an a##e##ment$ the !omm ## oner n#tead opted to f le a !r m nal !ompla nt. What wa# re!e %ed by the taxpayer wa# not !e of the f l n( of the !r m nal !a#e not a not !e that the B,R had made an a##e##ment. )+omm ## oner of ,nternal Re%en"e %. Pa#!or Realty and De%elopment +orporat on$ et al.$ G.R. No. 7-2/79$ prom. I"ne -.$ 7...3 N4TES AND +466ENTS: The N,R+ def ne# the #pe! f ! f"n!t on# and effe!t# of an a##e##ment. To !on# der the aff da% tD report atta!hed to the !r m nal !ompla nt a# a proper a##e##ment # to #"b%ert the nat"re of an a##e##ment and to #et a bad pre!edent that w ll pre="d !e nno!ent taxpayer#. Wh le an a##e##ment nform# the taxpayer that he or #he ha# tax l ab l t e#$ not all do!"ment# !om n( from the B,R !onta n n( a !omp"tat on of the tax l ab l ty !an be deemed a##e##ment#. To #tart w th$ an a##e##ment m"#t be #ent to and re!e %ed by a taxpayer and m"#t demand the payment of the taxe# there n w th n a #pe! f ! per od. Th"#$ the N,R+ mpo#e# a -9J penalty$ n add t on to the tax d"e$ n !a#e the taxpayer fa l# to pay the def ! en!y tax w th n the t me pre#!r bed for t# payment n the not !e of a##e##ment. * &ew #e$ an ntere#t of -8J per ann"m$ or #"!h h (her rate a# may be pre#!r bed by r"le# and re("lat on#$ # to be !olle!ted from the date pre#!r bed for t# payment "nt l f"ll payment. The ##"an!e of an a##e##ment # % tal n determ n n( the per od of l m tat on re(ard n( t# proper ##"an!e and the per od w th n wh !h to prote#t t. Ne!e##ar ly$ the taxpayer m"#t be !erta n that a #pe! f ! do!"ment !on#t t"te# an a##e##ment. 4therw #e$ !onf"# on wo"ld ar #e re(ard n( the per od w th n wh !h to ma&e an a##e##ment or to prote#t the #ameE or whether ntere#t and penalty may a!!r"e thereon. ,t #ho"ld al#o be #tre##ed that the #a d do!"ment # a not !e d"ly #ent to the taxpayer. ,ndeed$ an a##e##ment # deemed made only when the B,R relea#e#$ ma l# or #end# #"!h not !e to the taxpayer. +omm ## oner of ,nternal Re%en"e %. Pa#!or Realty and De%elopment +orporat on$ et al.$ G.R. No. 7-2/79$ prom. I"ne -.$ 7...3

16
Pa#!or ha# al#o def ned a##e##ment a# laying a tax . N4TES AND +466ENTS: The word a##e##ment when "#ed n !onne!t on w th taxat on$ may ha%e more than one mean n(. The "lt mate p"rpo#e of an a##e##ment to #"!h a !onne!t on # to a#!erta n the amo"nt that ea!h taxpayer # to pay. 6ore !ommonly the word Ba##e##ment C mean# the off ! al %al"at on of a taxpayer'# property for p"rpo#e of taxat on. The abo%e def n t on of a##e##ment f nd# appl !at on "nder nternal re%en"e taxat on$ tar ff and !"#tom# taxat on a# well a# lo!al (o%ernment taxat on. :or real property taxat on$ there may be a #pe! al mean n( to the b"rden# that are mpo#ed "pon real propert e# that ha%e been benef ted by a p"bl ! wor&# expend t"re of a lo!al (o%ernment. ,t # #omet me# !alled a #pe! al a##e##ment or a #pe! al le%y. The pre$ rip ti 'e perio#$ &or ma3ina$$e$$me n t$ are three )/3 year# from the la#t day w th n wh !h to f le a ret"rn or when the ret"rn wa# a!t"ally f led and ten year# from d #!o%ery of the fa l"re to f le the tax ret"rn or d #!o%ery of fal# ty or fra"d n the ret"rn. +.. What a$$e$$me n t >% i$ mean t ,y =6eopar #y a"thori@e# repre$en t a t i ' e $i-ne# three ;+< $epar a t e wai'er$ o& the =Stat " t e o& Limita tion$ "n#er the NIRC.> The wai'er$ were not $i-ne# ,y the EIR Commi$$ione r or hi$ a-ent$. In 1DDD4 the EIR i$$"e# !ett er$ o& #eman #4 a ompa ni e# ,y a$$e$$m en t noti e$ a$3in- the orpora tion to pay the #e&i ien y intern a! re'en" e taxe$ &or it$ in ome &or the year 1DD.. =X> #i$p"te # the a$$e$$me n t an# re0"e$t e # a rein'e$ti- a t ion. The EIR Commi$$ioner #enie# the prote$t. =X> appea!e # to the Co"rt o& Tax Appea!$4 on the -ro"n# o& pre$ ription. *e i#e. SUGGESTED ANSWER: The B,R'# a"thor ty to a##e## already pre#!r bed. The three )/3 wa %er# d d not #"#pend the r"nn n( of the pre#!r pt %e per od. The only a(reement that !o"ld #"#pend the r"nn n( of the pre#!r pt %e per od for the !olle!t on of the tax n 5"e#t on # a wr tten a(reement between B@C !orporat on an the B,R entered nto before the exp rat on of the three )/3 year pre#!r pt %e per od$ extend n( #a d per od. S n!e$ what # re5" red # the # (nat"re# of both the +omm ## oner and the taxpayer$ a "n lateral wa %er on the part of the taxpayer doe# not #"#pend the pre#!r pt %e per od. )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ G.R. No. 77907-$ :ebr"ary -9$ 7... )+arnat on !a#e3 N4TES AND +466ENTS: Gro"n#$ &or $"$pen#in$tat"t e o& !imita tion$ or pre$ ripti'e perio#$ &or a$$e$$me n t 4 ,e-innin- or #i$traint or !e'y or pro ee#in- in o"rt. The hold n( n +omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ G.R. No. 77907-$ :ebr"ary -9$ 7... )+arnat on !a#e3 that the wa %er of the per od for a##e##ment m"#t be n wr t n( and ha%e the wr tten !on#ent of the B,R +omm ## oner # #t ll do!tr nal be!a"#e of the pro% # on# of Se!. --/$ N,R+ of 7..0 wh !h pro% de#: a. When the +omm ## oner # proh b ted from ma& n( the a##e##ment$ or be( nn n( d #tra nt$ or le%y or pro!eed n( n !o"rt and for # xty )183 day# thereafterE b. When the taxpayer re5"e#t# for and # (ranted a re n%e#t (at on by the !omm ## onerE !. When the !omm ## oner !o"ld not be lo!ated n the addre## ( %en by h m n the ret"rn f led "pon wh !h the tax # be n( a##e##ed or !olle!tedE d. When the warrant of d #tra nt and le%y # d"ly #er%ed "pon the taxpayer$ h # a"thor <ed repre#entat %e$ or a member of h # ho"#ehold w th #"ff ! ent d #!ret on$ and no property !o"ld be lo!atedE and e. When the taxpayer # o"t of the Ph l pp ne#.

SUGGESTED ANSWER: A del n5"en!y tax a##e##ment wh !h wa# a##e##ed w tho"t the benef t of !omplete or part al a"d t by an a"thor <ed re%en"e off !er$ who ha# rea#on to bel e%e that the a##e##ment and !olle!t on of a def ! en!y tax w ll be =eopard <ed by delay be!a"#e of the taxpayer'# fa l"re to !omply w th the a"d t and n%e#t (at on re5" rement# to pre#ent h # boo&# of a!!o"nt# andRor pert nent re!ord#$ or to #"b#tant ate all or any of the ded"!t on#$ exempt on#$ or !red t# !la med n h # ret"rn. PSe!. /.7 )a3$ Re%. Re(#. No. 1D-8883 N4TES AND +466ENTS: a. Ieopardy a$$e$$m en t # an nd !at on of the do"btf"l %al d ty of the a##e##ment$ hen!e t may be #"b=e!t to a !omprom #e. PSe!. /.7 )a3$ Re%. RE(#. No. 1D-888Q b. Re0"ire m e n t $ &or 'a!i#i ty o& &orma! !ette r o& #ema n # an# a$$e$$m en t noti e . The letter of demand !all n( for payment of the taxpayer'# def ! en!y tax or taxe# #hall #tate the fa!t#$ the law$ r"le# and re("lat on#$ or ="r #pr"den!e on wh !h the a##e##ment # ba#ed$ otherw #e$ the formal letter of demand and a##e##ment not !e #hall be %o d. )Se!. /.7.F$ Re%. Re(#. No. 7-D ..3 +/. =X> Corpora tio n &i!e# it$ in ome tax ret" rn$ in Ban"ary4 1DD/ &or it$ in ome &or the year 1DD.. In O to,er4 1DD94 Aar h4 1DDG an# Aay4 1DDG4 =X> thro"- h it($

17
*aw on pre#!r pt on #ho"ld be l berally !on#tr"ed n fa%or of the taxpayer . :or the p"rpo#e of #afe("ard n( taxpayer# from an "nrea#onable exam nat on$ n%e#t (at on or a##e##ment$ o"r tax law pro% de# a #tat"te of l m tat on on the !olle!t on of taxe#. Th"#$ the law on pre#!r pt on$ be n( a remed al mea#"re$ #ho"ld be l berally !on#tr"ed n order to afford #"!h prote!t on. A# a !orollary$ the ex!ept on# to the law on pre#!r pt on #ho"ld perfor!e be #tr !tly !on#tr"ed. )+omm ## oner of ,nternal Re%en"e %. B.:. Goodr !h Ph l#.$ ,n!.$ et al.$ G.R. No. 78F707$ :ebr"ary -F$ 7...3 Re0"ire m e n t $ &or 'a!i#ity o& taxp a y e r ($ prote$t . The taxpayer #hall #tate the fa!t#$ the appl !able law$ r"le# and re("lat on#$ or ="r #pr"den!e on wh !h h # prote#t # ba#ed$ otherw #e$ h # prote#t #hall be !on# dered %o d and w tho"t for!e and effe!t. ,f therer are #e%eral ##"e# n%ol%ed n the d #p"ted a##e##ment and the taxpayer fa l# to #tate the fa!t#$ the appl !able law$ r"le# and re("lat on#$ or ="r #pr"den!e n #"pport of h # prote#t a(a n#t #ome of the #e%eral ##"e# on wh !h the a##e##ment # ba#ed$ the #ame #hall be !on# dered "nd #p"ted ##"e or ##"e#$ n wh !h !a#e$ the taxpayer #hall be re5" red to pay the !orre#pond n( def ! en!y tax or taxe# attr b"table thereto. )Se!. /.7.9$ Re%. Re(#. 7-D ..3 +8. E.F. Goo#ri h a'ai!in- o& the Parity Amen# m e n t to the Con$tit" tio n p"r ha$e# 'ario"$ par e!$ o& !an#. When the Parity Amen# m e n t expire# in 1D9.4 it $o!# the par e!$ &or P/CC4 C C C . C C paya,! e in in$ta!! m e n t$ an# !ea$e# ,a 3 the proper ti e$ &or )/ year$. It &i!e# it$ 1D9. ret"rn reportin - the $a!e. A EIR a$$e$$me n t on it$ in ome &or 1D9. wa$ pai#. In 1DGC it wa$ a$$e$$e# #onor($ tax ,e a"$e the EIR on$i#ere # the on$i#er a t i o n &or the $a!e in$"&&i ien t4 an# the #i&&ere n e ,etw e e n the &air mar3 e t 'a!"e an# the a t"a! p"r ha$e pri e4 a taxa,! e #onation . S",$e0" en t!y 4 on Apri! D4 1DG1 the EIR in rea$e# the a$$e$$me n t . Wa$ there a =&a!$e an# &ra"#"!en t ret" rn > within the ontex t o& the Tax Co#e whi h wo"!# a!!ow a$$e$$m en t ,eyon# the &i'e year Q"n# er the pre$en t Tax Co#e4 three ;+< year$ % SUGGESTED ANSWER: No$ the fa!t that B.:. Goodr !h #old the property for a pr !e lower than t# de!lared fa r mar&et %al"e d d not !on#t t"te a Bfal#e ret"rn C wh !h !onta n# wron( nformat on d"e to m #ta&e$ !arele##ne## or (noran!e. ,t # po## ble that real property may be #old for le## than ade5"ate !on# derat on for a bona f de b"# ne## p"rpo#e$ n #"!h e%ent$ the #ale rema n# an Barm# len(th C tran#a!t on. ,n the !a#e at bar$ B.:. Goodr !h wa# try n( to m n m <e t# lo## be!a"#e of the exp rat on of the Par ty Amendment. Be# de#$ the -9 year lea#e wa# another !on# derat on. B.:. Goodr !h de!lared the #ale n t# 7.0F ret"rn #"bm tted to the B,R W th n the pre#!r pt %e per odE the B,R !o"ld ha%e made the a##e##ment be!a"#e the de!lared fa r mar&et %al"e of #a d property wa# of p"bl ! re!ord. That part of the #ale tran#a!t on wa# a!t"ally a donat on d d not era#e the fa!t that the n!ome had already been reported . B.:. Goodr !h already reported t# n!ome by f l n( an n!ome tax ret"rn. E%en tho"(h a donor'# tax # d fferent from !ap tal (a n# tax$ a tax on the (a n from the #ale of the taxpayer'# property form n( part of !ap tal a##et#$ the tax ret"rn f led by B.:. Goodr !h to report t# n!ome for the year 7.0F wa# #"ff ! ent !ompl an!e w th the le(al re5" rement to f le a ret"rn. The B,R'# o%er# (ht on the ##"e of pre#!r pt on !annot pre="d !e the taxpayer. REAS4N: The pre#!r pt %e per od wa# pre! #ely ntended to ( %e the taxpayer# pea!e of m nd. )+omm ## oner of ,nternal Re%en"e %. B.:. Goodr !h Ph l#.$ ,n!.$ et al.$ G.R. No. 78F707$ :ebr"ary -F$ 7...3 +9 . A$$e$$men t an# re&"n# ,e on$o!i#at e # . a$e$ o"!# not

REAS4N: * feblood do!tr ne. ,f there a pend n( a##e##ment$ ref"nd #ho"ld not be (ranted. +G. .1 non2 !i&e in$"ran e orpora tion$ or-ani@e# an# exi$tin- "n#er the !aw$ o& the Phi!ippine$ or-ani@e# a poo! o& ma hiner y in$"rer$ &or the p"rpo$e o& enterin- into a J"ota Share Rein$"ran e Trea ty an# a S"rp!"$ Rein$"ran e Treat y with the A"n hen e r R" 3'er$i her "n -$2 Ge$$e!$ ha& t ;A"ni h &or ,re'ity <4 a non2 re$i#en t &orei-n in$"ran e orpora tion. On Apri! 1.4 1D98 the poo! $",mit t e # a &inan ia! $tate m e n t an# &i!e# an =In&or m a t i on Ret"rn o& Or-ani@a tion Exemp t &rom In ome Tax> &or the year en#in- 1D9/4 on the ,a$i$ o& whi h the poo! wa$ a$$e$$e# #e&i ien y orpora t e in ome tax o& P1.G mi!!ion an# withho!#in- tax in the amo"nt o& P1.9 mi!!ion an# PGD tho"$an# an# to the poo! on #i'i#en#$ pai# to A"ni h an# the poo! mem , e r$ re$pe ti' e!y. The poo! rai$e$ the &o!!owin- i$$"e$ why they $ho"!# not ,e $",6e t to the #e&i ien y taxe$F 1. They ha'e not &orme # an "nre-i$t e r e # partne r$hip to ,e trea t e # a$ a orpora tion &or tax p"rpo$e$1 ). There wo"!# ,e #o",!e taxa tion i& they wo"!# ,e ma#e to pay the #e&i ien y taxe$1 an# +. The ri-ht o& the -o'ern m e n t to o!!e t ha$ a!rea#y pre$ ri,e#. R"!e on the i$$"e$ rai$e# #i$ "$$in- ea h one o& the m.

18
SUGGESTED ANSWERS: 7. They ha%e formed an a##o! at on wh !h #ho"ld be taxable l &e a !orporat on. The Tax +ode ha# n!l"ded "nder the term B!orporat on C partner#h p#$ no matter how !reated or or(an <ed$ =o ntD #to!& !ompan e#$ =o nt a!!o"nt# ) cuentas en participacion 3$ a##o! at on#$ or n#"ran!e !ompan e#. PSe!. -F now Se!. -F )B3 of the N,R+ of 7..0Q. ,n E%an(el #ta %. +olle!tor$ 78- Ph l. 7F8$ the S"preme +o"rt already held ! t n( 6erten# that the term partner#h p n!l"de# a #ynd !ate$ (ro"p$ pool$ =o nt %ent"re or other "n n!orporated or(an <at on$ thro"(h or by mean# of wh !h any b"# ne##$ f nan! al operat on$ or %ent"re # !arr ed on. There # no 5"e#t on that the F7 nonD l fe !orporat on# entered nto a Pool A(reement or an a##o! at on that wo"ld handle all the n#"ran!e b"# ne##e# !o%ered "nder the r 5"otaD #hare re n#"ran!e treaty and #"rpl"# re n#"ran!e treaty w th 6"n !h. Th # "nm #ta&ably nd !ate# a partner#h p or an a##o! at on wh !h # !on# dered "nder the Tax +ode a# a partner#h p or a##o! at on treated l &e a !orporat on. -. There # no do"ble taxat on wh !h mean# tax n( the #ame property tw !e when t #ho"ld be taxed only on!e. The Pool # a taxable ent ty #eparate and d #t n!t from the nd % d"al !orporate ent t e# of the Pool. /. The pre#!r pt %e per od wa# not #"#pended be!a"#e t may be #"#pended only B f the taxpayer nform# the +omm ## oner of ,nternal Re%en"e of any !han(e n the addre##.C The fa!t that the Pool'# nformat on ret"rn f led n 7.28 nd !ated there n t# Bpre#ent addre##C # not #"ff ! ent !ompl an!e w th the le(al re5" rement. N4TES AND +466ENTS: The Bar exam nat on 5"e#t on may be w th re#pe!t to the n!ome of an e#tate that ha# not been part t oned or to a !a#e where there # !oDowner#h p. Certain ,"$ine$$ or-ani@a ti o n$ #o not &a!! "n#er the ate-o ry o& = orpo ra t io n$ > "n#er the Tax Co#e4 an# there &o r e not $",6e t to tax a$ orpora tion$ . They n!l"de: 7. General profe## onal partner#h p#E -. Io nt %ent"re or !on#ort "m formed for the p"rpo#e of "nderta& n( !on#tr"!t on pro=e!t# en(a( n( n petrole"m$ !oal$ (eothermal$ and other ener(y operat on#$ p"r#"ant to an operat on or !on#ort "m a(reement "nder a #er% !e !ontra!t w th the Go%ernment. P7 #t #enten!e$ Se!. -- )B3$ B,R+ of 7..0Q +D. What i$ a payme n t or#er% SUGGESTED ANSWER: A payment order !onta n# the part !"lar & nd of tax to be pa d and the !orre#pond n( TN+ # ##"ed to a taxpayer to be pre#ented by h m to the ban& when he pay# h # taxe#. )E%an(el #ta %. People of the Ph l pp ne#$ et al.$ G.R. No#. 7827/9D /1$ prom. September /8$ 7...3 .C. A-"$tin #ie# in *e e m, e r 4 1DDD !ea'into hi$ two $on$4 Fernan#o an# Bo$e4 an apart m e n t ,"i!#in-. A&ter the $ett!e m e n t o& A-"$tin($ e$tat e 4 hi$ two $on$ #e i#e# not to partition the apar t m e n t ,"i!#in- an# 6"$t #i'i#e# the renta!$ amon- them$e!'e$ &or the year )CCC. a. Wa$ a partn e r$hip &orme # whi h i$ $",6e t to orpora t e in ome taxe$ &or the year )CCC% Rea$on o"t yo"r an$wer. ,. I&4 in$tea# o& #i'i#in- the renta!$ in )CCC4 the ,rothe r$ in'e$te # the $ame in the p"r ha$e o& a ho"$e to ,e rente # o"t. 5ow $ha!! the in ome &rom the renta!$ o& the ho"$e ,e trea t e # &or tax p"rpo$e$% Exp!ain ,rie&!y. Wo"!# yo"r an$wer ,e #i&&ere n t i& the ho"$e wa$ not p"r ha$e# &or the p"rpo$e o& rentin- o"t the $ame ,"t wa$ !ater $o!# % Exp!ain ,rie&!y. SUGGESTED ANSWERS: a. No. +oDhe r# who own nher ted propert e# wh !h prod"!e n!ome #ho"ld not a"tomat !ally be !on# dered a# partner# of an "nre( #tered !orporat on #"b=e!t to n!ome tax for the follow n( rea#on#: 7. The #har n( of (ro## ret"rn# doe# not of t#elf e#tabl #h a partner#h p$ whether or not the per#on# #har n( them ha%e a =o nt or !ommon r (ht or ntere#t n any property from wh !h the ret"rn# are der %ed. There m"#t be an "nm #ta&able ntent on to form a partner#h p or =o nt %ent"re. )4b llo#$ Ir. %. +omm ## oner of ,nternal Re%en"e$ 7/. S+RA F/13 -. There # no !ontr b"t on or n%e#tment of add t onal !ap tal to n!rea#e or expand the nher ted propert e#$ merely !ont n" n( the ded !at on of the property to the "#e to wh !h t had been p"t by the r forebear#. ) Ibid. 3 /. Per#on# who !ontr b"te property or f"nd# to a !ommon enterpr #e and a(ree to #hare the (ro## ret"rn# of that enterpr #e n proport on to the r !ontr b"t on$ b"t who #e%erally reta n the t tle to the r re#pe!t %e !ontr b"t on$ are not thereby rendered partner#. They ha%e no !ommon #to!& !ap tal$ and no !omm"n ty of ntere#t a# pr n! pal propr etor# n the b"# ne## t#elf from wh !h the pro!eed# were der %ed. )Element# of the *aw of Partner#h p by :loyd R. 6e!hem$ - nd Ed.$ Se!. 2/$ p. 0F ! ted n Pa#!"al %. +omm ## oner of ,nternal Re%en"e$ 711 S+RA 9183

19
F. ,n order to !on#t t"te a partner#h p inter sese there m"#t be: )a3 an ntent to form the #ameE )b3 (enerally part ! pat n( n both prof t# and lo##e#E )!3 and #"!h a !omm"n ty of ntere#t$ a# far a# th rd per#on# are !on!erned a# enable# ea!h party to ma&e a !ontra!t$ mana(e the b"# ne##$ and d #po#e of the whole property. )6"n ! pal ty Pa% n( +o. %. >err n($ 798 4. 7810$ 98 ,ll. F08$ Ibid. 3 9. The !ommon owner#h p of property doe# not t#elf !reate a partner#h p between the owner#$ tho"(h they may "#e t for p"rpo#e of ma& n( (a n#$ and they may$ w tho"t be!om n( partner#$ are amon( them#el%e# a# to the mana(ement and "#e of #"!h property and the appl !at on of the pro!eed# therefrom.. )Sp"rlo!& %$. W l#on$ 7F- S.W. /1/$ 718 No. App. 7F$ Ibid. 3 b. The n!ome from the rental of the ho"#e #hall be treated a# the n!ome of an "nre( #tered partner#h p to be taxable a# a !orporat on be!a"#e of the !lear ntent on of the brother# to =o n to(ether n a %ent"re for ma& n( money o"t of rental#. The an#wer wo"ld be d fferent be!a"#e there wa# no ntent on to enter nto a prof t ma& n( %ent"re. They merely formed a !oD owner#h p. Th # # e% dent from the follow n( a"thor t e#: Where the pla nt ff$ h # brother and$ and another a(reed to be!ome owner# of a # n(le tra!t of realty hold n( a# tenant# n !ommon$ and to d % de the prof t# of d #po# n( of t$ the brother and the other not be n( ent tled to #hare n pla nt ff'# !omm ## on#$ no partner#h p ex #ted a# between the three part e#$ whate%er the r relat on may ha%e been a# to th rd part e#. )6a(ee %. 6a(ee$ 7-/ N.E. 10/$ -// 6a##. /F7 ! ted n Pa#!"al %. +omm ## oner of ,nternal Re%en"e$ 711 S+RA 9183 .1. Li,oro i$ a pra ti in- !awyer who on 1/ Apri! 1DD/ &i!e# hi$ in ome tax ret"rn &or the year 1DD.. Ipon exami n a ti o n 4 the EIR &o"n# hi$ ret" rn #e&i ien t o& P1.4C C D . G . . On +C Septe m , e r an# +C No'e m , e r 1DD/4 Li,oro wa$ noti&ie# o& hi$ tax #e&i ien y. 5e re$pon# e # with a prote$t !ett er #ate# 1D *e e m, e r 1DD/. On 11 Aay 1DD84 the Commi$$ioner o& Intern a! Re'en" e #enie# Li,oro($ prote$t &or !a 3 o& !e-a! ,a$i$. 5e then $ea$ona,!y &i!e# a peti tion &or re'ie w ,e&ore the Co"rt o& Tax Appea!$. On )D Aar h 1DDG4 the CTA ren#er e # a #e i$ion #i$mi$$in- the appea! whi h Li,oro re ei'e# on )D Aay 1DDG. Th"$4 he ha# "nti! 1+ B"ne 1DDG to &i!e a peti tion &or re'ie w ,e&ore the Co"rt o& Appea!$. On 11 B"ne 1DDG4 in$tea# o& &i!in- a peti tion &or re'ie w with the Co"rt o& Appea!$4 Li,oro &i!e# a Noti e o& Appea! with the Co"rt o& Appea!$4 an# on 1+ B"ne 1DDG4 a motion &or an exten$ion o& thirty ;+C< #ay$ to &i!e a petition &or re'iew ,e&ore the Co"rt o& Appea!$. Aay the Co"rt o& Appea!$ -rant Li,oro an exten$ion o& time to &i!e the petition &or re'ie w% SUGGESTED ANSWER: ?e#. The proh b t on a(a n#t (rant n( an exten# on of t me appl e# only n a !a#e where ord nary appeal # re5" red to perfe!t an appeal and noth n( more. >owe%er$ t # d fferent n a pet t on for re% ew where the plead n( # re5" red to be %er f ed. A pet t on for re% ew$ "nl &e an ord nary appeal$ re5" re# !aref"l preparat on and re#ear!h n order to p"t "p a per#"a# %e and form dable po# t on. ,n other word#$ the draft n( of a pet t on for re% ew enta l# more t me and effort than merely f l n( a not !e of appeal. )* boro %. +o"rt of Appeal#$ et al.$ G.R. No. 7877/and +omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ Ian"ary -.$ 7../3 N4TES AND +466ENTS: Se!. F$ R"le F/ of the 7..0 R"le# of + % l Pro!ed"re pro% de#$ BThe appeal #hall be ta&en w th n f fteen )793 day# from not !e of the ... ="d(ment.... Upon proper mot on and the payment of the f"ll amo"nt of the do!&et fee before the exp rat on of the re(lementary per od$ the +o"rt of Appeal# may (rant an add t onal per od of f fteen )793 day# only w th n wh !h to f le the pet t on for re% ew. No f"rther exten# on #hall be (ranted ex!ept for the mo#t !ompell n( rea#on and n no !a#e to ex!eed f fteen )793 day#.C )paraphra# n( #"ppl ed3 .). I$ there a ne e$$ity &or an a#mini$tr a t i' e #eter mi n a t i on that a tax i$ #"e ,e&ore initiation o& rimina! pro$e "tion &or tax e'a$ion% SUGGESTED ANSWER: No$ be!a"#e of the follow n( rea#on#$ wh !h d #t n(" #he# a !r m nal !har(e from an a##e##ment: a. +r m nal !har(e need only be #"pported by a prima facie #how n( of fa l"re to f le a re5" red ret"rn W>,*E the fa!t of fa l"re to f le a ret"rn need not be pro%en by an a##e##ment. b. Before an a##e##ment # ##"ed$ there #$ by pra!t !e$ a preD a##e##ment not !e #ent to the taxpayer W>,*E #"!h # not #o w th a !r m nal !har(e. The !har(e # f led d re!tly w th the Department of I"#t !e. !. A !r m nal !ompla nt # n#t t"ted not to demand payment$ b"t to penal <e the taxpayer for % olat on of the Tax +ode W>,*E the p"rpo#e of the ##"an!e of an a##e##ment # to !olle!t the tax. )+omm ## oner of ,nternal Re%en"e %. Pa#!or

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Realty and De%elopment +orporat on$ et al.$ G.R. No. 7-2/79$ I"ne -.$ 7...3 N4TES AND +466ENTS: :or Ear exami n a ti o n p"rpo$e$ ta&e note of the d #t n!t on between the :ort"ne Toba!!o !a#e )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ G.R. No. 77./--$ I"ne F$ 7..13 on one hand w th the abo%e Pa#!or !a#e and that of Un(ab %. +"# $ .0 S+RA 200 )7.283$ wh !h allowed the tax e%a# on !a#e to pro!eed notw th#tand n( no #how n( of an adm n #trat %e f nd n( that a tax # d"e. ,n Un(ab$ there wa# a prima facie attempt to e%ade taxe# be!a"#e of the taxpayer'# fa l"re to de!lare n h # n!ome tax ret"rn Bh # n!ome der %ed from banana #apl n(#$C W>,*E n the :ort"ne Toba!!o !a#e$ the re( #tered whole#ale pr !e of the (ood#$ appro%ed by the B,R # pre#"med to be the a!t"al whole#ale pr !e$ therefore$ not fra"d"lent and "nle## and "nt l the B,R ha# made a f nal determ nat on of what # #"ppo#ed to be the !orre!t taxe#$ the taxpayer #ho"ld not be pla!ed n the !r"! ble of !r m nal pro#e!"t on .+. What are the tax a$e$ whi h may ,e the $",6e t o& a ompro mi$e $ett! e m e n t with the EIR% SUGGESTED ANSWER: The follow n( may be the #"b=e!t matter of !omprom #e #ettlement: a. Del n5"ent a!!o"nt#E b. +a#e# "nder adm n #trat %e prote#t pend n( n the Re( onal 4ff !e#$ Re%en"e D #tr !t 4ff !e#$ *e(al Ser% !e$ *ar(e Taxpayer Ser% !e )*TS3$ Enfor!ement Ser% !e )ES3$ Ex! #e Taxpayer Ser% !e )ETS3 and +olle!t on Ser% !e )+S3E !. + % l tax !a#e# be n( d #p"ted before the !o"rt#$ e.(. +TA$ +A$ S+E d. +olle!t on !a#e# f led n !o"rt#E and e. +r m nal % olat on#$ other than tho#e already f led n !o"rt$ or tho#e n%ol% n( !r m nal tax fra"d#. )Se!. -$ Re%. Re(#. No. 1D-8883 N4TES AND +466ENTS: a. Tax a$e$ whi h o"!# not ,e the $",6e t o& ompro mi$e F 73 W thhold n( tax !a#e#E -3 +r m nal tax fra"d !a#e#E /3 +r m nal % olat on# already f led n !o"rtE and F3 Del n5"ent a!!o"nt# w th d"ly appro%ed #!hed"le of n#tallment payment#. )Se!. -$ Re%. Re(#. No. 1D -8883 F .. On B"ne 1/4 1DD84 Ar. Gran t O. Nea!4 pai# hi$ in ome tax &or the year 1DD/. On Aar h 1/4 1DDG4 he #i$ o'ere # that the EIR ex e$$i'e!y o!!e te# &rom hi$ the amo"nt o& P9/4 CC C . C C . Th"$4 on the $ame #ay he &i!e# with the Commi$$ioner o& Intern a! Re'en"e a writt e n !aim &or re&"n#. On A"-"$t 1/4 1DDG he re ei'e# the Commi$$ioner($ !ette r #enyin- hi$ !aim &or re&"n#. On Septe m , e r 14 1DDG4 or within thirty ;+C< #ay$ &rom re eipt o& the !ette r4 he &i!e# a petition &or re'ie w with the Co"rt o& Appea!$ &or the re&"n# o& the P9/4C C C . C C . In on&orm a n e with the mate ria! #ata r"!e4 he a!!e-e# that Se tion 11 o& Rep",!i A t No. 11)/4 pro'i#e$ that a taxpay e r a#'er$e!y a&&e t e# ,y a r"!in- or #e i$ion o& the Commi$$ioner o& Intern a! Re'en"e may appea! to the Co"rt o& Tax Appea!$ within thirty ;+C< #ay$ &rom re eipt o& the a#'er$e #e i$ion. *e i#e the a$e. SUGGESTED ANSWER: The pet t on #ho"ld be d #m ##ed for ha% n( been f led o"t of t me. Se!. --.$ N,R+ of 7..0 pro% de# that !o"rt a!t on for the re!o%ery of nternal re%en"e tax #ho"ld be f led w th n two )-3 year# from the date #"!h tax wa# pa d. The pet t on #ho"ld ha%e been f led no later than I"ne 71$ 7..2. There wa# a# yet no de! # on of the +omm ## oner to be appealed b"t th # !ontent on # bereft of mer t$ a# t wo"ld lea%e the taxpayer at the mer!y of the B,R +omm ## oner w tho"t any po# t %e and exped ent rel ef from the +o"rt. ,t # d #hearten n( eno"(h to a taxpayer to be &ept wa t n( for an ndef n te per od for the r"l n($. ,t wo"ld ma&e matter# more exa#perat n( for the taxpayer f the door# of ="#t !e wo"ld be !lo#ed for #"!h a rel ef "nt l after the +omm ## oner$ wo"ld ha%e$ at h # per#onal !on%en en!e$ ( %en h # (o # (nal. )+omm ## oner of +"#tom#$ et al$ %. +o"rt of Tax Appeal#$ et al.$ G.R. No. 2-172$ prom. 6ar!h 71$ 7.2.$ "nrep.3 ./. Phi!ippine Ean3 o& Comm"ni a tion$ &i!e# it$ 0"art e r! y in ome tax ret"rn$ &or the &ir$t an# $e on# 0"art e r$ o& 1DG/4 reportinpro&it$ an# pai# the tota! in ome tax o& P/ mi!!ion. The taxe$ #"e were $ett!e# ,y app!yin- the Ean3($ tax re#it memo$4 an# a or#in-!y4 the EIR i$$"e# the appropria t e Tax *e,it Aemo$. S",$e0" en t!y 4 the Ean3 $"&&er e # !o$$e$ $o that when it &i!e# it$ Ann"a! In ome Tax Ret"rn$ &or the year2 en#e# *e e m, e r +14 1DG/4 it #e !are # a net !o$$ o& P)/ mi!!ion4 there ,y $howinno tax !ia,i!ity. For the $" ee#in- year4 en#in*e e m, e r +14 1DG84 it !i3ewi$e report e # a net !o$$ o& P1. mi!!ion an# th"$ #e !are# no in ome tax paya,!e &or the year. *"rin- 1DG/ an# 1DG84 the Ean3 earne# rent a! in ome &rom !ea$e# proper ti e$ &rom wher e the !e$$ee$ withhe!# an# remit t e # to the EIR withho!#inre#it a,!e taxe$ o& P)G) tho"$an# &or 1DG/4 an# P)+. tho"$an# &or 1DG8. On A"-"$t 94 1DG94 the Ean3 re0"e$t e # the Commi$$ioner o& Intern a! Re'en"e4 amon- other$ &or a tax re#it o&

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P/ mi!!ion repre$en ti n - the o'erp ay m e n t o& taxe$ in the &ir$t an# $e on# 0"art e r$ o& 1DG/. Therea & t e r 4 on B"!y )/4 1DGG4 the Ean3 &i!e# a !aim &or re&"n# o& re#it a,!e taxe$ withh e! # ,y it$ !e$$ee$ &ro m proper t y ren ta!$ in 1DG/ an# in 1DG8. Eoth the re0"e$t an# the !aim were $ea$ona,! y &i!e# within the ten ;1C< year perio# &or &i!in!aim$ o& ex e$$ 0"art e r! y in ome tax paym e n t $ a$ pro'i# e# &or in RAC 92 G/ i$$"e# ,y the then A t-. EIR Commi$$ioner. On No'e m, e r 1G4 1DGG the Ean3 in$tit" t e # a Peti tion &or Re'iew ,e&ore the Co"rt o& Tax Appea!$. Wo"!# the petition pro$per % SUGGESTED ANSWER: No. ,t wa# f led o"t of t me and # n!e the taxpayer de! ded to a%a l of the tax !red t t !o"ld not anymore #ee& a ref"nd. The two )-3 year pre#!r pt %e per od #ho"ld be !omp"ted from the t me of f l n( the Ad="#tment Ret"rn and f nal payment of the tax for the year. )Ph l pp ne Ban& of +omm"n !at on# %. +omm ## oner of ,nternal Re%en"e$ et al.$ G.R. No. 77-8-F$ Ian"ary -2$ 7...3 The !la m for ref"nd #ho"ld be exer! #ed w th n the t me f xed by law. REAS4N: The B"rea" of ,nternal Re%en"e be n( an adm n #trat %e body enfor!ed to !olle!t taxe#$ t# f"n!t on# #ho"ld not be "nd"ly delayed or hampered by n! dental matter#. ) Ibid. 3 The ##"an!e of R6+ 0D29 !han( n( the #tat"tory pre#!r pt %e per od of two )-3 year# to ten )783 year# on !la m# of ex!e## 5"arterly n!ome tax payment# d d not merely nterpret the law$ rather t le( #lated (" del ne# !ontrary to the #tat"te pa##ed by +on(re##. Re%en"e 6emorand"m + r!"lar# are !on# dered adm n #trat %e r"l n(# ) n the #en#e of more #pe! f ! and le## (eneral nterpretat on# of tax law#3 wh !h are ##"ed from t me to t me by the +omm ## oner of ,nternal Re%en"e. ,t # w dely a!!epted that the nterpretat on pla!ed "pon a #tat"te by the exe!"t %e off !er#$ who#e d"ty t # to enfor!e t$ # ent tled to (reat re#pe!t by the !o"rt#. Ne%erthele##$ #"!h nterpretat on # not !on!l"# %e and w ll be (nored f ="d ! ally fo"nd to be erroneo"#. R"le# and re("lat on# ##"ed by adm n #trat %e off ! al# to mplement a law !annot (o beyond the term# and pro% # on# of the latter. :"rther$ f"ndamental # the r"le that the State !annot be p"t n e#toppel by the m #ta&e# or error# of t# off ! al# or a(ent#. ) supra 3 : nally$ Se!. 1. of the 7.00 N,R+ )now Se!. 01 of the 7..0 N,R+3 pro% de# that any ex!e## of the total 5"arterly payment# o%er the a!t"al n!ome tax !omp"ted n the ad="#tment or f nal !orporate n!ome tax ret"rn$ #hall e ther )a3 be ref"nded to the !orporat on$ or )b3 may be !red ted a(a n#t the e#t mated 5"arterly n!ome tax l ab l t e# for the 5"arter# of the #"!!eed n( taxable year. To ea#e the adm n #trat on of tax !olle!t on$ the#e remed e# are n the alternat %e and the !ho !e of one pre!l"de# the other. S n!e the Ban& ha# !ho#en the tax !red t approa!h t !annot anymore a%a l of the tax ref"nd.. ) supra 3 .8. On B"!y 1G4 1DG84 the EIR i$$"e# to Sa!"# H. 5i@on a #e&i ien y in ome tax a$$e$$me n t . Sin e the a$$e$$me n t wa$ not onte$t e #4 the EIR on Ban"ary 1)4 1DGD4 $er'e# warra n t$ o& #i$traint an# !e'y to o!!e t the tax #e&i ien y. For "n3nown rea$on$4 the EIR #i# not pro ee# to #i$po$e o& the atta he # proper ti e$. On No'e m, e r +4 1DD)4 Sa!"# wrote the EIR re0"e$tin- a re on$i#er a t ion o& her tax #e&i ien y a$$e$$me n t . The EIR4 in a !ette r #ate# A"-"$t 114 1DD.4 #enie#. On Ban"ary 14 1DD94 the EIR &i!e# with the RTC a a$e to o!!e t the tax #e&i ien y. The omp!aint wa$ $i-ne# ,y the Chie& o& the Le-a! *i'i$ion o& the Re-ion an# 'eri&ie# ,y the Re-iona! *ire tor. Sa!"# now $ee3$ the #i$mi$$a! o& the a$e on the &o!!owin- -ro"n#$F a. The omp!aint wa$ not &i!e# "pon a"thorit y o& the EIR Commi$$ioner a$ re0"ire# "n#er Se tion ))C o& the Tax Co#e1 ,. The a tion ha$ a!rea#y pre$ ri,e#. Re$o!'e the i$$"e$ rai$e#. SUGGESTED ANSWERS: a. Re%en"e Adm n #trat %e 4rder No. 78D .9 #pe! f !ally a"thor <e# the * t (at on and Pro#e!"t on Se!t on of the *e(al D % # on of the re( onal d #tr !t off !e# to n#t t"te the ne!e##ary ! % l and !r m nal a!t on# for tax !olle!t on. A# the !ompla nt f led n th # !a#e wa# # (ned by the B,R'# +h ef of *e(al D % # on for the re( on and %er f ed by the Re( onal D re!tor$ there wa#$ therefore$ !ompl an!e w th the law. Se!. 0 of the pre#ent Tax +ode a"thor <e# the B,R +omm ## oner to dele(ate #ome of h # power#. b .Se!. --2 of the N,R+ of 7..0 mandate# that a re5"e#t for re!on# derat on m"#t be made w th n /8 day# from the taxpayer'# re!e pt of the tax def ! en!y a##e##ment$ otherw #e the a##e##ment be!ome# f nal$ "nappealable and$ therefore demandable. The not !e wa# re!e %ed by Sal"d on I"ly 72$ 7.21 and #he made her re5"e#t for re!on# derat on thereof only on No%ember /$ 7..-. E%en a##"m n( that #he f r#t learned of the not !e on the day the warrant# were #er%ed on Ian"ary 7-$ 7.2.$ her re5"e#t for re!on# derat on wa# #t ll f led beyond the /8 day per od. >en!e$ her re5"e#t for re!on# derat on d d not #"#pend the r"nn n( of the pre#!r pt %e per od. Altho"(h the +omm ## oner a!ted on Sal"d'# re5"e#t$ e%ent"ally deny n( t on A"("#t 77$ 7..F$ th # # of no moment and doe# not detra!t from the fa!t that the a##e##ment had lon( be!ome demandable. )Rep"bl ! of the Ph l pp ne#$ et!. %. > <on$ G.R. No. 7/8F$ prom. De!ember 7/$ 7...3 N4TES AND +466ENTS:

22
a. E&&e t o& $er'i e o& warra n t o& #i$train t or !e'y . The t mely #er% !e of a warrant of d #tra nt or le%y #"#pend# the r"nn n( of the per od to !olle!t the tax def ! en!y n the #en#e that the d #po# t on of the atta!hed propert e# m (ht well ta&e t me to a!!ompl #h$ extend n( e%en after the lap#e of the #tat"tory per od for !olle!t on#. )Ad%ert # n( A##o! ate#$ ,n!.$ %. +o"rt of Appeal#$ 7// S+RA 019E Palan!a %. +omm ## oner of ,nternal Re%en"e$ 77F Ph l. -8/3. ,n tho#e !a#e#$ the B,R d d not f le any !olle!t on !a#e b"t merely rel ed on the #"mmary remedy of d #tra nt and le%y to !olle!t the tax def ! en!y. Th"#$ the enfor!ement of tax !olle!t on thro"(h #"mmary pro!eed n(# may be !arr ed o"t beyond the #tat"tory per od. )Rep"bl ! of the Ph l pp ne#$ et!. %. > <on$ G.R. No. 7/8F$ prom. De!ember 7/$ 7...3 The #tat"tory per od for !olle!t on appl e# only where a !o"rt #" t # a%a led of for !olle!t on. b. Form an# Ao#e o& Pro ee#in- in A tion$ Ari$in- "n#er the Tax Co#e . B+ % l and !r m nal a!t on# and pro!eed n(# n#t t"ted n behalf of the Go%ernment "nder the a"thor ty of th # +ode or other law enfor!ed by the B"rea" of ,nternal Re%en"e #hall be bro"(ht n the name of the Go%ernment of the Ph l pp ne# and #hall be !ond"!ted by le(al off !er# of the B"rea" of ,nternal Re%en"e b"t no ! % l or !r m nal a!t on for the re!o%ery of taxe# or the enfor!ement of any f ne$ penalty or forfe t"re "nder th # +ode #hall be f led n !o"rt w tho"t the appro%al of the +omm ## oner.K )Se!. --8$ N,R+ of 7..03 .9. A&ter #i$$o!"tion o& Para mo " n t on Aar h +14 1DG84 EPI a te# a$ !i0"i#a to r. On Aay +C4 1DG/ Para mo " n t pai# P+CG4 9 9 D . C C in in ome taxe$ &or the 1 $t 0"art e r1 &or the ) n# 0"art e r4 it pai# P8)84 C C C . C C on A"-"$t )D4 1DG/1 &or the + r# 0"art e r4 it pai# P)G.4 1 8 1 . C C on No'e m , e r )D4 1DG/. On Apri! )4 1DG84 Para mo " n t &i!e# it$ orpora t e ann"a! in ome tax ret" rn &or the a!en# a r year en#in- *e e m, e r +14 1DG/. A!! in a!!4 Para mo " n t pai# the tota! amo"n t o& P14)1 G4 D . C . C C there , y $howina re&"n # a , ! e amo"n t o& P8/4) / D . C C . On Apri! 1.4 1DGG4 EPI4 a$ !i0"i#ato r o& Para mo " n t 4 &i!e# with the Co"rt o& Tax Appea!$ a !ette r #ate# Apri! 1)4 1DGG reiter a t i n - it$ !aim &or the re&"n# o& P8/4 )/ D . C C a$ o'erp ai# in ome tax &or a!en# a r year 1DG/. On Apri! 1/4 1DGG4 the Para mo " n t repre$en t a t i ' e 4 &i!e# with the Co"rt o& Tax Appea!$ a peti tion to to!! the r"nnin- o& the pre$ rip ti 'e perio# &or &i!ina !aim &or re&"n # o& o'erp ai # in ome taxe$. The Co"rt o& Tax Appea!$ r"!e# that the two2 year pre$ rip ti 'e perio# omme n e # to r"n &rom Apri! 1/4 1DG84 the !a$t #ay &or &i!in- the orpora t e in ome tax ret" rn an# -ran t e # the re&"n# . Wa$ the -ran t o& the re&"n # proper % SUGGESTED ANSWER: No. The twoD year pre#!r pt %e per od for a!t on# for ref"nd of !orporate n!ome tax #ho"ld be !omp"ted from the t me of a!t"al f l n( of the : nal Ad="#tment Ret"rn or Ann"al ,n!ome Tax Ret"rn. REAS4N: At That po nt$ t !an already be determ ned whether there ha# been an o%erpayment made by the taxpayer. 6oreo%er$ payment # made at the t me the ret"rn # f led. S n!e Paramo"nt f led t# !orporate ann"al n!ome tax ret"rn on Apr l -$ 7.21$ t had only twoD year# from date w th n wh !h to f le t# wr tten !la m for ref"nd. When t f led a wr tten !la m for ref"nd on Apr l 7F$ 7.22$ and a pet t on for ref"nd only on Apr l 79$ 7.22$ both !la m and a!t on for ref"nd were th"# barred by pre#!r pt on. )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ G.R. No. 770-9F$ Ian"ary -7$ 7...3 N4TES AND +466ENTS: :or !orporat on#$ the two year pre#!r pt %e per od "nder Se!. -/8 )now Se!. --.$ N,R+ of 7..03$ for n#t t"t n( tax ref"nd !a#e# n !o"rt !ommen!e to r"n only from the t me the ref"nd # a#!erta ned$ wh !h !an only be determ ned after a f nal ad="#tment ret"rn # a!!ompl #hed. Two year# not ="r #d !t onal and may be #"#pended. )+omm ## oner of ,nternal Re%en"e %. The Ph l pp ne * fe ,n#"ran!e +o.$et al. G.R. No. 789-82$ 6ay -.$ 7..9 re terat n( the T6@ !a#e3. The two year per od appl e# only to re!o%ery of taxe# or penalt e# N4T to tax !red t# a%a lment. Ab#ent a #pe! f ! pro% # on n the Tax +ode or #pe! al law#$ the per od wo"ld be 78 year#. )I"#t !e ; t"($ !on!"rr n( n the abo%e !a#e 3 A # m"ltaneo"# f l n( of the appl !at on w th the B,R for ref"ndR!red t and the n#t t"t on of the !o"rt #" t w th the +TA # allowed. No need to wa t for a B,R den al. REAS4NS: a. The po# t %e re5" rement of Se!t on -/8 N,R+ )now Se!. --.$ N,R+ of 7..03E b. The do!tr ne that delay of the +omm ## oner n render n( de! # on doe# not extend the peremptory per od f xed by the #tat"teE !. The law f xed the #ame per od two year# for f l n( a !la m for ref"nd w th the +omm ## oner "nder Se!. -8F$ par. /$ N,R+ )now Se!. -8F P+Q$ N,R+ of 7..03$ and for f l n( #" t n !o"rt "nder Se!. -/8$ N,R+ )now Se!. --.$ N,R+ of 7..03$ "nl &e n prote#t# of a##e##ment# "nder Se!. --. )now Se!. --2$ N,R+ of 7..03$ wh !h f xed the per od )th rty day# from re!e pt of de! # on3 for appeal n( to the !o"rt$ th"# !learly mply n( that the pr or de! # on of the +omm ## oner # ne!e##ary to ta&e !o(n <an!e of the !a#e. )+omm ## oner of ,nternal Re%en"e %. Ban& of Ph l pp ne ,#land#$ et!. et al.$ +ADG.R. SP No. /F78-$ September .$ 7..FE G bb# %. +olle!tor of ,nternal Re%en"e and +o"rt of Tax Appeal#$ 780

23
Ph l$ -/-E Iohn#ton *"mber +o. %. +TA$ 787 Ph l. 7973 ,f the prote#t # den ed n whole or n part or n the n#tan!e where the +omm ## oner of ,nternal Re%en"e doe# not a!t within one h"ndred e (hty )7283 day# from #"bm ## on of do!"ment#$ the taxpayer ad%er#ely affe!ted may appeal to the +o"rt of Tax Appeal# w th n th rty )/83 day# from re!e pt of the #a d de! # on$ or from the lap#e of the one h"ndred e (hty )7283 day#$ otherw #e the de! # on #hall be!ome f nal$ exe!"tory and demandable. )la#t par.$ Se!. --2$ N,R+ of 7..03 .G. Phi!ippin e 5ome A$$"ran e Corpora tion pai# #o "m en t a r y $tamp taxe$ on ertain non2 !i&e in$"ran e po!i ie$ it i$$"e#. 5owe'e r 4 the premi" m$ were not pai#. The omp an y on ,a$i$ the pro'i$ion$ o& Se tion 99 o& the In$"ran e Co#e to the e&&e t that4 =No t w i t h$ t a n # i n - any a-ree m e n t to the ontra ry 4 no po!i y or ontra t o& in$"ran e i$$"e# ,y an in$"ran e omp an y i$ 'a!i# an# ,in#in- "n!e$$ an# "nti! the premi" m thereo & ha$ ,een pai# xxx4 > now !aim$ &or a re&"n# o& the #o " me n t a r y $tamp$ it pai# ,e a"$e the po!i ie$ ne'er ,e a m e e&&e ti' e. Sho"!# the re&"n # ,e -rant e #% A!tern a ti ' e! y 4 o"!# there ,e a re&"n# o& #o " me n t a r y $tamp tax payme n t$% SUGGESTED ANSWER: No. Do!"mentary #tamp taxe# are le% ed "pon the pr % le(e$ opport"n ty$ or fa! l ty to exe!"te !erta n n#tr"ment# rre#pe!t %e of whether the !ontra!t# are #"b#e5"ently de!lared to be re#! ## ble$ %o d$ %o dable or "nenfor!eable. The do!"mentary #tamp taxe# are mpo#ed on the mere ##"an!e of the pol ! e# e%en f the#e pol ! e# #"b#e5"ently are !on# dered a# not %al d or b nd n( "nder the law. )Ph l pp ne >ome A##"ran!e +orporat on$ et al.$ %. +o"rt of Appeal#$ et al.$ G.R. No. 77.FF1$ prom. Ian"ary -7$ 7...3 .D. Sho"!# inter e$ t ,e pai# wher e a tax i$ re&"n # e # ,y the Go'ern m e n t to a taxp ay e r% SUGGESTED ANSWER: The r"le # that no ntere#t on ref"nd of tax !an be awarded "nle## a"thor <ed by law or the !olle!t on of the tax wa# attended by arb trar ne##. An a!t on # not arb trary when exer! #ed hone#tly and "pon d"e !on# derat on where there # room for two op n on#$ howe%er m"!h t may be bel e%ed that an erroneo"# !on!l"# on wa# rea!hed. Arb trar ne## pre#"ppo#e# nex!"#able or ob#t nate d #re(ard of le(al pro% # on#. )Ph lex 6 n n( +orporat on %. +omm ## oner of ,nternal Re%en"e$ et al.$ G.R. No. 7-8/-F$ prom. Apr l -7$ 7...3 /C. What i$ the nat"r e o& a tax amn e$t y % SUGGESTED ANSWER: A tax amne#ty # a (eneral pardon to taxpayer# who want to #tart a !lean #late. ,t al#o ( %e# the (o%ernment a !han!e to !olle!t "n!olle!ted tax from tax e%ader# w tho"t ha% n( to (o thro"(h the ted o"# pro!e## of a tax !a#e. To a%a l of a tax amne#ty (ranted by the (o%ernment$ and to be mm"ne from #" t on t# del n5"en! e#$ the taxpayer m"#t ha%e %ol"ntar ly d #!lo#ed h # pre% o"#ly "ntaxed n!ome and m"#t ha%e pa d the !orre#pond n( tax on #"!h pre% o"#ly "ntaxed n!ome. A tax amne#ty$ m"!h l &e a tax exempt on$ # ne%er fa%ored nor pre#"med n law and f (ranted by #tat"te$ the term# of the amne#ty l &e that of a tax exempt on m"#t be !on#tr"ed #tr !tly a(a n#t the taxpayer and l berally n fa%or of the tax n( a"thor ty. )Bana#$ Ir. %. +o"rt of Appeal#$ et al.$ G.R. No. 78-.10$ prom. :ebr"ary 78$ -8883

NATIONAL INTERNAL REHENIE CO*E

T5E EIREAI OF INTERNAL REHENIE /1. An interna! re'en" e o&&i er4 ha'in,een re!ia,!y in&or m e # ,y an "nimp e a h a ,!e $o"r e4 that i-ar$4 6ewe!rie$4 !i0"or an# other arti !e$ $",6e t to ex i$e taxe$ are 3ept in the ho"$e o& Ar. Toma$4 enter e # $ai# ho"$e4 $ei@e# the arti !e$ an# arre$t e # Ar. Toma$ on the $tren-t h o& a warra n t $i-ne# ,y the Commi$$ioner o& Intern a! Re'en" e. a. Ar. Toma$ #eno"n e# the $ear h4 $ei@"re an# hi$ arre$t a$ 'io!ati' e o& the on$tit" tion ,e a"$e it wa$ e&&e t e # witho" t a $ear h warran t an# warra n t o& arre$t i$$"e# ,y the appropria t e o"rt. In#er the ir "m$t a n e$4 i$ the a t" ation o& the interna! re'en" e o&&i er $an tione# ,y !aw% Why% ,. Wo"!# yo"r an$wer ,e the $ame i& the $ear h4 $ei@"re an# arre$t wa$ e&&e t e# ,y "$tom$ o&&i er$ ,y 'irt"e o& a warr an t o& $ei@"re an# #eten tion $i-ne# ,y the o!!e tor o& "$tom$% Exp!ain. SUGGESTED ANSWER: a. ?e#. Any nternal re%en"e off !er n the d #!har(e of h # off ! al d"t e# may enter any ho"#e$ b" ld n( or pla!e where art !le# #"b=e!t to ex! #e taxe# are prod"!ed or &ept$ or are bel e%ed by h m "pon rea#onable (ro"nd# to be prod"!ed or &ept #o far a# may be ne!e##ary to exam ne$ d #!o%er or #e <e the #ame. )7#t par.$ Se!. 707$ N,R+ of 7..03 ,nternal re%en"e off !er# #hall ha%e a"thor ty to ma&e arre#t# and #e <"re# for % olat on of any penal law or re("lat on

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adm n #tered by the B"rea" of ,nternal Re%en"e. Any per#on #o arre#ted #hall forthw th be bro"(ht before a !o"rt$ there to be dealt w th a!!ord n( to law. )Se!. 7/$ N,R+ of 7..03 No #ear!h warrant or warrant of arre#t # re5" red "nder the do!tr ne of pr mary ="r #d !t on wh !h po# t# that n te!hn !al matter# where the adm n #trat %e bod e# ha%e obta ned expert #e$ the !o"rt# w ll defer. Th # # l &ew #e prem #ed on the l feblood theory wh !h mandate# the mmed ate !olle!t on of taxe# to en#"re the !ont n"ed ex #ten!e of the State. b. 6y an#wer wo"ld be d fferent be!a"#e !"#tom# a"thor t e# may #ear!h a dwell n( pla!e only "pon a warrant ##"ed by a I"d(e of the appropr ate !o"rt "pon #worn appl !at on #how n( probable !a"#e and part !"larly de#!r b n( the pla!e to be #ear!hed and per#on or th n( to be #e <ed. )Se!. --82$ --8.$ Tar ff N +"#tom# +ode3. The !"#tom# a"thor t e# !o"ld deta n per#on# only f they are !om n( to the Ph l pp ne# from fore (n !o"ntr e# )Se!. --7-$ ,b d.3 not n the abo%e ent tled problem where they are already n the Ph l pp ne#. /). Exp!ain the r"!e ma3in- power o& EIR. SUGGESTED ANSWER: a. There are two & nd# of r"l n(# the B,R may ##"e D nterpretat %e r"l n(# and le( #lat %e r"l n(#. ,nterpretat %e r"le# are de# (ned to pro% de (" del ne# to the law wh !h the adm n #trat %e a(en!y # n !har(e of enfor! n(. No not !e$ hear n( or p"bl !at on # re5" red$ a# they are ##"ed merely for the (" dan!e of adm n #trat %e off !er#. ,ll"#trat on: Re%en"e 6emorand"m + r!"lar No. F0D .7 !la## fy n( !opra a# an a(r !"lt"ral nonD food tem de!lar n( t exempt from ;AT only f the #ale # made by the pr mary prod"!er. )6 #am # 4r ental A##o! at on of +o!o Trader#$ ,n!. %. Department of : nan!e Se!retary$ et al.$ -/2 S+RA 1/ P7..FQ. *e( #lat %e r"le# are n the nat"re of #"bord nate le( #lat on$ de# (ned to mplement a pr mary le( #lat on by pro% d n( the deta l# thereof. They are ##"ed "nder the 5"a# D le( #lat %e a"thor ty of the B,R +omm ## oner. There # a re5" rement for not !e$ hear n( and p"bl !at on. ,ll"#trat on: Re%en"e 6emorand"m + r!"lar No. /0D ./ wh !h pla!ed >ope *"x"ry$ Prem "m 6ore and +hamp on ! (arette# w th n the #!ope of the amendatory law R.A. No. 019F and #"b=e!ted them to the n!rea#ed tax rate re5" re# not !e$ hear n( and p"bl !at on. )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ -17 S+RA -/13 N4TES AND +466ENTS: The r"l n(# and ! r!"lar# prom"l(ated by the +omm ## oner do not ha%e retroa!t %e appl !at on f the re%o!at on$ mod f !at on$ or re%er#al wo"ld be pre="d ! al to the taxpayer#. )Se!. -F1$ N,R+ of 7..0E +omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ -10 S+RA 9903 Exceptions : ,n#tan!e# when re%en"e r"l n(# and re("lat on# ha%e retroa!t %e effe!t e%en f pre="d ! al to the taxpayer: a. Where the taxpayer del berately m ##tate# or om t# mater al fa!t# from h # ret"rn or n any do!"ment re5" red of h m by the B,RE b. Where the fa!t# #"b#e5"ently (athered by the B,R are mater ally d fferent from the fa!t# on wh !h the r"l n( # ba#ed$ or !. Where the taxpayer a!ted n bad fa th. )Se!. -F1$ N,R+ of 7..03

/+. In what in$tan e$ may the E"rea" o& Intern a! Re'en"e $"$pen# or tempor a ri!y !o$e the ,"$ine$$ e$ta,!i$h m e n t o& a taxpa y e r % 5ow !on- #oe$ the $"$pen$ion !a$t % SUGGESTED ANSWER: The +omm ## oner or h # a"thor <ed repre#entat %e # empowered to #"#pend the b"# ne## operat on# and temporar ly !lo#e the b"# ne## e#tabl #hment of any per#on for any of the follow n( % olat on#C a. ,n !a#e of a ;ATDre( #tered per#on: 73 :a l"re to ##"e re!e pt# or n%o !e#E -3 :a l"re to f le a ;AT ret"rn a# re5" red "nder the Tax +odeE /3 Under#tatement of taxable #ale# or re!e pt# by /8J or more of h # !orre!t taxable #ale# or re!e pt# for the taxable 5"arter. b. :a l"re to re( #ter "nder the ;AT pro% # on# of the Tax +ode. The temporary !lo#"re of the e#tabl #hment #hall for the d"rat on of not le## than f %e )93 day# and #hall be l fted only "pon !ompl an!e w th whate%er re5" rement# pre#!r bed by the +omm ## oner n the !lo#"re order. )Atla# +on#ol dated 6 n n( N De%elopment +orporat on %. +omm ## oner of ,nternal Re%en"e$ G.R. No. 7/FF10$ prom. No%ember 70$ 7...3 /.. The Commi$$ioner o& Intern a! Re'en"e i$ a"thori@e# "n#er the Tax Co#e to #e!e-a t e the power$ 'e$te# in him "n#er the pertin en t pro'i$ion$ o& the Tax Co#e to any $",or#ina t e o&&i ia! with the ran3 e0"i'a!e n t to a #i'i$ion hie& or hi-her. What are the ex eption$ to thi$ r"!e on #e!e-a tion or a!tern a t i ' e !y $pea3in-4 what are the power$ o& the Commi$$ioner that he o"!# not #e!e-a t e% SUGGESTED ANSWER: The follow n( are #ome of the power# that he !o"ld not dele(ate: a. The power to re!ommend the r"le# and re("lat on# by the Se!retary of : nan!eE

25
b. The power to ##"e r"l n(# of f r#t mpre## on or to re%er#e$ re%o&e$ or mod fy any ex #t n( r"l n( of the B"rea"E !. The power to !omprom #e or abate$ any tax def ! en!y$ Pro% ded$ howe%er$ that a##e##ment# ##"ed by the Re( onal 4ff !e# n%ol% n( ba# ! def ! en!y taxe# of P988$888.88 or le##$ and m nor !r m nal % olat on# a# may be determ ned by r"le# and re("lat on# to be prom"l(ated by the Se!retary of : nan!e$ "pon the re!ommendat on of the +omm ## oner$ d #!o%ered by re( onal and d #tr !t off ! al#$ may be !omprom #ed by a re( onal e%al"at on board wh !h #hall be !ompo#ed of the Re( onal D re!tor a# +ha rman$ the A## #tant Re( onal D re!tor$ head# of the *e(al$ A##e##ment and +olle!t on D % # on# and the Re%en"e D #tr !t 4ff !er ha% n( ="r #d !t on o%er the taxpayer$ a# member#E and d. The power to a## (n or rea## (n nternal re%en"e off !er# to e#tabl #hment# where art !le# #"b=e!t to ex! #e tax are prod"!ed or &ept. )Se!. 0$ N,R+ of 7..0 ! ted n Rep"bl ! of the Ph l pp ne#$ et!. %. > <on$ G.R. No. 7/8F/8$ prom. De!ember 7/$ 7...3 The determ n n( fa!tor for the mpo# t on of n!ome tax # whether any (a n or prof t wa# der %ed from the tran#a!t on. ,n the metaphor of E #ner %. 6a!omber$ -9- U.S. F-1$ n!ome # not deemed Breal <edC "nt l the fr" t ha# fallen /8. What are the -enera! prin ip!e$ in ome taxa tion in the Phi!ippine$% o&

INCOAE TAXATION
//. *e&ine in ome in in ome tax !aw. BAn amo"nt of money !om n( to a per#on w th n a #pe! f ed t me$ whether a# payment for #er% !e#$ ntere#t$ or prof t from n%e#tment. C ,t mean# !a#h or t# e5" %alent. ,t # (a n der %ed and #e%ered from !ap tal$ from labor or from both !omb ned. :or example$ to tax a #to!& d % dend wo"ld be to tax a !ap tal n!rea#e rather than the n!ome. )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ G.R. No. 782901$ Ian"ary -8$ 7...3 N4TES AND +466ENTS: In ome #i$tin-"i$h e# &ro m apita!F a. +ap tal # wealth or f"nd$ W>,*E n!ome # prof t or (a n from the flow of wealth. )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ G.R. No. 782901$ Ian"ary -8$ 7...3 +ap tal # a f"nd of property ex #t n( at an n#tant of t me W>,*E n!ome # that flow of #er% !e# rendered by that !ap tal by the payment of money from t or any other benef t rendered by a f"nd of !ap tal n relat on to #"!h f"nd thro"(h a per od of t me. b. +ap tal # wealth W>,*E n!ome # the #er% !e of wealthE and !. +ap tal # the tree W>,*E n!ome # the fr" t. )6adr (al %. Rafferty$ /2 Ph l. F7F3 Real <at on # determ nat %e of earn n( pro!e## re#"lt n( to n!ome. W tho"t real <at on$ there # no n!ome.

a. A ! t <en of the Ph l pp ne# re# d n( there n # taxable on all n!ome der %ed from #o"r!e# w th n and w tho"t the Ph l pp ne#. b. A nonre# dent ! t <en # taxable only on n!ome der %ed from #o"r!e# w th n the Ph l pp ne#. !. An nd % d"al ! t <en of the Ph l pp ne# who # wor& n( and der % n( n!ome from abroad a# an o%er#ea# !ontra!t wor&er # taxable only on n!ome from #o"r!e# w th n the Ph l pp ne#$ "ro ided# That a #eaman who # a ! t <en of the Ph l pp ne# and who re!e %e# !ompen#at on for #er% !e# rendered abroad a# a member of the !omplement of a %e##el en(a(ed ex!l"# %ely n nternat onal trade #hall be treated a# an o%er#ea# !onta!t wor&er. d. An al en nd % d"al$ whether a re# dent or not of the Ph l pp ne#$ # taxable only on n!ome der %ed from #o"r!e# w th n the Ph l pp ne#. e. A dome#t ! !orporat on # taxable on all n!ome der %ed from #o"r!e# w th n and w tho"t the Ph l pp ne#. f. A fore (n !orporat on$ whether en(a(ed or not n trade or b"# ne## n the Ph l pp ne#$ # taxable only on n!ome der %ed from #o"r!e# w th n the Ph l pp ne#. )Se!. -/$ N,R+ of 7..03 /9. Are $to 3 #i'i#en#$ $",6e t to in ome taxation% SUGGESTED ANSWER: Sto!& d % dend# are "nreal <ed (a n and !annot be #"b=e!t to n!ome tax "nt l the (a n# ha%e been real <ed. Sto!& d % dend# repre#ent !ap tal and do not !on#t t"te n!ome to t# re! p ent. The mere ##"an!e thereof # not #"b=e!t to n!ome tax a# they are noth n( b"tBenr !hment thro"(h n!rea#e n %al"e of !ap tal n%e#tment. C A# !ap tal$ #to!& d % dend# po#tpone the real <at on of prof t# be!a"#e the Bf"nd repre#ented by the new #to!& ha# been tran#ferred from #"rpl"# to !ap tal and no lon(er a%a lable for a!t"al d #tr b"t on.C Before real <at on$ #to!& d % dend# are noth n( b"t a repre#entat on of an ntere#t n the !orporate propert e#. A# !ap tal$ t # not yet #"b=e!t to n!ome tax. )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ G.R. No. 782901$ Ian"ary -8$ 7...3 /G. What i$ mean t ,y re#e m p t ion o& $hare$ o& $to 3%

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SUGGESTED ANSWER: Redempt on # rep"r!ha#e$ a rea!5" # t on of #to!& by a !orporat on wh !h ##"ed the #to!& n ex!han(e for property$ whether or not the a!5" red #to!& # !an!elled$ ret red or held n trea#"ry. E##ent ally$ the !orporat on (et# ba!& #ome of t# #to!&$ d #tr b"te# !a#h or property to the #hareholder n payment for the #to!&$ and !ont n"e# n b"# ne## a# before. The redempt on of #to!& d % dend# pre% o"#ly ##"ed # "#ed a# a %e l for the !on#tr"!t %e d #tr b"t on of !a#h d % dend#. )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ G.R. No. 782901$ Ian"ary -8$ 7...3 N4TES AND +466ENT: Taxa,i!ity o& re#e m p ti o n ,y i$$"inorpora tio n o& $hare$ o& $to 3 . ,t # #"((e#ted that the Bar re% ewee (nore# the !on!ept# of taxab l ty of redempt on of #hare# # #to!& by the ##" n( !orporat on a# d #!"##ed n +omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ G.R. No. 782901$ Ian"ary -8$ 7... )the ANS+4R !a#e3$ where the pre#ent pro% # on# of the Tax +ode on tran#a!t on tax PSe!. 7-0 )A3$ N,R+ of 7..0Q$ and !ap tal (a n# tax f nd appl !at on. The only !on!ept# that #ho"ld be reta ned # the def n t on of redempt on$ and the appl !ab l ty of the ANS+4R !a#e !on!ept of redempt on where the #hare# of #to!& that are redeemed are ord nary a##et#. The tax treatment of redempt on of #hare# of #to!&$ "nder the pre#ent pro% # on# of the Tax +ode #hall be d #!"##ed below. Tax trea t m e n t o& re#e m p ti o n ,y i$$"in- orpora ti o n o& $hare$ o& $to 3 "n#er the pre$en t pro'i$ion$ o& the Tax Co#e4 not "n#er the &orm er pro'i$ion$ o& the Tax Co#e a$ interp r e t e # in the ANSCOR a$e. The tax treatment wo"ld be dependent "pon the follow n( fa!tor#: a. The nat"re of the #hare# of #to!& be n( d #po#ed of$ whether the #hare# are !ap tal a##et# or ord nary a##et#E b. Whether or not the #hare# of #to!& are l #ted and traded and l #ted n the #to!& ex!han(e. Taxa,i!ity o& $a!e$4 ,arte r or ex han - e o& $hare$ o& $to 3$ F a. Share# of #to!& are apita! a$$et$ an# not !i$te# an# tra# e# in the $to 3 ex han - e . Where the #hare# of #to!& are !ap tal a##et# be!a"#e the #eller # not en(a(ed n the b"# ne## of b"y n( and #ell n( #hare# of #to!& )a dealer n #e!"r t e#3$ and not l #ted and traded n the #to!& ex!han(e$ the #ale # #"b=e!t to a 9J tax on net !ap tal (a n not o%er P788$888.88 wh le the net !ap tal (a n o%er P788$888.88 # #"b=e!t to a tax of 78J. Note that the hold n( per od # not appl ed. The !ap tal (a n# tax # an n!ome tax be!a"#e the tax fall# "nder t tle ,, of the Tax +ode$ ent tled$ B,n!ome TaxC b. Share# of #to!& wheth e r apita! or or#inary a$$et$ ,"t are !i$te# an# tra#e # n the #to!& ex!han(e are #"b=e!t to the tran#a!t on tax of S of 7J of the (ro## #ell n( or tran#a!t on pr !e. The hold n( per od # not appl ed and the tran#a!t on tax # n l e" of all n!ome taxe# that may be !olle!ted. !. Share# of #to!& or#inary a$$et$ ,"t not !i$te# an# tra#e# in the $to 3 ex han-e . ,f the #hare# of #to!& are ord nary a##et# be!a"#e the #eller # en(a(ed n the b"# ne## of b"y n( and #ell n( #hare# of #to!& )dealer n #e!"r t e#3$ the tran#a!t on #hall be #"b=e!t to n!l"# on n the n!ome tax ret"rn depend n( on !erta n ! r!"m#tan!e#. See d #!"## on on tax treatment of redempt on of #hare# of #o!& where the #hare# that are redeemed are ord nary a##et# and not l #ted and traded n the #to!& ex!han(e. Tax trea t m e n t o& re#e m p tio n o& $hare$ o& $to 3 where the $hare$ that are re#ee m e # are or#inary a$$et$ an# not !i$te# an# tra#e# in the $to 3 ex han- e . Whether the tran#a!t on # to be #"b=e!t to n!ome taxat on or not wo"ld be dependent "pon the nat"re and !hara!ter of the #hare# of #to!& that are the #"b=e!t of redempt on. ,f the #o"r!e # the or ( nal !ap tal #"b#!r pt on# "pon the e#tabl #hment of the !orporat on or from n t al !ap tal n%e#tment n an ex #t n( enterpr #e$ the redempt on to the !on!"rrent %al"e of a!5" # t on # not #"b=e!t to n!ome taxat on$ a# t # not n!ome b"t a mere ret"rn of !ap tal. 4n the !ontrary$ f the redeemed #hare# are from #to!& d % dend de!larat on# other than a# n t al !ap tal n%e#tment$ the pro!eed# of the redempt on # add t onal wealth$ for t # not merely a ret"rn of !ap tal b"t a (a n therefrom. The te#t for taxab l ty therefor$ a# wo"ld ma&e the redempt on Be##ent ally e5" %alent to the d #tr b"t on of a taxable d % dend$C # whether the redempt on re#"lted nto a flow of wealth. ,f no wealth # real <ed from the redempt on$ there may not be a d % dend e5" %alen!e treatment. )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ G.R. No. 782901$ Ian"ary -8$ 7...3 /D. What earnin-$% are imprope r!y a "m"!a t e #

SUGGESTED ANSWER: The#e are the earn n(# or prof t# of a !orporat on wh !h are perm tted to a!!"m"late n#tead of be n( d % ded by a !orporat on to t# #hareholder# for the p"rpo#e of a%o d n( the n!ome tax w th re#pe!t to t# #hareholder# or the #hareholder# of another !orporat on. ,f the n!ome were d % ded and d #tr b"ted$ they wo"ld ha%e been taxed a# d % dend#. N4TES AND +466ENTS: a. ,mproperly a "m"!a t e # earnin-$ tax . ,n add t on to other n!ome taxe#$ there #

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mpo#ed for ea!h taxable year on the mproperly a!!"m"lated taxable n!ome of ea!h !orporat on$ an mproperly a!!"m"lated earn n(# tax e5"al to ten per!ent of the mproperly a!!"m"lated taxable n!ome. PSe!. -. )A3$ N,R+ of 7..0Q b. +orporat on# !ia,!e &or the improp e r! y a "m"! a t e # earnin-$ tax . E%ery !orporat on formed or a%a led for the p"rpo#e of a%o d n( n!ome tax w th re#pe!t to t# #hareholder# or the #hareholder# of another !orporat on$ by perm tt n( earn n(# and prof t# to a!!"m"late n#tead of be n( d % ded or d #tr b"ted. PSe!. -. )B3 )73$ N,R+ of 7..0Q ! . Corporati o n$ exem p t &rom the improp e r! y a " m"! a t e # earnin-$ tax F 73 P"bl !lyD held !orporat on#E -3 Ban&# and other nonban& f nan! al ntermed ar e#E and /3 ,n#"ran!e !ompan e#. PSe!. -. )B3 )-3$ N,R+ of 7..0Q d. E'i#en e #eter mi n a t i ' e o& p"rpo$e to a'oi# tax "pon $hareho!#e r$ . The fa!t that the earn n(# or prof t# of a !orporat on are perm t ted to a!!"m"lated beyond the rea#onable need# of the b"# ne## #hall be determ nat %e of the p"rpo#e to a%o d the tax "pon t# #hareholder# or member# "nle## the !orporat on$ by !lear preponderan!e of e% den!e$ #hall pro%e the !ontrary. PSe!. -. )+3 )-3$ N,R+ of 7..0Q Rea$ona,! e nee#$ o& ,"$ine$$ n!l"de# the rea#onably ant ! pated need# of the b"# ne##. PSe!. -. )E3$ N,R+ of 7..0Q ,n order to determ ne whether prof t# are a!!"m"lated for the rea#onable need# of the b"# ne## to a%o d the #"rtax "pon #hareholder#$ t m"#t be #hown that the !ontroll n( ntent on of the taxpayer # man fe#ted at the t me of the a!!"m"lat on$ not ntent on# de!lared #"b#e5"ently$ wh !h are mere aftertho"(ht#. :"rthermore$ the a!!"m"lated prof t# m"#t be "#ed w th n a rea#onable t me after the !lo#e of the taxable year. )+yanam d Ph l pp ne#$ ,n!. %. +o"rt of Appeal#$ et al.$ G.R. No. 782810$ prom. Ian"ary -8$ -8883 e. Te$t$ to #eter m i n e 6"$ti&ie# a "m"! a ti o n not $",6e t to tax. 73 Imme #i a y Te$t. BRea#onable need# of the b"# ne##C mean# the mmed ate need# of the b"# ne##$ and t wa# (enerally held that f the !orporat on d d not pro%e an mmed ate need for the a!!"m"lat on of the earn n(# and prof t#$ the a!!"m"lat on wa# not for the rea#onable need# of the b"# ne## and the penalty tax wo"ld apply. )+yanam d Ph l pp ne#$ ,n!. %. +o"rt of Appeal#$ et al.$ G.R. No. 782810$ prom. Ian"ary -8$ -888 ! t n( 6an la W ne 6er!hant#$ ,n!. %. +omm ## oner of ,nternal Re%en"e n t"rn ! t n( 6erten#3 -3 =) to 1> R"!e. The rat o of !"rrent a##et# to !"rrent l ab l t e# and the adopt on of the nd"#try #tandard. The rat o of !"rrent a##et# to !"rrent l ab l t e# # "#ed to determ ne the #"ff ! en!y of wor& n( !ap tal. ,deally$ the wor& n( !ap tal #ho"ld e5"al the !"rrent l ab l t e# and there m"#t be - "n t# of !"rrent a##et# for e%ery "n t of !"rrent l ab l ty$ hen!e the #oD!alled B- to 7C R"le. ) Ibid. 3 /3 =Ear# ah! > Form"!a . Allow# retent on a# wor& n( !ap tal re#er%e$ #"ff ! ent amo"nt# of l 5" d a##et# to !arry the !ompany thro"(h one operat n( !y!le. The form"la re5" re# an exam nat on of whether the taxpayer ha# #"ff ! ent l 5" d a##et# to pay all t# !"rrent l ab l t e# and any extraord nary expen#e# rea#onably ant ! pated$ pl"# eno"(h to operate the b"# ne## d"r n( one operat n( !y!le. Operatin - y !e # the per od of t me t ta&e# to !on%ert !a#h nto raw mater al#$ raw mater al# nto n%entory$ and n%entory nto #ale#$ n!l"d n( the t me t ta&e# to !olle!t payment for the #ale#. There are %ar at on# n the appl !at on of the BBardahl C form"la$ #"!h a# a%era(e operat n( !y!le or pea& o perat n( !y!le. ,n t me# when there # no re!"rren!e of a b"# ne## !y!le$ the wor& n( !ap tal need# !annnot be pred !ted w th a!!"ra!y. Altho"(h the BBardahlC form"la # wellD e#tabl #hed and ro"t nely appl ed by the !o"rt#$ t # not a pre! #e r"le. ,t # "#ed only for adm n #trat %e !on%en en!e. ) Ibid. 3 8C. What i$ mean t ,y the a a o"ntin-% r"a! metho# o&

SUGGESTED ANSWER: ,n!ome # reportable when all the e%ent# ha%e o!!"rred that f x the taxpayer'# r (ht to re!e %e the n!ome$ and the amo"nt !an be determ ned w th rea#onable a!!"ra!y. Th"# t # the r (ht to re!e %e n!ome$ and not the a!t"al re!e pt$ that determ ne# when to n!l"de the amo"nt n (ro## n!ome. +on#e5"ently$ the follow n( are the re5" # te#: 73 That the r (ht to re!e %e the n!ome m"#t be %al d$ "n!ond t onal and enfor!eable$ .e. not !ont n(ent "pon f"t"re t meE -3 The amo"nt m"#t be rea#onably #"#!ept ble of a!!"rate e#t mateE and /3 There m"#t be a rea#onable expe!tat on that the amo"nt w ll be pa d n d"e !o"r#e. ): l p na# : ber +orporat on %. +o"rt of Appeal#$ et al.$ G.R. No#. 772F.2 N 7-F/00$ prom. 4!tober 7-$ 7...3 N4TES AND +466ENTS: a. The two ;)< prin ipa! a o"ntinmetho#$ &or re o-nition o& in ome are the 73 a!!r"al methodE and the )-3 !a#h method.

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Under the a$h meth o # n!ome # to be !on#tr"ed a# n!ome for tax p"rpo#e# only "pon a!t"al re!e pt of the !a#h payment. ,t # al#o referred to a# the B!a#h re!e pt# and d #b"r#ement# method C be!a"#e both the re!e pt and d #b"r#ement# are !on# dered. Th"#$ n!ome # re!o(n <ed only "pon a!t"al re!e pt of the !a#h payment b"t no ded"!t on# are allowed from the !a#h n!ome "nle## a!t"ally d #b"r#ed thro"(h an a!t"al payment n !a#h. Example of the two method#. *eon the owner of a b" ld n( lea#ed the #ame to 6 ("el.for P98$888.88 monthly$ payable e%ery 7 #t day of the month. ,f *eon "#e# the a!!r"al method of n!ome re!o(n t on$ he wo"ld ha%e an n!ome of P98$888.88 on the 7 #t day of ea!h month rre#pe!t %e of whether he re!e %e# the rent from 6 ("el. 4n the other hand$ f *eon "#e# the !a#h method$ he wo"ld ha%e n!ome only when he phy# !ally re!e %e# the !a#h from 6 ("el. b. 4ther meth o #$ o& a o"nti n - F 73 Comp!e ti on o& Contra t ,a$i$ . Under th # method$ (ro## n!ome # to be reported n the taxable year n wh !h the !ontra!t # f"lly !ompleted and a!!epted by the !ontra!tee f the taxpayer ele!ted t a# a !on# #tent pra!t !e to treat #"!h n!ome$ pro% ded that #"!h method !learly refle!t# the net n!ome. Th # method # appl !able to !ontra!tor# n the !on#tr"!t on of b" ld n($ n#tallat on of e5" pment and other f xed a##et#$ or other !on#tr"!t on wor& !o%er n( a per od n ex!e## of one year. Th # # not re!o(n <ed "nder the N,R+ of 7..0. -3 Per en t a - e o& omp!etion ,a$i$ . /3 In$ta!! m e n t ,a$i$ wh !h # a method !on# dered when !olle!t on# extend o%er relat %ely lon( per od# of t me and there # a #tron( po## b l ty that f"ll !olle!t on w ll not be made. A# !"#tomer# ma&e n#tallment payment#$ the #eller re!o(n <e# the (ro## prof t on #ale n proport on to the !a#h !olle!ted. )+hapter ,,$ A!!o"nt n( 6ethod#$ >andboo& on A"d t Pro!ed"re# and Te!hn 5"e# M ;ol"me ,$ Re% # on -888$ pp. /DF3 81. What i$ a &rin- e ,ene&i t$ tax% SUGGESTED ANSWER: A f nal w thhold n( tax mpo#ed on the (ro##edD "p monetary %al"e of fr n(e benef t# f"rn #hed$ (ranted or pa d by the employer to the employee$ ex!ept ran& and f le employee#. )7 #t par.$ Se!. -.// PAQ$ Re%. Re(#. No. /D.23 8). What are on$i#ere # a$ &rin- e ,ene&i t$ &or p"rpo$e$ o& taxati o n% SUGGESTED ANSWER: :or p"rpo#e# of taxat on$ fr n(e benef t mean# any (ood$ #er% !e$ or other benef t f"rn #hed or (ranted n !a#h or n & nd by an employer to an nd % d"al employee )ex!ept ran& and f le employee#3$ #"!h a# b"t not l m ted to: a. >o"# n(E b. Expen#e a!!o"ntE !. ;eh !le of any & ndE d. >o"#ehold per#onnel$ #"!h a# ma d$ dr %er and other#E e. ,ntere#t on loan at le## than mar&et rate to the extent of the d fferen!e between the mar&et rate and a!t"al rate (rantedE f. 6ember#h p fee#$ d"e# and other expen#e# borne by the employer for the employee n #o! al and athlet ! !l"b# or other # m lar or(an <at on#E (. Expen#e# for fore (n tra%elE h. >ol day and %a!at on expen#e#E . Ed"!at onal a## #tan!e to the employee or h # dependent#E and =. * fe or health n#"ran!e and other nonD l fe n#"ran!e prem "m# or # m lar amo"nt# n ex!e## of what the law allow#. PSe!. // )B3$ N,R+ of 7..0E 7 #t par.$ Se!. -.// )B3$ Re%. Re(#. No. /D .2Q 8+. What are the 3in#$ o& &rin-e ,ene&it$ that are not $",6e t to the &rin-e ,ene&i t$ tax% SUGGESTED ANSWER: a. When the fr n(e benef t # re5" red by the nat"re of$ or ne!e##ary to the trade$ b"# ne## or profe## on of the employerE or b. When the fr n(e benef t # for the !on%en en!e or ad%anta(e of the employer. PSe!. /-)A3$ N,R+ of 7..0E 7 #t par.$ Se!. -.// )A3$ Re%. Re(#. No. /D.2Q !. :r n(e benef t# wh !h are a"thor <ed and exempted from n!ome tax "nder the Tax +ode or "nder any #pe! al lawE d. +ontr b"t on# of the employer for the benef t of the employee to ret rement$ n#"ran!e and ho#p tal <at on benef t plan#E e. Benef t# ( %en to the ran& and f le employee#$ whether (ranted "nder a !olle!t %e bar(a n n( a(reement or notE and f. De minimis benef t# a# def ned n the r"le# and re("lat on# to be prom"l(ated by the Se!retary of : nan!e "pon re!ommendat on of the +omm ## oner of ,nternal Re%en"e. P7 #t par.$ Se!. /- )+3$ N,R+ of 7..0E Se!. -.// )+3$ Re%. Re(#. No. /D.2Q 8.. What are de minimis ,ene&i t$% SUGGESTED ANSWER: :a! l t e# and pr % le(e# )#"!h a# enterta nment$ med !al #er% !e#$ or #oD!alled B!o"rte#y d #!o"nt#C on p"r!ha#e#3$ f"rn #hed or offered by an employer to h # employee#. They are not !on# dered a# !ompen#at on #"b=e!t to n!ome tax and !on#e5"ently to w thhold n( tax$

29
f #"!h fa! l t e# are offered or f"rn #hed by the employer merely a# a mean# of promot n( the health$ (oodw ll$ !ontent ment$ or eff ! en!y of h # employee#. PSe!. -.02$7 )A3 )/3$ Re%. Re(#. -D.2 a# amended by Re%. Re(#. No. 2D-888Q 8/. What are on$i#ere # a$ de minimis ,ene&i t$ not $",6e t to withho!#i n- tax on omp en$a tio n in ome o& ,oth man a- e ri a! an# ran3 an# &i!e emp!oye e$ % SUGGESTED ANSWER: The follow n( #hall be !on# dered a# de minimis benef t# not #"b=e!t to w thhold n( tax on !ompen#at on n!ome of both mana(er al and ran& and f le employee#: a. 6onet <ed "n"#ed %a!at on lea%e !red t# of employee# not ex!eed n( ten )783 day# d"r n( the yearE b. 6ed !al !a#h allowan!e to dependent# of employee# not ex!eed n( P098.88 per employee per #eme#ter or P7-9 per monthE !. R !e #"b# d y of P7$888.88 or one )73 #a!& of 98D &(. r !e per month amo"nt n( to not more than P7$888.88E d. Un form# and !loth n( allowan!e not ex!eed n( P/$888.88 per ann"mE e. A!t"al yearly med !al benef t# not ex!eed n( P78$888.88 per ann"mE f. *a"ndry allowan!e not ex!eed n( P/88 per monthE (. Employee# a!h e%ement award#$ e.(. for len(th of #er% !e or #afety a!h e%ement$ wh !h m"#t be n the form of a tan( ble per#ona property other than !a#h or ( ft !ert f !ate$ w th an ann"al monetary %al"e not ex!eed n( P78$888.88 re!e %ed by an employee "nder an e#tabl #hed wr tten plan wh !h doe# not d #!r m nate n fa%or of h (hly pa d employee#E h. G ft# ( %en d"r n( +hr #tma# and ma=or ann %er#ary !elebrat on# not ex!eed n( P9$888 per employee per ann"mE . :lower#$ fr" t#$ boo&#$ or # m lar tem# ( %en to employee# "nder #pe! al ! r!"m#tan!e#$ e.(. on a!!o"nt of llne##$ marr a(e$ b rth of a baby$ et!.E and =. Da ly meal allowan!e for o%ert me wor& not ex!eed n( twenty f %e per!ent )-9J3 of the ba# ! m n m"m wa(e. The amo"nt of de minimis benef t# !onform n( to the !e l n( here n pre#!r bed #hall not be !on# dered n determ n n( the P/8$888 !e l n( of Bother benef t#C pro% ded "nder Se!t on /- )B3)03)e3 of the +ode. >owe%er$ f the employer pay# more than the !e l n( pre#!r bed by the#e re("lat on#$ the ex!e## #hall be taxable to the employee re!e % n( the benef t# only f #"!h ex!e## # beyond the P/8$888.88 !e l n($ pro% ded$ f"rther$ that any amo"nt ( %en by the employer a# benef t# to t# employee#$ whether !la## f ed a# de minimis benef t# or fr n(e benef t#$ #hall !on#t t"te a# ded"!t ble expen#e "pon #"!h employer. PSe!. -.02.7 )A3 )/3$ Re%. Re(#. -D.2 a# amended by Re%. Re(#. No. 2D-888Q N4TES AND +466ENTS: The abo%e pro% # on of Re%. Re(#. No. 2D -888 l &ew #e mod f ed Se!. -.// )+3$ Re%. Re(#. No. /D.2$ wh !h en"merate# the de minimis benef t# exempt from fr n(e benef t# taxe#. 88. The &o!!owin- were the e'ent$ an# tran$a tion$ o& Ro$a!in#a4 a re$i#ent a!ien4 in )CCCF a. Re ei'e# P9.C mi!!ion a$ ommi$$ion$ &or ,ein- the a-ent o& a tor Ai3ey an# a tre$$ Ae--y1 ,. Re ei'e# P).C mi!!ion a$ ,!a 3m ai! money &or not expo$in- the in#i$ retion$ o& mo'ie a tre$$ A!ma1 . So!# her re$i#en tia! on#omini" m at Aya!a A'en"e &or P+C mi!!ion. She ,o"-ht the $ame in 1DD9 &or on!y P1C mi!!ion1 #. Aa#e a =3i!!in- > at the $to 3 mar3e t when $he $o!# &or P/.C mi!!ion Prim"$4 In . $hare$ whi h were not tra#e # in the $to 3 ex han- e. She ,o"-ht the $hare$ in 1DG/ &or on!y P/CC4 C C C . C C 1 e. *"rin- her ,irth# ay 4 Ar$. Wate r Li!y4 the &amo"$ pro#" er -a'e her a ten arat #iamon# rin- worth P9/C4 C C C . C C 1 &. Re ei'e# P+8C4C C C . C C ann"a! $a!ary a$ P.R.O. o& Re-a! Pro#" tion$1 -. Awar# e# P1./ mi!!ion #ama - e$ &rom the !i,e! $"it $he &i!e# a-ain$t a tre$$ Nata!ia1 h. Wa$ $ent ,y Re-a! Pro#" tion$ to 5o!!ywoo#4 I.S.A. to o,$er'e mo'ie ma3inat 'ario"$ $t"#io$. She tra'e!e # at Re-a! ($ expen$e thro"-h Fir$t C!a$$ Air&ar e4 an# Re-a! $pent ISP/C C. C C a #ay &or her hote! an# a om mo # a tio n$ whi h were a!! reim," r$ e# to Ro$a!in#a1 i. Re ei'e# P9/C4C C C . C C &rom Re-a! Pro#" tion$ a$ $epara tion pay when $he wa$ termin a t e # a$ the re$"!t o& her in'o!'e m e n t in a we!! p",!i i@e# $ an#a!1 6. Ipon nomina tion o& her &rien#4 Ro$a!in#a wa$ awar# e # the ,e$t P.R.O. o& the year with the a ompa nyintrophy worth P/C4CC C . C C an# a$h pri e o& P1CC4C C C . She wa$ re0"ire# to #e!i'er at !ea$t 1) !e t"re$ ,e&ore P.R.O.$1 3. Won a ,ran# new Aer e#e$ Een@ C8CC: worth P84/CC 4 C C C . C C #"rin- a ra&&!e on#" t e# ,y a we!!2 3nown $"per m a r 3 e t 1 !. P)/C4 C C C . C C pro ee#$ o& a ,o"n in- he 3 $he i$$"e# to her &rien# A$. Cri$ Ty4 who in$tit" t e # a rimina! a$e &or 'io!ation o& E.P. E!-. ))1 an# m. P/CC4C C C . C C whi h on$tit" t e # the $a!e$ pro ee#$ o& the 6ewe!ry $he $to!e &rom mo'ie pro#" er4 A!in- Pepa. 1< What item$ are to ,e in !"#e# a$ part o& Ro$a!in#a(7$ ompen$a tion in ome4 or in ome &rom $e!&2 emp!oy m e n t% Exp!ain.

30
)< Why were the item$ yo" ex !"# e# not in !"#i,!e a$ part o& Ro$a!in#a($ omp en$a tio n in ome or in ome &rom $e!&2 emp!oy m e n t% Exp!ain. part of the money wh !h r (htf"lly belon(# to the % !t m. ,n U.S. %. *o< a$ 78F$ 78F :. S"pp. )D.+.I.D.N.?. 7.9-3$ t wa# held that the money or other pro!eed# of the #ale or other d #po# t on of #tolen property # #"b=e!t to n!ome tax be!a"#e the felon ha# an obl (at on to ret"rn the property ta&en. The pro!eed# were not the property ta&en. The pro!eed# may not e%en be the e5" %alent of the property ta&en. /3 P7.9 m ll on dama(e#$ be!a"#e they are not !ompen#at on ar # n( from "nder Se!. /- )B3 PFQ of the N,R+ of 7..0. The#e are not dama(e# wh !h aro#e from per#onal n="r e#$ hen!e #"b=e!t to n!ome tax. F3 The P98$888.88 pr <e a# Be#t P.R.4. Wh le t # tr"e that Ro#al nda wa# #ele!ted w tho"t any a!t on on her part to enter the !onte#t or pro!eed n($ #he # re5" red to del %er 79 le!t"re#$ wh !h # !on# dered a# #"b#tant al f"t"re #er% !e# a# a !ond t on to re!e % n( the pr <e. )Se!. /- PBQ T0 U )!3 T U of the N,R+ of 7..03 b. The follow n( are the ex!l"ded tem# and rea#on# for the r ex!l"# on: 73 P/8 m ll on pro!eed# from the #ale of her re# dent al !ondom n "m be!a"#e the #ame # #"b=e!t to f nal taxe# n the form pre#"med !ap tal (a n# taxe# from the #ale of real property "nder Se!. -F )D3 of the N,R+ of 7..03. -3 The (a n# from the #ale of Pr m"# #hare# be!a"#e the (a n# are #"b=e!t to f nal taxe# for the !ap tal (a n# from #ale# of #to!& not traded n the #to!& ex!han(e "nder Se!. -F )+3 of the N,R+ of 7..0. /3 The P098$888.88 d amond r n( be!a"#e t # a ( ft ex!l"ded from (ro## n!ome )Se!. /- PBQ T/ U of the N,R+ of 7..03 ,t # #"b=e!t to ( ft taxe# "nder Se!. .2 of the N,R+ of 7..0. The ( % n( of the ( ft wa# a p"re a!t of l beral ty and not n !on# derat on of any #er% !e. F3 P098$888.88 #eparat on pay a# Ro#al nda'# #er% !e# were term nated for a !a"#e beyond her !ontrol n a!!ordan!e w th Se!. /- )B3 P1Q Tb U of the N,R+ of 7..0$ hen!e ex!l"ded from (ro## n!ome. 93 The P1$988$888.88 %al"e of the 6er!ede# Ben< #he won be!a"#e t # #"b=e!t to a f nal tax of -8J on pa## %e n!ome

SUGGESTED ANSWER: a. The follow n( are the tem# to be n!l"ded a# part of Ro#al nda'# !ompen#at on n!ome be!a"#e they were der %ed from employerD employee relat on#h p from Re(al Prod"!t on#: 7.3 The P/18$888.88 ann"al #alary a# P.R.4. of Re(al Prod"!t on#. -.3 The !o#t of the : r#t +la## A rfare T !&et ex!eed n( the !o#t of a b"# ne## !la## t !&et for the tra%el to >ollywood n p"r#" t by Ro#al nda of Re(alG# trade and b"# ne## # n!l"d ble a# part of Ro#al nda'# !ompen#at on n!ome. )No. /$ /.7$ Re%en"e A"d t 6emorand"m No. 7D 203. /.3 The amo"nt re mb"r#ed to Ro#al nda for meal# and lod( n( d"r n( her #tay n the U.S.A. ex!eed n( U.S.O798.88 per day or n the problem U.S.O/98.88 per day form# part of Ro#al nda'# !ompen#at on n!ome. )No. /$ /.-$ ,b d.3 The follow n( are the tem# to be n!l"ded a# part of Ro#al nda'# n!ome from #elfD employment en(a(ed n the b"# ne## of be n( an a(ent for a!tor# and a!tre##e#: 73 The P0.8 m ll on !omm ## on# for be n( the a(ent of a!tor 6 &ey and a!tre## 6e((yE -3 The P-.8 m ll on bla!&ma l money # !on# dered a# other n!ome !om n( from #o"r!e# other than tho#e ment oned n Se!. /)A3 of Re%en"e Re("lat on No. -D./ a# well a# n!ome from whate%er #o"r!e der %ed. )Se!t on /- PAQ$ N,R+ of 7..03 The #ame # tr"e w th the P-98$888.88 pro!eed# of the bo"n! n( !he!& and the P988$888.88 #ale# pro!eed# of the =ewelry #he #tole. Th"#$ all n!ome#$ lle(al or le(al$ are n!l"ded. :or Ph l pp ne tax p"rpo#e# all n!ome not expre##ly ex!l"ded or exempted from the !la## of taxable n!ome$ rre#pe!t %e of the %ol"ntary or n%ol"ntary a!t on of the taxpayer n prod"! n( the n!ome are #"b=e!t to n!ome taxat on. N4TES AND +466ENTS: The r"le # d fferent n the Un ted State#. ,n +omm ## oner of ,nternal Re%en"e %. W l!ox$ -21 U.S. F70$ the U.S. S"preme +o"rt held that a #w ndler$ embe<<ler$ th ef or robber ha# an "n5"al f ed d"ty and obl (at on to ret"rn the money. to !olle!t a tax wo"ld ( %e the (o%ernment an "n="#t f ed preferen!e a# to the

31
"nder the pro% # on# of Se!. -F )B3 P7Q of the N,R+ of 7..0. 89. In 1DDG4 Aan- Boe Li,y a&ter thirty ;+C< year$ experi en e a$ a me hani &or Aer e# e$ Een@ #e i#e# to e$ta,!i$h hi$ own a"to repair $hop with two o& hi$ &orme r $"per'i$or$ a$ hi$ partn e r$. For the year )CCC4 the a"to repai r $hop in "rre# the &o!!owin-F a. A#'erti$in- expen$e$1 ,. *onation$ to the Samah an Ri@a!i$ta4 a non2 pro&i t4 non2 $to 3 re!i-io"$ orpora tio n whi h 'ener a t e $ a$ it$ Go#4 the hero Bo$e Ri@a!1 . Taxe$ pai# on the import a tion o& a"to repair e0"ip m e n t 1 #. Lo$$e$ when the a"to repai r $hop wa$ ,"rne#1 e. In$"ran e premi" m$ on the !i&e o& Aan- Boe Li,y paya,! e to the partn e r$hip1 &. Sa!arie$ o& me hani $. Aan- Boe an# hi$ partn e r$ now a$3$ yo" how their partn e r$hi p in ome $ha!! ,e taxe# in the !i-ht o& the pro'i$ion$ o& the NIRC o& 1DD9. What a#'i$e $ha!! yo" -i'e% SUGGESTED ANSWER: 6an( Ioe and h # partner# #hall be taxed l &e a !orporat on. A# def ned "nder Se!. -- )B3$ of the N,R+ of 7..0$ a !orporat on n!l"de# partner#h p# no matter how !reated or or(an <ed$ b"t doe# not n!l"de (eneral profe## onal partner#h p. S n!e what wa# formed by 6an( Ioe and h # partner# wa# a b"# ne## partner#h p$ they #ho"ld be !on# dered a# ha% n( formed a !orporat on for tax p"rpo#e#. S n!e the partner#h p wa# or(an <ed and ex #t n( "nder Ph l pp ne law$ t# taxable n!ome #hall be #"b=e!t to the red"!ed rate of /-J on taxable n!ome effe!t %e Ian"ary 7$ -888. )Se!. -0 PAQ$ N,R+ of 7..03 To arr %e at t# taxable n!ome$ the partner#h p # allowed to "#e the allowed tem <ed ded"!t on "nder Se!. /F al#o of the N,R+ of 7..0. All of the abo%e expen#e#$ ex!ept the n#"ran!e prem "m are all ded"!t ble. The partner#h p #hall not be #"b=e!t to the m n m"m !orporate n!ome tax on dome#t ! !orporat on#$ be!a"#e t # only on t# #e!ond taxable year mmed ately follow n( the !ommen!ement of t# b"# ne## operat on#. The m n m"m !orporate n!ome tax # !omp"ted only be( nn n( the fo"rth taxable year mmed ately follow n( the year the taxpayer !orporat on !ommen!ed b"# ne##. )Se!. -0 PEQ T7 U $ N,R+ of 7..03 Sho"ld the partner#h p d #tr b"te t# net n!ome after tax to 6an( Ioe and h # partner#h p#$ the r nd % d"al #hare# n the d #tr b"t on #hall be #"b=e!t to tax on d % dend#. )Se!. -F PBQ T- U $ N,R+ of 7..03 8G. A&ter ten ;1C< year$ experi e n e wor3ina$ the Genera! Aan a- e r o& a &a$t&oo# hain4 Wen#y #e i#e# to ,e ome $e!& emp!oye# an# opene# an eate ry whi h $he a!!e# =A W e n # y($ Pi@@a. > She re-i$ter e # the eate ry a$ a $in-!e proprie tor$hip. In )CCC4 Wen#y ha# the &o!!owinin ome item$F a. Gro$$ re eipt$ &rom operation o& =A W e n # y($ Pi@@a> amo"ntin- to P/ mi!!ion. ,. Pro ee#$ &rom the $a!e o& her ho"$e an# !ot amo"n tin- to P+ mi!!ion whi h $he in'e$t e# in =A W e n # y($ Pi@@a>. . Ca$h pri@e o& P1/4C C C whi h $he won in a $in-in- onte$t. #. Ca$h #i'i#en#$ o& P+/4C C C . C C whi h $he re ei'e# &rom AERALCO4 a #ome$ti orpora tion. e. Li&e in$"ran e pro ee#$ whi h $he re ei'e# &rom the #eath o& her pet #oamo"n tin- to P1/4C C C . C C . &. P)/4CC C . C C a$h pri@e &or ,ein- the Ee$t Pi@@a Par!or in Aetro Aani!a. The awar# wa$ ma#e ,y an in#epen# e n t ,o#y ompri$e# o& $e!e te # pi@@a par!or opera to r$ whi h4 witho" t the 3now!e#- e o& pi@@a par!or operato r$4 went aro"n# Aetro Aani!a $amp!inthe &oo#4 ratinthe &a i!itie$ an# per$onne!. There were no entrie$ to the onte$t a$ the winner$ were ho$en ,y the in#epen# e n t ,o#y. -. Two ro"n# trip ti 3et$ &or the I.S.A. 'a!"e# at I.S. P+4/C C. C C with I.S. P/4CC C. C C po 3et money won &rom the ann"a! ra&&!e o& her #epo$itory ,an3. h. P./4CC C . C C inter e$ t earne# &rom her time #epo$it with a !o a! ,an3. I. P.C4C C C . C C #owry &rom her pro$pe ti' e mother 2 in2 !aw4 an Ameri an !i'in- in New Nor34 I.S.A.4 a$ Wen#y wa$ -ettin- marrie# in 1DDD. 6. P/C4CC C . C C net pro&it &rom the $a!e o& Prim"$ Corporation $to 3$ whi h were not tra#e # at the Phi!. Sto 3 Ex han-e. Ipon the other han#4 Wen#y ha# the &o!!owin- #i$,"r$e m e n t $F a. P/C4CC C . C C !e-a! &ee$ &or the or-ani@a tion o& =A W e n # y($ Pi@@a1> ,. P1)C4C C C . C C &or ra#io an# TH time to a#'erti$e =A W e n # y ($ Pi@@a1> . P)/4CC C . C C a$ ontri,"tion to the Fir$t La#y($ =*o tor &or the Poor> Pro-ra m$1 #. P+/4C C C . C C worth o& &oo# whi h Wen#y per$ona!!y #i$tri,"t e # to &ami!ie$ #i$p!a e# ,y !ahar in Pamp an - a 4 a a!ami ty 2 $tri 3en area #e !are# ,y the Pre$i#en t1 e. P1C4C C C . C C #onation to her a!ma mate r4 the Ini'er$ity o& the Phi!ippine$1 &. P1/C4C C C . C C 'a!"e o& $poi!e# &oo# re$"!tin- &rom a ,rown2 o"t1 -. P)/4C C C . C C "$tom$ #"tie$ an# 'a!"e a##e# taxe$ on the import a t ion o& &oo# heate r$1

32
h. P1)4 CC C . C C pai# to the in#ep en # e n t CPA who a"#ite# A W en #y ($ Eoo3$ o& A o"n t$1 I. P+/4CC C . C C me#i a! expen$e$ &or one o& her waiter$ who wa$ in6"re# in a 6o, re!ate # a i#en t1 6. PG/4C C C . C C pai# a$ inter e$ t to her $i$ter who !ent her P/CC4 C C C . C C a$ part o& the initia! apita!i@a tio n &or A W en # y($1 3. P+/4 CC C . C C inter e$ t payme n t$ &or the ar Wen#y ,o"-h t on in$ta!! m e n t ,a$i$ whi h ar wa$ ,o"-h t &ro m a ar ompany ,"t &inan e# ,y CITNTRIST4 a ,an3 a"thori@e# to operat e ,y the Ean-3o Sentra! n- Pi!ipina$1 an# !. P1/C4 C C C . C C whi h Wen#y $pent in o,$er'in - tren #$ in the &a$t&oo# ,"$ine$$ in the Inite# State$ an# E"rope. a. Whi h o& the a,o'e in ome item$ $ho"!# ,e report e # ,y Wen#y on her )CCC In ome Tax Ret"rn% Exp!ain. ,. Whi h o& the a,o'e #i$,"r$e m e n t $ are proper!y #e#" ti ,! e in omp" tin - the taxa,! e in ome o& Wen#y% Exp!ain. SUGGESTED ANSWER: a. The follow n( are the n!ome tem# to be reported by Wendy n her -888 n!ome tax ret"rn: 73 P9 m ll on (ro## re!e pt# from operat on of 6!Wendy'# P <<a der %ed a# n!ome from #elfD employment "nder #e!. 7)7-3 Re%. Re(#. No. -D./. -3 P79$888.88 l fe n#"ran!e pro!eed# der %ed from the death of her do(. The tax mpo#ed on n!ome from #elfD employment # mpo#ed on n!ome re!e %ed from all #o"r!e# other than !ompen#at on n!ome$ !erta n pa## %e n!ome#$ !ap tal (a n# from the #ale# of #hare# of #to!& and !ap tal (a n# from #ale# of real property )Se!. /)A3 Re%. Re(#. -D./3 Wh le the P79$888.88 # #o"r!ed from l fe n#"ran!e pro!eed#$ the #ame # not ex!l"ded "nder Se!. /- )B3 P7Q of the N,R+ of 7..0 be!a"#e the ex!l"# on pre#"ppo#e# l fe n#"ran!e pro!eed# from the death of a per#on and not of an mal#. /3 P-9$888.88 !a#h pr <e a# the Be#t P <<a Parlor be!a"#e th # # a pr <e wa# not ( %en pr mar ly n re!o(n t on rel ( o"#$ !har table$ #! ent f !$ ed"!at onal$ art #t !$ l terary or ! % ! a!h e%ement b"t rather a# part of b"# ne## a!t % ty. ,t doe# not matter that 6!Wendy'# P <<a wa# #ele!ted w tho"t any a!t on on t# part to enter the !onte#t or pro!eed n( and 6!Wendy'# P <<a # not re5" red to render #"b#tant al f"t"re #er% !e# a# a !ond t on to re!e % n( the pr <e. )Se!. /- )B3 T0 U )!3$ N,R+ of 7..03 The follow n( tem# are ex!l"ded from her n!ome reportable n her n!ome tax ret"rn#: 73 P/ m ll on pro!eed# from #ale of ho"#e and lot a# #"b=e!t to !ap tal (a n# from #ale of real property wh !h # a f nal tax. )Se!. -F PDQ$ N,R+ of 7..03 -3 P/9$888.88 d % dend# from 6ERA*+4$ a dome#t ! !orporat on # #"b=e!t to a f nal tax on d % dend# "nder Se!. -F )B3 P-Q$ N,R+ of 7..0. /3 P79$888.88 won n a # n( n( !onte#t a# th # # a pr <e ex!eed n( P78$888.88 #"b=e!t to a f nal tax on pa## %e n!ome n a!!ordan!e w th Se!. -F )B3 P7Q$ N,R+ of 7..0. F3 ;al"e of the t !&et# and po!&et money won from the ann"al raffle of Wendy'# Ban& for the #ame rea#on a# abo%e. 93 PF9$888.88 ntere#t n!ome for the #ame rea#on a# abo%e. 13 Net prof t from #ale of Pr m"# #hare# a# the#e are #"b=e!t to f nal tax on the #ale# of #hare# of #to!& not traded n the #to!& ex!han(e "nder Se!. -F )+3 of the N,R+ of 7..0. 03 PF8$888.88 dowry be!a"#e t # a ( ft. )Se!. /- PBQ T/ U $ N,R+ of 7..03 b. 4nly the P98$888.88 donat on to the Un %er# ty of the Ph l pp ne# # allowed to be ded"!ted from Wendy'# n!ome from #elfD employment to arr %e at her taxable n!ome. Th # # #o$ be!a"#e t # a donat on to the (o%ernment "nder Se!. /F )>3 P-Q Ta U $ N,R+ of 7..0. The (o%ernment a# "#ed here refer# to the Go%ernment of the Ph l pp ne# or any of t# a(en! e# or pol t !al #"bd % # on# and n!l"de# amon( other# #tate !olle(e# and "n %er# t e#. The Un %er# ty of the Ph l pp ne# # a #tate "n %er# ty )Se!. /)b3)f3 Re%. Re(#. No. -D./3. !. The P98$888.88 le(al fee#$ the P7-8$888.88 ad%ert # n( expen#e# for rad o and T; t meE the P798$888.88 %al"e of the #po led food$ the P-9$888.88 taxe#$ the P7-$888.88 a"d t fee$ the P/9$888.88 med !al expen#e# and the P798$888.88 expen#e# to ob#er%e trend# n the fa#tfood b"# ne## are ded"!t ble a# ord nary and ne!e##ary expen#e# n!"rred n !onne!t on w th WendyG# trade and b"# ne##. The follow n( are not ded"!t ble from her (ro## n!ome: 7. P-9$888.88 !ontr b"t on to the BDo!tor for the Poor Pro(ram C be!a"#e t # a !ontr b"t on to a pr %ate or(an <at on and not to the (o%ernment. -. Wh le t # tr"e that the P/9$888.88 worth of food wa# d #tr b"ted to fam l e# n a !alam ty #tr !&en area de!lared by the Pre# dent$ the #ame wa# not donated to the (o%ernment or

33
to a rel ef or(an <at on d"ly a!!red ted a# #"!h by the Department of So! al Welfare and the B"rea" of ,nternal Re%en"e. The ntere#t pa d to her # #ter amo"nt n( to P29$888.88 be!a"#e her # #ter # a related party. The P/9$888.88 ntere#t payment# to +,T?TRUST be!a"#e there # no #how n( n the problem that t ha# been pa d or n!"rred n !onne!t on w th the !ond"!t of Wendy'# b"# ne##. wh !h m"#t be %al d and le(ally demandableE -3 The #ame m"#t be !onne!ted w th the taxpayer'# trade$ b"# ne## or pra!t !e of profe## onE /3 The #ame m"#t not be #"#ta ned n a tran#a!t on entered nto between related part e# a# en"merated "nder the Tax +ode of 7..0E F3 The #ame m"#t be a!t"ally !har(ed off the boo&# of a!!o"nt# of the taxpayer a# of the end of the taxable yearE and 93 The #ame m"#t be a!t"ally a#!erta ned to be worthle## and "n!olle!t ble a# of the end of the taxable year. )Se!. /$ Re%. Re(#. 9D..3 b. The follow n( #tep# m"#t be "nderta&en by the taxpayer to pro%ed that t exerted d l (ent effort# to !olle!t the debt#: 73 Send n( of #tatement# of a!!o"nt#E -3 Send n( of !olle!t on letter#E /3 G % n( the a!!o"nt to a lawyer for !olle!t onE F3 : l n( a !olle!t on !a#e n !o"rt. Wh le t # not re5" red to f le #" t$ a taxpayer # at lea#t expe!ted by the law to prod"!e rea#onable proof that the debt# are "n!olle!t ble altho"(h d l (ent effort# were exerted to !olle!t the #ame. )Ph l. Ref n n( +ompany$ et!.$ %. +o"rt of Appeal#$ -91 S+RA 1103 N4TES AND +466ENTS: Re!ate# partie$. a. 6ember# of the #ame fam ly. The fam ly of an nd % d"al #hall n!l"de only h # brother# and # #ter# )whether by the whole or halfD blood3$ #po"#e$ an!e#tor#$ and l neal de#!endant#E b. An nd % d"al and a !orporat on more than f fty per!ent )98J3 n %al"e of the o"t#tand n( #to!& of wh !h # owned$ d re!tly or nd re!tly$ by or for #"!h nd % d"alE !. Two !orporat on# more than f fty per!ent )98J3 n %al"e of the o"t#tand n( #to!& of wh !h # owned$ d re!tly or nd re!tly$ by or for the #ame nd % d"alE d. A (rantor and a f d"! ary of any tr"#tE or e. The f d"! ary of a tr"#t and the f d"! ary of another tr"#t f the #ame per#on # a (rantor w th re#pe!t to ea!h tr"#tE or f. A f d"! ary of a tr"#t and a benef ! ary of #"!h. PSe!. /1 )B3$ N,R+ of 7..0Q 9). What i$ mean t ,y the r"!e>% I!!"$tra t e ,y exam p! e. SUGGESTED ANSWER: =tax ,ene&it

/. F.

S n!e #he # a re# dent$ Wendy !o"ld$ n#tead of a%a l n( of the tem <ed ded"!t on#$ !hoo#e to a%a l of the opt onal #tandard ded"!t on of ten per!ent )78J3 of (ro## n!ome. 8D. What i$ on$i#ere # a$ o& $erio"$ ,"$ine$$ !o$$e$% on !"$i'e proo&

SUGGESTED ANSWER: : nan! al #tatement# a"d ted by n dependent external a"d tor# !on#t t"te the normal method of proof of the prof t and lo## performan!e of a !ompany. A !omparat %e #tatement of re%en"e and expen#e# for two year#$ by t#elf$ # not !on!l"# %e proof of #er o"# b"# ne## lo##e#. )Bo(oD 6edell n S"(ar!ane Planter# A##o! at on$ ,n!. %. N*R+$ et al.$ -.1 S+RA 782$ 7-73 N4TES AND +466ENTS: The abo%e def n t on wa# for a labor !a#e. :or tax p"rpo#e#$ b"# ne## lo##e# ha%e to be pro%en by more #tr n(ent r"le# than thro"(h mere a"d ted f nan! al #tatement#. The a"thor bel e%e# that$ there m"#t be proof to #"pport ea!h tran#a!t on wh !h !ontr b"ted to a ma=or extent to the b"# ne## lo##e#. 9C. What are ,a# #e,t$% SUGGESTED ANSWER: Tho#e debt# re#"lt n( from the worthle##ne## or "n!olle!t b l ty$ n whole or n part$ of amo"nt# d"e the taxpayer by other#$ ar # n( from money lent or from "n!olle!t ble amo"nt# of n!ome from (ood# #old or #er% !e# rendered. )Se!. -.a$ Re%. Re(#. 9D..3 91. Phi!ippin e Re&ininCompan y wa$ a$$e$$e# ,y the E"rea" o& Intern a! Re'en"e #e&i ien y taxe$ ,e a"$e o& #i$a!!ow an e$ o& =,a# #e,t$ > expen$e. What are the re0"ire m e n t $ ,e&ore =,a# #e,t$ > expen$e are a!!ow e# to ,e #e#" ti,! e % SUGGESTED ANSWER: a. ,n (eneral$ the re5" # te# for ded"!t b l ty of bad debt# are: 73 There m"#t be an ex #t n( ndebtedne## d"e to the taxpayer

34
The re!o%ery of bad debt# pre% o"#ly allowed a# ded"!t on n the pre!ed n( year or year# #hall be n!l"ded a# part of the taxpayer'# (ro## n!ome n the year of #"!h re!o%ery to the extent of the n!ome tax benef t of #a d ded"!t on. :or example: ,f n the year the taxpayer !la med ded"!t on of bad debt# wr ttenD off$ he real <ed a red"!t on of the n!ome tax d"e from h m on a!!o"nt of the #a d ded"!t on$ h # #"b#e5"ent re!o%ery thereof from h # debtor #hall be treated a# a re!e pt of real <ed taxable n!ome. +on%er#ely$ f the #a d taxpayer d d not benef t from the ded"!t on of the #a d bad debt wr ttenD off be!a"#e t d d not re#"lt to any red"!t on of h # n!ome tax n the year of #"!h ded"!t on ) .e. where the re#"lt of h # b"# ne## operat on wa# a net lo## e%en w tho"t ded"!t on of the bad debt# wr ttenD off3$ then h # #"b#e5"ent re!o%ery thereof #hall be treated a# a mere re!o%ery or a ret"rn of !ap tal$ hen!e$ not treated a# re!e pt of real <ed taxable n!ome. )Se!. F$ Re%. Re(#. 9D..3 9+. What i$ mean t ,y #epre ia ti on% What are the #i&&ere n t metho #$ o& #epre ia tion a!!ow e# "n#er the !aw% SUGGESTED ANSWER: a. Depre! at on # the (rad"al d m n"t on n the "#ef"l %al"e of tan( ble property re#"lt n( from ord nary wear and tear and from normal ob#ole#!en!e. The term # al#o appl ed to amort <at on of the %al"e of ntan( ble a##et# the "#e of wh !h n the trade or b"# ne## # def n tely l m ted n d"rat on. b. The method# of depre! at on are the follow n(: 73 Stra (ht l ne methodE -3 De!l n n( balan!e methodE /3 S"m of year# d ( t# methodE and F3 Any other method pre#!r bed by the Se!retary of : nan!e "pon the re!ommendat on of the +omm ## oner of ,nternal Re%en"e: a3 Apport onment to "n t# of prod"!t onE b3 >o"r# of prod"!t %e "#eE !3 Re%al"at on methodE and d3 # n& n( f"nd method. 9.. What are or#inary an# ne e$$ary expen$e$ &or tax p"rpo$e$% What are the re0"ire m e n t $ ,e&ore ,"$ine$$ expen$e$ may ,e #e#" te # &rom -ro$$ in ome% SUGGESTED ANSWER: a. 4rd nary expen#e# are tho#e wh !h are !ommon to n!"r n the trade or b"# ne## of the taxpayer W>,*E !ap tal expend t"re# are tho#e n!"rred to mpro%e a##et# and benef t# for more than one taxable year. 4rd nary expen#e# are "#"ally n!"rred d"r n( a taxable year and benef t# #"!h taxable year. Ne!e##ary expen#e# are tho#e wh !h are appropr ate or helpf"l to the b"# ne##. b. The follow n( are the re5" # te# for ded"!t b l ty of b"# ne## expen#e#: 73 +ompl an!e w th the b"# ne## te#t: a3 6"#t be ord nary and ne!e##aryE b3 6"#t be pa d or n!"rred w th n the taxable yearE !3 6"#t be pa d or n!"rred n !arry n( on a trade or b"# ne##. d3 6"#t not be br be#$ & !&ba!&# or other lle(al expend t"re# -3 +ompl an!e w th the #"b#tant at on te#t. Proof by e% den!e or re!ord# the ded"!t on# allowed by law n!l"d n( !ompl an!e w th the b"# ne## te#t.

9/. In )CCC4 Aara4 In .4 in "rre# P+/C4C C C . C C in or#er to promot e the $a!e o& it$ !ine o& !a#ie$ #re$$e$ whi h were $pe ia!!y #e$i-ne# an# tar-e t t e # the Ha!entine ($ #ay mar3 e t &or that year. It !i3ewi$e in "rre# P/CC4 C C C . C C to promot e it$ ima-e in the !o a! mar3e t an# another P)/C4C C C . C C to promo t e the $a!e o& it$ $hare$ o& $to 3 whi h it wa$ o&&erin- to the -enera! p",!i &or $a!e. It a$3$ yo"r a#'i e on how to trea t the$e a#'er ti$in- expen$e$. SUGGESTED ANSWER: a. ,t #ho"ld ded"!t the P/98$888.88 from t# -888 (ro## n!ome a# ord nary and ne!e##ary expen#e# be!a"#e the#e are ad%ert # n( expen#e# "#ed to #t m"late the !"rrent #ale of mer!hand #e. b. ,t #ho"ld not ded"!t the P988$888.88 ad%ert # n( expen#e from t# -888 (ro## n!ome a# the#e are ad%ert # n( expen#e# de# (ned to #t m"late the f"t"re #ale of mer!hand #e. The#e are expend t"re# n order to !reate or ma nta n #ome form of (oodw ll for 6ara$ ,n!.'# trade or b"# ne##. The#e expend t"re# are to be #pread o%er a rea#onable per od of t me be!a"#e they are !on# dered that a !ap tal a##et wh !h ha# a determ nable l fe ha# been a!5" red. )General :ood# PPh l#.Q$ ,n!. %. +omm ## oner of ,nternal Re%en"e$ +TA +a#e No. F/21$ prom. :ebr"ary 2$ 7..F3 !. ,t #ho"ld l &ew #e #pread the P-98$888.88 o%er a rea#onable per od of t me be!a"#e the#e are expen#e# n!"rred to !reate a fa%orable ma(e for the !orporat on to (enerate #ale# of t# #hare# of #to!&. The#e !on#t t"te !ap tal n%e#tment be!a"#e the part !"lar ad%ert # n( expen#e wa# n!"rred n relat on to the !ap tal a##et or e5" ty of the !ompany. )Atla# +on#ol dated 6 n n( and De%elopment +orporat on %. +omm ## oner of ,nternal Re%en"e$ 78- S+RA -F13

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98. Ai3ey Corpora tio n i$$"e# pre&er r e # $hare$ with the &o!!owin- on#itionF =The ho!#er$ o& pre&er r e # $hare$ $ha!! ,e entit!e # to an ann"a! 9? intere$t 4 an# $ha!! !i3ewi$e parti ip a t e in the -ener a! #i$tri, " tion o& #i'i#en #$ to ommon $hare$. > In )CCC Ai3ey Corpora tio n pai# P. mi!!ion to it$ pre&er r e # $hareh o!# e r$ repre$e n ti n - the 9? inter e$ t. It $ee3$ yo"r a#'i$e wheth e r it o"!# #e#" t the $ai# amo" n t &rom it$ -ro$$ in ome. What wo"!# yo"r a#'i e ,e% SUGGESTED ANSWER: ,t # not allowed to ded"!t #a d ntere#t#. Preferred #hare# are !on# dered !ap tal re(ardle## of the !ond t on# "nder wh !h #"!h #hare# are ##"ed and d % dend# or B ntere#t#C pa d thereon are not allowed a# ded"!t on# from the (ro## n!ome of !orporat on#. )Re%en"e 6emorand"m + r!"lar No. 70D 073 99. Ba 34 ./ year$ o!# with 1C year$ $er'i e with hi$ emp!oye r4 #e i#e# to a'ai! o& the !i,era! ear!y 'o!"nt ar y retire m e n t pro-ra m o&&ere # ,y hi$ emp!oye r. The pro-ra m wa$ part o& the pro&it impro'e m e n t pro-ra m o& the ompan y. The po$ition$ o& tho$e who wo"!# a'ai! o& the pro-ra m wo"!# not ,e &i!!e# "p on e they are 'a at e# a$ a re$"!t o& the 'o!"nt a r y ear!y retire m e n t . Are any amo"n t$ re ei'e# ,y Ba 3 a$ a re$"!t o& hi$ a'ai! m e n t o& $" h pro-ra m tax2 &ree% What $ho"!# ,e #one in or#er to ha'e hi$ retire m e n t pay ,e exem p t &rom taxation% Exp!ain ,rie&!y. SUGGESTED ANSWER: Any amo"nt he #hall re!e %e #hall be #"b=e!t to tax$ !on# der n( that he # below 98 year# of a(e and that h # ret rement # %ol"ntary n !hara!ter. :or Ia!& to a%a l of the tax exempt on h # employer #ho"ld Bf reC h m. >en!e$ any amo"nt he wo"ld be re!e % n( wo"ld be a# a !on#e5"en!e of h # #eparat on for a !a"#e beyond h # !ontrol #"!h a# retren!hment. P7 #t par.$ Se!. -.02.7 )B3 T7 U Tb U $ Re%. Re(#. No. -D.2Q N4TES AND +466ENTS: a. Con#ition$ &or ex !"#inretire m e n t ,ene&i t$ &ro m -ro$$ in ome F 73 Ret rement benef t# re!e %ed "nder Rep"bl ! A!t No. 01F7 and tho#e re!e %ed by off ! al# and employee# of pr %ate f rm#$ whether nd % d"al or !orporate$ n a!!ordan!e w th the employer'# rea#onable pr %ate benef t plan appro%ed by the B,R. -3 Ret r n( off ! al or employee a3 ,n the #er% !e of the #ame employer for at lea#t ten )783 year#E b3 Not le## than f fty )983 year# of a(e at t me of ret rementE !3 A%a led of the benef t of ex!l"# on only on!e. PSe!. /- )B3 T1 U Ta U $ N,R+ of 7..0Q. The ret r n( off ! al or employee #ho"ld not ha%e pre% o"#ly a%a led of the pr % le(e "nder the ret rement plan of the #ame or another employer. P7 #t par.$ Se!. -.02 )B3 T7 U $ Re%. Re(#. No. -D.2Q b. Separa tion ;retire m e n t < pay ex !"#e# &rom -ro$$ in ome4 hen e tax2 exem p t . 73 Any amo"nt re!e %ed by an off ! al$ employee or by h # he r#$ -3 :rom the employer /3 A# a !on#e5"en!e of #eparat on of #"!h off ! al or employee from the #er% !e of the employer be!a"#e of a3 Death$ # !&ne## or other phy# !al d #ab l tyE or b3 :or any !a"#e beyond the !ontrol of #a d off ! al or employee PSe!. /- )B3 T1 U Tb U $ N,R+ of 7..0Q$ #"!h a# retren!hment$ red"ndan!y and !e##at on of b"# ne##. P7 #t par.$ Se!. -.02 )B3$ T7 U Tb U $ Re%. Re(#. No. -D.2Q 9G. What are the pri@e$ that are ex !"#e# &rom -ro$$ in ome4 hen e not taxa,! e% SUGGESTED ANSWER: a. Pr <e# and award# made pr mar ly n re!o(n t on of rel ( o"#$ !har table$ #! ent f !$ ed"!at onal$ art #t !$ l terary$ or !%! a!h e%ement b"t only f 73 The re! p ent wa# #ele!ted w tho"t any a!t on on h # part to enter the !onte#t or pro!eed n(E and -3 The re! p ent # not re5" red to render #"b#tant al f"t"re #er% !e# a# a !ond t on to re!e % n( the pr <e or award. PSe!. /)B3 T0 U T! U $ N,R+ of 7..0Q b. All pr <e# and award# 73 Granted to athlete# -3 ,n lo!al and nternat onal #port# to"rnament# and !ompet t on# /3 Whether held n the Ph l pp ne# or abroad$ and F3 San!t oned by the r nat onal #port# a##o! at on# PSe!. /-)B3 T0 U Td U $ N,R+ of 7..0Q$ wh !h per B,R r"l n( # a!!red tat on w th the Ph l pp ne 4lymp ! +omm ttee. Note that the exempt on refer# only to amate"r #port#. :or profe## onal box n($ a #pe! al law (rant# the exempt on not the N,R+. 9D. =A> wa$ $erio"$!y in6"re# in a 'ehi "!ar a i#ent . A$ a re$"!t o& hi$ in6"rie$4 he wa$ a,!e to re o'er P1 mi!!ion repre$en ti n"nearn e # in ome4 an# P/ mi!!ion &or mora! an# exe mp!a r y #ama- e$. Are the amo"nt$ $",6e t to tax% SUGGESTED ANSWER: No. Ex!l"ded from (ro## n!ome$ hen!e exempt from n!ome tax are amo"nt# re!e %ed a# !ompen#at on for per#onal n="r e# pl"# the

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amo"nt# of any dama(e# re!e %ed whether by #" t or a(reement on a!!o"nt of #"!h n="r e#. PSe!. /- TB U TF U $ N,R+ of 7..0E Se!. -.02 )B3 T. U $ Re%. Re(#. No. -D.2Q N4TES AND +466ENTS: The abo%e # the pre%a l n( % ew. The a"thor #"bm t# that the amo"nt of P7 m ll on$ be n( n the nat"re of repla!ement of n!ome lo#t # taxable. Th # # #o$ be!a"#e ex!l"# on# are n the nat"re of tax exempt on#$ hen!e they m"#t be #tr !tly !on#tr"ed a(a n#t the taxpayer. GC. in 1DG8 Ee!!a p"r ha$e# a par e!4 o& !an# a#6oinin- the City Camp La-oon in Ea-"io City &or P)./ mi!!ion. She inten# e# to ,"i!# her &ami!y home on the $ai# par e! o& !an#. In&ort" n a t e ! y &or her4 the em, an 3 m e n t wa$ #e$tro ye # #"rin- the B"!y 84 )CC1 &!a$h &!oo#$ a"$in- ero$ion whi h !e# to a #eterio ra ti o n o& the mar3e t 'a!"e to on!y P1./ mi!!ion. The City A$$e$$or a$$e$$e# the proper t y &or tax p"rpo$e$ at P1.) mi!!ion whi!e the EIR @ona! 'a!"atio n i$ P1.. mi!!ion. a. S"ppo$in- that on A"-"$t +14 )CC14 the owner o& the a#6oinin- proper t y ,"y$ the proper t y at P1.+ mi!!ion4 what wo"!# ,e the tax on$e0" en e$ to Ee!!a on$i#erinthat $he $"&&er e# a !o$$% Exp!ain. ,. Wo"!# yo"r an$w er ,e the $ame i& the -o'ern m e n t exprop ri a t e # the proper t y at it$ pre$en t mar3e t 'a!"e o& P1./ mi!!ion% Why% SUGGESTED ANSWERS: a. The par!el of land # a !ap tal a##et of Bella. Th # # #o be!a"#e t # not her #to!& n trade$ or property n!l"d ble a# part of her n%entory at the end of the taxable year$ or property pr mar ly held by her for #ale to !"#tomer# n the ord nary !o"r#e of trade or b"# ne##$ or property "#ed n trade or b"# ne## #"b=e!t to depre! at on$ or real property "#ed by Bella n her trade or b"# ne##. )Se!. // PAQ T7 U $ N,R+ of 7..03 +on#e5"ently$ rre#pe!t %e of the hold n( per od "nder the pro% # on# of Se!. /. )B3 of the N,R+ of 7..0$ the !ap tal (a n# pre#"med to ha%e been real <ed from the #ale #hall be taxed at the rate of 1J ba#ed on the (ro## #ell n( pr !e or the fa r mar&et %al"e at the t me of the #ale wh !he%er # h (her. )Se!. -F PDQ$ N,R+ of 7..03 S n!e the mar&et %al"e of P7.9 m ll on # h (her than the (ro## #ell n( pr !e of P7./ m ll on$ then the pre#"med !ap tal (a n# tax of 1J #ho"ld be ba#ed on P7.9 m ll on not P7./ m ll on. The tax # denom nated a# a pre#"med !ap tal (a n# tax hen!e t # mpo#ed e%en f there wa# a lo##. b. No. The taxpayer$ n th # !a#e Bella$ ha# the opt on of report n( her a!t"al (a n# from the expropr at on a# part of her n!ome #"b=e!t to the rate# for !ompen#at on n!ome "nder Se! -7)a3 of the Nat onal ,nternal Re%en"e +ode or to pay a 1J pre#"med !ap tal (a n# tax ba#ed on the fa r mar&et %al"e of P7.9 m ll on. )Se!. -F )D3 P7Q$ N,R+ of 7..03 S n!e #he #"ffered a lo## and there # no (a n$ #he #ho"ld !hoo#e the f r#t opt onE #he #ho"ld not be #"b=e!ted to any tax. G1. In 1DD.4 a #ome$ti orpora tion en-a-e # in the man"& a t " r e o& $emi2 on#" tor #e'i e$ ,o"-ht a par e! o& !an# &or P).C mi!!ion. On A"-"$t )94 )CC14 it $o!# the par e! o& !an# &or P/./ mi!!ion. The &air mar3e t 'a!"e at the time wa$ P/.9 mi!!ion4 the a$$e$$e# 'a!"e wa$ P../ mi!!ion an# the EIR @ona! 'a!"ation wa$ P/.8 mi!!ion. The orpora tion rea!i@e# a net pro&it o& P+./ mi!!ion on the tran$a tion. The !an# wa$ not part o& the orpora tion($ $to 3 in tra#e4 or proper t y in !"#i,!e a$ part o& it$ in'entor y at the en# o& the taxa,!e year4 or proper t y prima ri!y he!# ,y it &or $a!e to "$tom e r$ in the or#inary o"r$e o& tra#e or ,"$ine$$ or proper t y "$e# in tra#e or ,"$ine$$ $",6e t to #epre ia tion4 or rea! proper t y "$e# ,y the orpora tion in it$ tra#e or ,"$ine$$. To what tax $ho"!# the orpora tion ,e $",6e t to an# why% SUGGESTED ANSWER: A f nal tax of # x per!ent )1J3 ba#ed on the (ro## #ell n( pr !e or fa r mar&et %al"e a# determ ned by the +omm ## oner of ,nternal Re%en"e or a# #hown n the #!hed"le of %al"e# of the Pro% n! al and + ty A##e##or#. )Se!. -0 PDQ T9 U $ N,R+ of 7..0 n relat on to Se!. 1 PEQ3 G). *e&ine net !o$$ arry2 o'er an# net opera tin- !o$$ arry2 o'er. *i$tin-"i$h the two on ept$ an# #i$ "$$ tax imp!i ation$ o& ea h. SUGGESTED ANSWER: a. Net lo## !arryD o%er mean# the ded"!t on from net !ap tal (a n# of a #"!!eed n( year the net !ap tal lo## #"ffered d"r n( the pr or year. Net operat n( lo## !arryD o%er # the ded"!t on from (ro## n!ome for the next three )/3 !on#e!"t %e taxable year# follow n( the year of #"!h lo##$ the ex!e## of allowable ded"!t on o%er the (ro## n!ome. b. D #t n!t on# between net lo## !arryD o%er and net operat n( lo## !arryD o%er. So"r!e : The #o"r!e of net lo## !arryD o%er are !ap tal lo##e# only W>,*E the #o"r!e of net operat n( lo## !arryD o%er are from the ord nary trade and b"# ne## of the taxpayer. Who may en=oy the !arryD o%er : 4nly taxpayer# other than !orporat on# may en=oy net lo## !arryD o%er W>,*E only !orporat on# may en=oy the net operat n( lo## !arryD o%er.

37
!. Any taxpayer$ other than a !orporat on ) nd % d"al# n!l"d n( tr"#t# and e#tate#3$ who #"#ta n# n any taxable year a net !ap tal lo## from !ap tal tran#a!t on# n%ol% n( !ap tal a##et# )other than real property or #hare# of #to!& not l #ted or traded n the #to!& exhan(e3$ # allowed to treat d"r n( the #"!!eed n( year #"!h net !ap tal lo## a# a lo## from the #ale or ex!han(e of a !ap tal a##et )other than real property or #hare# of #to!& not l #ted and traded n the #to!& ex!han(e3$ held for more than twel%e month#. )Se!. /. PDQ$ N,R+ of 7..03 G+. In 1DD/4 A$. Aa Gan#a ,o"-ht a #iamon # rin- worth P9/4 CC C . C C &or "$e #"rin- her #e,"t. On Septe m , e r /4 )CC14 ha'in- no &"rth e r "$e &or the rin-4 $he #e i#e# to $e!! it to Ar$. A. Ayam an &or P+/C4 C C C . C C . Witho " t -oininto arith m e t i a! omp" t a t i o n$4 how $ho"!# A$. Gan#a ,e taxe# on the $a!e o& her rin- . SUGGESTED ANSWER: The r n( # 6#. Ganda'# !ap tal a##et be!a"#e #he # not n the b"# ne## of b"y n( and #ell n( =ewelry. She bo"(ht the r n( for her per#onal "#e and not for trade or b"# ne##. +on#e5"ently$ #he #ho"ld determ ne the net prof t from the #ale# of the r n( and apply n( the hold n( per od #ho"ld report f fty per!ent )98J3 of #"!h net prof t n her n!ome tax ret"rn for 7... a# part of ord nary n!ome. The hold n( per od #ho"ld be appl ed be!a"#e #he held the d amond r n($ her !ap tal a##et$ for more than twel%e )7-3 month#. G.. In 1DGC4 China Ean3in- Corporation ma# e a /+? e0"ity in'e$t m e n t in the Fir$t CEC Capita! ;A$ia< Lt#.4 a 5on-3on$",$i#iary en-a- e # in &inan inan# in'e$t m e n t with =#epo$i t2 ta3in- > &"n tion. The in'e$t m e n t amo"n t e # to P184 )) 9 4 G / 1 . G C 4 on$i$tin o& 1C84C C C $hare$ with a par 'a!"e o& P1CC per $hare. S",$e0" en t! y 4 Fir$t CEC Capita! ;A$ia<4 Lt#.4 ha$ ,e om e in$o!'en t. China Ean3in- trea t e # the in'e$t m e n t in it$ 1DG9 In ome Tax Ret"rn a$ a ,a# #e,t or a$ an or#inary !o$$ #e#" ti,! e &ro m it$ -ro$$ in ome. The EIR #i$a!!o w e # the #e#" tion ,e a"$e the in'e$t m e n t $ho"!# not ,e !a$$i&ie# a$ =wort h! e$$. > R"!e on the #i$a!!o w a n e. SUGGESTED ANSWER: B,R wa# !orre!t. The e5" ty n%e#tment # !ap tal n !hara!ter$ the lo## of wh !h !o"ld be ded"!t ble only from !ap tal (a n#$ and not from any other n!ome of the taxpayer. : r#t +B+ +ap tal )A# a3$ *td.$ the n%e#tee !orporat on$ # a #"b# # dary !orporat on of +h na Ban& n( who#e #hare# n #a d n%e#tee !orporat on are not ntended for p"r!ha#e or #ale b"t an n%e#tment. )+h na Ban& n( +orporat on %. +o"rt of Appeal#$ et al.$ G.R. No. 7-982$ prom. I"ly 7.$ -8883 N4TES AND +466ENTS: a. When $e "ritie$ ,e om e worth!e$$4 the !aw #eem$ the !o$$ to ,e a !o$$ &rom the $a!e or ex han- e o& apita! a$$et$ . An e5" ty n%e#tment # a !ap tal$ not ord nary$ a##et of the n%e#tor$ the #ale or ex!han(e of wh !h re#"lt# n e ther a !ap tal (a n or a !ap tal lo##. The (a n or the lo## # ord nary when the property #old or ex!han(ed # not a !ap tal a##et. The lo## #"#ta ned by the holder of the #e!"r t e#$ wh !h are !ap tal a##et# )to h m3$ # to be treated a# a !ap tal lo## a# f n!"rred from a #ale or ex!han(e tran#a!t on. A !ap tal (a n or a !ap tal lo## normally re5" re# the !on!"rren!e of two !ond t on# for t to re#"lt: 73 There # a #ale or ex!han(eE and -3 The th n( #old or ex!han(ed # a !ap tal a##et. When #e!"r t e# be!ome worthle## there # #tr !tly no #ale or ex!han(e b"t the law deem# the lo## anyway to be Ba lo## from the #ale or ex!han(e of !ap tal a##et#.C )+h na Ban& n( +orporat on %. +o"rt of Appeal#$ et al.$ G.R. No. 7-982$ prom. I"ly 7.$ -8883 b. Se "ritie$4 #e&ine# &or #e#" ti,i!ity o& ,a# #e,t$ . Share# of #to!& n a !orporat on and r (ht# to #"b#!r be for or to re!e %e #"!h #hare#. The term n!l"de# bond#$ debent"re#$ note# or !ert f !ate#$ or other e% den!e of ndebtedne##$ ##"ed by any !orporat on$ n!l"d n( tho#e ##"ed by a (o%ernment or pol t !al #"bd % # on thereof$ w th ntere#t !o"pon# or n re( #tered form. )Se!. -.b$ Re%. Re(#. No. 9D..3 !. Tax trea t m e n t o& $e "ritie$ ,e ominworth!e$$ . ,f #e!"r t e#$ a# def ned "nder Se!. - )b3 hereof$ held a# !ap tal a##et$ are a#!erta ned to be worthle## and !har(ed off w th n the taxable year$ the lo## re#"lt n( therefrom #hall be !on# dered a# a lo## from the #ale or ex!han(e of !ap tal a##et made on the la#t day of #"!h taxable year. The taxpayer$ howe%er$ ha# to pro%e thro"(h !lear and !on% n! n( e% den!e that the #e!"r t e# are n fa!t worthle##. Th # r"le$ howe%er$ # not tr"e n the !a#e of ban&# or tr"#t !ompan e# n!orporated "nder the law# of the Ph l pp ne#$ a #"b#tant al part of who#e b"# ne## # the re!e pt of depo# t#. )Se!. 9$ Re%. Re(#. No. 9D..3 G/. XN: Corporation ha$ an a"thori@e# apita! $to 3 o& P/ mi!!ion #i'i#e# into /C4CC C $hare$ with par 'a!"e o& P1CC. C C per

38
$hare. P) mi!!ion o& the a"tho ri@e# apita! $to 3 were $",$ ri, e# 4 ,y 'ario"$ $to 3ho!# e r$ in !"#inAr. F!ore$ who $",$ ri, e# &or $to 3$ with par 'a!"e o& P1./ mi!!ion. To &"!!y pay &or hi$ $",$ ription4 Ar. F!ore$ tran$&e r r e # in )CCC to XN: Corpora tio n a par e! o& !an#. It wa$ $",$e0 " e n t! y #i$ o'er e# ,y the E"rea" o& Intern a! Re'en " e that the par e! o& !an# ha# a &air mar3e t 'a!"e o& on!y P1 mi!!ion. a. Sin e the 'a!"e o& the par e! o& !an# wa$ on!y P1 mi!!ion whi!e Ar. F!ore$ re ei'e# $hare$ o& $to 3 worth P1./ mi!!ion #i# Ar. F!ore$ earn in ome amo" n ti n- to P/CC4 C C C . C C whi h $ho"!# ,e $",6e t to in ome tax % On the other han#4 $ho"!# the orpora tio n ,e a!!ow e# to #e#" t a !o$$ amo"n ti n - to P/CC4 C C C . C C% ,. What wo"!# ,e the tax trea t m e n t 4 i& in )CC14 Ar. F!ore$ $o!# the $hare$ o& $to 3 in XN: Corporati o n whi h are not !i$te# or tra# e# in the $to 3 ex han -e &or P1.) mi!!ion% . S"ppo$in- that in )CC1 XN: Corpora tio n $o!# the par e! o& !an# &or P1 mi!!ion whi h i$ it$ @ona! 'a!"a ti on in )CC1. XN: i$ not en-a- e # in the rea! e$tat e ,"$ine$$. What wo"!# ,e the tax trea t m e n t &or $" h a $a!e% SUGGESTED ANSWER: a. 6r. :lore# d d not earn any n!ome #"b=e!t to tax ne ther d d @?A n!"r a lo## wh !h t !o"ld ded"!t from t# -888 (ro## n!ome. The tran#a!t on # &nown a# a taxD free ex!han(e #olely n & nd$ hen!e no (a n or lo## # re!o(n <ed. ,t # an ex!han(e #olely n & nd be!a"#e property )land3 wa# ex!han(ed for another property )#hare# of #to!&3. ,t # a taxD free ex!han(e be!a"#e a# a re#"lt of the ex!han(e$ 6r. :lore# by h m#elf wa# able to obta n !ontrol of the !orporat on. b. ,f n -887$ 6r. :lore# #old the #hare# of #to!& for P7.- m ll on$ the ba# # for the #hare# of #to!& wo"ld be the %al"e of the par!el of land. ,n th # !a#e$ t wo"ld be !on# dered a# f 6r. :lore# a!5" red the #hare# of #to!& for P7 m ll on the %al"e of the property he ha# ex!han(ed for the #hare# of #to!&. S n!e there # no #how n( n the problem that 6r. :lore# # en(a(ed n the b"# ne## of b"y n( and #ell n( #hare# of #to!&$ then the net (a n #ho"ld be !omp"ted$ by ded"!t n( the a!5" # t on pr !e )P7 m ll on3 from the #ell n( pr !e )P7.- m ll on3. Th"#$ the net (a n # P-88$888.88. 4n the f r#t P788$888.88 net (a n the tax #ho"ld be 9J and on the amo"nt ex!eed n( the f r#t P788$888.88 net (a n then the tax #ho"ld be 78J. ,t # to be noted that the hold n( per od # not appl ed. !. A !orporat on # now #"b=e!t to !ap tal (a n# taxe# and all pro!eed# from #ale# of real property owned by a !orporat on wh !h are not "#ed n trade or b"# ne## # #"b=e!t to the 1J pre#"med !ap tal (a n# tax. N4TES AND +466ENTS: Remember that the f r#t tran#a!t on # taxD free b"t the #e!ond tran#a!t on # taxable. The problem that may be ( %en may n%ol%e a mer(er or !on#ol dat on n wh !h !a#e the abo%e pr n! ple# al#o f nd appl !at on. * &ew #e$ f there are more part e# n%ol%ed than 6r. :lore#$ then 6r. :lore# to(ether w th other# not more than fo"r #ho"ld obta n !ontrol of the !orporat on. ,f the ex!han(e # not #olely n & nd )for example$ money pl"# property wa# ex!han(ed or #hare# of #to!& or % !eD %er#a3$ then there # no taxD free ex!han(e be!a"#e the (a n # taxed b"t the lo## # not allowed to be ded"!t ble. G8. In tax2 &ree ex han- e$ $o!e!y in 3in#4 what i$ mean t ,y ,oot% What a,o"t ,a$i$% SUGGESTED ANSWER: Boot # the property ex!han(ed for #to!&# or #e!"r t e#. :or example$ 6r. *eon ex!han(e# h # par!el of land for #hare# of #to!& n 6 !&ey$ ,n!. The boot # the par!el of land. Ba# # # the %al"e a## (ned to the land or the #hare# of #to!&.

TRANSFER TAXES
G9. *on Ce$ar Soriano4 a Spani$h nationa!4 #ie# on Septe m , e r /4 )CCC in hi$ 'i!!a at L" erne4 Swit@er! an #. 5e exe "t e # a wi!! ,e&ore hi$ #eath !ea'in- a!! o& hi$ proper ti e$ to hi$ -ir! &rien# Aari e! Aont ano4 a Fi!ipino re$i#in- in Er"-e4 Ee!-i"m. The -ir! &rien# #e i#e# to ,rin- the rem ain$ o& *on Ce$ar4 who wa$ a re$i#en t o& the Phi!ippine$ &rom 1D+/ "p to 1DD9 to the Phi!ippine$ &or ,"ria! ,e a"$e that wa$ hi$ wi$h a$ mo$t o& hi$ &rien#$ are $ti!! !i'in- in the Phi!ippine$. She $pent a,o"t P9/C4C C C . C C &or &"ner a! expen$e$. On Septe m , e r 194 )CCC Aari e! met yo" in 5on-3on- an# en-a- e# yo"r $er'i e$ in or#er to $ett!e the e$tat e o& *on Ce$ar in a or#an e with the wi!! whi h wa$ proper!y pro,at e # in Swit@er! an #. She pre$ent$ to yo" an in'ento ry o& the proper ti e$ !e&t ,y *on Ce$ar with their orre$pon#in- 'a!"e$ a$ o& Septe m , e r /4 )CCC4 *on Ce$ar($ #ate o& #eath. The 'i!!a in Swit@er!a n# ISP1 mi!!ion1 an apar t m e n t ,"i!#in- !o ate# in New Nor34 ISP/ mi!!ion1 a ha ien# a in *a'ao P)/ mi!!ion ,"t the pre$ent 'a!"a tion i$ now P.C mi!!ion ,e a"$e o& roa# on$tr" tion$ whi h

39
enhan e# the 'a!"e o& the proper t y1 ISP1/ mi!!ion the 'a!"e o& !i&e in$"ran e pro ee#$ &ro m an in$"ran e ta3en o"t ,y *on Ce$ar on hi$ own !i&e #e$i-na ti n - hi$ e$tat e a$ ,ene&i i ary &ro m the Canton Swi$$ In$"ran e at Canton4 Swit@er! an #1 P)/ mi!!ion pro ee#$ o& !i&e in$"ran e ta3en ,y *on Ce$ar on hi$ own !i&e &ro m Phi!am!i&e In$"ran e in the Phi!ippin e$ paya,!e to Aari e! a$ irre'o a,! e ,ene&i iary1 o"t$tan # i n - ,an3 ,a!an e with Phi!ippine Ean3 o& Comme r e in the amo"n t o& P/ mi!!ion with Nanet t e a$ hi$ an#Kor o2 #epo$itor. Share$ o& $to 3 o& a 5on-3onomp an y ,"t man a- e # &rom the Phi!ippine$ an# a P1/ mi!!ion apart m e n t !o ate# in Aani! a4 Phi!ippin e$ whi h he #onat e # to hi$ !o$e &rien # on Apri! )/4 1DGD $",6e t to the on#ition that the &rien # remi t$ to *on Ce$$ar a!! the renta!$ o& the proper t y #"rinthe !i&eti m e o& *on Ce$ar. a. What $ho"!# ,e report e # a$ part o& *on Ce$ar($ -ro$$ e$tat e an# what #e#" tion$ are a!!ow a, ! e to #eter mi n e hi$ net e$tat e% Exp!ain. ,. Are the pro ee#$ o& the P)/ mi!!ion !i&e in$"ran e to ,e on$i#er e# a$ part o& the -ro$$ e$ta t e o& *on Ce$ar or Aari e!($ in ome% Why% . S"ppo$in- Aari e! want$ to with#r a w the P/ mi!!ion &ro m the ,an34 what a#'i$e $ho"!# yo" -i'e her% #. I$ Aari e! ,ein- the $o!e ,ene&i iary !ia,!e &or the payme n t o& the e$tat e taxe$% SUGGESTED ANSWER: a. S n!e Don +e#ar wa# a BnonD re# dent de!edent who at the t me of h # death wa# not a ! t <en of the Ph l pp ne#$ only that part of the ent re (ro## e#tate wh !h # # t"ated n the Ph l pp ne#$ #hall be n!l"ded n h # taxable e#tate. C )Se!. 29$ N,R+ of 7..03 The problem # !lear that Don +e#ar re# ded n the Ph l pp ne# only from 7./9 to 7..0. Spe! f !ally$ the part of h # (ro## e#tate wh !h are # t"ated o"t# de of the Ph l pp ne# and ex!l"ded from the taxable e#tate are the USO7 m ll on % lla n Sw t<erland$ the USO9 m ll on apartment b" ld n( n New ?or&$ U.S.A.$ and the pro!eed# of the USO79 m ll on l fe n#"ran!e from the +anton Sw ## ,n#"ran!e. The follow n( propert e# are part of h # (ro## e#tate be!a"#e they are # t"ated n the Ph l pp ne#. The P-9 m ll on Da%ao >a! enda$ the P9 m ll on ban& balan!e w th the Ph l pp ne Ban& of +ommer!e$ the #hare# of #to!& n the >on(&on( !orporat on and the P79 m ll on apartment. The #hare# of #to!& ha%e a!5" red a b"# ne## # t"# n the Ph l pp ne# be!a"#e the fore (n !orporat on # mana(ed from the Ph l pp ne# hen!e$ n!l"d ble a# part of Don +e#ar'#'# (ro## e#tate. The P79 m ll on apartment # part of the (ro## e#tate be!a"#e t wa# tran#ferred n !ontemplat on of death. Don +e#ar ha# reta ned for h # l fe the en=oyment of the fr" t# of the property. )Se!. 29 )B3$ N,R+ of 7.03 b. The pro!eed# of the P-9 m ll on l fe n#"ran!e # ne ther part of the (ro## e#tate nor n!ome to 6ar !el. The pro!eed# are not part of the e#tate be!a"#e the benef ! ary # not the e#tate of Don +e#ar$ h # exe!"tor or adm n #trator and the de# (nat on of the benef ! ary # rre%o!able. )Se!. 29 )E3$ N,R+ of 7..03 The P-9 m ll on # not al#o n!ome to 6ar !el be!a"#e l fe n#"ran!e pro!eed# pa d to benef ! ar e# "pon the death of the n#"red are ex!l"# on# from (ro## n!ome. )Se!. /- PBQ T7 U $ N,R+ of 7..03 !. , wo"ld ad% #e 6ar !el to f r#t #e!"re a !ert f !at on from the +omm ## oner of ,nternal Re%en"e that the appropr ate e#tate taxe# were already pa d. ,f the amo"nt to be w thdrawn doe# not ex!eed P-8$888.88$ #he #ho"ld #e!"re an a"thor <at on from the +omm ## oner e%en f #a d taxe# ha%e not yet been pa d. )-nd par.$ Se!. .0$ N,R+ of 7..03 d. ,f 6ar !el # at the #ame t me the exe!"tor or adm n #trator of the e#tate$ then #he # pr mar ly l able. ,f #he # not the exe!"tor or adm n #trator$ then be n( the benef ! ary$ #he # #"b# d ary l able to the #a d exe!"tor or adm n #trator. )Se!. .7 P+U$ N,R+ of 7..03 N4TES AND +466ENTS: The %al"at on to be "#ed # the %al"at on at the t me of the de!edent'# death N4T at the t me of f l n( ret"rn or payment of e#tate tax. GG. The NIRC o& 1DD9 a!!ow$ a$ a #e#" tion &rom the -ro$$ e$ta t e o& a iti@en or re$i#en t o& the Phi!ippine$ =6"#i ia! expen$e$ o& the te$ta m e n t a r y or inte$ta t e pro ee#in-$ > in or#er to arri'e at the net e$tat e $",6e t to e$tat e taxe$. QSe . G8 ;A< ;,<R. Are notaria! &ee$ pai# &or the extra6"#i ia! $ett!e m e n t o& the e$tat e a$ we!! a$ attorne y$ &ee$ &or the -"ar#ian #e#" ti,!e &rom the -ro$$ e$tat e a$ =6"#i ia! expen$e$ >% Exp!ain ,rie&!y. SUGGESTED ANSWER: ?e#. The notar al fee pa d for the extra="d ! al #ettlement # !learly a ded"!t ble expen#e # n!e #"!h #ettlement effe!ted a d #tr b"t on of the e#tate to h # lawf"l he r#$ S m larly$ the attorney'# fee# for a ("ard an of the property d"r n( the de!edent'# l fet me #ho"ld al#o be !on# dered a# a ded"!t ble adm n #trat on expen#e. The ("ard an ( %e# a deta led a!!o"nt n( of de!edent'# property and ( %e# ad% !e a# to the proper #ettlement of the e#tate$ a!t# wh !h !ontr b"ted toward# the !olle!t on of de!edent'# a##et# and the #"b#e5"ent #ettlement of the !a#e. )+omm ## oner of ,nternal Re%en"e %. +o"rt

40
of Appeal#$ et al.$ G.R. No. 7-/-81$ prom. 6ar!h --$ -8883 N4TES AND +466ENTS: I"d ! al expen#e# are expen#e# of adm n #trat on. Adm n #trat on expen#e#$ a# an allowable ded"!t on from (ro## e#tate of the de!edent for p"rpo#e# of arr % n( at the %al"e of the net e#tate$ ha%e been !on#tr"ed to n!l"de all expen#e# Be##ent al to the !olle!t on of the a##et#$ payment of debt# or the d #tr b"t on of the property to the per#on# ent tled to t.C ,n other word#$ the expen#e# m"#t be e##ent al to the proper #ettlement of the e#tate. Not ded"!t ble are expend t"re# n!"rred for the nd % d"al benef t of the he r#$ de% #ee# or le(atee#. Th"#$ n *oren<o %. Po#ada#$ the +o"rt !on#tr"ed the phra#e B="d ! al expen#e# of the te#tamentary or nte#tate pro!eed n(#C a# not n!l"d n( the !ompen#at on pa d to a tr"#tee of the de!edent'# e#tate when t appeared that #"!h tr"#tee wa# appo nted for the p"rpo#e of mana( n( the de!edent'# real property for the benef t of the te#tamentary he r. ,n another !a#e$ the +o"rt d #allowed the prem "m# pa d on the bond f led by the adm n #trator a# an expen#e of adm n #trat on # n!e the ( % n( of a bond # n the nat"re of a 5"al f !at on for the off !e$ and not ne!e##ary n the #ettlement of the e#tate. Ne ther may attorney'# fee# n! dent to l t (at on n!"rred by the he r# n a##ert n( the r re#pe!t %e r (ht# be !la med a# a ded"!t on from the (ro## e#tate. )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ G.R. No. 7-/-81$ prom. 6ar!h --$ -8883 GD. In 1DDD Atty. Chari T. A,!e ma#e the &o!!owin- #onation$F a. P )/C4 C C C . C C a!"mni a$$o iatio n o& her a!ma mate r 4 the Ini'er$ity o& the Phi!ippine$1 ,. P+/C4 C C C . C C to J"e@on City 5i-h S hoo!4 a p",!i $ hoo! !o ate# in Oam"nin -4 J"e@on City1 . P/CC4 C C C . C C a$ pri@e to A. A!a3a$4 a Fi!ipino ath!e t e who -arn er e # the -o!# me# a! in an intern a ti o n a! wei-h t !i&tinonte$t he!# in Ao$ ow whi h onte$t wa$ $an tion e# ,y the Phi!ippine Wei-h t!i & ti n - A$$o iatio n4 the nationa! wei-h t!i& ti n - a$$o iatio n1 #. P/C4 CC C . C C to a &rien # $he ha$ not $een &or a !on- time1 e. On *e e m, e r +14 1DDG $he #onate # one2 ha!& o& her par e! o& !an# worth P)./ mi!!ion to her $on4 an# on Ban"ary )4 1DDD4 $he #onate # the remaininone2 ha!& o& the $ame par e! o& !an# to the $ame $on1 an# &. P9/C4 C C C . C C to the 5o!y Or#er o& Friar$4 a re!i-io"$ on-re- a ti o n to ,e "$e# &or the on$tr" tio n o& a h"r h. Atty. Chari T. A,!e #eri'e$ her in ome $o!e!y &rom the pra ti e o& her pro&e$$ion. a< Sho"!# $he ,e $",6e t to #onor($ taxe$ on the a,o'e #onation$% ,< I$ $he entit!e# to any exem p t ion$% < Sho"!# the #onation ma#e to her $on ,e trea t e # a$ a $in-!e #onation ,e a"$e on!y two #ay$ $epara t e the #onation$% #< Sho"!# $he ,e a!!owe# to #e#" t the #onation$ &rom her in ome #eri'e# &rom the exer i$e o& her pro&e$$ion% SUGGESTED ANSWER: a. Atty. Able # #"b=e!t to the payment of donor'# taxe# on the follow n( donat on#: 73 P-98$888.88 donat on to the al"mn a##o! at on of the Un %er# ty of the Ph l pp ne# be!a"#e the al"mn a##o! at on # not a #!hoolE -3 The P98$888.88 donat on to a fr end )not related to Atty. Able by !on#an(" n ty w th n the fo"rth de(ree3 wh !h # !on# dered a# a donat on to a #tran(er hen!e #"b=e!t to a donor'# tax of th rty per!ent )/8J3 of the net ( ftE and /3 the donat on to her #on. b. She # ent tled to an exempt on on the f r#t P788$888.88 of the 7... net donat on#. :"rthermore$ the follow n( donat on# are exempt from donor'# taxe#: 73 P-98$888.88 donat on to V"e<on + ty > (h S!hool a# the #ame # !on# dered a# a donat on to the (o%ernmentE -3 the donat on to 6.A. *a&a# "nder the pro% # on# of Rep"bl ! A!t No. 09F.$ a# t # !lear that the !ond t on# n the #a d law are metE and /3 the donat on to the rel ( o"# !on(re(at on be!a"#e t # e% dent that the whole amo"nt # not to be "#ed for adm n #trat on p"rpo#e#. !. The donat on to the #on #ho"ld be treated a# #eparate donat on# be!a"#e donor'# taxe# are !omp"ted on the ba# # of net ( ft# made d"r n( a !alendar year. d. The donat on to 6.A. *a&a# # allowed a# a ded"!t on be!a"#e t # a pr <e to an athlete n an nternat onal #port# to"rnament held abroad and #an!t oned by the nat onal #port# a##o! at on. )Se!. 7$ R.A. No. 09F.3 Al#o allowed a# a ded"!t on # the donat on to V"e<on + ty > (h S!hool. DC. On Septe m , e r )D4 1DGD4 &orm er Pre$i#en t Aar o$ #ie# in 5awaii4 I.S.A. A $pe ia! a"#it tea m reat e # to on#" t in'e$ti-a tion$ an# exa min a t ion$ o& the tax !ia,i!ity o& the !ate pre$i#en t #i$ !o$e# that the Aar o$e$ &ai!e# to &i!e a writt e n noti e o& #eath o& the #e e#en t an# an e$ta t e tax ret"rn in 'io!ation o& the NIRC. The Commi$$ioner o& Intern a! Re'en"e there, y a"$e# the prepar a tio n an# &i!in- o& the E$tate Tax Ret"rn &or the e$tat e o& the !ate pre$i#en t. On B"!y )84 1DD14 the EIR i$$"e# a #e&i ien y tax

41
a$$e$$me n t a-ain$t the e$ta t e whi h were $er'e# on$tr" ti' e! y "pon A$. Ime!#a Aar o$ ;thro"- h her areta 3 e r Ar. Aarti n e@ < at her !a$t 3nown a##re$$ at No. )C. Orte- a St.4 San B"an4 A .A. The #e&i ien y tax a$$e$$m en t wa$ not prote$t e # a#mini$tr a t i ' e! y ,y Ar$. Aar o$ an# the other heir$ o& the !ate pre$i#en t . On Fe,r" a ry ))4 1DD+4 the EIR Commi$$ioner i$$"e# twen t y 2 two noti e$ o& !e'y on rea! proper t y a-ain$t ertain par e!$ o& !an# owne# ,y the Aar o$e$ 2 to $ati$&y the a!!e-e# e$tat e tax4 amonother$. Other noti e$ o& !e'y were ma#e "nti! the proper ti e$ were $o!# at p",!i a" tion4 with the !ot$ ,ein- &or&ei t e # in &a'or o& the -o'ern m e n t &or !a 3 o& ,i##er$. The 'a!i#i ty o& the EIR7$ a tion$ i$ now rai$e#. SUGGESTED ANSWER: The appro%al of the !o"rt # tt n( n probate$ or a# a #ettlement tr b"nal o%er the e#tate of the de!ea#ed # not a mandatory re5" rement for the !olle!t on of the e#tate. The probate !o"rt # determ n n( ##"e# wh !h are not a(a n#t the property of the de!edent$ or a !la m a(a n#t the e#tate a# #"!h$ b"t # a(a n#t the ntere#t or property r (ht wh !h the he r$ le(atee$ de% #ee$ et!. ha# n the property formerly held by the de!edent. The not !e# of le%y were re("larly ##"ed w th n the pre#!r pt %e per od. The tax a##e##ment ha% n( be!ome f nal$ exe!"tory and enfor!eable$ the #ame !an no lon(er be !onte#ted by mean# of a d #(" #ed prote#t. )6ar!o#$ ,, %. +o"rt of Appeal#$ et al.$ -0/ S+RA F03 D1. Ar. Fi! I. Pino4 a Cana#ian iti@en an# a re$i#en t o& Ontario4 Cana# a4 $en#$ a -i&t o& ISP)C4 C C C . C C to hi$ &"t"r e #a"-h t e r 2 in2 !aw who i$ to ,e marri e# to hi$ on!y $on in the Phi!ippin e$. The marri a- e a t"a!!y too3 p!a e on the #ate the -i&t wa$ re ei'e#. a. I$ the #onatio n ,y Ar. Pino $",6e t to tax% Exp!ain. Wo"!# yo"r an$wer ,e the $ame i& Ar. Pino i$ a Fi!ipino iti@en ,"t i$ a non2 re$i#en t% ,. What i$ the tax on$e0" en e4 i& any4 to the Ar. Pino($ #a"-h t e r 2 in2 !aw% SUGGESTED ANSWER: a. ?e#$ be!a"#e a nonD re# dent al en # exempt only from the payment of donor'# taxe# f h # ( ft# are made to or for the "#e of the Nat onal Go%ernment or any ent ty !reated by any of t# a(en! e# wh !h # not !ond"!ted for prof t$ or to any pol t !al #"bd % # on of the #a d Go%ernment. >e # #"b=e!t to tax be!a"#e the ( ft wa# not made n fa%or of an ed"!at onal andRor !har table$ rel ( o"#$ !"lt"ral or #o! al welfare !orporat on$ n#t t"t on$ fo"ndat on$ tr"#t or ph lanthrop ! or(an <at on or re#ear!h n#t t"t on or !orporat on wh !h doe# not "#e more than /8J of the donat on for adm n #trat on p"rpo#e#. ,f 6r. P no wa# a nonD re# dent : l p no my an#wer wo"ld #t ll be the #ame. b. None. The amo"nt #ho"ld not be !on# dered a# part of her n!ome a# the #ame # one of the ex!l"# on#. Ne ther # there any donor'# tax d"e from her be!a"#e the tax # to be pa d by the donor and not the re! p ent.

RETIRNS
D). What i$ the pro,ati'e 'a!"e o& in ome tax ret"rn$ a$ e'i#en e% SUGGESTED ANSWER: ,n!ome tax ret"rn# be n( p"bl ! do!"ment#$ "nt l !ontro%erted by !ompetent e% den!e$ are !ompetent e% den!e$ are prima facie !orre!t w th re#pe!t to the entr e# there n. )Ropal Trad n( %. N*R+$ et al.$ -.1 S+RA /8.$ /703 N4TES AND +466ENTS: Wh le the abo%e ! ted !a#e # a labor !a#e$ the a"thor #"((e#t# that the #ame !o"ld f nd appl !at on n taxat on a# well. D+. Ei!! an# 5i!!ary are marrie# to ea h other. Ei!! i$ emp!oye# a$ a -o'ern m e n t emp!oye e #eri'inann"a! -ro$$ ompen$a tion in ome amo"n tinto P1)C4C C C . C C whi!e 5i!!ary #eri'e$ in ome &rom $e!!in- ,a,y #re$$e$. 5er month!y in ome &!" t"a t e$4 ,"t &or the year )CCC4 $he -ro$$e# P/CC4C C C . C C . The o"p!e ha'e no hi!#ren. Are they a!!owe# to &i!e $epar a t e in ome tax ret"rn$% Why% SUGGESTED ANSWER: No. A# a (eneral r"le$ they are not allowed to f le #eparate ret"rn# a# only marr ed nd % d"al# who are both earn n( p"rely !ompen#at on n!ome are allowed to f le #eparate n!ome tax ret"rn#. Se!t on 97 )D3 of the N,R+ of 7..0 pro% de# that$ B6arr ed nd % d"al#$ whether ! t <en#$ re# dent or nonD re# dent al en#$ who do not der %e n!ome p"rely from !ompen#at on #hall f le a ret"rn for the taxable year to n!l"de the n!ome of both #po"#e#$ b"t where t # mpra!t !able for the #po"#e# to f le one ret"rn$ ea!h #po"#e may f le a #eparate ret"rn of n!ome b"t the ret"rn# #o f led #hall be !on#ol dated by the B"rea" for p"rpo#e# of %er f !at onC There # no #how n( n the problem that t # mpra!t !able for B ll and > llary to f le one ret"rn$ hen!e they #ho"ld f le a # n(le ret"rn.

42
the tax payer. rea$on$. D.. Who are the in#i'i#" a!$ re0"ire# to &i!e an in ome tax ret"rn% SUGGESTED ANSWER: a. E%ery : l p no ! t <en re# d n( n the Ph l pp ne#E b. E%ery : l p no ! t <en re# d n( o"t# de the Ph l pp ne# on h # n!ome from #o"r!e# w th n the Ph l pp ne#E !. E%ery al en re# d n( n the Ph l pp ne# on n!ome der %ed from #o"r!e# w th n the Ph l pp ne#E and d. E%ery nonre# dent al en en(a(ed n trade or b"# ne## or n the exer! #e of profe## on n the Ph l pp ne#. )Se!. 97 PAQ T7 U $ N,R+ of 7..03 D/. Who are the in#i'i#" a!$ who are required to &i!e an in ome tax ret"rn L not R"!e on the i$$"e with

SUGGESTED ANSWER: a. An nd % d"al who#e (ro## n!ome doe# not ex!eed h # total per#onal and add t onal exempt on# for dependent#$ "ro ided# That a ! t <en of the Ph l pp ne# and any al en nd % d"al en(a(ed n b"# ne## or pra!t !e of profe## on w th n the Ph l pp ne# #hall f le an n!ome tax ret"rn re(ardle## of the amo"nt of (ro## n!omeE b. An nd % d"al w th re#pe!t to p"re !ompen#at on n!ome for #er% !e# n whate%er form pa d$ n!l"d n($ b"t not l m ted to fee#$ #alar e#$ wa(e#$ !omm ## on#$ and # m lar tem#$ der %ed from #o"r!e# w th n the Ph l pp ne#$ the n!ome tax on wh !h ha# been !orre!tly w thheld$ "ro ided# That an nd % d"al der % n( !ompen#at on !on!"rrently from two or more employer# at any t me d"r n( the taxable year #hall f le an n!ome tax ret"rn: "ro ided# further# That an nd % d"al who#e p"re !ompen#at on n!ome der %ed from #o"r!e# w th n the Ph l pp ne# ex!eed# S xty tho"#and pe#o# )P18$888.883$ #hall al#o f le an n!ome tax ret"rnE !. An nd % d"al who#e #ole n!ome ha# been #"b=e!t to f nal w thhold n( taxE d. An nd % d"al who # exempt from n!ome tax p"r#"ant to the pro% # on# of the N,R+ of 7..0$ and other law#$ (eneral or #pe! al. )Se!. 97 PAQ T- U $ N,R+ of 7..03 N4TES AND +466ENTS: An nd % d"al who # not re5" red to f le an n!ome tax ret"rn may ne%erthele## be re5" red to f le an nformat on ret"rn. )Se!. 97 PAQ T/ U $ N,R+ of 7..03 D8. =F> Corporati o n ,ro"-h t to o"rt the i$$"e o& wheth e r it $ho"!# ,e ma# e !ia,!e &or the payme n t o& the withho!#i n- tax at $o"r e $in e it i$ mere! y an a-en t an# not

SUGGESTED ANSWER: B :C +orporat on a# the w thhold n( a(ent # expl ! tly made per#onally l able "nder the Tax +ode for the payment of the tax re5" red to be w thheld. )eason : The law #et# no !ond t on for the per#onal l ab l ty of the w thhold n( a(ent to atta!h. Th # # n order to !ompel the w thhold n( a(ent to w thhold the tax "nder any and all ! r!"m#tan!e#. ,n effe!t$ the re#pon# b l ty for the !olle!t on of the tax a# well a# the payment thereof # !on!entrated "pon the per#on o%er whom the Go%ernment ha# ="r #d !t on. Th"#$ the w thhold n( a(ent # the !on#t t"ted a(ent both of the (o%ernment and the taxpayer. W th re#pe!t to the !olle!t on andRor w thhold n( of the tax$ he # the Go%ernment'# a(ent. ,n re(ard to the f l n( of the ne!e##ary n!ome tax ret"rn and the payment to the Go%ernment$ he # the a(ent of the taxpayer. The w thhold n( a(ent$ therefore$ # no ord nary (o%ernment a(ent e#pe! ally be!a"#e "nder the Tax +ode he # per#onally l able for the tax he # d"ty bo"nd to w thholdE wherea#$ the +omm ## oner of ,nternal Re%en"e and h # dep"t e# are not made l able "nder the law. ): l p na# Synthet ! : ber +orporat on %. +o"rt of Appeal#$ et al.$ G.R. No#. 772F.2 N 7-F/00$ prom. 4!tober 7-$ 7...3 N4TES AND +466ENTS: Do not !onf"#e the abo%e hold n( w th 5"e#t on no. .0$ infra. The ##"e n th # 5"e#t on # the l ab l ty of the w thhold n( a(ent for the "npa d taxe# W>,*E "nder 5"e#t on no. .0 the ##"e # whether a w thhold n( a(ent # w th n le(al !ontemplat on a taxpayer who !o"ld a%a l of the tax amne#ty. The two )-3 type# of w thhold n( at #o"r!e are the 73 final withholding tax E and - + creditable withholding tax . Under the &ina! withho!#intax $y$te m the amo"nt of n!ome tax w thheld by the w thhold n( a(ent # !on#t t"ted a# a f"ll and f nal payment of the n!ome d"e from the payee on the #a d n!ome. P7 #t #enten!e$ 7 #t par.$ Se!. -.90 )A3$ Re%. Re(#. No. -D.2Q The l ab l ty for payment of the tax re#t# pr mar ly on the payor or the w thhold n( a(ent.. Th"#$ n !a#e of h # fa l"re to w thhold the tax or n !a#e of "nder w thhold n($ the def ! en!y tax #hall be !olle!ted from the payor w thhold n( a(ent. The payee # not re5" red to f le an n!ome tax ret"rn for the part !"lar n!ome. Example : 6ara won P-88$888.88 from the Pera or Bayon( !onte#t. ,t #ho"ld be the #pon#orD payor who # re5" red to ded"!t the appropr ate w thhold n( tax from the P-88$888.88 pr <e before t # ( %en to 6ara. 6ara$ the payee

43
# not re5" red to f le an n!ome tax ret"rn for the P-88$888.88. :a l"re to w thhold #"b=e!t# the #pon#orD payee to the tax. Under the re#it a, ! e withho!#in- tax $y$te m $ taxe# w thheld on !erta n n!ome payment# are ntended to e5"al or at lea#t approx mate he tax d"e from the payee on the #a d n!ome. The n!ome re! p ent # #t ll re5" red to f le an n!ome tax ret"rn andRor pay the d fferen!e between the tax w thheld and the tax d"e on the n!ome. P7 #t and - nd #enten!e#$ Se!. -90)B3$ Re%. Re(#. No. -D.2Q The two & nd# of !red table w thhold n( taxe# are 73 taxe# w thheld on n!ome payment# !o%ered by the expanded w thhold n( taxE and -3 taxe# w thheld on !ompen#at on n!ome. Exemp ti on$ &ro m the re0"ire m e n t o& withho!#in - or when no w thhold n( taxe# re5" red: Payment# to the follow n(: 7. Nat onal Go%ernment and t# n#tr"mental t e# n!l"d n( pro% n! al$ ! ty$ or m"n ! pal (o%ernment#E -. Per#on# en=oy n( exempt on from payment of n!ome taxe# p"r#"ant to the pro% # on# of any law$ (eneral or #pe! al$ #"!h a# b"t not l m ted to the follow n(: a. Sale# of real property by a !orporat on wh !h # re( #tered w th and !ert f ed by the >*URB or >UD++ a# en(a(ed n #o! al <ed ho"# n( pro=e!t where the #ell n( pr !e of the ho"#e and lot or only the lot doe# not ex!eed P728$888.88 n 6etro 6an la and other h (hly "rban <ed area# and P798$888.88 n other area# or #"!h ad="#ted amo"nt of #ell n( pr !e for #o! al <ed ho"# n( a# may later be determ ned and adopted by the >*URBE b. +orporat on# re( #tered w th the Board of ,n%e#tment# and en=oy n( exempt on# from n!ome "nder the 4mn b"# ,n%e#tment +ode of 7..0E !. +orporat on# exempt from n!ome tax "nder Se!. /8$ of the Tax +ode$ l &e the SSS$ GS,S$ the P+S4$ et!. >owe%er$ n!ome payment# ar # n( from any a!t % ty wh !h # !ond"!ted for prof t or n!ome der %ed from real or per#onal property #hall be #"b=e!t to a w thhold n( tax. )Se!. 90.9$ Re%. Re(#. No. -D.23 D9. An#re$ Soriano4 a I.S. iti@en an# re$i#en t4 &orme # =A. Soriano N Cia4> whi h wa$ $",$e0" e n t ! y rena m e # ANSCOR. 5e owne# ori-in a!!y i$$"e# ommon $hare$ whi h $",$e0" en t! y earn e# $to 3 #i'i#en#$. When he #ie#4 part o& the $hare$ pa$$e# on to hi$ wi#ow an# anoth er part to hi$ e$tat e . Sto 3 #i'i#en#$ were a-ain #e !are #. S",$e0" en t!y 4 ANSCOR re !a$$i&ie# it$ exi$tin- ommon $hare$ into ommon an# pre&er r e # $hare$. The wi#ow an# the e$tat e ex han-e # their ommon $to 3ho!#in-$ &or pre&er r e # $hare$4 with the e$tat e retainin$ome ommon $hare$. ANSCOR then re#ee m e # the ommon $hare$ ,e!on-in- to the e$ta t e a&ter whi h the EIR a$$e$$e# ANSCOR &or #e&i ien y withho!#intax2 at $o"r e on the tran$a tion$ o& ex han-e an# re#e m p tio n o& $to 3$. Aay ANSCOR4 a$ the withho!#ina-ent a'ai! o& the ,ene&i en t pro'i$ion$ o& P.*. No. 894 whi h on#one$4 =the o!!e tion o& a!! interna! re'en" e taxe$ in !"#in- the in rem e n t $ o& pena!ti e$ on a o"nt o& non2 paym e n t a$ we!! a$ a!! i'i!4 rimina! or a#mini$tr a t i' e !ia,i!itie$ ari$in- &rom or in i#en t to> ;'o!"nta r y < #i$ !o$"re$ "n#er the NIRC o& pre'io"$!y "ntaxe # in ome an#Kor wea!th =rea!i@e# here or a,roa# ,y any taxpay e r 4 nat"ra! or 6"ri#i a!. > % SUGGESTED ANSWER: No. ,n the operat on of the w thhold n( tax #y#tem$ the w thhold n( a(ent # the payor$ a #eparate ent ty a!t n( no more than an a(ent of the (o%ernment for the !olle!t on of the tax n order to en#"re t# payment#. The payor of the tax # the taxpayer$ he # the per#on #"b=e!t to tax mpo#ed by lawE and the payee # the tax n( a"thor ty. ,n other word#$ the w thhold n( a(ent # merely a tax !olle!tor$ not a taxpayer. Under the w thhold n( #y#tem$ howe%er$ the a(entD payor be!ome# a payee by f !t on of law. > # )a(ent3 l ab l ty # d re!t and ndependent from the taxpayer$ be!a"#e the n!ome tax # #t ll mpo#ed on and d"e from the latter. The a(ent # not l able for the tax a# no wealth flowed nto h m$ he earned no n!ome. The Tax +ode only ma&e# the a(ent per#onally l able for the tax ar # n( from the brea!h of t# le(al d"ty to w thhold a# d #t n(" #hed from t# d"ty to pay tax # n!e$ the (o%ernment !a"#e of a!t on a(a n#t the w thhold n( a(ent # not for the !olle!t on of n!ome tax$ b"t for the enfor!ement of the w thhold n( pro% # on# of the Tax +ode$ !ompl an!e w th wh !h # mpo#ed on the w thhold n( a(ent and not "pon the taxpayer. A w thhold n( a(ent$ not be n( a taxpayer # not !o%ered by the prote!t %e embra!e of a tax amne#ty be!a"#e the pro% # on# of the mplement n( r"le# of P.D. No. /08 wh !h expanded amne#ty on pre% o"#ly "ntaxed n!ome # expl ! t n ex!l"d n( tax l ab l t e# on w thhold n( tax at #o"r!e. )+omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ G.R. No. 782901$ Ian"ary -8$ 7...3 N4TES AND +466ENTS:

44
The abo%e +omm ## oner of ,nternal Re%en"e %. +o"rt of Appeal#$ et al.$ )ANS+4R3$ !a#e may ha%e an mpa!t on the do!tr ne en"n! ated n +omm ## oner of ,nternal Re%en"e %. Pro!ter N Gamble Ph l pp ne 6an"fa!t"r n( +orporat on$ -8F S+RA /00$ /2/D /21. Pro!ter N Gamble held that a taxpayer # def ned "nder the N,R+ a# Bany per#on #"b=e!t to tax.C S n!e$ the w thhold n( a(ent who # Bre5" red to ded"!t and w thhold any taxC # made Bper#onally l able for #"!h tax$C #"b=e!t to and l able for def ! en!y a##e##ment#$ #"r!har(e# and penalt e# #ho"ld the amo"nt of the tax be f nally determ ned to be le## than that re5" red to he w thheld by law$ then he # a taxpayer. >e ha# #"ff ! ent le(al ntere#t to br n( a #" t for ref"nd of taxe# he bel e%e# were lle(ally !olle!ted from h m. )! t n( Ph l pp ne G"aranty +ompany$ ,n!. %. +omm ## oner of ,nternal Re%en"e$ 79 S+RA 73 The reader #ho"ld ta&e note that$ n !a#e of do"bt$ tax amne#t e# are to be #tr !tly !on#tr"ed a(a n#t the (o%ernment. Tax #tat"te# be n( b"rden# are not to be pre#"med beyond what the tax amne#ty expre##ly and !learly de!lare#. )Rep"bl ! %. ,ntermed ate Appellate +o"rt$ 7.1 S+RA //93 To #"mmar <e$ f the ##"e # appl !at on for ref"nd$ the w thhold n( a(ent # a taxpayer )Pro!ter N Gamble3$ b"t for tax amne#ty p"rpo#e#$ he # not. )An#!or3 "pon re!ommendat on of the NEDA to n!rea#e$ red"!e or remo%e ex #t n( prote!t %e rate# of mport d"ty$ PR4;,DED T>AT$ the n!rea#e #ho"ld not be h (her than 788J ad %aloremE to e#tabl #h mport 5"ota or to ban mport# of any !ommod ty$ to mpo#e add t onal d"ty on all mport# not ex!eed n( 78J ad %alorem. 1CC. The Tari&& an# C"$tom$ Co#e pro'i#e$ &or the impo$ition o& $pe ia! "$tom$ #"tie$. What are the$e #"tie$ an# what i$ their nat"re an# p"rpo$e% SUGGESTED ANSWER: Spe! al !"#tom# d"t e# are add t onal mport d"t e# mpo#ed on #pe! f ! & nd# of mported art !le# "nder !erta n !ond t on#. The #pe! al !"#tom# d"t e# are the ant D d"mp n( d"ty$ the !o"nter%a l n( d"ty$ the d #!r m natory d"ty and the mar& n( d"ty. The #pe! al !"#tom# d"t e# are mpo#ed for the prote!t on of !on#"mer# and man"fa!t"rer#$ a# well a# Ph l pp ne prod"!t#. 1C1. Exp!ain ,rie&!y what i$ mean t ,y anti2 #"mpin- #"ty an# when i$ it impo$e#% SUGGESTED ANSWERS: A #pe! al d"ty mpo#ed on the mportat on of a prod"!t$ !ommod ty or art !le of !ommer!e nto the Ph l pp ne# at le## than t# normal %al"e when de#t ned for dome#t ! !on#"mpt on n the export !o"ntry$ wh !h # the d fferen!e between the export pr !e and the normal %al"e of #"!h prod"!t$ !ommod ty or art !le. )Se!. /87 )#3 )73$ T++$ a# amended by R.A. No. 209-$ BAnt D D"mp n( A!t of 7....C3 The ant D d"mp n( d"ty # mpo#ed where the mportat on of the prod"!t$ !ommod ty or art !le of !ommer!e de#!r bed abo%e # !a"# n( or # threaten n( to !a"#e mater al n="ry to a dome#t ! nd"#try$ or mater ally retard# the e#tabl #hment of a dome#t ! nd"#try prod"! n( the l &e prod"!t. )Se!. /87 )a3$ T++$ Ibid. C3 N4TES AND +466ENTS: The def n t on "nder the R.A. No. 209-$ the BAnt D D"mp n( A!t of 7...$C # #"b#tant ally the def n t on pro% ded for "nder R.A. No. 02F/$ the BAnt D D"mp n( A!t of 7..F.C

TARIFF AN* CISTOAS CO*E

DG. When #oe$ when #oe$ it en#% import a t i o n ,e-in an#

SUGGESTED ANSWER: ,mportat on be( n# when the !on%ey n( %e##el or a r!raft enter# the ="r #d !t on of the Ph l pp ne# w th ntent on to "nlade there n. ,mportat on # deemed term nated "pon payment of the d"t e#$ taxe# and other !har(e# d"e "pon the a(en! e#$ or #e!"red to be pa d$ at the port of entry and the le(al perm t for w thdrawal #hall ha%e been (ranted. ,n !a#e the art !le# are free of d"t e#$ taxe# and other !har(e#$ "nt l they ha%e le(ally left the ="r #d !t on of the !"#tom#. )Se!. 7-8-$ T++P3 DD. What i$ mean t ,y the &!exi,!e tari&& !a"$e% SUGGESTED ANSWER: Th # # a pro% # on n the Tar ff and +"#tom# +ode$ wh !h mplement# the !on#t t"t onally dele(ated power of the Pre# dent of the Ph l pp ne#$ n the ntere#t of nat onal e!onomy$ (eneral welfare andRor nat onal #e!"r ty

1C). Exp!ain the meanin- o& norm a! 'a!"e &or p"rpo$e$ o& impo$in- the anti2 #"mpin#"ty. SUGGESTED ANSWER: ,t # the !omparable pr !e at the date of #ale of l &e prod"!t$ !ommod ty$ or art !le n the ord nary !o"r#e of trade when de#t ned for !on#"mpt on n the !o"ntry of export. )Se!. /87 )#3 )/ 3$ T++$ a# amended by R.A. No. 209-$ BAnt D D"mp n( A!t of 7....C3

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1C+. What importK p ro # " t% i$ mean t ,y #"mpe# mpo#ed by law on !ommod ty or art !le$ 1C8. What are SUGGESTED ANSWER: Any prod"!t$ !ommod ty or art !le of !ommer!e ntrod"!ed nto the Ph l pp ne# at an export pr !e le## than t# normal %al"e n the ord nary !o"r#e of trade$ for the l &e prod"!t$ !ommod ty or art !le de#t ned for !on#"mpt on n the export n( !o"ntry$ wh !h # !a"# n( or # threaten n( to !a"#e mater al n="ry to a dome#t ! nd"#try$ or mater ally retard n( the e#tabl #hment of a dome#t ! nd"#try prod"! n( the l &e prod"!t. )Se!. /87 )#3 )93$ T++$ a# amended by R.A. No. 209-$ BAnt D D"mp n( A!t of 7....C3 1C.. Who impo$e$ the anti2 #"mpi n- #"ty% SUGGESTED ANSWER: The Se!retary of Trade and ,nd"#try n the !a#e of nonD a(r !"lt"ral prod"!t$ !ommod ty$ or art !le or the Se!retary of A(r !"lt"re$ n the !a#e of a(r !"lt"ral prod"!t$ !ommod ty or art !le$ after formal n%e#t (at on and aff rmat %e f nd n( of the Tar ff +omm ## on. E%en when all the re5" rement# for the mpo# t on ha%e been f"lf lled$ the de! # on on whether or not to mpo#e a def n t %e ant D d"mp n( d"ty rema n# the prero(at %e of the Tar ff +omm ## on. )Se!. /87 )a3$ T++$ a# amended by R.A. No. 209-$ BAnt D D"mp n( A!t of 7....C3 N4TES AND +466ENTS: R.A. No. 209-$ BAnt D D"mp n( A!t of 7...C abol #hed the Spe! al +omm ttee on Ant D D"mp n( !reated "nder R.A. No. 02F/$ the BAnt D D"mp n( A!t of 7..FC. Criteri a "$e# ,y the Tari&& Commi$$ion wheth e r or not to impo$e the anti2 #"mpin#"ty. ,t may !on# der amon( other#$ the effe!t of mpo# n( an ant D d"mp n( d"ty on the welfare of the !on#"mer# andRor the (eneral p"bl !$ and other related lo!al nd"#tr e#. )Se!. /87 )a3$ T++$ a# amended by R.A. No. 209-$ BAnt D D"mp n( A!t of 7....C3 1C/. What i$ the amo"n t o& anti2 #"mpin#"ty that may ,e impo$e#% SUGGESTED ANSWER: The d fferen!e between the export pr !e and the normal %al"e of #"!h prod"!t$ !ommod ty or art !le. )Se!. /87 )#3 )73$ T++$ a# amended by R.A. No. 209-$ BAnt D D"mp n( A!t of 7....C3 The ant D d"mp n( d"ty #hall be e5"al to the mar( n of d"mp n( on #"!h prod"!t$ !ommod ty or art !le thereafter mported to the Ph l pp ne# "nder # m lar ! r!"m#tan!e#$ n add t on to ord nary d"t e#$ taxe# and !har(e# the mported prod"!t$

o"nter ' ai!in- #"tie$%

SUGGESTED ANSWER: Add t onal !"#tom# d"t e# mpo#ed on any prod"!t$ !ommod ty or art !le of !ommer!e wh !h # (ranted d re!tly or nd re!tly by the (o%ernment n the !o"ntry of or ( n or exportat on$ any & nd or form of #pe! f ! #"b# dy "pon the prod"!t on$ man"fa!t"re or exportat on of #"!h prod"!t !ommod ty or art !le$ and the mportat on of #"!h #"b# d <ed prod"!t$ !ommod ty$ or art !le ha# !a"#ed or threaten# to !a"#e mater al n="ry to a dome#t ! nd"#try or ha# mater ally retarded the (rowth or pre%ent# the e#tabl #hment of a dome#t ! nd"#try. )Se!. /8-$ T++P a# amended by Se!t on 7$ R.A. No. 20973 1C9. What are mar3in- #"tie$% SUGGESTED ANSWER: Add t onal !"#tom# d"t e# mpo#ed on fore (n art !le# )or t# !onta ner# f the art !le t#elf !annot be mar&ed3$ not mar&ed n any off ! al lan("a(e n the Ph l pp ne#$ n a !on#p !"o"# pla!e a# le( bly$ ndel bly and permanently n #"!h manner a# to nd !ate to an "lt mate p"r!ha#er n the Ph l pp ne# the name of the !o"ntry of or ( n. 1CG. What i$ a #i$ rimina t o r y #"ty% SUGGESTED ANSWER: New and add t onal !"#tom# d"ty mpo#ed "pon art !le# wholly or n part the (rowth or prod"!t of$ or mported n a %e##el$ of any fore (n !o"ntry wh !h mpo#e#$ d re!tly or nd re!tly$ "pon the d #po# t on or tran#portat on n tran# t thro"(h or reexportat on from #"!h !o"ntry of any art !le wholly or n part the (rowth or prod"!t of the Ph l pp ne#$ any "nrea#onable !har(e$ exa!t on$ re("lat on or l m tat on wh !h # not e5"ally enfor!ed "pon l &e art !le# of e%ery fore (n !o"ntry$ or d #!r m nate# a(a n#t the !ommer!e of the Ph l pp ne#$ d re!tly or nd re!tly$ by law or adm n #trat %e re("lat on or pra!t !e$ by or n re#pe!t to any !"#tom#$ tonna(e$ or port d"ty$ fee$ !har(e$ exa!t on$ !la## f !at on$ re("lat on$ !ond t on$ re#tr !t on or proh b t on$ n #"!h manner a# to pla!e the !ommer!e of the Ph l pp ne# at a d #ad%anta(e !ompared w th the !ommer!e of any fore (n !o"ntry. 1CD. What 6"ri$#i tion% i$ the #o trine o& prima ry

SUGGESTED ANSWER: The B"rea" of +"#tom# ha# ex!l"# %e adm n #trat %e ="r #d !t on to !ond"!t #ear!he#$ #e <"re# and forfe t"re# of !ontraband w tho"t

46
nterferen!e from the !o"rt#. ,t !o"ld !ond"!t #ear!he# and #e <"re# w tho"t need of a ="d ! al warrant ex!ept f the #ear!h # to be !ond"!ted n a dwell n( pla!e. 11C. The Co!!e to r o& C"$tom$ i$$"e# a Warra n t o& Sei@"re an# *eten tio n o& )/4C C C ,a-a o& ri e4 ,earin the name o& =SNO W AAN 4 Ai!!e# in Pa!aw a n > $hippe# on ,oar# the AKH =A!,er to > whi h wa$ then #o 3e# at Pier 8 at Ce," City. The warra n t wa$ i$$"e# on the ,a$i$ o& a report that the ri e ha# ,een i!!e-a!!y import e # a$ it wa$ !an#e# in Pa!aw an ,y a &orei- n 'e$$e! an# then p!a e# in $a 3$ mar3e# =SNO W AAN 4 Ai!!e# in Pa!aw a n . > It wa$ then $hippe# to Ce," City on ,oar# the AKH =A!,er to. > For&ei t " r e pro ee#in -$ were then $tarte # in the Ce," City "$to m$ o&&i e. The on$i-ne e then &i!e# a i'i! $"it &or in6"n tion ,e&ore the Ce," City RTC4 whi h i$$"e# the in6"n tion ,e a"$e there wa$ a!!e- e# !a 3 o& pro,a,! e a"$e &or "$to m$ to e&&e t the $ei@"re. Wa$ the i$$"an e o& the in6"n tion proper% SUGGESTED ANSWER: No. There # no 5"e#t on that RT+'# are de%o d of any !ompeten!e to pa## "pon the %al d ty or re("lar ty of #e <"re and forfe t"re pro!eed n(# !ond"!ted by the B"rea" of +"#tom# and to en=o n or otherw #e nterfere w th the#e pro!eed n(#. The +olle!tor of +"#tom# # tt n( n #e <"re and forfe t"re pro!eed n(# ha# ex!l"# %e ="r #d !t on to hear and determ ne all 5"e#t on# to"!h n( on the #e <"re and forfe t"re of d"t able (ood#. RT+# are pre!l"ded from a##"m n( !o(n <an!e o%er #"!h matter# e%en thro"(h pet t on# of !ert orar $ proh b t on or mandam"#. )The B"rea" of +"#tom#$ et al.$ %. 4(ar o$ et al.$ G.R. No. 7/2827$ prom. 6ar!h -8$ -8883 N4TES AND +466ENTS: a. The Tari&& an# C"$to m$ Co#e an# the A t Creati n - the Co"rt o& Tax Appea!$ $pe i&y the proper &ora an# pro e#"re for the %ent lat on of ant le(al ob=e!t on# or ##"e# ra #ed !on!ern n( #e <"re and forfe t"re pro!eed n(#. Th"#$ a!t on# of the +olle!tor of +"#tom# are appealable to the +omm ## oner of +"#tom#$ who#e de! # on$ n t"rn$ # #"b=e!t to the ex!l"# %e appellate ="r #d !t on of the +o"rt of Tax Appeal# and from there to the +o"rt f Appeal#. The r"le that RT+# ha%e no re% ew power# o%er #"!h pro!eed n(# # an!hored "pon the pol !y of pla! n( no "nne!e##ary h ndran!e on the (o%ernment'# dr %e$ not only to pre%ent #m"((l n( and other fra"d# "pon +"#tom#$ b"t more mportantly$ to render effe!t %e and eff ! ent the !olle!t on of mport and export d"t e# d"e the State$ wh !h enable# the (o%ernment to !arry o"t the f"n!t on# t ha# been n#t t"ted to perform. b. The "$tom$ a"thoritie$ #o not ha'e to pro'e to the $ati$&a tion o& the o"rt that the arti !e$ on ,oar# a 'e$$e! were import e # &rom a,roa# or are inten# e# to ,e $hippe# a,roa# ,e&ore they may exer i$e the power to e&&e t "$tom$ $ear he$4 $ei@"re$4 or arre$t$ pro'i#e# ,y !aw an# ontin"e with the a#mini$tr a t i' e hearin-$ . )The B"rea" of +"#tom#$ et al.$ %. 4(ar o$ et al.$ G.R. No. 7/2827$ prom. 6ar!h -8$ -8883 111. A tin- on in&orm a t ion that a $hipmen t &rom 5on-3on- on ,oar# the SKS SA *ra-on 'io!at e# the Tari&& an# C"$tom$ Co#e4 a$ amen# e #4 a-ent$ o& the EIIE $ei@e# the $hipme n t . It wa$ &o"n# that the .C &t. 'an wa$ ma#e to appea r a$ a on$o!i#ation $hipme n t on$i$tin- o& )+) pa 3a-e$ with Tran$!in3 Int(!. Frei-ht Forwar # e # a$ $hipper an# Tran$-!o,e Int(!. In .4 a$ on$i-nee1 that there were ei-ht ;G< $hipper$ an# ei-ht ;G< on$i-nee$ #e !are# a$ o2 !oa#er$ an# o2 owner$ o& the onten t$ o& the 'an4 when in tr"th the entire $hipme n t ,e!on-$ on!y to one entity1 that the item$ a$ #e !are # ;'ario"$ in#"$tria! item$< were &o"n# in the 'an4 in$tea# it wa$ &o"n# to ,e &"!!y $t"&&e# with texti!e pie e -oo#$. A$ a re$"!t o& the a,o'e4 the appropria t e warra n t o& $ei@"re wa$ i$$"e# an# the -oo#$ &or&eit e # in &a'or o& the -o'ern m e n t . The on$i-nee &i!e# a petition &or re#e m p t ion o& the $hipme n t an# the hearino&&i er re om m e n # e # the re!ea$e o& the $hipme n t "pon the paym en t o& it$ #ome$ti 'a!"e a$ =the $hipme n t on$i$t$ o& -oo#$ whi h are in !e-a! onte m p! a tio n not prohi,ite #4 nor the re!ea$e thereo & to the !aima n t ontra ry to !aw.> The Commi$$ioner o& C"$tom$ #enie# the o&&er o& re#e m p t ion on the -ro"n#$ ;1< that the $hipm en t wa$ ma#e to appear an inno "o"$ on$o!i#a tion $hipme n t #e$tine# &or $hipm en t o"t$i#e o& the CN2 CFS in or#er to on ea! the texti!e &a,ri $1 ;)< the ei-ht o2 !oa#er$K on$i-ne$ o& the $hipme n t are a!! &i titio"$1 an# ;+< CAO G92 D) pro'i#e$ &or a #enia! o& an o&&er o& re#e m p t ion when the $ei@e# $hipme n t i$ on$i-ne# to a &i titio"$ per$on. Wo"!# yo" a!!ow the re#e m p tio n% Why% SUGGESTED ANSWER: ?e#. There # ab#ent the follow n( ! r!"m#tan!e# hen!e$ t wo"ld be proper to allow the redempt on of forfe ted property "pon payment of t# !omp"ted dome#t ! mar&et %al"e.

47
)Tran#(lobe ,nternat onal$ ,n!. %. +o"rt of Appeal#$ et al.$ G.R. No. 7-11/F$ Ian"ary -9$ 7...3 a. There # fra"dE b. The mportat on # ab#ol"tely proh b ted$ or !. The relea#e of the property wo"ld be !ontrary to law. ) Ibid. 3 6 #de!larat on# n man fe#t and r der !annot be a#!r bed to a !on# (nee # n!e t wa# not the one that prepared them. A# #a d n :arolan$ f at all$ the wron(f"l ma& n( or fal# ty of the do!"ment# !an only be attr b"ted to the fore (n #"ppl er# or #h pper#. .) Ibid. 3 N4TES AND +466ENTS: :ra"d a# def ned n Se!. 7$ par. 7.a.$ +64D 20D .- m"#t be a!t"al$ not !on#tr"!t %e. Se!. 7.a.$ +64D20D .- # of the #ame tenor a# Se!. -9/8$ par#.$ )f3 and )m3$ #"bpar#. /$ F and 9$ wh !h deal# w th fal# t e# !omm tted by the owner$ mporter$ exporter or !on# (nee or mportat onRexportat on thro"(h any other pra!t !e or de% !e. ,n A<nar %. +o"rt of Tax Appeal#$ 92 S+RA 97.$ re terated n :arolan$ Ir. %. +o"rt of Tax appeal#$ et al.$ -70 S+RA -.2$ the S"preme !o"rt !lar f ed that the fra"d !ontemplated by law m"#t be a!t"al and not !on#tr"!t %e. ,t m"#t be ntent onal$ !on# #t n( of de!ept on$ w llf"lly and del berately done or re#orted to n order to nd"!e another to ( %e "p #ome r (ht. :orfe t"re pro!eed n(# are n the nat"re of pro!eed n(# in rem. :orfe t"re of #e <ed (ood# n the B"rea" of +"#tom# # a pro!eed n( a(a n#t the (ood# and not a(a n#t the owner. ,t # n the nat"re of a pro!eed n( in rem $ .e. d re!ted a(a n#t the res or mported (ood# and enta l# a determ nat on of the le(al ty of the r mportat on. ,n th # pro!eed n($ t # n le(al !ontemplat on the property t#elf wh !h !omm t# the % olat on and # treated a# the offender$ w tho"t referen!e what#oe%er to the !hara!ter or !ond"!t of the owner. The ##"e # l m ted to whether the mported (ood# #ho"ld be forfe ted and d #po#ed of n a!!ordan!e w th law for % olat on of the Tar ff and +"#tom# +ode. .)Tran#(lobe ,nternat onal$ ,n!. %. +o"rt of Appeal#$ et al.$ G.R. No. 7-11/F$ Ian"ary -9$ 7...3 The one( year prescripti e period for forfeiture proceedings applies only in the absence of fraud . )+omm ## oner of +"#tom# %. +l"rt of Tax Appeal#$ et al.$ G.R. No. 7/-.-.$ prom. 6ar!h -0$ -8883 11). On Apri! 1C4 1DD94 the Co!!e tor o& C"$tom$ on#" te # a p",!i a" tion $a!e o& Lot No. 1/ on$i$tin - o& 'ario"$ mar,!e pro e$$in- ma hin e an# -rin#in - ma hine whi h in !"#e# a Spe ia! Cir "!ar Saw an# a *iamo n # Sawin- Aa hin e. The awar# wa$ ma# e to En-r. Fran3!in Po!i arpio4 the hi-he$t ,i##er. A&ter En-r. Po!i arpio $i-ne# the Gate Pa$$ e'i#en in- with#ra w a ! o& Lot No. 1/ &rom "$tom$ "$to#y4 he &o"n# that the two $aw$ were mi$$in- an# "pon hi$ in'e$ti-a tion &o"n# that the item$ were in$ta!!e# in the ompo"n# o& Carrara Aar,!e Phi!ippine$4 In . Con$e0"en t!y 4 &or a!!e-e# 'io!ation$ o& Se tion )/+8 ;non2 paym e n t o& #"tie$ an# taxe$< an# Se tion )/+C QeR ;i!!e-a! remo' a! o& arti !e$ &rom wareho"$e< o& the Tari&& an# C"$tom$ Co#e ;TCC< the $aw$ were $ei@e# ,y a"thorit y o& a Warr an t o& Sei@"re an# *eten tion #ate# Aay )D4 1DD14 &rom the ompo"n# o& Carrara Aar,!e. Carrar a Aar,!e &ai!e# to pre$ent e'i#en e o& paym en t o& #"tie$ an# taxe$ an# it$ #e&en$e i$ an a!!e-e# !o a! $a!e e'i#en e# ,y notari@e # *ee#$ o& Sa!e. In the mean ti m e 4 En-r. Po!i arpio inter' e n e # an# !aime# owner$hip o& the $aw$. Carrar a Aar,!e then o&&er e# to $ett!e the a$e in a or#an e with the pro'i$ion$ o& the TCC. 5owe'e r 4 the o&&er wa$ re&"$e# ,y the E"rea" o& C"$tom$4 whi h then #e !are# the arti !e$ &or&eit e # in &a'or o& the Go'ern m e n t . Re$o!'e the &o!!owin- i$$"e$ exp!ainin- ,rie&!y the rea$on$ &or yo"r an$werF a. I$ it 'a!i# to &or&eit an arti !e &o"n# in the po$$e$$ion o& a thir# party a&ter the $a!e at p",!i a" tion% ,. 5a$ the import a tio n ,een termin a t e #% . Who ha$ the ri-ht to retain po$$e$$ion o'er the two ;)< $aw$% SUGGESTED ANSWERS: a. ?e#$ be!a"#e there # #how n( that the mported #aw# were a!5" red by +arrara 6arble wh le they were n !"#tom# !"#tody w tho"t #how n( that the !orre!t d"t e# and taxe# were pa d thereon. The T++ #"b=e!t# to forefe t"re any art !le wh !h # remo%ed !ontrary to law from any p"bl ! or pr %ate wareho"#e "nder !"#tom# #"per% # on$ or relea#ed rre("larly from !"#tom# !"#tody. Before forfe t"re pro!eed n(# are n#t t"ted$ the law re5" re# the pre#en!e of probable !a"#e. 4n!e e#tabl #hed the b"rden of proof # #h fted to the !la mant. +"#tom# off !er# w th proper a"thor <at on from the +omm ## oner n wr t n($ may demand e% den!e of payment of d"t e# and taxe# on fore (n art !le# openly offered for #ale or &ept n #tora(eE and f no #"!h e% den!e !an be prod"!ed$ #"!h art !le# may be #e <ed and #"b=e!ted to forfe t"re pro!eed n(E pro% ded howe%er$ that d"r n( #"!h pro!eed n(# the per#on or ent ty from whom #"!h art !le# were #e <ed #hall be ( %en an opport"n ty to pro%e or #how the #o"r!e of #"!h art !le# and the payment of d"t e# and taxe# thereon. Under the ! r!"m#tan!e#$ t # !lear that before the del %ery of the tem# to

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En(r. Pol !arp o$ the B"rea" of +"#tom# had !"#tody of #a d #aw#. ,t wa# only when the whole wa# handed o%er to En(r. Pol !arp o that t wa# d #!o%ered that the two #aw# were m ## n(. ,n th # !a#e the forfe t"re ta&e# effe!t mmed ately "pon the !omm ## on of the offen#e. The forfe t"re of the #"b=e!t ma!h ner e#$ retroa!ted to the date they were lle(ally w thdrawn from !"#tom# !"#tody. The (o%ernment '# r (ht to re!o%er the ma!h ner e# pro!eed# from t# r (ht a# lawf"l owner and po##e##or thereof "pon abandonment by the mporter. S"!h r (ht may be a##erted no matter n who#e hand# the property may ha%e !ome$ and the !ondemnat on when obta ned a%o d# all ntermed ate al enat on#. The forfe t"re of the #aw# re#t# on a d fferent #tat"tory ba# # from Pol !arp o'# r (ht to re!e %e the property a# the w nn n( b dder n the a"!t on #ale. ,t wa# ba#ed "pon the (o%ernment'# r (ht to re!o%er property lle(ally w thdrawn from t# !"#tody. b. ,mportat on wa# already term nated after En(r. Pol !arp o ha# # (ned the Gate Pa## e% den! n( w thdrawal of *ot 79 from !"#tom# !"#tody. ,mportat on # deemed term nated "pon payment of d"t e#$ taxe# and other !har(e# d"e or #e!"red to be pa d "pon the art !le# at a port of entry$ and "pon the (rant of a le(al perm t for w thdrawalE or n !a#e #a d art !le# are free of d"t e#$ taxe# and other !har(e#$ "nt l they ha%e le(ally left the ="r #d !t on of the !"#tom#. The forfe t"re of the #"b=e!t #aw# howe%er$ # not dependent on whether or not the mportat on wa# term natedE rather t # prem #ed on the lle(al w thdrawal of (ood# from !"#tom# !"#tody. Th"#$ re(ardle## of the term nat on of mportat on$ !"#tom# a"thor t e# may %al dly #e <e (ood# wh !h$ for all ntent# and p"rpo#e#$ #t ll belon( to the (o%ernment. !. +omprom #e !o"ld not be allowed anymore # n!e the #"b=e!t ma!h ner e# had already been awarded to Pol !arp o$ be n( the h (he#t b dder n the p"bl ! a"!t on. The (o%ernment ha# the r (htf"l po##e## on of the #aw# b"t t #ho"ld t"rno%er the #ame to Pol !arp o. )+arrara 6arble Ph l pp ne#$ ,n!.$ %. +omm ## oner of +"#tom#$ G.R. No. 7-.128$ prom. September 7$ 7...3 N4TES AND +466ENTS: Adm n #trat %e and ="d ! al pro!ed"re# relat %e to !"#tom# #ear!he#$ #e <"re# and forfe t"re#: a. *eter m i n a t i o n o& pro,a,! e a"$e an# i$$"an e o& warr an t . The +olle!tor of +"#tom# "pon probable !a"#e that the art !le# are mported or exported$ or are attempted to be mported or exported$ n % olat on of the tar ff and !"#tom# law# #hall ##"e a warrant of #e <"re. )Se!. 1$ T tle ,,,$ +A4 No. .D./3 ,f the #ear!h and #e <"re # to be !ond"!ted n a dwell n( pla!e$ then a #ear!h warrant #ho"ld be ##"ed by the re("lar !o"rt# not the B"rea" of +"#tom#. There may be n#tan!e# where no warrant# ##"ed by the B"rea" of +"#tom# or the re("lar !o"rt# # re5" red$ a# n #ear!h and #e <"re# of motor %eh !le# and %e##el#. b. A t"a! $ei@"re o& the arti !e$ . 6a#ter th # pro!ed"re. Re0"ire m e n t $ &or re!ea$e "n#er ,on# o& $ei@e# arti !e$ : Th # # a probable area #o ma#ter. Sett!e m e n t o& $ei@"re a$e ,y paym en t o& &ine or re#e m p tio n o& &or&eit e # proper t y. Th # # another probable area.

LOCAL TAXATION
11+. What are the &"n#a m e n t a ! prin ip!e$ o& !o a! taxation% SUGGESTED ANSWER: The f"ndamental pr n! ple# of lo!al taxat on are: a. Ini&or mi t y E b. Taxe#$ fee#$ !har(e# and other mpo# t on# #hall be e0"ita ,! e and ba#ed on ab l ty to pay$ for p",!i p"rpo$e$ $ not "n6"$t4 ex!e## %e$ oppre## %e or !onf #!atory$ not ontra ry to law$ p"bl ! pol !y$ nat onal e!onom ! pol !y or n re#tra nt of tradeE !. The le%y and !olle!t on #hall not be !et to any pr %ate per#onE d. In"re$ #olely to the lo!al (o%ernment "n t le%y n( the taxE e. The pro-re$$i'ity pr n! ple m"#t be ob#er%ed. 11.. On B"ne )84 1DD)4 the Sanggunian g Panlala wig a n o& E"!a an pa$$e# Pro'in ia! Or#inan e No. +4 to ta3e e&&e t on B"!y 14 1DD)4 whi h !e'ie$ a tax o& 1C? o& the &air mar3e t 'a!"e in the !o a!ity per ",i met er o& or#inary $tone$4 -ra'e!4 $an#4 earth an# other 0"arry re$o"r e$ extra t e # &rom area$ o& p",!i !an# within it$ territoria! 6"ri$#i tion. It now o!!e t$ the $ai# tax "pon 0"arry re$o"r e$ extra t e # &rom pri'at e !an#$ ,y Rep",!i Cement . It !aim$ a"thorit y to #o $o "n#er the pro'i$ion$ o& the Lo a! Go'ern m e n t Co#e a$ we!! a$ "n#er

49
the Re-a!ian theory o& State owner$hip o'er a!! nat"r a! re$o"r e$. I$ the o!!e tion orre t% SUGGESTED ANSWER: No$ be!a"#e the a"thor ty "nder the *o!al Go%ernment +ode to !olle!t taxe# on 5"arry re#o"r!e# appl e# only to tho#e extra!ted from p"bl ! land#. )Se!. 7/F n relat on to Se!. 7/2$ *o!al Go%ernment +ode3 :"rthermore$ the *o!al Go%ernment +ode proh b t# lo!al (o%ernment "n t# from !olle!t n( ex! #e taxe# on art !le# en"merated "nder the N,R+$ and taxe#$ fee# or !har(e# on petrole"m prod"!t#. )Se!. 7// PhQ$ *o!al Go%ernment +ode n relat on to the Tax +ode3 The tax mpo#ed # an ex! #e tax "pon the performan!e$ !arry n( on$ or the exer! #e of an a!t % ty. Wh le the Tax +ode le% e# a tax on all 5"arry re#o"r!e#$ re(ardle## of or ( n$ whether extra!ted from p"bl ! or pr %ate land#$ the *o!al Go%ernment +ode a"thor <e# the lo!al (o%ernment "n t to mpo#e #"!h taxe# on tho#e ta&en from p"bl ! land#. Th"#$ tho#e extra!ted from pr %ate land# are taxable "nder the N,R+ and not by lo!al (o%ernment "n t#. The Re(al an do!tr ne may not be appl ed be!a"#e taxe#$ be n( b"rden#$ are not to be pre#"med beyond what the appl !able #tat"te expre##ly and !learly de!lare#$ tax #tat"te# be n( !on#tr"ed stricitssimi *uris a(a n#t the (o%ernment. )The Pro% n!e of B"la!an$ et al.$ %. The +o"rt of Appeal#$ et!.$ et al.$ -.. S+RA FF-3 11/. Phi!ippin e Ea$3et, a! ! A$$o iation onte$t e # the #e&i ien y am"$e m e n t tax a$$e$$e# a-ain$t it ,y the EIR &or on#" tin the pro&e$$ion a! ,a$3et, a!! -ame$ an# &or the e$$ion o& a#'erti$inan# $trea m e r $pa e$ to Hinta- e Enterp ri$e$4 In . a< Sho"!# the am"$e m e n t taxe$ ,e pai# to the !o a! -o'ern m e n t in$tea# o& the EIR% ,< I$ the e$$ion o& a#'er ti$in - an# $trea m e r $pa e$ to Hinta- e Enterp ri$e$4 In . $",6e t to the paym e n t o& am"$e m e n t taxe$% SUGGESTED ANSWER: a. No. Profe## onal ba#&etball (ame# #ho"ld pay the am"#ement taxe# !olle!ted by the B,R and not the am"#ement taxe# !olle!ted by the lo!al (o%ernment#. The am"#ement tax wh !h pro% n!e# and ! t e# are allowed to !olle!t "nder Se!. 7F8 of the *o!al Go%ernment +ode$ refer# to Ban am"#ement tax to be !olle!ted from propr etor#$ le##ee#$ or operator# of theater#$ ! nema#$ !on!ert hall#$ ! r!"#e#$ box n( #tad a$ and other pla!e# of am"#ement. C The a"thor ty to tax profe## onal ba#&etball (ame# # not n!l"ded there n be!a"#e t # a nat onal tax pro% ded for "nder Se!. 7-9 of the 7..0 Tax +ode wh !h pro% de# that$ BThere #hall be !olle!ted from the propr etor$ le##ee or operator of !o!&p t#$ !abaret#$ n (ht or day !l"b#$ box n( exh b t on#$ profe## onal ba#&etball (ame#$ Ia DAla and ra!etra!&#$ a tax e5" %alent to: xxxx )d3 : fteen per!ent )79J3 n the !a#e of profe## onal ba#&etball (ame# en% # oned n Pre# dent al De!ree No. .07: "ro ided# howe er# That the tax here n #hall be n l e" of all other per!enta(e taxe# of whate%er nat"re and de#!r pt onE xxxC b. ?e#. The #e!ond to the la#t para(raph of Se!. 7-9 of the 7..0 Tax +ode pro% de# that$ the term B(ro## re!e pt# embra!e# all the re!e pt# of the propr etor$ le##ee or operator of the am"#ement pla!e.. Th # term # broad eno"(h to embra!e the !e## on of ad%ert # n( and #treamer #pa!e# a# the #ame embra!e# all the re!e pt# of the propr etor$ le##ee or operator of the am"#ement pla!e. ,t # th"#$ a nat onal tax not a lo!al tax. The re!o(n t on by the B,R of #"!h n!ome from !e## on a# a lo!al tax # of no moment be!a"#e the Go%ernment # ne%er e#topped by the m #ta&e or error on the part of t# a(ent#$ #pe! ally on the matter of taxe#. )Ph l pp ne Ba#&etball A##o! at on %. +o"rt of Appeal#$ et al.$ G.R. No. 77.7--$ prom. A"("#t 2$ -8883 118. The City Trea$"r er #i$ o'ere # that the One ht$ &ai!e# to pay their rea! proper t y taxe$ on their proper t y on$i$tin- o& a par e! o& !an# with an area o& G41C ) $0.m. The proper t y wa$ $",$e0" en t!y $o!# at p",!i a" tion &or the tax #e!in0"e n y. 5owe'e r 4 the One ht$ #i# not re ei'e any noti e o& their tax #e!in0"e n y an# that the Re-i$ter o& *ee#$ #i# not or#er them to $"rren# e r their owner($ #"p!i at e &or annot a tion o& the tax !ien prior to the $a!e. Neith er #i# they ha'e noti e o& the a" tion $a!e nor wa$ the erti&i a t e o& $a!e annot a t e # on their tit!e nor with the tit!e in the po$$e$$ion o& the Re-i$ter o& *ee#$. I$ the tax $a!e 'a!i#% Rea$on o"t yo"r an$wer. SUGGESTED ANSWER: No. ,t ha# been r"led that the not !e and p"bl !at on$ a# well a# the le(al re5" rement# for a tax del n5"en!y #ale$ are mandatory$ and the fa l"re to !omply therew th !an n%al date the #ale. The pre#!r bed not !e# m"#t be #ent to !omply w th the re5" rement# of d"e pro!e##. )De Wne!ht$ et al$. %. +o"rt of Appeal#E De Wne!ht$ et al.$ %. >onorable Sayo$ -.8 S+RA --/$-/13 The rea#on beh nd the not !e re5" rement # that tax #ale# are adm n #trat %e pro!eed n(# wh !h are in personam n nat"re. )P"<on %. Abbellera$ 71. S+RA 02.$ 0.9E De A# # %. ,.A. +.$ 71. S+RA /7F3 N4TES AND +466ENTS:

50
All of the abo%e !a#e# were de! ded nterpret n( the pro% # on# of +.A. No. F08$ the old A##e##ment *aw$ and P.D. No. F1F$ the Real Property Tax +ode$ both of wh !h re5" red per#onal not !e to the taxpayer n add t on to the re5" # te ad%ert #ement. The pro% # on# of Se!. -18 of the *o!al Go%ernment +ode on BAd%ert #ement and SaleC doe# not re5" re per#onal not !e to the del n5"ent taxpayer. ,n % ew of the abo%e$ the a"thor bel e%e# that per#onal not !e of the a"!t on #ale # not re5" red anymore "nder the pro% # on# of the *o!al Go%ernment +ode of 7.. wh !h repealed +.A. No. F08 and P.D. No. F1F3 d #tr !t#E and (o%ernment owned and !ontrolled !orporat on# en(a(ed n the #"pply and d #tr b"t on of water and (enerat on and tran#m ## on of ele!tr ! powerE d. Real property owned by d"ly re( #tered !ooperat %e#E e. 6a!h nery and e5" pment "#ed for poll"t on !ontrol and en% ronmental prote!t on. 1)C. The prote#t !ontemplated "nder Se!t on -9- of R.A. No. 0718 # needed where there # a 5"e#t on of rea#onablene## of the amo"nt a##e##ed$ not where the 5"e#t on ra #ed # on the %ery a"thor ty and power of the a##e##or to mpo#e the a##e##ment and of the trea#"rer to !olle!t the tax. )Ty %. Trampe$ -98 S+RA 9883 1)1. On Apri! +4 1DG94 Ra"! p"r ha$e# &rom E$tre!!a two !ot$4 ,oth !o ate# in Ce," City. Lot no. 1 ontain e# an area o& .D $0.m. whi!e !ot no. ) ontain e# an area o& .G $0.m. more or !e$$. Eoth !ot$ ha# impro'e m e n t $ 4 whi h were #e$ ri,e# a$ La re$i#en tia! ho"$e o& $tron- mat eri a!$ on$tr" te # on the !ot$ a,o'e2 mentione #.L Ra"! #e !are # the rea! proper t y on$tr" t e # on the $ai# !ot$ &or p"rpo$e$ o& tax a$$e$$me n t a$ a re$i#en ti a! ho"$e o& $tron- mat e ria!$ with a &!oor area o& 8C $0.m. E&&e ti' e 1DG94 the #e !are# proper t y wa$ a$$e$$e# ,y the City A$$e$$or "n#er Tax *e !ara t ion 1 at a mar3e t 'a!"e o& P8C4CC C . C C an# an a$$e$$e# 'a!"e o& P+84DC C . C C . *"rina tax2 mappinopera tion on#" t e# in Fe,r"a ry 1DD84 the City A$$e$$or #i$ o'er e# that the rea! proper t y #e !are# an# a$$e$$e# "n#er Tax *e !ar a tion No. 1 wa$ a t"a!!y a re$i#en ti a! ,"i!#in- on$i$tin- o& &o"r ;.< $torey$ with a &i&th $torey "$e# a$ a roo& #e 3. The ,"i!#in- ha$ a tota! &!oor area o& /CC.) C $0. m. The area &or ea h &!oor wa$ 1CC.C . $0"are met er$. A$ a re$"!t o& the &in#in-$4 the City A$$e$$or i$$"e# Tax *e !ar a tion No. ) e&&e ti' e in the year 1DD84 an e!in- the pre'io"$ Tax *e !ara tion an# a$$e$$in- the ,"i!#in- therein at a net mar3e t 'a!"e o& P.DD4G 8 C . C C an# an a$$e$$e# 'a!"e o& P+9.4D C C . C C . The 1DG92 1DD1 S he#"!e o& Aar3e t Ha!"e wa$ app!ie# in the a$$e$$me n t . Ra"! prote$t e # the new a$$e$$m en t &or ,ein- Lex e$$i'e an# "n on$ iona,!e4L onten#in- that it wa$ in rea$e# ,y more than 14CC C ? a$ ompar e # to it$ pre'io"$ mar3e t o& P8C4C C C . C C or a$$e$$e# 'a!"e o& P+84DC C . C C "n#er Tax *e !ar a tion No. C)2 )C./. an# Lthat he ,o"-ht the ,"i!#inin !"#in- the !ot$ &or on!y P1CC4C C C . C C on Apri! +4 1DG94 whi h amo"nt $ho"!# ,e the mar3e t 'a!"e o& the ,"i!#in- &or p"rpo$e$ o&

REAL PROPERTN TAXATION

119. What are the &"n# a m e n t a ! prin ip!e$ o& rea! proper t y taxa tio n% a. Appra #al at !"rrent and fa r mar&et %al"eE b. +la## f !at on for a##e##ment on the ba# # of a!t"al "#eE !. A##e##ment on the ba# # of "n form !la## f !at onE d. Appra #al$ a##e##ment$ le%y and !olle!t on #hall not be let to a pr %ate per#onE e. Appra #al and a##e##ment #hall be e5" table. 11G. *eter m i n a t i o n o& 'ario"$ item$F a. The rea#onable mar&et %al"e # determ ned by the a##e##or n the form of a #!hed"le of fa r mar&et %al"e#. The #!hed"le # then ena!ted by the lo!al #an(("n an. b. The a##e##ment le%el # f xed by ord nan!e# of the appropr ate #an(("n an. !. The tax rate # al#o f xed by ord nan!e# of the appropr ate #an(("n an. 11D. Proper t y exem p t &rom the paym e n t o& rea! proper t y taxF a. Real property owned by the Rep"bl ! of the Ph l pp ne# or any of t# pol t !al #"bd % # on# ex!ept when the benef ! al "#e thereof ha# been (ranted to a taxable per#on for a !on# derat on or otherw #eE b. +har table n#t t"t on#$ !h"r!he#$ par#ona(e# or !on%ent# app"rtenant thereto$ mo#5"e#$ nonD prof t or rel ( o"# !emeter e#$ and all land#$ b" ld n(# and mpro%ement# a!t"ally$ d re!tly and ex!l"# %ely "#ed for rel ( o"#$ !har table and ed"!at onal p"rpo#e#E !. 6a!h ner e# and e5" pment$ a!t"ally$ d re!tly and ex!l"# %ely "#ed by lo!al water

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#eter mi n i n it$ a$$e$$e# 'a!"e.L 5e 0"e$tion e# the new a$$e$$m en t ,e&ore the Lo a! Eoar# o& A$$e$$me n t Appea!$ o& Ce," City4 whi h #i$mi$$e# hi$ appea! on Ban"ary 114 1DD9. Ra"! e!e'at e # hi$ a$e to the Centra! Eoar# o& A$$e$$me n t Appea!$. On Septe m , e r 194 1DDG4 the CEAA ren#er e # a #e i$ion or#erin - the Ce," City A$$e$$or to i$$"e a new Tax *e !ar a tion in the amo" n t o& P)G14 / G G . C C . Ra"! then &i!e# a motion &or the re on$i#er a ti o n o& the CEAA7$ #e i$ion. Ra"! an# the City A$$e$$or 6oint!y a-re e# that the re'i$e# 'a!"ation o& the proper t y i$ P9G4+ + C . C C a$ a$$e$$e# 'a!"e4 !a$$i&yin - the proper t y at P1411 C per $0. m.4 the ,"i!#in- ha'in- ,een omp!e t e # an# o "pie# in 1D/9 or &orty2 two ;.)< year$ a-o. The CEAA then r"!e# that &or p"rpo$e$ o& #eter m i n i n - the ,a 3 taxe$ #"e on the ex e$$ area o& $",6e t ,"i!#in- &rom 1DGG to 1DD84 the Ce," City A$$e$$or $ho"!# i$$"e in a or# an e with Se . ))) o& the Lo a! Go'ern m e n t Co#eF a. Tax *e !ara ti o n e&&e ti' e 1DGG to B"ne +C4 1DD84 ,a$e# on the mini m" m rate per $0. m. &or the type o& ,"i!#in- in a or#an e with the 1DG/2 1DG8 S he#"! e o& Ha!"e$1 ,. Tax *e !ara ti o n to $"per$e# e Tax *e !ar a ti o n No. 1 to ,e e&&e ti' e &rom B"!y 14 1DD. to the year 1DD/4 ,a$e# on the minim" m rate per $0. m. &or the type o& ,"i!#in-4 in a or#an e with the 1DGG2 1DD1 S he#"!e o& Ha!"e$1 an# . Tax *e !ar a ti o n to $"per$e# e Tax *e !ar a ti o n No. ) to ta3e e&&e t in 1DD84 ,a$e# on the re'i$e# 'a!"a tion o& the proper t y a$ a-ree # "pon ,y the parti e$. Ra"! #i$a-re e$ with the a,o'e &in#in-$4 ,a$e# on the &o!!owin-F a< The CEAA erre# in re$o!'in- the i$$"e o& ,a 3 taxe$ &rom 1DGG to 1DD/4 #e$pite the &a t that $" h i$$"e wa$ not rai$e# in the appea! to it4 "n#er it$ prete x t that it i$ app!yin - Se . ))) o& the Lo a! Go'ern m e n t Co#e. ,< The CEAA erre# in not $tri t!y app!yinpar. ;!<4 Se . 1DD o& the Lo a! Go'ern m e n t Co#e4 #e&ininLFair Aar3e t Ha!"eL a$ ,a$i$ &or omp"tinthe La$$e$$e# 'a!"e.L < The CEAA7$ r"!in- i$ #i$ ri min a t o r y4 "n6"$t4 on&i$ ato ry an# "n on$ti t" ti o n a! . To what o"rt $ho"!# Ra"! e!e'a t e the a#'er$e #e i$ion o& the CEAA% Wo"!# hi$ appea! pro$per% SUGGESTED ANSWER: Ra"l #ho"ld appeal the de! # on of the +BAA to the +o"rt of Appeal#$ "nder R"le F/ of the 7..0 R"le# of + % l Pro!ed"re$ by f l n( a pet t on for re% ew w th n a per od of f fteen )793 day# from re!e pt of the ad%er#e +BAA de! # on. Ra"lG# appeal wo"ld not pro#per for the follow n( rea#on#: a. The fa!t# of the !a#e do not #how that Ra"l ha# pa d "nder prote#t the tax a##e##ed a(a n#t h # property. Th # # a mandatory re5" rement "nder Se!. -9- of the *o!al Go%ernment +ode. Th # # #o$ be!a"#e the ##"e # rea#onablene## of the amo"nt a##e##ed and not on the %ery a"thor ty and power of the a##e##or to mpo#e the a##e##ment and of the trea#"rer to !olle!t the tax. )Ty %. Trampe$ -98 S+RA 9883 b. Appellate !o"rt# a# well a# appellate adm n #trat %e a(en! e#$ ha%e nherent a"thor ty to re% ew "na## (ned error# )73 which are closely related to an error properly raised# or )-3 upon which the determination of the error properly assigned is dependent# or )/3 where the court or administrati e agency finds that consideration of them is necessary in arri ing at a *ust decision of the case . There wa# no error$ be!a"#e Ra"l h m#elf # a##a l n( the #"b=e!t a##e##ment a# Kex!e## %e and "n!on#! onable.K Th"#$ +BAA wa# d"tyD bo"nd to re% ew the fa!t"al ante!edent# of the !a#e and to apply hereon the pert nent pro% # on# of law. ,n the pro!e##$ +BAA ha# to apply Se!. --- of the *o!al Go%ernment +ode wh !h a"thor <e# the !olle!t on of ba!& taxe#. !. The ex!e## area# re#"lt n( from the re% # on m"#t be "nder#tood a# ne%er ha% n( been de!lared before. Th # # e% dent from the pro% # on# of Se!. --- of the *o!al Go%ernment +ode wh !h read#: KSe!. ---. ,ssessment of "roperty !ub*ect to -ack Taxes. ( Real property de!lared for the f r#t t me #hall be a##e##ed for taxe# for the per od d"r n( wh !h t wo"ld ha%e been l able b"t n no !a#e for more than ten )783 year# pr or to the date of n t al a##e##ment: "ro ided# howe er# That #"!h taxe# #hall be !omp"ted on the ba# # of the appl !able #!hed"le of %al"e# n for!e d"r n( the !orre#pond n( per od.K ,t # ne ther ="#t that a landowner #ho"ld be perm tted by an n%ol"ntary m #ta&e or thro"(h other !a"#e#$ not to #ay bad fa th$ to #tate an area far le## than that a!t"ally !onta ned n h # land and pay a tax to the State a tax far below that wh !h he #ho"ld really pay. d. Ra"lG# !ontent on on the "#e of mar&et %al"e for the !omp"tat on of the a##e##ed %al"e # erroneo"#. Par. )l3 Se!. 7.. of the *o!al Go%ernment +ode merely def ne# K:a r 6ar&et ;al"e.K ,t doe# not n any way d re!t that the K:a r 6ar&et

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;al"eK #ho"ld be "#ed a# a ba# # for p"rpo#e# of real property taxat on. 4n the other hand$ par. )a3$ Se!. 7.2 of the #ame +ode pro% de# "ne5" %o!ally that$ KReal property #hall be appra #ed at t# !"rrent and fa r mar&et %al"e.K The !"rrent %al"e of l &e propert e# and the r a!t"al or potent al "#e#$ amon( other#$ are al#o !on# dered. Un#!r"p"lo"# #eller# of real e#tate often "nder#tate the #ell n( pr !e n the deed of #ale to m n m <e the r tax l ab l ty. 6oreo%er$ the %al"e of real property doe# not rema n #ta(nant$ t # "nreal #t ! to expe!t that the !"rrent mar&et %al"e of a property # the #ame a# t# !o#t of a!5" # t on ten year# a(o. ,n th # l (ht$ a (eneral re% # on of real property a##e##ment # re5" red by law w th n two )-3 year# after the effe!t % ty of the *o!al Go%ernment +ode and e%ery three )/3 year# thereafter. )Se!. -7.$ *o!al Go%ernment +ode3 e. When ba!& taxe# were mpo#ed on Ra"lG# property$ there wa# no % olat on of the r"le that law# #hall ha%e only pro#pe!t %e appl !ab l ty. The pro% # on# of Se!. -9 of P.D. No. F1F$ The Real Property Tax +ode )now Se!. --- of the *o!al Go%ernment +ode3 # not penal n !hara!ter$ hen!e t may not be !on# dered a# an ex post facto law. )Se#breno %. +entral Board of A##e##ment Appeal#$ et al.$ G.R. No. 781922$ 6ar!h -F$ 7..03 1)). What are the a#mini$tr a ti ' e rem e#ie$ that are pro'i#e# &or "n#er the pro'i$ion$ o& R.A. No. 918C4 the Lo a! Go'ern m e n t Co#e4 ,e&ore re$ort to o"rt$ i$ ma#e re!ati' e to rea! proper t y taxe$% SUGGESTED ANSWER: A taxpayer may 5"e#t on the !on#t t"t onal ty or le(al ty of a tax ord nan!e on appeal w th n th rty )/83 day# from effe!t % ty thereof$ to the Se!retary of I"#t !e. The taxpayer after f nd n( that h # a##e##ment # "n="#t$ !onf #!atory$ or ex!e## %e$ m"#t br n( the !a#e before the Se!retary of I"#t !e for 5"e#t on# of le(al ty or !on#t t"t onal ty of a ! ty ord nan!e. An owner of real property who # not #at #f ed w th the a##e##ment of h # property may$ w th n # xty )183 day# from not !e of a##e##ment$ appeal to the *o!al Board of A##e##ment Appeal#. Sho"ld the taxpayer 5"e#t on the ex!e## %ene## of the amo"nt of tax$ he m"#t f r#t pay the amo"nt d"e. Then$ he m"#t re5"e#t the annotat on of the phra#e Bpa d "nder prote#t C and a!!ord n(ly appeal to the *o!al Board of A##e##ment Appeal# by f l n( a pet t on "nder oath to(ether w th !op e# of the tax de!larat on# and aff da% t# or do!"ment# to #"pport h # appeal. )*ope< %. + ty of 6an la$ et al.$ G.R. No. 7-07/.$ :ebr"ary 7.$ 7...3 N4TES AND +466ENTS: Remed e# of real property owner who 5"e#t on# %al d ty of tax ord nan!e: Se!retary of I"#t !e !an ta&e !o(n <an!e of a !a#e n%ol% n( the !on#t t"t onal ty or le(al ty of tax ord nan!e# where there are fa!t"al ##"e# n%ol%ed. ): ("erre# %. +o"rt of Appeal#$ et al.$ G.R. No. 77.70-$ 6ar!h -9$ 7...3 J"e$tion$ on 'a!i#ity or !e-a!ity o& a tax or#inan e . Taxpayer f le# appeal to the Se!retary of I"#t !e$ w th n /8 day# from effe!t % ty thereof. ,n !a#e the Se!retary de! de# the appeal$ a per od al#o of /8 day# # allowed for an a((r e%ed party to (o to !o"rt. B"t f the Se!retary doe# not a!t thereon$ after the lap#e of 18 day#$ a party !o"ld already #ee& rel ef n !o"rt. The#e three #eparate per od# are !learly ( %en for !ompl an!e a# a prere5" # te before #ee& n( redre## n a !ompetent !o"rt. S"!h #tat"tory per od# are #et to pre%ent delay# a# well a# enhan!e he orderly and #peedy d #!har(e of ="d ! al f"n!t on#. :or th # rea#on the !o"rt# !on#tr"e the#e pro% # on# of #tat"te# a# mandatory. )Reye#$ et al.$ %. +o"rt of Appeal#$ et al.$ G.R. No. 772-//$ prom. De!ember 78$ 7...3 P",!i hearin-$ are man# a to r y prior to appro'a! o& tax or#inan e $ b"t th # #t ll re5" re# the taxpayer to add"!e e% den!e to #how that no p"bl ! hear n(# e%er too& pla!e. ) Ibid. 3 1)+. What are the $tep$ to ,e &o!!owe# &or the man#a t o r y on#" t o& Genera! Re'i$ion o& Rea! Proper t y A$$e$$men t$ % a. Preparat on of S!hed"le of :a r 6ar&et ;al"e#E b. Ena!tment of 4rd nan!e#E 73 le%y n( an ann"al Bad %alorem C tax on real property and an add t onal tax a!!r" n( to the Spe! al Ed"!at on :"ndE -3 : x n( the a##e##ment le%el# to be appl ed to the mar&et %al"e# of real propert e#E /3 Pro% d n( the ne!e##ary appropr at on# to defray expen#e# n! dent to (eneral re% # on of real property a##e##ment#$E and F3 Adopt n( the S!hed"le of :a r 6ar&et ;al"e# prepared by the a##e##or#. )*ope< %. + ty of 6an la$ et al.$ G.R. No. 7-07/.$ :ebr"ary 7.$ 7...3 N4TES AND +466ENTS: P"bl ! hear n(# are re5" red to be !ond"!ted pr or to the ena!tment of an ord nan!e mpo# n( real property taxe#. ): ("erre# %. +o"rt of Appeal#$ et al.$ G.R. No. 77.70-$ 6ar!h -9$ 7...3

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1).. What are the $tep$ to ,e &o!!owe# in the prep ar a ti o n o& &air mar3e t 'a!"e$% a. The ! ty or m"n ! pal a##e##or #hall prepare a #!hed"le of fa r mar&et %al"e# for the d fferent !la##e# of real property # t"ated n the r re#pe!t %e *o!al Go%ernment Un t# for the ena!tment of an ord nan!e by the sanggunian !on!ernedE and b. The #!hed"le of fa r mar&et %al"e# #hall be p"bl #hed n a new#paper of (eneral ! r!"lat on n the pro% n!e$ ! ty or m"n ! pal ty !on!erned or the po#t n( n the pro% n! al !ap tol or other pla!e# a# re5" red by law. )*ope< %. + ty of 6an la$ et al.$ G.R. No. 7-07/.$ :ebr"ary 7.$ 7...3 N4TES AND +466ENTS: Propo#ed fa r mar&et %al"e# of real property n a lo!al (o%ernment "n t a# well a# the ord nan!e !onta n n( the #!hed"le m"#t be p"bl #hed n f"ll for three )/3 !on#e!"t %e day# n a new#paper of lo!al ! r!"lat on$ where a%a lable$ w th n ten )783 day# of t# appro%al$ and po#ted n at lea#e two )-3 prom nent pla!e# n the pro% n! al !ap tol$ ! ty$ m"n ! pal or baran(ay hall for a m n m"m of three )/3 !on#e!"t %e wee&#. ): ("erre# %. +o"rt of Appeal#$ et al$. G.R. No. 77.70-$ 6ar!h -9$ 7...3 1)/. What i$ the pro e# " re to ,e &o!!owe# in omp" ti n - rea! proper t y taxe$% SUGGESTED ANSWER: a. A#!erta n the a##e##ment le%el of the propertyE b. 6"lt ply the mar&et %al"e by the appl !able a##e##ment le%el of the propertyE and !. : nd the tax rate wh !h !orre#pond# to the !la## )"#e3 of the property and m"lt ply the a##e##ed %al"e by the appl !able tax rate. :or ea#y referen!e$ the !omp"tat on of real property tax # ! ted below: 6ar&et %al"e ) x J3 A##e##ed %al"e 6"lt pl ed by Rate of Tax ) x J3 Real Property Tax Px x x Px x x 6"lt pl ed by A##e##ment *e%el W th the ntrod"!t on of a##e##ment le%el#$ tax rate# !o"ld be ma nta ned$ altho"(h tax payment# !an be made e ther h (her or lower depend n( on the r per!enta(e )a##e##ment le%el3 appl ed to the fa r mar&et %al"e of property to der %e t# a##e##ed %al"e wh !h # #"b=e!t to tax. 6oreo%er$ !la##e# and %al"e# of real propert e# !an be ( %en proper !on# derat on$ l &e a## (n n( lower a##e##ment le%el# to re# dent al propert e# and h (her le%el# to propert e# "#ed n b"# ne##. )*ope< %. + ty of 6an la$ et al.$ G.R. No. 7-07/.$ prom. :ebr"ary 7.$ 7...3 GOO* LICO AN* PRANERS FOR NOIR PASSING T5E EAR.

Px x x

)*ope< %. + ty of 6an la$ et al.$ G.R. No. 7-07/.$ prom. :ebr"ary 7.$ 7...3 N4TES AND +466ENTS: ,t # farfet!hed that the abo%e 5"e#t on wo"ld be ( %en. ,t wa# n!l"ded only for ll"#trat %e p"rpo#e#. >owe%er the follow n( !on!ept relat %e to the determ nat on of real property taxe# n order to ea#e the pred !ament of the low and m ddleD n!ome (ro"p# of taxpayer#$ may be a#&ed: