TAX II - Finals Reviewer - 3B ALS

RIGHTS
AND REMEDIES OF THE GOVERNMENT UNDER

THE NATIONAL INTERNAL REVENUE CODE

I. EXAMINATION AND AUDIT OF RETURNS
A. Statutory Basis
SEC. 5.1 Power of the Commissioner to Obtain Information, and to Summon, Examine, and Take
Testimony of Persons. - In ascertaining the a.) correctness of any return, b.) or in making a return
when none has been made, c.) or in determining the liability of any person for any internal revenue
tax, d.) or in collecting any such liability, e.) or in evaluating tax compliance, the Commissioner is
authorized:

(A) To examine any book, paper, record, or other data which may be relevant or material to
such inquiry;
(B) To Obtain on a regular basis from a.) any person other than the person whose internal
revenue tax liability is subject to audit or investigation, b.) or from any office or officer of the
national and local governments, government agencies and instrumentalities, including the
Bangko Sentral ng Pilipinas and government-owned or -controlled corporations, any
information
(C) To summon the a.) person liable for tax or required to file a return, b.) or any officer or
employee of such person, c.) or any person having possession, custody, or care of the books of
accounts and other accounting records containing entries relating to the business of the
person liable for tax, d.) or any other person, to appear before the Commissioner or his duly
authorized representative at a time and place specified in the summons and to produce such
books, papers, records, or other data, and to give testimony;
(D) To take such testimony of the person concerned, under oath, as may be relevant or
material to such inquiry;
(E) To cause revenue officers and employees to make a canvass from time to time of any
revenue district or region and inquire after and concerning all persons therein who may
be liable to pay any internal revenue tax, and all persons owning or having the care,
management or possession of any object with respect to which a tax is imposed.

*Does not grant the Commissioner the authority to inquire into bank deposits other than as
provided for in Section 6(F) of this Code.

SEC. 6.2 Power of the Commissioner to Make assessments and Prescribe additional Requirements for
Tax Administration and Enforcement. -
(A) Examination of Returns and Determination of Tax Due.

1
1. Examine any book, paper, record
2. TPI
3. Subpoena duces tecum
4. Supoena testificandum
5. Tax mapping
2
1. Examination of Returns and Determination of tax due
2. Best evidence obtainable
3. Conduct Inventory-Taking, surveillance and to prescribe presumptive gross sales and receipts
4. Authority to terminate tax period
5. Prescribe real property values
6. Inquire into bank deposits
7. Accredit and register tax agents
8. Prescribe additional procedural and document requirements

Bianca Mendoza/ALS 3B 2016/Tax II-Atty. Bello 1

1. After a return has been duly filed - CIR or his duly authorized representative may
authorize the examination of any taxpayer and the assessment
2. Even if TP failed to file a return CIR may examine the TP
(B) Best evidence obtainable - When a report required by law as a basis for the
assessment of any national internal revenue tax shall not be forthcoming within the
time fixed by laws or rules and regulations or when there is reason to believe that any such
report is false, incomplete or erroneous.

If delayed, or wilfully or otherwise files a false or fraudulent return or other document,
the Commissioner shall make or amend the return from his own knowledge and from
such information as he can obtain through testimony or otherwise, which shall be prima
facie correct and sufficient for all legal purposes.

(C) Authority to Conduct Inventory-taking, surveillance and to Prescribe Presumptive Gross
Sales and Receipts. - if there is reason to believe that such person is not declaring his correct
income, sales or receipts for internal revenue tax purposes. The findings may be used as the
basis for assessing the taxes for the other months or quarters of the same or different
taxable years and such assessment shall be deemed prima facie correct.

When TP failed to issue receipts and invoices, or when there is reason to believe that the
books of accounts or other records do not correctly reflect the declarations made or to
be - CIR after taking into account the sales, receipts, income or other taxable base of
other persons engaged in similar businesses under similar situations or circumstances
or after considering other relevant information may prescribe a minimum amount of
such gross receipts, sales and taxable base, and such amount so prescribed shall be
prima facie correct for purposes of determining the internal revenue tax liabilities of
such person.

(D) Authority to Terminate Taxable Period.
a. TP is retiring from business subject to tax,
b. TP is intending to leave the Philippines
c. TP intending to remove his property therefrom or to hide or conceal his
property,
d. TP is performing any act tending to obstruct the proceedings for the collection of
the tax for the past or current quarter or year or to render the same totally or partly
ineffective unless such proceedings are begun immediately,

CIR shall terminated the period and send TP a notice of such decision with request for
immediate payment of the tax for the period so declared terminated and the tax for the
preceding year or quarter, or such portion thereof as may be unpaid, and said taxes
shall be due and payable immediately and shall be subject to all the penalties hereafter
prescribed, unless paid within the time fixed in the demand made by the Commissioner.

(E) Authority of the Commissioner to Prescribe Real Property Values.
1. CIR is authorized to divide into different zones or area
2. Upon consultation with competent appraisers both from the private and public
sectors, determine the fair market value of real properties located in each zone or
area.
3. For purposes of computing any internal revenue tax, the value of the property
shall be, whichever is the HIGHER of;
(1) the FMV as determined by the Commissioner, [ZONAL]

(2) FMV as shown in the schedule of values of the Provincial and City
Assessors. [ASSESSED VALUE]

(F) Authority of the Commissioner to inquire into Bank Deposit Accounts. -
(1) a decedent to determine his gross estate; and
(2) any taxpayer who has filed an application for compromise of his tax liability
under Sec. 204 (A) (2) of this Code by reason of financial incapacity to pay his tax
liability. his application shall only be considered upon waiving in writing his
privilege under RA 1405 or under other laws.

(G) Authority to Accredit and Register Tax Agents. - The Commissioner shall accredit and
register individuals and general professional partnerships and their representatives who
prepare and file tax returns, statements, reports, protests, and other papers with or who
appear before, the Bureau for taxpayers.

(H) Authority of the Commissioner to Prescribe Additional Procedural or Documentary
Requirements. - in connection with the submission or preparation of financial statements
accompanying the tax returns.

II. BIRS INVESTIGATIVE AUTHORITY
A. Statutory Basis
1. Administrative Summons to Taxpayer

Sec. 5(C), (D), NIRC
(C)To summon the a.) person liable for tax or required to file a return, b.) or any officer or
accounts and other accounting records containing entries relating to the business of the person
liable for tax, d.) or any other person, to appear before the Commissioner or his duly authorized
representative at a time and place specified in the summons and to produce such books, papers,
records, or other data, and to give testimony; [subpoena duces tecum]

(D) To take such testimony of the person concerned, under oath, as may be relevant or
material to such inquiry; [subpoena testificandum]

Sec. 6(C), NIRC

such person.

2. Third-Party Summons
Sec. 5(B), (C), NIRC

(B)To Obtain on a regular basis from a.) any person other than the person whose internal
revenue tax liability is subject to audit or investigation, b.) or from any office or officer of the
national and local governments, government agencies and instrumentalities, including the
Bangko Sentral ng Pilipinas and government-owned or -controlled corporations, any
information

(C)To summon the a.) person liable for tax or required to file a return, b.) or any officer or
accounts and other accounting records containing entries relating to the business of the person
liable for tax, d.) or any other person, to appear before the Commissioner or his duly authorized
representative at a time and place specified in the summons and to produce such books, papers,
records, or other data, and to give testimony;

B. Informers Reward
Sec. 282, NIRC
SEC. 282. Informer's Reward to Persons Instrumental in the Discovery of Violations of the National
Internal Revenue Code and in the Discovery and Seizure of Smuggled Goods. -

(A) For Violations of the National Internal Revenue Code.
1. Any person, except an internal revenue official or employee, or other public official or
employee, or his relative within the sixth degree of consanguinity,
2. Who voluntarily gives definite and sworn information,
3. Not yet in the possession of the Bureau of Internal Revenue, leading to the discovery
of frauds or violation, thereby resulting in the recovery of revenues, surcharges and fees
and/or the conviction of the guilty party and/or the imposition of any of the fine or
penalty
4. Shall be rewarded in a sum equivalent to 10% of amount actually recovered or collected
or 1M, whichever is LOWER.
a. Same amount shall be given even if the offender compromised with the CIR and paid
b. If no amount is actually recovered or collected, informer is not entitled to the
reward:
c. Information shall not be already pending or previously investigated or examined by
the CIR or any of his deputies, agents or examiners, or the Secretary of Finance or
any of his deputies or agents:
d. The reward shall be paid under rules and regulations issued by the Secretary of
Finance, upon recommendation of the Commissioner.

(B) For Discovery and Seizure of Smuggled Goods. To encourage the public to extend full
cooperation in eradicating smuggling, a cash reward equivalent to 10% of the FMV of the
smuggled and confiscated goods or P1Million/case, whichever is LOWER, shall be given to
persons instrumental in the discovery and seizure of such smuggled goods.

The cash rewards of informers shall be subject to income tax, collected as a
final withholding tax, at a rate of ten percent (10%).
All public officials, whether incumbent or retired, who acquired the
information in the course of the performance of their duties during their
incumbency, are prohibited from claiming informer's reward.

BIR Rul. No. 071-00, Dec. 18, 2000
WON Ms. Vera is entitled to informers reward? NO. Ms. Vera was not able to furnish a
definite and sworn statement, not yet in the possession of the BIR, leading to the discovery

of frauds upon internal revenue law or violations of any of the provisions thereof. Further, a
BIR Ruling can never be a basis of granting an informers reward.

Meralco Securities Corp. v. Savellano, 117 SCRA 804 (1982)
WON Maniago can file for mandamus to compel the CIR to impose the alleged deficiency?
NO. Maniago filed for petition for mandamus to compel the CIR to impose the deficiency tax
assessment on MERALCO and to award him the corresponding informers rewards, however
this function is discretionary and it was found that there was no deficiency at all; thus, no
taxes are collected and so no informers reward is due to Maniago. The reward is contingent
upon the payment and collection of unpaid or deficiency taxes.

Fitness by Design, Inc. v. CIR, G.R. No. 177982, Oct. 17, 2008
WON the documents were illegally obtained? No. Consent is not needed because if so, BIR
will be inutile if the TPs consent is a condition to the use of the documents. Further, the CIR
is allowed to examine papers [Sec 5A], obtain from person other than the TP [Sec 5B] and
summon person who has custody of books, etc [Sec 5C].

III. BIRS POWER TO MAKE ASSESSMENTS
A. Upon Examination of Returns Filed
Sec. 6(A), NIRC Examination of Returns and Determination of Tax Due.
1. After a return has been duly filed - CIR or his duly authorized representative may
authorize the examination of any taxpayer and the assessment
2. Even if TP failed to file a return CIR may examine the TP

B. In Case of Failure to Submit Required Reports
Sec. 6(B), NIRC
(B) Best evidence obtainable - When a report required by law as a basis for the
assessment of any national internal revenue tax shall not be forthcoming within the
time fixed by laws or rules and regulations or when there is reason to believe that any such
report is false, incomplete or erroneous.

If delayed, or wilfully or otherwise files a false or fraudulent return or other document,
the Commissioner shall make or amend the return from his own knowledge and from
such information as he can obtain through testimony or otherwise, which shall be prima
facie correct and sufficient for all legal purposes.

C. After Inventory Taking or Surveillance
Sec. 6(C), NIRC

such person.

D. Where CIR Terminates Taxpayers Taxable Period
Sec. 6(D), NIRC Authority to Terminate Taxable Period.
a. TP is retiring from business subject to tax,
b. TP is intending to leave the Philippines
c. TP intending to remove his property therefrom or to hide or conceal his
property,
d. TP is performing any act tending to obstruct the proceedings for the collection of
the tax for the past or current quarter or year or to render the same totally or partly
ineffective unless such proceedings are begun immediately,

CIR shall terminated the period and send TP a notice of such decision with request for
immediate payment of the tax for the period so declared terminated and the tax for the
preceding year or quarter, or such portion thereof as may be unpaid, and said taxes
shall be due and payable immediately and shall be subject to all the penalties hereafter
prescribed, unless paid within the time fixed in the demand made by the Commissioner.
[terminate + notice + demand]

E. Prescribe Zonal Value
Sec. 6(E), NIRC Authority of the Commissioner to Prescribe Real Property Values.
1. CIR is authorized to divide into different zones or area
2. Upon consultation with competent appraisers both from the private and public
sectors, determine the fair market value of real properties located in each zone
or area.
3. For purposes of computing any internal revenue tax, the value of the property
shall be, whichever is the HIGHER of;
(a) the FMV as determined by the Commissioner, [ZONAL]
(b) the fair market value as shown in the schedule of values of the
Provincial and City Assessors. [ASSESSED VALUE]

CIR v. Aquafresh Seafoods, Inc., G.R. No. 170389, Oct. 20, 2010
WON consultation with competent appraisers is mandatory? YES. If the BIR wants to
reclassify the property, it needs to go through the process of consultation with competent
appraisers both from private and public sectors. This is mandatory.

F. Issuance of Pre-Assessment Notice
Sec. 228, NIRC
When the Commissioner or his duly authorized representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his findings: provided, however, That a preassessment
notice shall not be required in the following cases:

(a) Deficiency due to mathematical error in the computation as appearing on the face of the
return; or
(b) Discrepancy between the tax withheld and the amount actually remitted by the
withholding agent; or
(c) TP is claiming excess creditable withholding tax was determined to have carried over
and automatically applied the same amount claimed against the estimated tax liabilities
(d) When the excise tax due on exciseable articles has not been paid; or
(e) When the article locally purchased or imported by an exempt person has been sold,
traded or transferred to non-exempt persons.


TP shall be informed in writing of the law and the facts on which the assessment is made;
otherwise, the assessment shall be VOID.
TP must respond within 15 days to said notice. If TP fails to respond, considered in default
and assessment shall issue.

Sec. 3, Rev. Regs. No. 12-99, Sept. 6, 1999
3.1.1 Preliminary Assessment Notice (PAN). If after review and evaluation by the
Commissioner or his duly authorized representative, as the case may be, it is determined that there
exists sufficient basis to assess the taxpayer for any deficiency tax or taxes, the said Office shall
issue to the taxpayer a Preliminary Assessment Notice (PAN) for the proposed assessment. It shall
show in detail the facts and the law, rules and regulations, or jurisprudence on which the proposed
assessment is based.

1. If the taxpayer fails to respond within fifteen (15) days from date of receipt of the PAN, he
shall be considered in default, in which case, a Formal Letter of Demand and Final Assessment
Notice (FLD/FAN) shall be issued calling for payment of the taxpayer's deficiency tax liability,
inclusive of the applicable penalties.
2. If the taxpayer, within fifteen (15) days from date of receipt of the PAN, responds that
he/it disagrees with the findings of deficiency tax or taxes, an FLD/FAN shall be issued within
fifteen (15) days from filing/submission of the taxpayers response, calling for payment of the
taxpayer's deficiency tax liability, inclusive of the applicable penalties.

***So in both cases, FAN/FLD shall issue

3.1.2 Exceptions to Prior Notice of the Assessment. Pursuant to Section 228 of the Tax Code, as
amended, a PAN shall not be required in any of the following cases:
(i) When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax appearing on the face of the tax return filed by the taxpayer; or
(ii) When a discrepancy has been determined between the tax withheld and the amount
actually remitted by the withholding agent; or
(iii) When a taxpayer who opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to have carried over and automatically
applied the same amount claimed against the estimated tax liabilities for the taxable quarter
or quarters of the succeeding taxable year; or
(iv) When the excise tax due on excisable articles has not been paid; or
(v) When an article locally purchased or imported by an exempt person, such as, but not
limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded
or transferred to non-exempt persons.

***In the above-cited cases, a FLD/FAN shall be issued outright.

G. Issuance of Final Assessment Notice3
Sec. 228, NIRC Failure to respond within 15 days, the Commissioner or his duly authorized
representative shall issue an assessment based on his findings.

3
Atty Bello: What are the three acts which can render the assessment final?
1. Failure to protest the FAN
2. Failure to submit relevant supporting documents within 60 days of filing the protest
3. Failure to appeal before the CTA


3.1.3 Formal Letter of Demand and Final Assessment Notice (FLD/FAN). The Formal Letter of
Demand and Final Assessment Notice (FLD/FAN) shall be issued by the Commissioner or his duly
authorized representative. The FLD/FAN calling for payment of the taxpayer's deficiency tax or
taxes shall state the facts, the law, rules and regulations, or jurisprudence on which the assessment
is based; otherwise, the assessment shall be void.

1. What Constitutes an Assessment
CIR v. Pascor Realty and Dev. Corp., 309 SCRA 402 (1999)
WON criminal complaint attached with the affidavit of the BIR is sufficient to serve as an
assessment? NO. An assessment must be sent and received by a TP and must demand
payment of taxes described therein within a specified period. It is vital as it signals the
running of the penalties and the determination of the period of limitation. It must also be
duly sent to the TP, it is only deemed made when the collector releases, mails or send such
notice to the TP. The complaint here was addressed to the DOJ and not the TP.

WON assessment is a condition before the filing of a criminal complaint? NO. Sec 222, NIRC
states that where a false of fraudulent return is submitted or in cases of failure to file a
return such as this case, proceedings in court may be commenced without an assessment.
Further, Sec 205, NIRC, mandates that the civil and criminal aspects of the case may be
pursued simultaneously. Criminal charge need only be supported by a prima facie showing
of failure to file a required return. This fact need not be proved by an assessment. Finally, a
criminal complaint, serves a different purpose, it is instituted not to demand payment, but
to penalize the TP for the violation of the Tax Code.

Fort Bonifacio Dev. Corp. v. CIR, CTA Case No. 5665, Aug. 11, 2000
An assessment is a written notice and demand made by the BIR to the TP for the settlement
of tax due liability during a definite period of time. In this case, the first letter is not an
assessment as there was no definite time for payment and demand (letter said it is still
subject to audit verification). Further, not all documents from the BIR are assessments; it
must also be sent and received by the TP.

Republic v. Court of Appeals, 149 SCRA 351 (1987)
Presumption that mailed letter is received by addressee in the ordinary course of the mail is
merely a presumption, and is subject to controversion, and a direct denial of the receipt
thereof shifts the burden on the party favoured by the presumption to prove that the mailed
letter was indeed received by the addressee. Records, however, show that BIR wrote the TP
a follow-up letter reiterating its demand for the payment of taxes as originally demanded in
the first letter. This follow up letter is considered a notice of assessment in itself which was
duly received by TP in accordance with its own admission.

2. Presumption of Correctness of Assessment
Sy Po v. CTA, 164 SCRA 524 (1988)
WON the assessments have valid and legal basis? YES. Sec 16B, NIRC allows the CIR to
assess the proper tax on the best evidence obtainable when a report required by law as a
basis for the assessment of any national internal revenue tax shall not be forthcoming
within the time fixed by law or regulation or when there is reason to believe that any such
report is false, incomplete, or erroneous. Further, if the TP fails to file the required
documents, or wilfully or otherwise, files a false or fraudulent return, the CIR shall make or
amend the return from his own knowledge and from such info through testimony or
otherwise, which shall be prima facie correct and sufficient for all legal purposes.

Further, tax assessment by tax examiners are presumed correct and made in good
faith. In the absence of proof of any irregularities in the performance of duties, an
assessment duly made by the BIR and approved by his superior officers will not be
disturbed. All presumption are in favour of the correctness of tax assessments.

3. Assessment Must be Based on Actual Facts
CIR v. Benipayo, 4 SCRA 182 (1962)4
WON Benipayo is liable for deficiency taxes? NO. In order to stand the test of judicial
scrutiny, the assessment must be based on actual facts. The presumption of correctness
being a mere presumption cannot be made to rest on another presumption. Fraud is a
serious charge and, to be sustained, must be supported by clear and convincing proof
which in this case, is lacking.

Chemical Industries of the Phil., Inc. v. CIR, CTA Case No. 5257,
TP is not liable, citing CIR vs Benipayo, In order to stand the test of judicial scrutiny, the
assessment must be based on actual facts. The presumption of correctness being a mere
presumption cannot be made to rest on another presumption. Further, the TP in this case
was able to explain the increase.

4. Assessment Issued Outside Scope of Letter of Authority
Sony Philippines, Inc. v. CIR, CTA Case No. 6185, Oct. 26, 2004
Assessment is void since examiners went beyond the scope of their authority under the
Letter of Authority.

IV. COLLECTION OF UNPAID TAXES
A. Distraint, Garnishment, Levy and Seizure
Secs. 205-217, 224-225 NIRC
SEC. 205. Remedies for the Collection of Delinquent Taxes. - The civil remedies for the collection of
internal revenue taxes, fees or charges, and any increment thereto resulting from delinquency shall
be:
(a) By distraint of goods, chattels, or effects, and other personal property of whatever
character, including stocks and other securities, debts, credits, bank accounts and interest
in and rights to personal property, and by levy upon real property and interest in rights to
real property; and
(b) By civil or criminal action.5
May be simultaneously pursued
Not to be availed of where the amount of tax involved is not more than P100
Judgment in criminal case shall impose the penalty and order the payment of taxes which is
the subject of the case as finally decided by the CIR
BIR shall advance the amounts needed to defray costs of collection by means of civil or
criminal action, including the preservation/transportation of personal property distrained
and the advertisement and sale thereof, as well as of real property and improvements
thereon.

SEC. 206. Constructive Distraint of the Property of A Taxpayer. - To safeguard the interest of the
Government, the Commissioner may place under constructive distraint the property of a delinquent
taxpayer or any taxpayer who, in his opinion:
a. retiring from any business subject to tax,

4
The theatre case wherein taxes imposed were based on ratios in the previous period of the TP.
5
Atty. Bello: Institution of civil and criminal actions for the recovery of taxes and enforcement of any fine, penalty
or forfeiture under the NIRC requires the approval of the CIR [Sec 220].

b. intending to leave the Philippines
c. intending to remove his property therefrom or to hide or conceal his property
d. perform any act tending to obstruct the proceedings for collecting the tax due or which may
be due from him.
Shall be affected by requiring the TP or the person in possession or control of such property
to sign a receipt covering the property distrained and obligate himself to preserve the same
intact and unaltered and not to dispose of the same ;in any manner whatever, without the
express authority of the Commissioner.
If TP of person in possession or control of the said property refuses or fails to sign the
receipt, RO effecting the constructive distraint shall proceed to 1.) prepare a list of such
property and, 2.) in the presence of 2 witnesses, 3.) leave a copy thereof in the premises
where the property distrained is located, after which said property shall be deemed to have
been placed under constructive distraint.

DISTRAINT6

Procedure: DISTRAINT
1. Commencement of distraint SEC. 207. Summary Remedies.
proceedings (A) Distraint of Personal Property. - Upon the failure to pay at the
time required:
1. More than P1M - the CIR or duly authorized representative
2. P1M or less RDO
shall seize and distraint any goods, chattels or effects, and the
personal property, including stocks and other securities,
debts, credits, bank accounts, and interests in and rights to
personal property of such persons; in sufficient quantity to
satisfy the tax, or charge, together with any increment
thereto incident to delinquency, and the expenses of the
distraint and the cost of the subsequent sale. A report on the
distraint shall, within ten (10) days from receipt of the
warrant, be submitted by the distraining officer to the RDO
and to the Revenue Regional Director:
CIR or his duly authorized representative shall, subject to
rules and regulations promulgated by the Secretary of
Finance, upon recommendation of the Commissioner, have the
power to lift such order of distraint
Consolidated report by the Revenue Regional Director may be
required by the Commissioner as often as necessary.
2. Service of warrant of SEC. 208. Procedure for Distraint and Garnishment.
distraint 1. The officer serving the warrant of distraint shall make or
cause to be made an account of the goods, chattels, effects or
other personal property distrained, a copy of which, signed by
himself, shall be left either with the owner or person from
whose possession such goods, chattels, or effects or other
personal property were taken, or at the dwelling or place of
business of such person and with someone of suitable age and
discretion, to which list shall be added a statement of the sum

6
Atty. Bello: 2 Types of distraint:
1. Actual
2. Constructive no assessment necessary; enough that administrative procedures (leading to issuance of
an assessment) are commenced. Actual delinquency is not necessary before this can be resorted to.

demanded and note of the time and place of sale.
a. Stocks and other securities - serving a copy of the warrant of
distraint upon TP and upon the president, manager, treasurer
or other responsible officer of the corporation, company or
association, which issued the said stocks or securities.
b. Debts and credits - leaving with the person owing the debts or
having in his possession or under his control such credits, or
with his agent, a copy of the warrant of distraint. The warrant
of distraint shall be sufficient authority to such person
(creditor) to pay to the Commissioner the amount of such
debts or credits.
c. Bank accounts - garnished by serving a warrant of
garnishment upon the TP and upon the president, manager,
treasurer or other responsible officer of the bank. Upon
receipt of the warrant of garnishment, the bank shall turn over
to the Commissioner so much of the bank accounts as may be
sufficient to satisfy the claim of the Government.
3. Notice of sale of distrained SEC. 209. Sale of Property Distrained and Disposition of Proceeds. - The
property Revenue District Officer or his duly authorized representative, other
than the officer referred to in Section 208 of this Code shall, according
to rules and regulations prescribed by the Secretary of Finance, upon
recommendation of the Commissioner, forthwith cause a notification
to be exhibited:
1. in not less than two (2) public places in the municipality or
city where the distraint is made, one of which shall be at the
Office of the Mayor of the city or municipality in which the
property is distrained.
2. specifying; the time and place of sale and the articles
distrained.
The time of sale shall not be less than twenty (20) days
after notice.

v At the time and place fixed in such notice, the said revenue
officer shall sell at public auction, to the highest bidder for
cash, or with the approval of the Commissioner, through duly
licensed commodity or stock exchanges.
In the case of Stocks and other securities - officer making the sale
shall execute a bill of sale which he shall deliver to the buyer, and a
copy thereof furnished the corporation, company or association
which issued the stocks or other securities
Upon receipt of the copy of the bill of sale, the corporation,
company or association shall make the entry transferring the
stocks or other securities sold in the name of the buyer, and issue,
if required to do so, the corresponding certificates of stock or
other securities.
Any residue over and above what is required to pay the entire
claim, including expenses, shall be returned to the owner of the
property sold.
v Chargeable expenses upon each seizure and sale shall embrace
only the ACTUAL EXPENSES of seizure and preservation of the
property pending the sale,
v No charge shall be imposed for the services of the local

internal revenue officer or his deputy.
4. Release of distrained SEC. 210. Release of Distrained Property Upon Payment Prior to Sale. -
property, prior to sale If at any time prior to the consummation of the sale all proper charges
are paid to the officer conducting the sale, the goods or effects
distrained shall be restored to the owner.
5. Sale of property distrained SEC. 211. Report of Sale to Bureau of Internal Revenue. - Within two
(2) days after the sale, the officer making the same shall make a report
of his proceedings in writing to the Commissioner and shall himself
preserve a copy of such report as an official record.
6. Purchase by Government at SEC. 212. Purchase by Government at Sale Upon Distraint.
sale upon distraint When the amount bid for the property under distraint is
1. not equal to the amount of the tax
2. or is very much less than the actual market value of the articles
offered for sale
v CIR or his deputy may purchase the same in behalf of the national
Government for the amount of taxes, penalties and costs due
thereon.
Property so purchased may be resold by the Commissioner or
his deputy, subject to the rules and regulations prescribed by the
Secretary of Finance, the net proceeds therefrom shall be
remitted to the National Treasury and accounted for as internal
revenue.


Procedure: LEVY
1. Commencement of levy (B) Levy on Real Property. - After the expiration of the time required
proceedings to pay, real property may be levied upon, before simultaneously or
2. Service of warrant of levy after the distraint of personal property belonging to the delinquent.
any internal revenue officer designated by the Commissioner
or his duly authorized representative shall prepare a duly
authenticated certificate showing the name of the taxpayer
and the amounts of the tax and penalty due from him.
Said certificate shall operate with the force of a legal execution
throughout the Philippines.

Levy shall be affected by writing upon said certificate a
description of the property upon which levy is made.
Written notice of the levy shall be mailed to or served upon the
Register of Deeds for the province or city where the property
is located and upon the delinquent taxpayer, or if he be absent
from the Philippines, to his agent or the manager of the
business in respect to which the liability arose, or if there be
none, to the occupant of the property in question
If not is not issued before or simultaneously with the warrant
of distraint on personal property, and the personal property of
the taxpayer is not sufficient to satisfy his tax delinquency, the
Commissioner or his duly authorized representative shall,
within thirty (30) days after execution of the distraint, proceed
with the levy on the taxpayer's real property.
Within ten (10) days after receipt of the warrant, a report on
any levy shall be submitted by the levying officer to the CIR or
his duly authorized representative
Consolidated report by the Revenue Regional Director may be
required by the Commissioner as often as necessary
CIR or his duly authorized representative, subject to rules and
regulations promulgated by the Secretary of Finance, upon
recommendation of the Commissioner, shall have the authority
to lift warrants of levy issued in accordance with the provisions
hereof.

3. Advertisement for sale SEC. 213. Advertisement and Sale.
1. Within twenty (20) days after levy, the officer conducting the
proceedings shall proceed to advertise the property or a
usable portion thereof as may be necessary to satisfy the claim
and cost of sale;
2. Advertisement shall cover a period of a least thirty (30) days.
3. It shall be effectuated by posting a notice at the 1.) main
entrance of the municipal building or city hall and in public
and 2.) conspicuous place in the barrio or district in which the
real estate lies and ;by publication once a week for three (3)
weeks in a newspaper of general circulation in the
municipality or city where the property is located.
4. The advertisement shall contain:
a. Statement of the amount of taxes and penalties so due and
the time and place of sale
b. Name of the taxpayer against whom taxes are levied
c. Short description of the property to be sold.
At any time before the day fixed for the sale, the
taxpayer may discontinue all proceedings by paying
the taxes, penalties and interest.
If he does not do so, the sale shall proceed and shall be
held either at the main entrance of the municipal
building or city hall, or on the premises to be sold, as
the officer conducting the proceedings shall determine
and as the notice of sale shall specify.

v Within five (5) days after the sale, a return by the
distraining or levying officer of the proceedings shall be
entered upon the records of the Revenue Collection Officer,
the Revenue District officer and the Revenue Regional
Director.
v The Revenue Collection Officer, in consultation with
the Revenue district Officer, shall then make out and deliver
to the purchaser a certificate from his records, showing the
proceedings of the sale, describing the property sold stating
the name of the purchaser and setting out the exact amount of
all taxes, penalties and interest:
In case the proceeds of the sale exceeds the
claim and cost of sale, the excess shall be
turned over to the owner of the property.
v The Revenue Collection Officer, upon approval by the
Revenue District Officer may, out of his collection, advance an
amount sufficient to defray the costs of collection by means of
the summary remedies provided for in this Code, including;
1. Preservation or transportation in case
of personal property,
2. Advertisement and subsequent sale,
both in cases of personal and real property
including improvements found on the latter.
In his monthly collection reports, such
advances shall be reflected and
supported by receipts.

4. Public sale of property
under levy
5. Redemption of property SEC. 214. Redemption of Property Sold
sold 1. Within one (1) year from the date of sale, the delinquent
taxpayer, or any one for him, shall have the right of paying to
the Revenue District Officer the amount of the public taxes,
penalties, and interest thereon from the date of delinquency to
the date of sale, together with interest on said purchase price
at the rate of fifteen percent (15%) per annum from the date of
purchase to the date of redemption [taxes + penalties +
interest + interest on purchase price from purchase date to
redemption date]
2. Such payment shall entitle the person paying to the delivery of
the certificate issued to the purchaser and a certificate from
the said Revenue District Officer that he has thus redeemed
the property
3. RDO shall forthwith pay over to the purchaser the amount by
which such property has thus been redeemed, and said
property thereafter shall be free from the lien of such taxes
and penalties.
Owner will not be deprived of possession of the
property and is entitled to rents and income thereof until
the expiration of the redemption period
6. Forfeiture to the SEC. 215. Forfeiture to Government for Want of Bidder.
government for want of 1. In case there is no bidder for real property exposed for sale as
bidder herein above provided or if the highest bid is for an amount
insufficient to pay the taxes, penalties and costs, the Internal
Revenue Officer conducting the sale shall declare the property
forfeited to the Government in satisfaction of the claim
2. Within two (2) days thereafter, shall make a return of his
proceedings and the forfeiture which shall be spread upon the
records of his office. It shall be the duty of the Register of
Deeds concerned, upon registration with his office of any such
declaration of forfeiture, to transfer the title of the property
forfeited to the Government without the necessity of an order
from a competent court
3. Within one (1) year from the date of such forfeiture, the
taxpayer, or any one for him may redeem said property by
paying to the Commissioner or the latter's Revenue Collection
Officer the full amount of the taxes and penalties, together
with interest thereon and the costs of sale, but if the property
be not thus redeemed, the forfeiture shall become absolute.
7. Resale of real estate taken SEC. 216. Resale of Real Estate Taken for Taxes.
for taxes 1. The Commissioner shall have charge of any real estate
obtained by the Government of the Philippines in payment or
satisfaction of taxes, penalties or costs arising under this Code
or in compromise or adjustment of any claim
2. Commissioner may, upon the giving of not less than twenty
(20) days notice, sell and dispose of the same of public auction
or with prior approval of the Secretary of Finance, dispose of
the same at private sale.
3. In either case, the proceeds of the sale shall be deposited with

the National Treasury, and an accounting of the same shall
rendered to the Chairman of the Commission on Audit.
8. Further distraint and levy SEC. 217. Further Distraint or Levy. - The remedy by distraint of
personal property and levy on realty may be repeated if necessary until
the full amount due, including all expenses, is collected.

SEC. 224. Remedy for Enforcement of Forfeitures
1. Chattels and removable fixtures of any sort - enforced by the seizure and sale, or
destruction, of the specific forfeited property
2. Real property - enforced by a judgment of condemnation and sale in a legal action or
proceeding, civil or criminal, as the case may require.

SEC. 225. When Property to be Sold or Destroyed
1. Sales of forfeited chattels and removable fixtures shall be effected, so far as practicable, in
the same manner and under the same conditions as the public notice and the time and
manner of sale as are prescribed for sales of personal property distrained for the non-
payment of taxes.
2. Distilled spirits, liquors, cigars, cigarettes, other manufactured products of tobacco, and all
apparatus used I or about the illicit production of such articles may, upon forfeiture, be
destroyed by order of the Commissioner, when the sale of the same for consumption or use
would be injurious to public health or prejudicial to the enforcement of the law.
3. All other articles subject to excise tax, which have been manufactured or removed in
violation of this Code, as well as dies for the printing or making of internal revenue stamps
and labels which are in imitation of or purport to be lawful stamps, or labels may, upon
forfeiture, be sold or destroyed in the discretion of the Commissioner.
Forfeited property shall not be destroyed until at least twenty (20) days
after seizure.

SEC. 202. Final Deed to Purchaser.
Property not redeemed by TP - RDO, as grantor, shall execute a deed conveying to the purchaser so
much of the property as has been sold, free from all liens of any kind whatsoever, and the deed shall
succinctly recite all the proceedings upon which the validity of the sale depends.

B. Civil Action
Sec. 205, NIRC
The civil remedies for the collection of internal revenue taxes, fees or charges, and any increment
thereto resulting from delinquency shall be:
b. by civil or criminal action

SEC. 220. Form and Mode of Proceeding in Actions Arising under this Code
Civil and criminal actions and proceedings instituted in behalf of the Government by the BIR:
1. Brought in the name of the Government of the Philippines
2. Conducted by legal officers of the Bureau of Internal Revenue
but no civil or criminal action for the recovery of taxes or the enforcement of
any fine, penalty or forfeiture under this Code shall be filed in court without
the approval of the Commissioner

Sec. 7(b)(2)(c), Rep. Act. No. 1125, as amended by Rep. Act. No. 9282
"c. Jurisdiction over tax collection cases as herein provided:
"1. Exclusive original jurisdiction in tax collection cases involving final and executory
assessments for taxes, fees, charges and penalties: Provided, however, That collection cases
where the principal amount of taxes and fees, exclusive of charges and penalties, claimed is

less than One million pesos (P1,000,000.00) shall be tried by the proper Municipal Trial
Court, Metropolitan Trial Court and Regional Trial Court.
"2. Exclusive appellate jurisdiction in tax collection cases:
"a. Over appeals from the judgments, resolutions or orders of the Regional Trial
Courts in tax collection cases originally decided by them, in their respective
territorial jurisdiction.
"b. Over petitions for review of the judgments, resolutions or orders of the Regional
Trial Courts in the Exercise of their appellate jurisdiction over tax collection cases
originally decided by the Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts, in their respective jurisdiction."

Sec. 11, Rep. Act. No. 1125, as amended by Rep. Act. No. 9282

Republic v. Lim Tian Teng Sons & Co., 16 SCRA 584 (1966)
WON the lower court had jurisdiction over the case? YES. The Collector of Internal Revenue
is authorized to collect delinquent internal revenue taxes either by distraint and levy or by
judicial action or both simultaneously. The only requisite before he can collect the tax is that
he must first assess the same within the time fixed by law. And in the case of a false or
fraudulent return with intent to evade the tax or of a failure to file a return, a proceeding in
court for the collection of such tax may be begun without assessment.
Nowhere in the Tax Code is the Collector of Internal Revenue required to rule first
on a taxpayer's request for reinvestigation before he can go to court for the purpose of
collecting the tax assessed. The legislative policy is to allow the Collector of Internal
Revenue much latitude in the speedy and prompt collection of taxes. Republic Act 1125
creating the Court of Appeals allows the taxpayer to dispute the correctness legality of an
assessment both in the purely administrative level and in said court, but it does not stop the
Collector of Internal Revenue from collecting the tax except when enjoined by said Court of
Tax Appeals.

San Juan v. Vasquez, 3 SCRA 92 (1961)
WON the CFI had jurisdiction over the case? NO. In support of his claim that the lower court
has no jurisdiction to try and decide the instant case because it involves a disputed
assessment.7
The complaint is for the recovery of income taxes and deficiency tax and the
petitioner herein in his answer questions the legality and correctness of said assessment.
CIR refused to correct the assessment, claiming the same to be in accordance with law. The
claim is without foundation in law or in fact. The Collector may not overlook the fact that
the assessment had been disputed as the objections to the assessment had been made at the
opportune time. He may not ignore the positive dispute against the assessment by
immediately bringing an action to collect, thus depriving the taxpayer of his right to appeal
the disputed assessment.
The determination of the correctness or incorrectness of a tax assessment to which
the taxpayer is not agreeable falls within the jurisdiction of the CTA and not of the CFI, for
under the aforequoted provision of law, the CTA has exclusive appellate jurisdiction to
review on appeal any decision of the CIR in cases involving disputed assessments and other
matters arising under the NIRC or other law or part of law administered by the BIR.

7
SEC. 7. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein
provided
(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the

National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue;

Yabes v. Flojo, L-46954, July 20, 1982
WON CFI had jurisdiction over the case? NO. Under the circumstances of this case,8 what
may be considered as final decision or assessment of the Commissioner is the filing of the
complaint for collection before the CFI, and that therefore the appeal with the Court of Tax
Appeals in CTA Case was filed on time. The CFI can only acquire jurisdiction over this case
filed against the heirs of the taxpayer if the assessment made by the CIR had become final
and incontestable. If the contrary is established, as this Court holds it to be, considering the
aforementioned conclusion of the CTA on the finality and incontestability of the assessment
made by the Commissioner is correct, then the Court of Tax Appeals has exclusive
jurisdiction over this case.

C. Criminal Action
SEC. 220. Form and Mode of Proceeding in Actions Arising under this Code
Civil and criminal actions and proceedings instituted in behalf of the Government by the BIR:
1. Brought in the name of the Government of the Philippines
2. Conducted by legal officers of the Bureau of Internal Revenue
but no civil or criminal action for the recovery of taxes or the enforcement of
any fine, penalty or forfeiture under this Code shall be filed in court without
the approval of the Commissioner

SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.
(a) In the case of a 1.) false or fraudulent return with intent to evade tax or 2.) of failure to file a
return, the tax may be assessed, or a preceeding in court for the collection of such tax may be filed
without assessment, at any time within ten (10) years after the discovery of the falsity, fraud or
omission: Provided, That in a fraud assessment which has become final and executory, the fact of
fraud shall be judicially taken cognizance of in the civil or criminal action for the collection thereof.

Sec. 248 Civil Penalties
(B) In case of 1.) willful neglect to file the return within the period prescribed by this Code or by
rules and regulations, 2.) or in case a false or fraudulent return is willfully made, the penalty to be
imposed shall be fifty percent (50%) of the tax or of the deficiency tax, in case, any payment has
been made on the basis of such return before the discovery of the falsity or fraud

Prima facie evidence of false or fraudulent return: A substantial underdeclaration (exceeding 30%)
of taxable sales, receipts or income, or a substantial overstatement (exceeding 30%) of deductions
declared per return, as determined by the Commissioner pursuant to the rules and regulations to
be promulgated by the Secretary of Finance.

SEC. 254. Attempt to Evade or Defeat Tax. - Any person who willfully attempts in any manner to
evade or defeat any tax imposed under this Code or the payment thereof shall, in addition to other
penalties provided by law, upon conviction thereof, be punished by a fine not less than Thirty
thousand (P30,000) but not more than One hunderd thousand pesos (P100,000) and suffer
imprisonment of not less than two (2) years but not more than four (4) years: Provided, That the
conviction or acquittal obtained under this Section shall not be a bar to the filing of a civil suit for
the collection of taxes.

8
Here there were two other notices both of which were not considered notice, first, it was not yet final because
it was still waiting for the resolution of another case with the same facts and circumstance and second, it was not
shown it was ever served to the TP.

SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax Withhold and
Remit Tax and Refund Excess Taxes Withheld on Compensation. - Any person required under this
Code or by rules and regulations promulgated thereunder to pay any tax 1.) make a return 2.) keep
any record or 3.) supply correct the accurate information, who wilfully fails:
1. To pay such tax,
2. Make such return
3. Keep such record,
4. Supply correct and accurate information,
5. Withhold or remit taxes withheld,
6. Refund excess taxes withheld on compensation
at the time or times required by law or rules and regulations shall, in
addition to other penalties provided by law, upon conviction thereof, be punished by
a fine of not less than Ten thousand pesos (P10,000) and suffer imprisonment of not
less than one (1) year but not more than ten (10) years.

Any person who 1.) attempts to make it appear for any reason that he or another has in fact filed a
return or statement, or 2.) actually files a return or statement and subsequently withdraws the
same return or statement after securing the official receiving seal or stamp of receipt of internal
revenue office wherein the same was actually filed shall, upon conviction therefor, be punished by a
fine of not less than Ten thousand pesos (P10,000) but not more than Twenty thousand pesos
(P20,000) and suffer imprisonment of not less than one (1) year but not more than three (3) years.

Rev. Mem. Order No. 27-2010 RATE program

CIR v. Pascor Realty and Dev. Corp., supra
WON assessment is a condition precedent to the filing of criminal complaint? NO.
Assessment is not necessary to precede the filing of a criminal complaint. The NIRC
specifically states that in cases where a false or fraudulent return is submitted or in cases of
failure to file a return such as this case, proceedings in court may be commenced without an
assessment. Furthermore the same Code clearly mandates that the civil and criminal
aspects of the case may be pursued simultaneously.

Republic v. Patanao, 20 SCRA 712 (1967)
WON the action to collect the tax due is barred by prior judgment in the criminal cases? NO.
The acquittal in the said criminal cases cannot operate to discharge defendant appellee
from the duty of paying the taxes that the law requires to be paid, since that duty is imposed
by statute prior to and independently of any attempts by the taxpayer to evade payment.
Said obligation is not a consequence of the felonious acts charged in the criminal
proceeding, nor is it a mere civil liability arising from crime that could be wiped out by the
judicial declaration of non-existence of the criminal acts charged.

Ungab v. Cusi, G.R. No. L-41919-24, May 30, 1980
WON assessment shall first be issued before a criminal complaint may be filed? NO. What is
involved here is not the collection of taxes where the assessment of the Commissioner of
Internal Revenue may be reviewed by the Court of Tax Appeals, but a criminal prosecution
for violations of the National Internal Revenue Code which is within the cognizance of
courts of first instance. While there can be no civil action to enforce collection before the
assessment procedures provided in the Code have been followed, there is no requirement
for the precise computation and assessment of the tax before there can be a criminal
prosecution under the Code.
An assessment of a deficiency is not necessary to a criminal prosecution for wilful
attempt to defeat and evade the income tax. A crime is complete when the violator has

knowingly and wilfully filed a fraudulent return with intent to evade and defeat the tax. The
perpetration of the crime is grounded upon knowledge on the part of the taxpayer that he
has made an inaccurate return, and the government's failure to discover the error and
promptly to assess has no connections with the commission of the crime.

People v. Kintanar, CTA EB Crim No. 006, Dec. 3, 2010, aff. in G.R. No.196340, Feb. __, 2012
WON TP is liable for the 50% surcharge? YES. Doctrine of wilful blindness

People v. Judy Anne Santos, CTA Crim Case No. O-012, Jan. 16, 2013
WON TP is liable for the 50% surcharge? NO. She participated in the proceedings and
cooperated (no element of wilfulness as she provided all documents required of her.)9

Atty Bello on P v Kintanar and P v Santos: CPA, principle of agency

D. Anti-Injunction Rule
1. General Rule
SEC. 218. Injunction not Available to Restrain Collection of Tax. - No court shall have the authority to
grant an injunction to restrain the collection of any national internal revenue tax, fee or charge
imposed by this Code

Churchill v. Rafferty, 32 Phil. 580 (1915)
WON injunction lies to stop the collection of taxes? NO. The mere fact that a tax is illegal, or
that the law, by virtue of which it is imposed, is unconstitutional, does not authorize a court
of equity to restrain its collection by injunction

CIR v. Cebu Portland Cement Co., 156 SCRA 535, 541 (1987)
WON the assessment can be enforced while it is contested? YES. The argument that the
assessment cannot as yet be enforced because it is still being contested loses sight of the
urgency of the need to collect taxes as "the lifeblood of the government." If the payment of
taxes could be postponed by simply questioning their validity, the machinery of the state
would grind to a halt and all government functions would be paralyzed. That is the reason
why, save for the exception already noted, the Tax Code provides:
Sec. 291. Injunction not available to restrain collection of tax. No court shall have
authority to grant an injunction to restrain the collection of any national internal revenue tax,
fee or charge imposed by this Code.
It goes without saying that this injunction is available not only when the assessment
is already being questioned in a court of justice but more so if, as in the instant case, the
challenge to the assessment is still-and only-on the administrative level. There is all the
more reason to apply the rule here because it appears that even after crediting of the refund
against the tax deficiency, a balance of more than P 4 million is still due from the private
respondent.

2. Exception
a. Sec. 11, Rep. Act. No. 1125, as amended by Rep. Act. No. 9282
SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a
decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of
Customs, the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of
Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts may file an
appeal with the CTA within thirty (30) days after the receipt of such decision or ruling or after the
expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein.

9
Atty. Bello: Who is Judays manager?

Appeal shall be made by filing a petition for review under a procedure analogous to that provided
for under Rule 42 of the 1997 Rules of Civil Procedure with the CTA within thirty (30) days from
the receipt of the decision or ruling or in the case of inaction as herein provided, from the
expiration of the period fixed by law to act thereon. A Division of the CTA shall hear the appeal:
Provided, however, That with respect to decisions or rulings of the Central Board of Assessment
Appeals and the Regional Trial Court in the exercise of its appellate jurisdiction appeal shall be
made by filing a petition for review under a procedure analogous to that provided for under rule 43
of the 1997 Rules of Civil Procedure with the CTA, which shall hear the case en banc.

All other cases involving rulings, orders or decisions filed with the CTA as provided for in Section 7
shall be raffled to its Divisions. A party adversely affected by a ruling, order or decision of a
Division of the CTA may file a motion for reconsideration of new trial before the same Division of
the CTA within fifteens (15) days from notice thereof: Provide, however, That in criminal cases, the
general rule applicable in regular Courts on matters of prosecution and appeal shall likewise apply.

No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the
Commissioner of Customs or the Regional Trial Court, provincial, city or municipal treasurer or the
Secretary of Finance, the Secretary of Trade and Industry and Secretary of Agriculture, as the case
may be shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for
the satisfaction of his tax liability as provided by existing law: Provided, however, That when in
the opinion of the Court the collection by the aforementioned government agencies may
jeopardize the interest of the Government and/or the taxpayer the Court any stage of the
proceeding may suspend the said collection and require the taxpayer either to deposit the
amount claimed or to file a surety bond for not more than double the amount with the Court.

In criminal and collection cases covered respectively by Section 7(b) and (c) of this Act, the
Government may directly file the said cases with the CTA covering amounts within its exclusive and
original jurisdiction.

b. Rule 10, Revised Rules of the CTA (SC AM no. 05-11-07-CTA, Nov. 22, 2005)

RULE 10
SUSPENSION OF COLLECTION OF TAX
SECTION 1. No suspension of collection of tax, except as herein prescribed. No appeal taken to the
Court shall suspend the payment, levy, distraint, or sale of any property of the taxpayer for the
satisfaction of his tax liability as provided under existing laws, except as hereinafter prescribed. (n)

SEC. 2. Who may file. Where the collection of the amount of the taxpayers liability, sought by
means of a demand for payment, by levy, distraint or sale of any property of the taxpayer, or by
whatever means, as provided under existing laws, may jeopardized the interest of the Government
or the taxpayer, an interested party may file a motion for the suspension of the collection of the tax
liability. (RCTA, Rule 12, sec. 1a)

SEC. 3. When to file. The motion for the suspension of the collection of the tax may be filed
together with the petition for review or with the answer, or in a separate motion filed by the
interested party at any stage of the proceedings. (RCTA, Rule 12, sec. 2)

SEC. 4. Contents and attachments of the motion. The motion for the suspension of the collection of
the tax shall be verified and shall state clearly and distinctly the facts and the grounds relied upon
in support of the motion. Affidavits and other documentary evidence in support thereof shall be
attached thereto, which, if uncontroverted, would be admissible in evidence as proof of the facts

alleged in the motion. (RCTA, Rule 12, sec. 3a)

SEC. 5. Opposition. Unless a shorter period is fixed by the Court because of the urgency of the
motion, the adverse party shall, within five days after receipt of a copy of the motion, file an
opposition thereto, if any, which shall state clearly and distinctly the facts and the grounds relied
upon in support of the opposition. (RCTA, Rule 12, sec. 4)

SEC. 6. Hearing of the motion. The movant shall, upon receipt of the opposition, set the motion for
hearing at the next available motion day, and the Court shall give preference to the motion over all
other cases, except criminal cases. At the hearing, both parties shall submit their respective
evidence. If warranted, the Court may grant the motion if the movant shall deposit with the Court
an amount in cash equal to the value of the property or goods under dispute or filing with the Court
of an acceptable surety bond in an amount not more than double the disputed amount or value.
However, for the sake of expediency, the Court, motu proprio or upon motion of the parties, may
consolidate the hearing of the motion for the suspension of the collection of the tax with the hearing
on the merits of the case. (RCTA, Rule 12, sec. 5a)

SEC. 7. Corporate surety bonds. In the selection and qualification of surety companies, the parties
and the Court shall be guided by Supreme Court Circular A.M. No. 04-7-02-SC, dated July 20, 2004.

E. Nature and Extent of Tax Lien
SEC. 219. Nature and Extent of Tax Lien. - If any person, corporation, partnership, joint-account
(cuentas en participacion), association or insurance company liable to pay an internal revenue tax,
neglects or refuses to pay the same after demand, the amount shall be a lien in favor of the
Government of the Philippines from the time when the assessment was made by the Commissioner
until paid, with interests, penalties, and costs that may accrue in addition thereto upon all property
and rights to property belonging to the taxpayer: Provided, That this lien shall not be valid against
any mortgagee purchaser or judgment creditor until notice of such lien shall be filed by the
Commissioner in the office of the Register of Deeds of the province or city where the property of the
taxpayer is situated or located.

F. Compromise and Abatement
SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The
Commissioner may -

(A) Compromise the payment of any internal revenue tax, when:

(1) A reasonable doubt as to the validity of the claim against the taxpayer exists10; or
(2) The financial position of the taxpayer demonstrates a clear inability to pay the assessed
tax11.

The compromise settlement of any tax liability shall be subject to the following minimum
compromise rates
1. Financial incapacity, equivalent to ten percent (10%) of the basic assessed tax;
2. Other cases, equivalent to forty percent (40%) of the basic assessed tax.

Provided that: Where the basic tax involved:

10
What if assessment is already final? Compromise is no longer allowed because all doubt is removed from the
assessment. What if on the ground of inability to pay? Still allowed because poverty is forever! Or until the TP is
still not able to pay.
11
Waiver of right required before you can avail of this CIR can look into your bank deposit.

1. Exceeds One million pesos (P1,000.000) or
2. Where the settlement offered is less than the prescribed minimum rates,
the compromise shall be subject to the approval of the Evaluation Board which shall
be composed of the Commissioner and the four (4) Deputy Commissioners.

(B) Abate or cancel a tax liability, when:
(1) The tax or any portion thereof appears to be unjustly or excessively assessed; or
(2) The administration and collection costs involved do not justify the collection of the
amount due.

All criminal violations may be compromised EXCEPT:
(a) those already filed in court, or
(b) those involving fraud.

BIR Rul. No. 111-99, July 22, 1999
WON the BIR has the power to grant amnesty prayed for by the baranggays? NO. This is a
case to case basis if it qualifies under Sec 204; otherwise, it is only the Congress which has
such plenary power. Court said that since the records are already taken judicial cognizance
of, the baranggays should just file separately.

BIR Rul. No. 059-01, Dec. 20, 2001
WON the assignment of subscription is assignment of shares, therefore subject to DST? YES.
But because the TP relied on a Revenue Regulation which says otherwise, the increments to
the DST to be paid is abated pursuant to Sec 204 B.

V. IMPOSITION OF SURCHARGE, INTEREST, AND COMPROMISE PENALTY
A. Civil Penalties
SEC. 248. - Civil Penalties. -
(A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to
twenty-five percent (25%) of the amount due, in the following cases:

(1) Failure to file any return and pay the tax due thereon as required under the provisions
of this Code or rules and regulations on the date prescribed; or
(2) Unless otherwise authorized by the Commissioner, filing a return with an internal
revenue officer other than those with whom the return is required to be filed; or
(3) Failure to pay the deficiency tax within the time prescribed for its payment in the notice
of assessment; or
(4) Failure to pay the full or part of the amount of tax shown on any return required to be
filed under the provisions of this Code or rules and regulations, or the full amount of tax due
for which no return is required to be filed, on or before the date prescribed for its payment.

(B) In case of 1.) willful neglect to file the return within the period prescribed by this Code or by
rules and regulations, 2.) or in case a false or fraudulent return is willfully made, the penalty to be
imposed shall be fifty percent (50%) of the tax or of the deficiency tax, in case, any payment has
been made on the basis of such return before the discovery of the falsity or fraud

Prima facie evidence of false or fraudulent return: A substantial underdeclaration (exceeding 30%)
of taxable sales, receipts or income, or a substantial overstatement (exceeding 30%) of deductions
declared per return, as determined by the Commissioner pursuant to the rules and regulations to
be promulgated by the Secretary of Finance.


SEC. 250. Failure to File Certain Information Returns. - In the case of each failure to file an
information return, statement or list, or keep any record, or supply any information required by
this Code or by the Commissioner on the date prescribed therefor, unless it is shown that such
failure is due to reasonable cause and not to willful neglect, there shall, upon notice and demand by
the Commisssioner, be paid by the person failing to file, keep or supply the same: P1,000 for each
failure but not more than P25,000 in total during a calendar year.

SEC. 251. Failure of a Withholding Agent to Collect and Remit Tax. - Any person required to
withhold, account for, and remit any tax imposed by this Code or
1. who willfully fails to withhold such tax,
2. or account for and remit such tax,
3. or aids or abets in any manner to evade any such tax or the payment thereof,
***shall, in addition to other penalties provided for under this Chapter, be liable upon
conviction to a penalty equal to the total amount of the tax not withheld, or not accounted
for and remitted.

SEC. 252. Failure of a Withholding Agent to refund Excess Withholding Tax. - Any
employer/withholding agent who fails or refuses to refund excess withholding tax shall, in addition
to the penalties provided in this Title, be liable to a penalty to the total amount of refunds which
was not refunded to the employee resulting from any excess of the amount withheld over the tax
actually due on their return.

Secs. 4 & 5, Rev. Regs. No. 12-99, Sept. 6, 1999

CIR v. Javier, Jr., 199 SCRA 824, 831 (1991)12
WON TP is guilty of fraud, therefore liable to 50% surcharge? NO. The fraud contemplated
by law is actual and not constructive. It must be intentional fraud, consisting of deception
wilfully and deliberately done or resorted to in order to induce another to give up some
legal right. Negligence, whether slight or gross, is not equivalent to the fraud with intent to
evade the tax contemplated by law. It must amount to intentional wrong-doing with the sole
object of avoiding the tax. It necessarily follows that a mere mistake cannot be considered
as fraudulent intent.

CIR v. Japan Air Lines, 202 SCRA 450, 458 (1991)13
WON JAL is guilty of fraud therefore liable to 50% surcharge? NO. The fraud contemplated
by law is actual and constructive. It must be intentional fraud, consisting of deception
wilfully and deliberately done or resorted to in order to induce another to give up some
legal right. Negligence, whether slight or gross, is not equivalent to the fraud with intent to
evade the tax contemplated by the law. It must amount to intentional wrongdoing with the
sole object of evading the tax. This was not proven to be so in the case of JAL as it believed
in good faith that it doesnt need to file the tax return for it had no taxable income then. The
element of fraud is lacking. At most, only negligence may be imputed to JAL for not
ascertaining the dispensability of filing the tax returns. As such, JAL may be subjected only
to the 25% surcharge prescribed by the law. [good faith is a defense]

PICOP v. CIR, CTA Case No. 3215, Feb. 15, 198714
WON PICOP is liable for the 25% surcharge? NO. Consequently, where a tax-payer failed to
pay its taxes due to and on account of the fact that it based its actions upon reliance to

12
$1M erroneously deposited to the Sps. Javiers account notified the BIR thru footnotes
13
JAL only had an office here in the Philippines but no landing rights
14
TP asked for the extension of their 100% tax exemption, it was approved by BOI but later revoked by NEDA

certain official; facts or rulings, the 25% penalty or surcharge is not imposable upon said
taxpayer as it was only acting in complete honesty and good faith when it did not pay said
sales tax.

CIR v. Pilipinas Shell Petroleum Corporation, CTA E.B. No. 64 (CTA Case No. 6003)15
WON Pilipinas Shell is liable for the 50% and the 25% surcharge? 50% - NO; 25% - YES.
There is no direct proof introduced by the petitioner in this case to the effect that
respondent committed fraud. No 50% fraud is applicable in the absence of proof of fraud on
the part of taxpayer, notwithstanding the applicability of the ten (10) -year prescriptive
periods from discovery of the fraud, falsity or omission. Both the 25% surcharge and the
20% interest per annum imposed cannot be waived. The same are meant to compensate the
Government for the inability to use the taxes during the time such taxes remain unpaid.

BIR Rul. No. 002-95, Jan. 6, 199516
WON YMCA can be exempted from the penalties? NO. For failure to collect, or account for
and remit taxes withheld, the imposition of the penalties prescribed therein is mandatory,
as shown from their language and context, and therefore, cannot be waived. (Because as
withholding agents they are precisely that - agents of the government and withholding
taxes are regarded as special funds until they are paid to the collecting officers.)

BIR Rul. No. 048-99, April 13, 1999
TP paid DST at wrong venue. WON TP is liable for the 25% surcharge? NO. The procedure
was still experimental at that time and had not yet been widely disseminated.

BIR Rul. No. 205-99, Dec. 28, 1999
TP suffered business reverses and had no cash flow to pay income tax liabilities and so used
TCCs however it took some time to secure them despite best efforts exerted by the TP. Court
held that surcharge and penalty are waived but not the interest.

BIR Rul. No. 078-98, May 28, 1998
TP was unable to pay withholding taxes on the last day due to change in the payment
system. RDO officials also could not give a definitive answer on the new system. TP then
tendered a managers check which was not accepted by the AAB. WON TP is liable for
penalties and surcharges? NO, waived because the CIR was convinced in this case that the
TP attempted to pay the taxes due on the last day, it was only due to confusion that he was
unable to do so.

B. Interest
Sec. 249, Interest
(A) In General There shall be assessed and collected on any unpaid amount of tax,
interest at the rate of twenty percent (20%) per annum, or such
higher rate as may be prescribed by rules and regulations, from
the date prescribed for payment until the amount is fully paid.
(B) Deficiency Interest. Any deficiency in the tax due, as the term is defined in this Code,
shall be subject to the interest prescribed in Subsection (A) hereof,
which interest shall be assessed and collected from the date
prescribed for its payment until the full payment thereof.
(C) Delinquency Interest. - In case of failure to pay:

15
TP paid with TCCs and were found negligent
16
Their buildings were undergoing renovations, so they were asking for exemption from penalties as they were not

able to remit the withholding taxes because they do not have any income during the renovation

(1) The amount of the tax due on any return to be filed, or
(2) The amount of the tax due for which no return is required, or
(3) A deficiency tax, or any surcharge or interest thereon on the
due date appearing in the notice and demand of the
Commissioner, there shall be assessed and collected on the unpaid
amount, interest at the rate prescribed in Subsection (A) hereof
until the amount is fully paid, which interest shall form part of the
tax.
(D) Interest on Extended - If any person required to pay the tax is qualified and elects to pay
Payment. the tax on installment under the provisions of this Code, but fails
to pay the tax or any installment hereof, or any part of such
amount or installment on or before the date prescribed for its
payment, or where the Commissioner has authorized an extension
of time within which to pay a tax or a deficiency tax or any part
thereof, there shall be assessed and collected interest at the rate
hereinabove prescribed on the tax or deficiency tax or any part
thereof unpaid from the date of notice and demand until it is paid.


Cagayan Electric v. CIR, 138 SCRA 629 (1985)
TP pays 3% on its gross earnings from the sale of electric current is "in lieu of all taxes and
assessments. RA 5431 amended the Tax Code making franchise companies subject to
income tax in addition to franchise tax. Subsequently, RA 5431was amended by RA 6020
which reenacted the tax exemption. WON the TP is liable to pay interest? NO. For taxes, TP
is liable only during the interregnum of the two laws. The assessment was highly
controversial as the CIR was not certain of the TPs tax liability. It had reason not to pay
income tax because of the tax exemption in its franchise. For this reason, it should be liable
only for tax proper and should not be held liable for the surcharge and interest.

Republic v. Heras, 32 SCRA 507, 513-514 (1970)
TP paid the tax with negotiable certificates of indebtedness and cash. He was notified that
payment of income taxes with indorsed negotiable backpay certificates is not allowed, and
thus required that the tax supposedly unsettled be paid. WON TP is liable to pay the
interest? YES, both surcharge and interest. The refusal of the taxpayer to pay the demanded
tax cannot be considered as made in good faith that would relieve him of liability for
payment of surcharges and interests (there was an existing BIR circular prohibiting
payment with BPC). Thus payment of such constituted no payment at all; the collection of
surcharges and interests thereon from said taxpayer becomes mandatory.

C. Compromise Penalty17

17 Notes from class:
deficiency tax + interest (counted from the date prescribed by law)
delinquency tax + surcharge + interest (counted from time prescribed by notice until paid)
BIR does not waive interest because it is mandatory unlike surcharge which may be waived depending on the
circumstance of the case.
Compromise penalty CIR and TP enter into an agreement in lieu of criminal prosecution of NIRC violation. This is
different from compromise in Sec 204 A. Only the criminal aspect is waived but the TP at the end of the day is still
liable for taxes.

SECTION 6. Suggested Compromise Penalty in Extra-judicial Settlement of a Taxpayer's Criminal
Violation. - Section 204 of the Tax Code of 1997 provides that "All criminal violations may be
compromised except: (a) those already filed in court, or (b) those involving fraud."
This means that, in general, the taxpayer's criminal liability arising from his violation of the
pertinent provision of the Code may be settled extra-judicially instead of the BIR instituting against
the taxpayer a criminal action in Court.
A compromise in extra-judicial settlement of the taxpayer's criminal liability for his
violation is consensual in character, hence, may not be imposed on the taxpayer without his
consent.
Hence, the BIR may only suggest settlement of the taxpayer's liability through a
compromise. The extra-judicial settlement of the taxpayer's criminal liability and the amount of the
suggested compromise penalty shall conform with the schedule of compromise penalties provided
under Revenue Memorandum Order No. 1-90 or as hereafter revised.

CIR v. Lianga Bay Logging Co., Inc., 193 SCRA 86, 92-93 (1991)
The CIR required payment of P300 as compromise if Lianga wished "to settle extrajudicially
the violation" in question. Lianga asked the Commissioner to reconsider his assessment and
demand. When the Commissioner refused to change his stand, Lianga appealed to the CTA.
WON compromise penalty is valid? NO. There is no basis therefor, and, as the CTA finally
declares, "the imposition of the same without the conformity of the taxpayer is illegal and
unauthorized.

Atlas Consolidated Mining & Dev. Corp. v. CIR, CTA Case No. 5671, Aug 29, 2002
WON compromise penalty is valid? NO. However, we cannot sustain the said compromise
penalties. The penalties provided by law shall only be imposed upon conviction. Moreover,
as facts would demonstrate, TP did voluntarily entered into a compromise and such
penalties being an imposition based upon mutual agreement or consent by TP, cannot be
compulsorily imposed to those who do not agree to its imposition.

RIGHTS AND REMEDIES OF THE TAXPAYER UNDER THE NATIONAL INTERNAL REVEUE CODE
I. AMEND TAX RETURN
Sec. 6(A), NIRC, last paragraph
Any return, statement of declaration filed in any office authorized to receive the same shall not be
withdrawn: the same may be modified, changed, or amended:
1. Provided, That within three (3) years from the date of such filing ,
2. Provided, further, That no notice for audit or investigation of such return, statement or
declaration has in the meantime been actually served upon the taxpayer.

Rev. Mem. Cir. No. 40-2003, July 3, 2003
LN being served by the Bureau upon taxpayers who were found to have under-declared their sales
or purchases through the Third Party Information Program can be considered a notice of audit or
investigation which would in effect disqualify the taxpayers concerned from amending any return
which is the subject of such audit or investigation.

Rohm Apollo Semiconductor Phil. v. CIR, CTA E.B. No. 59
Although TP is allowed to amend its returns, the amendment so allowed does not extend as
to give support to TPs allegation in its pleadings that are contradictory to the existing
evidence on record.

II. PROTEST ASSESSMENT
A. Procedure

Rev. Regs. No. 12-85, Nov. 27, 1985

SECTION 318. Due Process Requirement in the Issuance of a Deficiency Tax Assessment.
SECTION 3. Due Process Requirement in the Issuance of a Deficiency Tax Assessment.

3.1 Mode of procedure in the issuance of a deficiency tax assessment:
3.1.1 Preliminary Assessment Notice (PAN). If after review and evaluation by the
Commissioner or his duly authorized representative, as the case may be, it is determined that there
exists sufficient basis to assess the taxpayer for any deficiency tax or taxes, the said Office shall
issue to the taxpayer a Preliminary Assessment Notice (PAN) for the proposed assessment. It shall
show in detail the facts and the law, rules and regulations, or jurisprudence on which the proposed
assessment is based.

1. If the taxpayer fails to respond within fifteen (15) days from date of receipt of the PAN, he
shall be considered in default, in which case, a Formal Letter of Demand and Final Assessment
Notice (FLD/FAN) shall be issued calling for payment of the taxpayer's deficiency tax liability,
inclusive of the applicable penalties.
2. If the taxpayer, within fifteen (15) days from date of receipt of the PAN, responds that
he/it disagrees with the findings of deficiency tax or taxes, an FLD/FAN shall be issued within
fifteen (15) days from filing/submission of the taxpayers response, calling for payment of the
taxpayer's deficiency tax liability, inclusive of the applicable penalties.

***So in both cases, FAN/FLD shall issue

3.1.2 Exceptions to Prior Notice of the Assessment. Pursuant to Section 228 of the Tax Code, as
amended, a PAN shall not be required in any of the following cases:
(i) When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax appearing on the face of the tax return filed by the taxpayer; or
(ii) When a discrepancy has been determined between the tax withheld and the amount
(iii) When a taxpayer who opted to claim a refund or tax credit of excess creditable
(iv) When the excise tax due on excisable articles has not been paid; or
(v) When an article locally purchased or imported by an exempt person, such as, but not

***In the above-cited cases, a FLD/FAN shall be issued outright.

3.1.3 Formal Letter of Demand and Final Assessment Notice (FLD/FAN). The Formal Letter of
Demand and Final Assessment Notice (FLD/FAN) shall be issued by the Commissioner or his duly
authorized representative. The FLD/FAN calling for payment of the taxpayer's deficiency tax or
taxes shall state the facts, the law, rules and regulations, or jurisprudence on which the assessment
is based; otherwise, the assessment shall be void.

3.1.4 Disputed Assessment. The taxpayer or its authorized representative or tax agent may
protest administratively against the aforesaid FLD/FAN within thirty (30) days from date of receipt

18
RR 18-2013 deleted the informal conference

thereof. The taxpayer protesting an assessment may file a written request for reconsideration or
reinvestigation defined as follows:
(i) Request for reconsideration refers to a plea of re-evaluation of an assessment on
the basis of existing records without need of additional evidence. It may involve both a
question of fact or of law or both.

(ii) Request for reinvestigation refers to a plea of re-evaluation of an assessment on the
basis of newly discovered or additional evidence that a taxpayer intends to present in the
reinvestigation. It may also involve a question of fact or of law or both.

The taxpayer shall state in his protest:
(i) the nature of protest whether reconsideration or reinvestigation, specifying newly
discovered or additional evidence he intends to present if it is a request for reinvestigation,
(ii) date of the assessment notice, and
(iii) the applicable law, rules and regulations, or jurisprudence on which his protest is based,
otherwise, his protest shall be considered void and without force and effect.

If there are several issues involved in the FLD/FAN but the taxpayer only disputes or
protests against the validity of some of the issues raised,
1. The assessment attributable to the undisputed issue or issues shall become final, executory
and demandable;
2. and the taxpayer shall be required to pay the deficiency tax or taxes attributable thereto, in
which case, a collection letter shall be issued to the taxpayer calling for payment of the said
deficiency tax or taxes, inclusive of the applicable surcharge and/or interest.

If there are several issues involved in the disputed assessment and the taxpayer fails to
state the facts, the applicable law, rules and regulations, or jurisprudence in support of his protest
against some of the several issues on which the assessment is based,
1. the same shall be considered undisputed issue or issues, in which case, the assessment
attributable thereto shall become final, executory and demandable;
2. and the taxpayer shall be required to pay the deficiency tax or taxes attributable thereto
and a collection letter shall be issued to the taxpayer calling for payment of the said
deficiency tax, inclusive of the applicable surcharge and/or interest.

For requests for reinvestigation, the taxpayer shall submit all relevant supporting
documents in support of his protest within sixty (60) days from date of filing of his letter of protest,
otherwise, the assessment shall become final.

The term relevant supporting documents refer to those documents necessary to support
the legal and factual bases in disputing a tax assessment as determined by the taxpayer.

The sixty (60)-day period for the submission of all relevant supporting documents shall not
apply to requests for reconsideration.

Furthermore, the term the assessment shall become final shall mean the taxpayer is
barred from disputing the correctness of the issued assessment by introduction of newly
discovered or additional evidence, and the FDDA shall consequently be denied.

If the taxpayer fails to file a valid protest against the FLD/FAN within thirty (30) days from
date of receipt thereof, the assessment shall become final, executory and demandable.

No request for reconsideration or reinvestigation shall be granted on tax assessments that

have already become final, executory and demandable.

If the protest is denied, in whole or in part, by the Commissioners duly authorized
representative, the taxpayer may either:
(i) appeal to the Court of Tax Appeals (CTA) within thirty (30) days from date of receipt of
the said decision; or
(ii) (ii) elevate his protest through request for reconsideration to the Commissioner within
thirty (30) days from date of receipt of the said decision. ***No request for
reinvestigation shall be allowed in administrative appeal and only issues raised in the
decision of the Commissioners duly authorized representative shall be entertained by
the Commissioner.

If the protest is not acted upon by the Commissioners duly authorized representative
1. Request for reconsideration - within one hundred eighty (180) days counted from the date
of filing of the protest;
2. Request for reinvestigation within 180 days counted from date of submission by the
taxpayer of the required documents within sixty (60) days from the date of filing of the
protest in case of a request for reinvestigation

***The taxpayer may either:
(i) appeal to the CTA within thirty (30) days after the expiration of the one hundred
eighty (180)-day period; or
(ii) (ii) await the final decision of the Commissioners duly authorized representative on
the disputed assessment.

If the protest or administrative appeal, as the case may be, is denied, in whole or in part, by
the Commissioner, the taxpayer may appeal to the CTA within thirty (30) days from date of receipt
of the said decision. Otherwise, the assessment shall become final, executory and demandable.
***A motion for reconsideration of the Commissioners denial of the protest or
administrative appeal, as the case may be, shall not toll the thirty (30)-day period to appeal to the
CTA.

If the protest or administrative appeal is not acted upon by the Commissioner within one
hundred eighty (180) days counted from the date of filing of the protest, the taxpayer may either:

(i) appeal to the CTA within thirty (30) days from after the expiration of the one
hundred eighty (180)-day period; or
(ii) await the final decision of the Commissioner on the disputed assessment and
appeal such final decision to the CTA within thirty (30) days after the receipt of a
copy of such decision.

It must be emphasized, however, that in case of inaction on protested assessment within the
180-day period, the option of the taxpayer to either:
(1) file a petition for review with the CTA within 30 days after the expiration of the
180-day period; or
(2) await the final decision of the Commissioner or his duly authorized
representative on the disputed assessment and appeal such final decision to the CTA
within 30 days after the receipt of a copy of such decision, are ***mutually exclusive
and the resort to one bars the application of the other.

3.1.5 Final Decision on a Disputed Assessment (FDDA). The decision of the Commissioner or
his duly authorized representative shall state the

(i) facts, the applicable law, rules and regulations, or jurisprudence on which such
decision is based, otherwise, the decision shall be void and
(ii) that the same is his final decision.

3.1.6 Modes of Service. The notice (PAN/FLD/FAN/FDDA) to the taxpayer herein required may
be served by the Commissioner or his duly authorized representative through the following modes:
(i) The notice shall be served through personal service by delivering personally a
copy thereof to the party at his registered or known address or wherever he may be
found. A known address shall mean a place other than the registered address where
business activities of the party are conducted or his place of residence.

In case personal service is not practicable, the notice shall be served by substituted service or by
mail.
(ii) Substituted service can be resorted to when the party is not present at the
registered or known address under the following circumstances:

1. The notice may be left at the partys registered address, with his clerk or with a person
having charge thereof.

*** Should the party be found at his registered or known address or any other place but refuse to
receive the notice, the revenue officers concerned shall bring a barangay official and two (2)
disinterested witnesses in the presence of the party so that they may personally observe and attest
to such act of refusal. The notice shall then be given to said barangay official. Such facts shall be
contained in the bottom portion of the notice, as well as the names, official position and signatures
of the witnesses.

2. If the known address is a place where business activities of the party are conducted,
the notice may be left with his clerk or with a person having charge thereof.
3. If the known address is the place of residence, substituted service can be made by
leaving the copy with a person of legal age residing therein.
4. If no person is found in the partys registered or known address, the revenue officers
concerned shall bring a barangay official and two (2) disinterested witnesses to the
address so that they may personally observe and attest to such absence. The notice shall
then be given to said barangay official. ***Such facts shall be contained in the bottom
portion of the notice, as well as the names, official position and signatures of the
witnesses.

Disinterested witnesses refers to persons of legal age other than employees of the Bureau of
Internal Revenue.

(iii) Service by mail is done by sending a copy of the notice by registered mail to the
registered or known address of the party with instruction to the Postmaster to
return the mail to the sender after ten (10) days, if undelivered. A copy of the notice
may also be sent through reputable professional courier service. If no registry or
reputable professional courier service is available in the locality of the addressee,
service may be done by ordinary mail.

The server shall accomplish the bottom portion of the notice. He shall also make a written report
under oath before a Notary Public or any person authorized to administer oath under Section 14 of
the NIRC, as amended, setting forth the manner, place and date of service, the name of the
person/barangay official/professional courier service company who received the same and such
other relevant information. The registry receipt issued by the post office or the official receipt

issued by the professional courier company containing sufficiently identifiable details of the
transaction shall constitute sufficient proof of mailing and shall be attached to the case docket.
Service to the tax agent/practitioner, who is appointed by the taxpayer under circumstances
prescribed in the pertinent regulations on accreditation of tax agents, shall be deemed service to
the taxpayer.

B. Notice of Informal Conference
Bank of the Phil. Islands v. CIR, CTA Case No. 6593, Aug. 31, 2004
TP received a PAN regarding deficiency DST and withholding taxes. He now claims that the
non-observance of the sections of Revenue Regulations No. 12-85 violated its right to due
process. Petitioner admitted that it received a PAN then duly protested and requested for a
reconsideration or reinvestigation. BIR then issued FAN and demand notices. thereof. But
petitioner cannot claim denial of due process nor allege procedural defects with respect to
the subject deficiency documentary stamp tax assessment and not with regard to the
deficiency withholding tax assessment that was cancelled as they were only in one notice.
Moreover, failure to issue notice for an informal conference does not invalidate the
assessments. Revenue Regulations No. 12-85 does not provide so nor does Section 319 of the
Tax Code that its implementation.

C. Preliminary Assessment Notice (PAN)19 - ***for protest you use respond or reply
Sec. 228, NIRC TP shall respond within 15 days otherwise he shall be considered in default, in
which a formal demand and assessment shall be issued to him. If TP files reply disagreeing with
PAN, FAN and FLD shall be issued.

Pier 8 Arrastre and Stevedoring Services v. CIR, CTA Case No. 3789, Aug. 1, 1991
Failure to appear and/or present evidence during PAN stage or even during the protest
period does not mean a waiver of right to present evidence to dispute the assessment
Such failure is not equivalent to an implied admission of the correctness of the tax
assessment
It is only when TP fails to files a timely protest on the FAN or fails to timely appeal the
denial of the protest would the assessment become final, unappealable, and executor
thereby negating the TPs right to present evidence precisely because the right to dispute
assessment has prescribed and the court can no longer acquire jurisdiction over the same

1. Exceptions
Sec. 228(a) to (e), NIRC
(a) When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and the amount
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable
(d) When the excise tax due on exciseable articles has not been paid; or
(e) When the article locally purchased or imported by an exempt person, such as, but not

19
Atty Bello, PAN is now merely a token reply FAN/FLD will still issue.

2. Effect of Failure to Receive PAN
CIR v. Menguito, G.R. No. 167560, Sept. 17, 2008
While the lack of a post-reporting notice and pre-assessment notice is a deviation from the
requirements under Revenue Regulation No. 12-85, the same cannot detract from the fact
that formal assessments were issued to and actually received by respondents in accordance
with Section 228 of the National Internal Revenue Code.
It should be emphasized that the stringent requirement that an assessment notice be
satisfactorily proven to have been issued and released or, if receipt thereof is denied, that
said assessment notice have been served on the taxpayer, applies only to formal
assessments, but not to post-reporting notices or pre-assessment notices.
The issuance of a valid formal assessment is a substantive prerequisite to tax collection
Due process requires that it must be served on and received by the taxpayer
Hence, the lack of such notices inflicts no prejudice on the taxpayer for as long as the latter
is properly served a formal assessment notice

CIR v. Metro Star Superama, G.R. No. 185371, Dec. 8, 2010
WON FAN is sufficient? NO. Indeed, Section 228 of the Tax Code clearly requires that the
taxpayer must first be informed that he is liable for deficiency taxes through the sending of
a PAN. He must be informed of the facts and the law upon which the assessment is made.
The law imposes a substantive, not merely a formal, requirement.
The sending of a PAN to taxpayer to inform him of the assessment made is but part of the
due process requirement in the issuance of a deficiency tax assessment, the absence of
which renders nugatory any assessment made by the tax authorities. The use of the word
shall in subsection 3.1.2 describes the mandatory nature of the service of a PAN.. Thus, for
its failure to send the PAN stating the facts and the law on which the assessment was made
as required by Section 228 of R.A. No. 8424, the assessment made by the CIR is void.

***CIR v Menguito contrary to CIR v Metro Star Superama? NO. RA No. 8424 has already amended
the provision of Section 229 on protesting an assessment. The old requirement of merely notifying
the taxpayer of the CIRs findings was changed in 1998 to informing the taxpayer of not only the
law, but also of the facts on which an assessment would be made. Otherwise, the assessment itself
would be invalid. The regulation then, on the other hand, simply provided that a notice be sent to
the respondent in the form prescribed, and that no consequence would ensue for failure to comply
with that form.

D. Final Assessment Notice - ***for FAN, you use protest
SEC. 228. TP to file a protest within 30 days, otherwise the assessment shall become final, executor
and demandable

E. Requirement to Inform Taxpayer of Factual and Legal Basis of Assessment20
Sec. 228, NIRC - The taxpayers shall be informed in writing of the law and the facts on which the
assessment is made; otherwise, the assessment shall be VOID.

CIR v. Reyes, G.R. No. 159694, Jan. 27, 2006

20
Notes from class:
What is the minimum requirement for informing TP of facts and law? In writing.
At what stage? During FAN/FLD/detail of discrepancy (required? Yes. Enron case)
****Though not written in the law, TP also has the obligation to assert the facts and laws of the protest because
what is required of him is not only the timely filing of the protest but he must also be able to indicate the errors
and be able to substantiate such contentions.

Void. Merely notifying the TP of the BIRs findings without informing the TP of factual and
legal basis is insufficient. To be simply informed in writing of the investigation being
conducted and of the recommendation for the assessment of the estate taxes due is nothing
but a perfunctory discharge of the tax function of correctly assessing a TP. The act cannot be
taken that the TP already knew the law and the facts on which the assessment is based.

CIR v. Enron Subic Power Corp., G.R. No. 166387, Jan. 19, 200921
Void. The legal and factual bases, were however, not indicated. Even though they were
furnished with the copy of the audit working papers, these were not a valid substitute for
the mandatory notice in writing of the legal and factual bases. The law requires that the
legal and factual bases of the assessment be stated in the formal letter of demand and the
assessment notice.

Australasia Cylinder Corp. v. CIR, CTA Case No. 6014, Aug. 14, 2002
Void. The demand letter was devoid of factual as well as legal bases that would enlighten
anyone, this court included, on how and why the assessment was reached. The computation
made by the respondent lacked any support and did not state the basis either in fact or in
law for the disallowances made. Neither did the assessment notice nor the demand letter
explain why the total tax credits ofP776,671.36 was not recognized by the respondent.

Abbot Laboratories v. CIR, CTA Case No. 5718, Feb. 16, 2001
Void. CIR must not only inform the TP of the law but more importantly the surrounding
circumstance supporting the assessment, for it is only through a detailed appraisal of its
basis that the TP may be able to dispute the imposition or agree with it.

PNZ Marketing v. CIR, CTA Case No. 5726, Dec. 14, 2001
Valid. The assessment notice, while vague at first glance is subsequently cured by the
demand letter that shows the legal and factual basis relied upon in issuing the assessment.
The demand letter contains the reasons why a deficiency income tax assessment was issued
against TP. Factual and legal basis embodied in the FDL attached to the FAN complies with
Sec 228.

Sevilla v. CIR, CTA Case No. 6211, Oct. 4, 2004
Valid. Even though BIR did not provide the specific provision of the NIRC or other internal
revenue laws as bases for the assessments but by indicating the kind of tax the TP were
liable was a substantial compliance with the requirements of Sec 228. And in this case, the
TP was able to intelligently argue its case and elucidate the reasons for the assessment so he
cant contradict himself by asserting that it was not informed of the laws and facts of the
assessment. Further, the TP had already been informed during the preliminary stage of the
bases for the assessment, he could not now insist it was not informed.

FMF Development Corp. v. CIR, CTA Case No. 6153, March 20, 2003
Valid. Words "not necessary", "unsupported" and "unaccounted" followed by the specific
provision of the Tax Code violated is sufficient to inform the petitioner of the factual and
legal basis of the assessment issued. Said notations were likewise indicated in the income
tax demand letter which was attached to the deficiency income tax assessment notice. This
is particularly true where, prior to the issuance of the same, several informal conferences
were held to afford the taxpayer the opportunity to present his side and be informed of the
basis of the deficiency assessment. These lead to the logical conclusion that the petitioner

21
In this case, CIR merely itemized the deductions disallowed and included these in the gross income and imposed
preferential rate of 5% on some items categorized by Enron as cost. It also sent TP its audit working papers.

had prior knowledge of the cause of disallowances and/or unaccounted income. The
intrinsic validity of the assessment notice should be given more weight rather than its form
or extrinsic features.

Subic Power Corp. v. CIR, CTA Case No. 6059, May 8, 2003
Valid. If the taxpayer is able to intelligently argue its case and elucidate the reasons for the
assessment, as in this case, then it cannot contradict itself by asserting that it was not
informed of the law and facts on which the assessment was made. In whatever form and
manner, as long as the taxpayer is informed of how the assessment was arrived at, then
Section 228 has not been violated.

Phil. Mining Service Corp. v. CIR, CTA Case No. 5725, July 25, 2002
Valid. The BIR sent a letter to TP informing the latter that a report of investigation on its
income and business tax returns had been submitted for appropriate action. Attached
thereto were the report of investigation and the memorandum of RO recommending, among
others, the issuance of an assessment notice for the alleged deficiency taxes. The attached
investigation report of Revenue Officer contained the detailed findings made by the latter,
the facts and the law on which the recommended assessments were based. Moreover, in its
protest petitioner was able to effectively contest the subject assessments and submit
documents to support its claim that the assessments were erroneous.

Oceanic Wireless Network v. CIR, CTA Case No. 6111, Nov. 3, 2004
Valid. TP was able to protest the assessments intelligently, thereby implying that it had
actual knowledge of the factual and legal bases of the assessments. The fact that petitioner
was furnished the computation and brief explanation of the how the assessment for
deficiency quarterly income tax was arrived at, the requirement under Section 228 of the
1997 Tax Code is deemed complied with. Petitioner was notified of the specific provision of
law on which the assessment was based. This is evident in the Details of Discrepancies
wherein Sections 75 and 76 (of the 1997 Tax Code) were written.

F. Submission of Supporting Documents22
Sec. 228, NIRC - Within sixty (60) days from filing of the protest, all relevant supporting documents
shall have been submitted

1. Effect of Non-Compliance
Sec. 228, NIRC, 4th par. - otherwise, the assessment shall become FINAL.

2. What Constitutes Relevant Supporting Documents23
H. Tambunting Pawnshop, Inc. v. CIR, CTA Case No. 6238, Oct. 8, 2004
Relevant supporting documents mentioned in the law refers to such documents that the
taxpayer feels would be necessary to support his protest and not what the respondent
commissioner feels should be submitted, otherwise, petitioner taxpayer would always be at

22
For requests for reinvestigation, the taxpayer shall submit all relevant supporting documents in support of his
protest within sixty (60) days from date of filing of his letter of protest, otherwise, the assessment shall become
final.
The term relevant supporting documents refer to those documents necessary to support the legal and
factual bases in disputing a tax assessment as determined by the taxpayer.
The sixty (60)-day period for the submission of all relevant supporting documents shall not apply to

requests for reconsideration. (RR 18-2013)
23
So what can BIR do if it feels the relevant supporting documents are insufficient? They can deny the protest but
not consider it as a failure to submit such documents.

the mercy of the BIR that may require production of such documents which taxpayer
couldnt produce.

CIR v. First Express Pawnshop Co., Inc., G.R. No. 172045-46, June 16, 2009
The term relevant supporting documents should be understood as those documents
necessary to support the legal basis in disputing a tax assessment as determined by the
taxpayer. The BIR can only inform the taxpayer to submit additional documents. The BIR
cannot demand what type of supporting documents should be submitted. Otherwise, a
taxpayer will be at the mercy of the BIR, which may require the production of documents
that a taxpayer cannot submit.

G. Effect of Failure to File Protest
Sec. 228, NIRC
Such assessment may be protested administratively by filing a request for reconsideration or
reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as
may be prescribed by implementing rules and regulations [failure to do this = final, unappealable
and executory]

Dayrit v. Cruz, 165 SCRA 571 (1988)
A letter asking for reconsideration of the assessments cannot be considered as one
disputing the assessments because TP failed to substantiate their claim that the deficiency
assessments are contrary to law. TP also asked for 30 days to submit position paper which
he failed to do, thus the letter of request for reconsideration is nothing but a mere scrap of
paper. Further, failure to file said position paper may be construed as an abandonment of
request for reconsideration. The act of the CIR to institute the action for collection may be
considered as denial thus appealable to the CTA.

III. IN CASE OF DENIAL OF PROTEST OR INACTION, APPEAL TO CTA
A. Scope of Jurisdiction of CTA/What is Appealable to CTA

Sec. 4, 2nd par., NIRC
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under this Code or other laws or
portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner,
subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.

Sec. 228, NIRC
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180)
days from submission of documents, the taxpayer adversely affected by the decision or inaction
may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or
from the lapse of one hundred eighty (180)-day period; otherwise, the decision shall become final,
executory and demandable.

Sec. 7, Rep. Act No. 1125, as amended by Rep. Act No. 9282
Sec. 7. Jurisdiction. - The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue or other laws
administered by the Bureau of Internal Revenue;
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or

other matters arising under the National Internal Revenue Code or other laws administered
by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a
specific period of action, in which case the inaction shall be deemed a denial;
3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally
decided or resolved by them in the exercise of their original or appellate jurisdiction;
4. Decisions of the Commissioner of Customs in cases involving liability for customs duties,
fees or other money charges, seizure, detention or release of property affected, fines,
forfeitures or other penalties in relation thereto, or other matters arising under the Customs
Law or other laws administered by the Bureau of Customs;
5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate
jurisdiction over cases involving the assessment and taxation of real property originally
decided by the provincial or city board of assessment appeals;
6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for
review from decisions of the Commissioner of Customs which are adverse to the
Government under Section 2315 of the Tariff and Customs Code;
7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product,
commodity or article, and the Secretary of Agriculture in the case of agricultural product,
commodity or article, involving dumping and countervailing duties under Section 301 and
302, respectively, of the Tariff and Customs Code, and safeguard measures under Republic
Act No. 8800, where either party may appeal the decision to impose or not to impose said
duties.

b. Jurisdiction over cases involving criminal offenses as herein provided:
1. Exclusive original jurisdiction over all criminal offenses arising from violations of the
National Internal Revenue Code or Tariff and Customs Code and other laws administered by
the Bureau of Internal Revenue or the Bureau of Customs: Provided, however, That offenses
or felonies mentioned in this paragraph where the principal amount of taxes and fees,
exclusive of charges and penalties, claimed is less than One million pesos (P1,000,000.00) or
where there is no specified amount claimed shall be tried by the regular Courts and the
jurisdiction of the CTA shall be appellate. Any provision of law or the Rules of Court to the
contrary notwithstanding, the criminal action and the corresponding civil action for the
recovery of civil liability for taxes and penalties shall at all times be simultaneously
instituted with, and jointly determined in the same proceeding by the CTA, the filing of the
criminal action being deemed to necessarily carry with it the filing of the civil action, and no
right to reserve the filling of such civil action separately from the criminal action will be
recognized.
2. Exclusive appellate jurisdiction in criminal offenses:
a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts
in tax cases originally decided by them, in their respected territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions or orders of the Regional
Trial Courts in the exercise of their appellate jurisdiction over tax cases originally
decided by the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit
Trial Courts in their respective jurisdiction.
c. Jurisdiction over tax collection cases as herein provided:
1. Exclusive original jurisdiction in tax collection cases involving final and executory
assessments for taxes, fees, charges and penalties: Provided, however, That
collection cases where the principal amount of taxes and fees, exclusive of charges
and penalties, claimed is less than One million pesos (P1,000,000.00) shall be tried
by the proper Municipal Trial Court, Metropolitan Trial Court and Regional Trial
Court.
2. Exclusive appellate jurisdiction in tax collection cases:

a. Over appeals from the judgments, resolutions or orders of the Regional
Trial Courts in tax collection cases originally decided by them, in their
respective territorial jurisdiction.
b. Over petitions for review of the judgments, resolutions or orders of the
Regional Trial Courts in the Exercise of their appellate jurisdiction over tax
collection cases originally decided by the Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts, in their respective
jurisdiction."

CIR v. Villa, 22 SCRA 4 (1968)
Villa, without contesting the assessment in the BIR, filed a petition for review before the
CTA. WON CTA has jurisdiction over the case? NO. The word "decisions" has been
interpreted to mean the decisions of the Commissioner of Internal Revenue on the protest of
the taxpayer against the assessments (does not signify the assessment itself.) Where a
taxpayer questions an assessment and asks the CIR to reconsider or cancel the same, the
assessment becomes a "disputed assessment" that the CIR must decide, and the taxpayer
can appeal to the CTA only upon receipt of the decision of the Collector on the disputed
assessment. Note that the law uses the word "decisions", not "assessments", further
indicating the legislative intention to subject to judicial review the decision of the
Commissioner on the protest against an assessment but not the assessment itself.

B. Application of 180-day Rule24
Sec. 3(a)(2), Rule 4 and Sec. 3(a), Rule 8, Revised Rules of the CTA
Sec. 3(a)(2), Rule 4 Inaction by the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto,
or other matters arising under the National Internal Revenue Code or other laws administered by
the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law
provides a specific period for action:
1. Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal
Revenue within the one hundred eighty day-period under Section 228 of the National
Internal revenue Code shall be deemed a denial for purposes of allowing the taxpayer to
appeal his case to the Court and does not necessarily constitute a formal decision of the
Commissioner of Internal Revenue on the tax case;
2. Provided, further, that should the taxpayer opt to await the final decision of the
Commissioner of Internal Revenue on the disputed assessments beyond the one hundred
eighty day-period abovementioned, the taxpayer may appeal such final decision to the Court
under Section 3(a), Rule 8 of these Rules; and
3. Provided, still further, that in the case of claims for refund of taxes erroneously or illegally
collected, the taxpayer must file a petition for review with the Court prior to the expiration
of the two-year period under Section 229 of the National Internal Revenue Code;

Sec 3(a) Rule 8: SEC. 3. Who may appeal; period to file petition. (a) A party adversely affected by a
decision, ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments
or claims for refund of internal revenue taxes, or by a decision or ruling of the Commissioner of

24
If the protest is not acted upon by the Commissioners duly authorized representative
1. Request for reconsideration - within one hundred eighty (180) days counted from the date of filing of the
protest;
2. Request for reinvestigation within 180 days counted from date of submission by the taxpayer of the
required documents within sixty (60) days from the date of filing of the protest in case of a request for
reinvestigation


Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture,
or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by
petition for review filed within thirty days after receipt of a copy of such decision or ruling, or
expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the
disputed assessments. In case of inaction of the Commissioner of Internal revenue on claims for
refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition
for review within the two-year period prescribed by law from payment or collection of the taxes.

Lascona Land Co., Inc. v. CIR, CTA Case No. 5777, Jan. 4, 2000
WON after the 30 days after the 180 days rule, the assessment becomes final? NO. The
wordings of Section 228 of the Tax Code clearly provide that it is only the decision not
appealed by the taxpayer that becomes final, executory and demandable. In cases of
inaction, TP is given the ff options:
1. He may appeal to the Court of Tax Appeals within thirty (30) days from the lapse
of the one hundred eighty (180) day period provided for under the said section, or
2. He may wait until the Commissioner decides on his protest before he elevates his
case.
TP is given this option so that in case his protest is not acted upon within the 180-day
period, he may be able to seek immediate relief and need not wait for an indefinite period of
time for the Commissioner to decide. But if he chooses to wait for a positive action on the
part of the Commissioner, then the same could not result in the assessment becoming final,
executory and demandable.

Rizal Commercial Banking Corp. v. CIR, G.R. No. 168498, April 24, 2007
Options provided in Lacsona are MUTUALLY EXCLUSIVE, and resort to one bars the
application of the other. In this case, CIR did not act upon the disputed assessment within
180 days from date of submission of documents so TP filed a petition for review before the
CTA. However the same was filed beyond the period prescribed. It cant file an appeal
before the CTA beyond the period on the pretext that the assessment has not been acted
upon by the CIR.

C. What Constitutes Denial of Protest/Decision on Disputed Assessment
1. General Rule: FDDA (Final Demand on Disputed Assessment)25

2. Issuance of Revised Assessment Upon Reinvestigation
Avon Products Mfg., Inc. v. CIR, CTA Case No. 5908, Jan. 20, 2005
Three kinds of taxes is disputed. Acting upon the protest, CIR revised the assessment and
only demanding the other two taxes. It is held that this is a denial because in the wording of
Sec 228: denial in whole and in part. Since there was already part denial, it is appealable
to the CTA. Atty. Bello said this applies to reduction of taxes too because the amount still
demanded is the denied part thus could be brought to the CTA.

3. Final Notice Before Seizure
CIR v. Isabela Cultural Corp., 361 SCRA 71 (2001)

25
3.1.5 Final Decision on a Disputed Assessment (FDDA). The decision of the Commissioner or his duly
authorized representative shall state the
(i) facts, the applicable law, rules and regulations, or jurisprudence on which such decision is
based, otherwise, the decision shall be void and
(ii) that the same is his final decision.


Not only was the Notice the only response received, its contents and tenor supported the
theory that it was the CIRs final act regarding the request for reconsideration. The very title
expressly indicated that it was a final notice prior to seizure of property. The letter itself
clearly stated that TP was being given this last opportunity to pay, otherwise, its properties
would be subjected to distraint and levy.

4. Final Demand Letter
CIR v. Ayala Securities Corp., 70 SCRA 204 (1976)
The letter reiterated the demand of the BIR and for its immediate payment is tantamount to
denial of protest for reconsideration of the firm stand of the BIR against the disputed
assessment. This being said, the letter amounted to a decision which places the case within
the ambit of the CTA.

Surigao Electric Co. Inc. v. CTA, 57 SCRA 523 (1974)
The letter unquestionably constitutes the final action taken by the Commissioner on the
petitioner's several requests for reconsideration and recomputation. In this letter, the
Commissioner not only in effect demanded that the petitioner pay the amount but also gave
warning that in the event it failed to pay, the said Commissioner would be constrained to
enforce the collection thereof by means of the remedies provided by law. The tenor of the
letter, specifically, the statement regarding the resort to legal remedies, unmistakably
indicates the final nature of the determination made by the Commissioner of the
petitioner's deficiency franchise tax liability.
CTA held to be actions appealable to the CTA:
(a) a letter which stated the result of the investigation requested by the taxpayer
and the consequent modification of the assessment;
(b) letter which denied the request of the taxpayer for the reconsideration
cancellation, or withdrawal of the original assessment;
(c) a letter which contained a demand on the taxpayer for the payment of the
revised or reduced assessment; and
(d) a letter which notified the taxpayer of a revision of previous assessments.

5. Filing of Collection Suit
CIR v. Union Shipping Corp., 185 SCRA 547 (1990)
Under the circumstances, the CIR, not having clearly signified his final action on the
disputed assessment, legally the period to appeal has not commenced to run. Thus, it was
only when private respondent received the summons on the civil suit for collection of
deficiency income that the period to appeal commenced to run. The request for
reinvestigation and reconsideration was in effect considered denied by CIR when the latter
filed a civil suit for collection of deficiency income. At that moment, the case is appealable to
the CTA.

6. Referral to Solictor General for Collection
Republic v. Lim Tian Teng Sons & Co., supra
The Collector of Internal Revenue is authorized to collect delinquent internal revenue taxes
either by distraint and levy or by judicial action or both simultaneously. The only requisite
before he can collect the tax is that he must first assess the same within the time fixed by
law. And in the case of a false or fraudulent return with intent to evade the tax or of a failure
to file a return, a proceeding in court for the collection of such tax may be begun without
assessment. In fact, there was a final and executory assessment when the CIR referred the
matter to the Solicitor General for collection. The taxpayer shouldve filed a petition for
review with the CTA from that moment (Atty Bello).


7. Issuance of Warrant of Distraint and Levy
Central Cement Corporation v. CIR, CTA Case No. 4312, Sept. 1, 1993
TP is estopped from questioning the jurisdiction of the CTA as it never well, questioned it,
and TP participated in the trial for years. In the case at bar the WDLS were issued by the CIR
knowing full well that the deficiency assessments were under protest. Even when the
issuance of the WDLS was objected to for being in violation of NIRC, CIR did not lift said
warrants. It is by the CIRs own doing that the administrative remedies available to TP were
effectively shut down thereby, leaving the TP with no recourse but to seek relief from this
Court.

CIR v. Algue, Inc., 158 SCRA 9 (1988)
It is true that as a rule the warrant of distraint and levy is "proof of the finality of the
assessment" and renders hopeless a request for reconsideration," being "tantamount to an
outright denial thereof and makes the said request deemed rejected." But there is a special
circumstance in the case at bar that prevents application of this accepted doctrine.
The proven fact is that four days after the private respondent received the
petitioner's notice of assessment, it filed its letter of protest. This was apparently not taken
into account before the warrant of distraint and levy was issued; indeed, such protest could
not be located in the office of the petitioner. It was only after Atty. Guevara gave the BIR a
copy of the protest that it was, if at all, considered by the tax authorities. During the
intervening period, the warrant was premature and could therefore not be served.

Advertising Associates, Inc. v. CA, 133 SCRA 765 (1984)
The reviewable decision is that contained in the CIRs letter and not the WDLs. No amount
of quibbling or sophistry can blink the fact that said letter, as its tenor shows, embodies the
Commissioner's final decision within the meaning of section 7 of Republic Act No. 1125. The
Commissioner said so. He even directed the taxpayer to appeal it to the Tax Court. The
directive is in consonance with this Court's dictum that the Commissioner should always
indicate to the taxpayer in clear and unequivocal language what constitutes his final
determination of the disputed assessment. That procedure is demanded by the pressing
need for fair play, regularity and orderliness in administrative action.

D. Period to Appeal/Effect of Failure to Appeal
Sec. 228, last par., NIRC - If the protest is denied in whole or in part, or is not acted upon within
one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by
the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt
of the said decision, or from the lapse of one hundred eighty (180)-day period; otherwise, the
decision shall become final, executory and demandable.

decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs,
the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the
Central Board of Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA
within thirty (30) days after the receipt of such decision or ruling or after the expiration of the
period fixed by law for action as referred to in Section 7(a)(2) herein.
"Appeal shall be made by filing a petition for review under a procedure analogous to that provided

"All other cases involving rulings, orders or decisions filed with the CTA as provided for in Section 7
shall be raffled to its Divisions. A party adversely affected by a ruling, order or decision of a Division
of the CTA may file a motion for reconsideration of new trial before the same Division of the CTA
within fifteens (15) days from notice thereof: Provide, however, That in criminal cases, the general
rule applicable in regular Courts on matters of prosecution and appeal shall likewise apply.
"No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue or the
the satisfaction of his tax liability as provided by existing law: Provided, however, That when in the
opinion of the Court the collection by the aforementioned government agencies may jeopardize the
interest of the Government and/or the taxpayer the Court any stage of the proceeding may suspend
the said collection and require the taxpayer either to deposit the amount claimed or to file a surety
bond for not more than double the amount with the Court.
"In criminal and collection cases covered respectively by Section 7(b) and (c) of this Act, the
original jurisdiction."

St. Stephens Association v. Collector of Internal Revenue, 104 Phil. 314 (1958)
This decision becomes final thirty days after your receipt hereof unless an appeal is taken to
the Court of Tax Appeals within the same period, in accordance with the provision of Republic
Act No. 1125. From the above-quoted statement appearing in his letter of July 11, 1955, it is
evident that the respondent Collector himself considered said letter as his final decision in
the case. Prior to his letter-decision of July 11, 1955, then, the Collector must have held the
matter under advisement and considered his preceding rulings as merely tentative in
character, pending his final determination and resolution of the merits of the arguments of
fact and law submitted by petitioners in support of their requests for the cancellation and
withdrawal of the assessment.

Roman Catholic Archbishop of Cebu v. Collector, 4 SCRA 279 (1962)
We cannot countenance the theory that would make the commencement of the statutory 30
day-period solely dependent on the will of the TP and place the latter in a position to put off
indefinitely and at his convenience the finality of the tax assessment. To hold that the
taxpayer has now lost the right to appeal from the ruling on the disputed assessment but
must prosecute his appeal under section 306 of the Tax Code, which requires a taxpayer to
file a claim for refund of the taxes paid as a condition precedent to his right to appeal, would
in effect require of him to go through a useless and needless ceremony that would only
delay the disposition of the case, for the CIR would certainly disallowed the claim for refund
in the same way as he disallowed the protest against the assessment. The law should not be
interpreted as to result in absurdities.

Pantranco v. Blaquera, 107 Phil. 975 (1960)
TP contends the period spent by counsel consulting with the TP should be deducted. NO the
30-day appeal period is jurisdictional and non-extendible. As to the ten-day period "for
consultation", we discover no authority in support thereof.

Basa v. Republic, 138 SCRA 34 (1985)

If the TP wanted to contest the assessments he should have appealed to the CTA; not having
done so, he could no longer contest the same in the CFI. TP can no longer raise prescription
which could have been interposed as a defense in CTA.

Mambulao Lumber Co. v. CIR, 132 SCRA 1 (1984)
In a suit for collection internal revenue taxes, as in this case, where the assessment has
already become final and executory, the action to collect is akin to an action to enforce a
judgment. No inquiry can be made therein as to the merits of the original case or the
justness of the judgment relied upon. The TP is already precluded from raising the defense
of prescription.

E. Mode of Appeal and Effect of Appeal
1. Appeal to a Division of the CTA
2. Appeal to CTA En Banc
"SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No civil proceeding involving matter arising
under the National Internal Revenue Code, the Tariff and Customs Code or the Local Government
Code shall be maintained, except as herein provided, until and unless an appeal has been
previously filed with the CTA and disposed of in accordance with the provisions of this Act.
"A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration

or new trial, may file a petition for review with the CTA en banc."

IV. APPEAL TO SUPREME COURT
SEC. 19. Review by Certiorari. - A party adversely affected by a decision or ruling of the CTA en banc
may file with the Supreme Court a verified petition for review on certiorari pursuant to Rule 45 of
the 1997 Rules of Civil Procedure.

V. REFUND AND/OR TAX CREDIT OF ERRONEOUSLY PAID TAX
A. What Constitutes Erroneous Payment
CIR v. Central Azucarera Don Pedro, 49 SCRA 474 (1973)
2 year period starts, when the tax sought to be refunded is illegally or
erroneously collected from the day the tax was paid
2 year period starts, when the tax sought to be refunded is legally collected
from the date of the occurrence of the supervening event which gave rise to
the right to refund
***not a good case law because of Sec 229 irrespective of any supervening event

B. Requirement of Filing Administrative Claim
SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be
maintained in any court for the recovery of any national internal revenue tax hereafter alleged to
have been 1.) erroneously or illegally assessed or collected, or 2.) of any penalty claimed to have
been collected without authority, of any sum alleged to have been excessively or in any manner
wrongfully collected without authority, 3.) or of any sum alleged to have been excessively or in any
manner wrongfully collected, until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or
sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years
from the date of payment of the tax or penalty regardless of any supervening cause that may arise
after payment: Provided, however, That the Commissioner may, even without a written claim
therefor, refund or credit any tax, where on the face of the return upon which payment was made,
such payment appears clearly to have been erroneously paid.

Sec. 204(C), NIRC
(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority,
refund the value of internal revenue stamps when they are returned in good condition by the
purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit
for use and refund their value upon proof of destruction.
No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing
with the Commissioner a claim for credit or refund within two (2) years after the payment of the
tax or penalty: Provided, however, That a return filed showing an overpayment shall be considered
as a written claim for credit or refund.
A Tax Credit Certificate validly issued under the provisions of this Code may be applied
against any internal revenue tax, excluding withholding taxes, for which the taxpayer is directly
liable.
Any request for conversion into refund of unutilized tax credits may be allowed, subject to
the provisions of Section 230 of this Code: Provided, That the original copy of the Tax Credit
Certificate showing a creditable balance is surrendered to the appropriate revenue officer for
verification and cancellation: Provided, further, That in no case shall a tax refund be given resulting
from availment of incentives granted pursuant to special laws for which no actual payment was
made.

The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of
both the Senate and House of Representatives, every six (6) months, a report on the exercise of his
powers under this Section, stating therein the following facts and information, among others:
names and addresses of taxpayers whose cases have been the subject of abatement or compromise;
amount involved; amount compromised or abated; and reasons for the exercise of power: Provided,
That the said report shall be presented to the Oversight Committee in Congress that shall be
constituted to determine that said powers are reasonably exercised and that the government is not
unduly deprived of revenues.

Bermejo v. Collector, 87 Phil. 96 (1950)
The law clearly stipulates that after paying the tax, the citizen must submit a claim for
refund before resorting to the courts. The idea probably is, first, to afford the collector an
opportunity to correct the action of subordinate officers; and second, to notify the
Government that such taxes have been questioned, and the notice should then be borne in
mind in estimating the revenue available for expenditure. Previous objections to the tax
may not take place of that claim for refund, because there may be reason to believe that, in
paying, the tax payer has finally come to realize the validity of assessment. Anyway, strict
compliance with the conditions imposed for the return of revenue collected is a doctrine
consistently applied here and in the United States. [there were only letters here protesting
the assessment of taxes due.

Andrea Vda. De Aguinaldo v. CIR, 13 SCRA 269 (1965)
The authority of the Commissioner of Internal Revenue under Section 309 can only be
exercised if a claim for credit is made in writing and filed with him within two years from
the payment of the tax. The authority of the Collector of Internal Revenue to credit or refund
taxes or penalties under this section can only be exercised if the claim for credit or refund is
made in writing and filed with him within two years after the payment of the tax or penalty.
The third paragraph of Section 309, clearly requires the filing by the taxpayer of a written
claim for credit or refund within two years after payment of the tax, before the CIR can
exercise his authority to grant the credit or refund. Such requirement is therefore a
condition precedent and non-compliance therewith precludes the Commissioner of
Internal Revenue from exercising the authority thereunder given.

Chemical Industries of the Phil., Inc. v. CIR, CTA Case No. 5887, Aug. 8, 2000
The document is not a letter-claim for refund but a letter requesting for a ruling for the
refund of the tax allegedly paid by the TP. Moreover, the same was addressed to the Deputy
Commissioner contrary to the mandate of the law which led Us to believe that Petitioner
really intended to request for a ruling from the Deputy Commissioner. In short, the letter
alluded to as the request claim for refund is not the written claim required by law before a
judicial claim may be had in the CTA. Even granting for the sake of argument that a written
claim was filed with the CIR, still TP failed to comply with the requirement that the tax
subject of the claim must be alleged to have been erroneously or illegally assessed or
collected.

C. Exception to Requirement of Filing Administrative Claim
Sec. 229, NIRC, proviso, last paragraph
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the
date of payment of the tax or penalty regardless of any supervening cause that may arise after
payment: Provided, however, That the Commissioner may, even without a written claim therefor,
refund or credit any tax, where on the face of the return upon which payment was made, such payment
appears clearly to have been erroneously paid.


Sec. 204(C), NIRC
for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties
shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or
refund within two (2) years after the payment of the tax or penalty: Provided, however, That a
return filed showing an overpayment shall be considered as a written claim for credit or refund.
A Tax Credit Certificate validly issued under the provisions of this Code may be applied
against any internal revenue tax, excluding withholding taxes, for which the taxpayer is directly
liable. Any request for conversion into refund of unutilized tax credits may be allowed, subject to
the provisions of Section 230 of this Code: Provided, That the original copy of the Tax Credit
Certificate showing a creditable balance is surrendered to the appropriate revenue officer for
verification and cancellation: Provided, further, That in no case shall a tax refund be given resulting
from availment of incentives granted pursuant to special laws for which no actual payment was
made.
The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of
both the Senate and House of Representatives, every six (6) months, a report on the exercise of his
powers under this Section, stating therein the following facts and information, among others:
names and addresses of taxpayers whose cases have been the subject of abatement or compromise;
amount involved; amount compromised or abated; and reasons for the exercise of power: Provided,
That the said report shall be presented to the Oversight Committee in Congress that shall be
constituted to determine that said powers are reasonably exercised and that the government is not
unduly deprived of revenues.

D. Effect of Supervening Event
SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - no suit or proceeding shall be
have been erroneously or illegally assessed or collected, or of any penalty claimed to have been
collected without authority, of any sum alleged to have been excessively or in any manner
wrongfully collected without authority, or of any sum alleged to have been excessively or in any
sum has been paid under protest or duress. cralaw
date of payment of the tax or penalty REGARDLESS OF ANY SUPERVENING CAUSE that may arise
after payment: Provided, however, That the Commissioner may, even without a written claim
therefor, refund or credit any tax, where on the face of the return upon which payment was made,
such payment appears clearly to have been erroneously paid.

Manila Electric Co. v. CIR, CTA Case No. 7107, October 16, 2006
Under the above-quoted provisions, it is clear that the claim for refund must be filed, or the
suit or proceeding therefor must be commenced in court, within two (2) years from date of
payment of the tax or penalty regardless of any supervening cause. Non-compliance with
this condition precedent bars the taxpayer from recovering the erroneously paid tax.
Simply put, there is no requirement in the law that petitioner must request first for
a ruling from the BIR for exemption before it can file a claim for refund in cases of
erroneous payment or overpayment of taxes. The 1997 National Internal Revenue Code
provides for the exemption as well as the period within which to file a claim for refund of
erroneously paid taxes and not the BIR Ruling which merely echoes whatever is provided
by the law. Now therefore, considering the date of filing of returns and payment of taxes and
the date when petitioner administratively filed its claim with the respondent and the date

when it judicially filed the instant case before this Court, petitioner's claim for the refund of
taxes beyond the 2-year period already prescribed.

CIR v. Central Azucarera Don Pedro, supra
In connection with the claim for tax credit filed by the respondent Central, the basis thereof
is the tax exemption granted by the Board of Industries. Before the application for such
exemption was approved there was absolutely no basis for the Central to file a claim with
the Commissioner or to commence a suit in court.

E. Offsetting Against Deficiency Tax Assessments
CIR v. Cebu Portland Cement Co., 156 SCRA 535, 541 (1987)
The argument that the assessment cannot as yet be enforced because it is still being
contested loses sight of the urgency of the need to collect taxes as "the lifeblood of the
government." If the payment of taxes could be postponed by simply questioning their
validity, the machinery of the state would grind to a halt and all government functions
would be paralyzed.

BPI Securities Corp. v. CIR, CTA Case No. 6089, Aug. 22, 2002
Moreover, it appears that the memorandum-report has not yet ripened into a formal
assessment duly approved by the Regional Director or by the Commissioner of Internal
Revenue. Thus, the same can proceed independently of the claim for refund and its merits
or demerits may be determined in separate proceedings as provided for in the Tax Code.
The principle that taxes are not subject to set-off or legal compensation must govern,
especially in this case where the taxes and the taxpayer's claim are not fully liquidated, due
and demandable.

FNCB Finance v. CIR, CTA Case No. 3717, May 10, 1993
It is significant to note that in the investigation of petitioner's claim for tax credit, there was
instead found due from petitioner alleged deficiency income tax which respondent
automatically set-off against the amount claimed as excess creditable income tax. The result
was that petitioner has no longer any excess creditable income tax but a deficiency tax due.
An assessment fixes and determines the tax liability of a taxpayer. Without an
assessment, there is no debt from taxpayer, and there is no obligation on his part that can
be enforced in an action. Accordingly, respondent cannot be allowed to apply the tax credit
claimed against the alleged deficiency tax when no assessment has been made. In like manner
that a taxpayer cannot refuse to pay a tax on the ground that the government owes him an
amount equal to or greater than the tax being collected, the government cannot
automatically set-off alleged deficiency tax against a claim for tax credit.

F. Whether Government is Liable for Interest, Attorneys Fees, Etc.
Philex Mining Corp. v. CIR, et. al., 306 SCRA 126 (1999)
WON government is liable for interest etc? NO. As held in Rio Tuba: [t]he rule is that no
interest on refund of tax can be awarded unless authorized by law or the collection of the tax
was attended by arbitrariness. An action is not arbitrary when exercised honestly and upon
due consideration where there is room for two opinions, however much it may be believed
that an erroneous conclusion was reached. Arbitrariness presupposes inexcusable or
obstinate disregard of legal provisions. None of the exceptions are present in the case at
bar. Respondents decision denying petitioners claim for refund was based on an honest
interpretation of law.


G. Taxes Not Subject of Set-Off
Francia v. IAC, 162 SCRA 753 (1988)
WON the real property taxes due may be set off with the proceeds from the expropriation of
his property? NO. There can be no off-setting of taxes against the claims that the taxpayer
may have against the government. A person cannot refuse to pay a tax on the ground that
the government owes him an amount equal to or greater than the tax being collected. The
collection of a tax cannot await the results of a lawsuit against the government. A claim for
taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under the
statutes of set-off, which are construed uniformly, in the light of public policy, to exclude the
remedy in an action or any indebtedness of the state or municipality to one who is liable to
the state or municipality for taxes. Neither are they a proper subject of recoupment since
they do not arise out of the contract or transaction sued on. *besides different entity due =
RPT is due to the local government and expropriation is due to the national government

BIR Ruling No. 415-93, Oct. 15, 1993 [asking for confirmation of automatic set off]
I reply, I regret to inform you that the same cannot be granted for lack of legal basis. Any claim for
tax credit or refund of alleged excess input tax by a VAT registered taxpayer pursuant to Sections
104 and 106 both of the Tax Code, as amended by E.O. 273, shall be subject to verification by this
Office pursuant to existing rules and regulations. Accordingly, until after the amount claimed as
input taxes attributable to goods exported, or on sales which are zero-rated or effectively zero-
rated or input tax paid on capital goods imported or locally purchased, to the extent that such input
taxes have not been applied against output taxes, have been finally determined to be legally due to
the taxpayer, and a tax credit certificate issued therefor, no automatic offsetting of the amount
claimed as input tax against the tax liability of the taxpayer can be allowed.

However, a Tax Credit Certificate duly issued by this Office shall, upon proper application, be
allowed to be used in payment of excise and other tax liabilities of taxpayers, like the mining
companies.

VI. APPEAL IN CASE OF DENIAL OF REFUND/TAX CREDIT CLAIM
A. CTA (Division and En Banc)
Sec. 4, 2nd par., NIRC - The power to decide disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under
this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is
vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax
Appeals.
Sec. 7(a)(1), (2), Rep. Act. No. 1125, as amended by Rep. Act. No. 9282
"Sec. 7. Jurisdiction. - The CTA shall exercise:
"a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
"1. Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relation thereto, or other matters arising under the National Internal Revenue or
other laws administered by the Bureau of Internal Revenue;
"2. Inaction by the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in
relations thereto, or other matters arising under the National Internal Revenue Code
or other laws administered by the Bureau of Internal Revenue, where the National
Internal Revenue Code provides a specific period of action, in which case the
inaction shall be deemed a denial;
"SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a

"SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No civil proceeding involving matter arising
under the National Internal Revenue Code, the Tariff and Customs Code or the Local Government
Code shall be maintained, except as herein provided, until and unless an appeal has been previously
filed with the CTA and disposed of in accordance with the provisions of this Act
"A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration
or new trial, may file a petition for review with the CTA en banc."

B. Supreme Court

"SEC. 19. Review by Certiorari. - A party adversely affected by a decision or ruling of the CTA en
banc may file with the Supreme Court a verified petition for review on certiorari pursuant to Rule
45 of the 1997 Rules of Civil Procedure."

VII. Decisions on Other Matters
Sec 4, 2nd paragraph
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under this Code or other laws or
portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner,
subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.
Sec 7 a 1 RA 1125

"1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue or other laws administered by the Bureau of
Internal Revenue;
"2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other
matters arising under the National Internal Revenue Code or other laws administered by the
Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of
action, in which case the inaction shall be deemed a denial;
"3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided
or resolved by them in the exercise of their original or appellate jurisdiction;
"4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or
other money charges, seizure, detention or release of property affected, fines, forfeitures or other
penalties in relation thereto, or other matters arising under the Customs Law or other laws
administered by the Bureau of Customs;
"5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction
over cases involving the assessment and taxation of real property originally decided by the
provincial or city board of assessment appeals;
"6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review
from decisions of the Commissioner of Customs which are adverse to the Government under
Section 2315 of the Tariff and Customs Code;
"7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product,
commodity or article, involving dumping and countervailing duties under Section 301 and 302,
respectively, of the Tariff and Customs Code, and safeguard measures under Republic Act No. 8800,
where either party may appeal the decision to impose or not to impose said duties.

RODRIGUEZ VS BLAQUERA
Pursuant to the law which imposes license fees for fire arms, the CIR published a circular and added
that to be under the exemption, the gun must be register with the Constabulary and of a certain
model. Phil Rifle and Pistol Association claims that such additional requirements are not warranted
by the Statute and demands refund of the excess of the annual fee they paid.

WON the action to nullify the general circular is a decision of the CIR and therefore within the
jurisdiction of the CTA if appealed therefrom? YES.

The General Circular directs its agents to strictly adhere on the manner of enforcement of said
statute, the administration of which is entrusted to the BIR. RA 1125 states that the CTA sill
exercise exclusive appellate jurisdiction to review by appeal decisions of the CIR in matters arising
under the NIRC or other law or part of the law administered by the BIR.

Sec 229 erroneous or illegal
at the time of the collection, legal? Yes - cant recover under Sec 229.
No, can recover under Sec 229

PNOC VS CA

PHIL JOURNALIST VS CIR
WON the CTA has jurisdiction over the determination of the legality of the WDL?


The jurisdiction of the CTA is not limited to the decisions or inactions of the CTA but also covers
other cases which arise from NIRC or other related laws administered by the BIR. Thus, CTA may
decide if the WDL is valid and if the waiver was validly effected.

CIR VS LEAL
WON RTC has jurisdiction over the case? NO, should have been filed before the CTA

Jurisdiction to review the rulings of the CIR pertains to the CTA not the RTC. The RMOs were issued
pursuant to the CIRs power under Art 245 of the NIRC which provides for the SOF authority to
promulgate rules and regulation and the power of the CIR to make rulings or opinions in connection
with the implementation fot he provision of NIRC, including ruling on the classification of article of
sales and similar purposes.. Thus CA erred in saying that the RTC decision should have been
appealed to the CTA because the case should have been at first filed before the latter court.

ASIA AUCTIONEER VS PARAYNO
WON the RTC has jurisdiction over the case? NO, should have been filed before the CTA.

RMCs are considered administrative rulings or opinions of the CIR. Thus in this case, these are
actually rulings or opinions of the CIR on the tax treatment of MV sold at public auction within the
SSEZ to implement RA 7227. These RMCs were issued in pursuant to the power of the CIR under
Sec 4 of the NIRC.

BAT VS CAMACHO
WON RTC has jurisdiction over the case? YES.

Law confers on the CTA jurisdiction over tax disputes but does not include cases where the
constitutionality of a law or rule is challenged, or a rule issued by an administrative agency in the
performance of its quasi judicial function -regular courts have the jurisdiction to pass upon the
same. the injection prayed for is a direct attack on the constitutionality of Sec 145 (c) of the NIRC
and its IRR.

VII. STATUTE OF LIMITATION
A. Period to assess
Sec 203, 222, 223
SEC. 203. Period of Limitation Upon Assessment and Collection. - Except as provided in Section
222, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by
law for the filing of the return, and no proceeding in court without assessment for the collection of
such taxes shall be begun after the expiration of such period: Provided, That in a case where a
return is filed beyond the period prescribed by law, the three (3)-year period shall be counted from
the day the return was filed. For purposes of this Section, a return filed before the last day
prescribed by law for the filing thereof shall be considered as filed on such last day.
SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes.
(a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a
return, the tax may be assessed, or a preceeding in court for the collection of such tax may be
filed without assessment, at any time within ten (10) years after the discovery of the falsity,
fraud or omission: Provided, That in a fraud assessment which has become final and
executory, the fact of fraud shall be judicially taken cognizance of in the civil or criminal
action for the collection thereof.
(b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax,
both the Commissioner and the taxpayer have agreed in writing to its assessment after such
time, the tax may be assessed within the period agreed upon. The period so agreed upon may

be extended by subsequent written agreement made before the expiration of the period
previously agreed upon.
(c) Any internal revenue tax which has been assessed within the period of limitation as
prescribed in paragraph (a) hereof may be collected by distraint or levy or by a proceeding in
court within five (5) years following the assessment of the tax.
(d) Any internal revenue tax, which has been assessed within the period agreed upon as
provided in paragraph (b) hereinabove, may be collected by distraint or levy or by a
proceeding in court within the period agreed upon in writing before the expiration of the five
(5) -year period. The period so agreed upon may be extended by subsequent written
agreements made before the expiration of the period previously agreed upon.
(e) Provided, however, That nothing in the immediately preceding and paragraph (a) hereof
shall be construed to authorize the examination and investigation or inquiry into any tax
return filed in accordance with the provisions of any tax amnesty law or decree.

SEC. 223. Suspension of Running of Statute of Limitations. - The running of the Statute of
Limitations provided in Sections 203 and 222 on the making of assessment and the beginning of
distraint or levy a proceeding in court for collection, in respect of any deficiency, shall be suspended
for the period during which the Commissioner is prohibited from making the assessment or
beginning distraint or levy or a proceeding in court and for sixty (60) days thereafter; when the
taxpayer requests for a reinvestigation which is granted by the Commissioner; when the taxpayer
cannot be located in the address given by him in the return filed upon which a tax is being assessed
or collected: Provided, that, if the taxpayer informs the Commissioner of any change in address, the
running of the Statute of Limitations will not be suspended; when the warrant of distraint or levy is
duly served upon the taxpayer, his authorized representative, or a member of his household with
sufficient discretion, and no property could be located; and when the taxpayer is out of the
Philippines.
1. When is assessment deemed made?
BASILAN ESTATE VS CIR
Assessment is deemed made when notice to this effect is released, mailed or sent by the Collector to
the taxpayer and it is not required that the notice be received by the TP within the five-year period.

2. Effect of filing an amended return
CIR vs Phoenix
WON prescription has already set in? NO.
Assessment was based on amended return, this the period must be counted from the filing of such.
This only applies when the amended return is substantially different from the original return. If the
counting is from the filing of the original return, this would pave way to tax payers to evade the
payment of taxes by simply reporting in their original return heavy losses and maneding the same
more than 5 years later when the Cir has lost its power to assess the proper tax.

3. Effect of filing a wrong return
BUTUAN SAWMILL vs CTA
WON prescription has already set it? NO.

The taxpayer must file a return for the particular tax as required by law in order to avail of Sec 331.
In this case, the taxpayer failed to file a return for the disputed sales and such was discovered only
in 1957; thus, assessment may then be made within 10 years from and after the discovery of the
omission to file the return. ITR cant be considered as a return for compensation tax for the
purposes of computing the period of prescription.

4. How Prescriptive Period Counted
CIR vs PRIMETOWN

WON the claim was filed within the prescriptive period? YES.

The period must be reckoned from the filing of the final adjusted return.However, there is an
incompatibility between counting of days in Civil Code and the Administrative Code but the latter
being a more recent law shall be followed. According to the Admin Code, one year is 12 calendar
months and a month designated in the calendar without regard to the number of days it may
contain. Thus the petition was filed on the last day of the 24th month form the day the respondent
filed its final adjusted return.

5. Ordinary prescription
Sec 103
SEC. 103. Filing of Return and Payment of Tax. -
(A) Requirements. - any individual who makes any transfer by gift (except those which, under
Section 101, are exempt from the tax provided for in this Chapter) shall, for the purpose of the said
tax, make a return under oath in duplicate. The return shall se forth:
(1) Each gift made during the calendar year which is to be included in computing net gifts;
(2) The deductions claimed and allowable;
(3) Any previous net gifts made during the same calendar year;
(4) The name of the donee; and
(5) Such further information as may be required by rules and regulations made pursuant to
law.

(B) Time and Place of Filing and Payment. - The return of the donor required in this Section shall be
filed within thirty (30) days after the date the gift is made and the tax due thereon shall be paid at
the time of filing. Except in cases where the Commissioner otherwise permits, the return shall be
filed and the tax paid to an authorized agent bank, the Revenue District Officer, Revenue Collection
Officer or duly authorized Treasurer of the city or municipality where the donor was domiciled at
the time of the transfer, or if there be no legal residence in the Philippines, with the Office of the
Commissioner. In the case of gifts made by a nonresident, the return may be filed with the
Philippine Embassy or Consulate in the country where he is domiciled at the time of the transfer, or
directly with the Office of the Commissioner.

6. Extraordinary prescription
A. false/fraudulent return Sec 222(a)
TALIGMAN LUMBER VS CIR
The taxpayer failed to file a return thus it is incumbent upon the TP to prove that it indeed filed a
return to avail of the benefit of the 5-year period however in this case, it failed to do so. The
conclusion must be that no such returns had been filed and that the government has 10 years
within which to make the assessments.

AZNAR VS CTA
The ten year prescription shall be applied to:
1. false return - deviation from truth, intentional or not
2. fraudulent return with intent to evade taxes - intentional or deceitful entry with intent to
evade taxes due
3. failure to file a return.

In this case, there is a false return and the filing of wrong returns for 6 years may be considered as
gross negligence.

CIR VS BF GOODRICH
As the Parity of Agreement ended, BF Goodrich was compelled to sell its land for a lower value than

its FMV. CIR assessed BF for deficiency donors tax based on difference of FMV and the actual
consideration received.

WON the right to assess the donors tax has prescribed? YES

The purpose of prescriptive period is safeguarding the taxpayer from any unreasonable
examination, investigation or assessment. Such is construed liberally in favor of the taxpayer and
exceptions are to be interpreted strictly. Falsity - contains wrong information due to mistkae,
carelessness or ignorance however this does not make the return false. It is only false when there is
gross or culpable neglignece.

TELESAT VS CIR
Fraud must be actual and not constructive. There must appear a design to mislead or deceive on the
part of the taxpayer, or at least culpable negligence. Mere falsity of the rerun does not warrant the
use of the 10 years prescriptive period as intent to evade taxes must be clearly established. In this
case, the discrepancy is cause by the use of different accounting methods.

ESTATE OF REYES VS CIR
Which prescriptive period shall apply? 10 years
With filing false returns, intent to evade taxes is not required as compared to fraudulent returns;
thus even if the FAN was issued beyond the 3 years after the return was filed, the right to assess has
not yet prescribed.
A. Waiver of prescriptive period
-CIR and TP may agree to assess the tax beyond the assessment period if: a. agreed upon in writing
and before the expiration of the period to assess. The extension may further be prolonged by a
subsequent written agreement before the expiration of the first extended period.

REPUBLIC VS ACEBEDO
The written waiver beyond the period to assess cant revive the right of action for under the law,
the waiver must be executed within the original 5-year period within which the suit could be
commenced.

CIR VS CA
WON the absence of signature of the CIR is fatal to the agreement? YES, waivers are void.

The law provides that the extension of the period to assess is a written agreement between the CIR
and the taxpayer and must also be executed before the expiration of the period. The signature of the
CIR is not a mere formal requirement and implied consent does not apply here.

PHIL JOURNALIST VS CIR

CIR VS KUDOS METAL
Requirements of a valid waiver:

A. Suspension of prescriptive period
CONTINENTAL MICRONESIA VS CIR
The counting of the prescriptive period is reckoned from the last day required by law for the filing
of a monthly remittance return which in this is 10 days after the end of each calendar month. It
would appear that both subject deficiency assessments are time barred; however, since the
petitioner requested for reinvestigation, which was granted, he running of the 3 year eriod was
suspended. Further there is distinction if the assessment is in the PAN or FAN stage thus, the time
employed in reinvestigating should be deducted from the total period of limitation.

B. PERIOD TO COLLECT
Sec 203, 222, 223
REPUBLIC VS ABLAZA
The benefit of fixing the period in which to assess the taxpayer:
1. Government - tax officers would be obliged to act promptly in making the assessment
2. taxpayer - after the lapse of the period of prescription, citizens would have feeling of security
against unscrupulous tax agents

PALANCA VS CIR
The right of the CIR to collect by summary method has the effect of stopping the running of the
prescriptive period. Such will start upon the issuance of WDL and it is not necessary that it be
actually executed to be made effective.

REPUBLIC VS KER

REPUBLIC VS HIZON

CIR VS WYETH
The period of prescription of action to collect a taxpayers deficiency income tax assessment is
interrupted when the taxpayer requests for a review or reconsideration of said assessment, and
starts to run again when said request is denied.

BPI VS CIR

CIR VS HAMBRECH
C. PERIOD TO FILE PROTEST

D. PERIOD TO APPEAL DECISION ON DISPUTED ASSESSMENT TO CTA

E. PERIOD TO FILE REFUND OR TAX CREDIT CLAIM
SEC 204 (C)
for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties
shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or
refund within two (2) years after the payment of the tax or penalty: Provided, however, That a
return filed showing an overpayment shall be considered as a written claim for credit or refund.
A Tax Credit Certificate validly issued under the provisions of this Code may be applied against any
internal revenue tax, excluding withholding taxes, for which the taxpayer is directly liable. Any
request for conversion into refund of unutilized tax credits may be allowed, subject to the
provisions of Section 230 of this Code: Provided, That the original copy of the Tax Credit Certificate
showing a creditable balance is surrendered to the appropriate revenue officer for verification and
cancellation: Provided, further, That in no case shall a tax refund be given resulting from availment
of incentives granted pursuant to special laws for which no actual payment was made.
The Commissioner shall submit to the Chairmen of the Committee on Ways and Means of both the
Senate and House of Representatives, every six (6) months, a report on the exercise of his powers
under this Section, stating therein the following facts and information, among others: names and
addresses of taxpayers whose cases have been the subject of abatement or compromise; amount
involved; amount compromised or abated; and reasons for the exercise of power: Provided, That
the said report shall be presented to the Oversight Committee in Congress that shall be constituted

to determine that said powers are reasonably exercised and that the government is not unduly
deprived of revenues.

SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - no suit or proceeding shall be
refund or credit any tax, where on the face of the return upon which payment was made, such
payment appears clearly to have been erroneously paid.

COLLECTOR VS SWEENEY

GIBBS VS CIR

CIR VS CA
WON the period shall be reckoned from April 2 (date of payment) or April 15 (last day to file)? April
2

April 2 because this is the date of the filing of the return which is the date of payment within the
meaning of Sec 230 because at that time it could already be determined that there was
overpayment. Further NIRC Sec 49 states that payment is made at the time the return is filed.

ACCRA VS VA
Filing of return is the reckoning date because it is at this point that the liability is known for certain.

CIR VS TMX
The reckoning date shall be at the filing of the Final Adjusted Return because that is when it is
finally ascertained if the TP has to pay additional income tax or if he is entitled to refund because of
overpayments. Quarter payments are mere installments.

F. PERIOD TO PROSECUTE VIOLATIONS OF ANY PROVISION OF NIRC
SEC 281
EC. 281. Prescription for Violations of any Provision of this Code. - All violations of any
provision of this Code shall prescribe after Five (5) years.
Prescription shall begin to run from the day of the commission of the violation of the law, and if the
same be not known at the time, from the discovery thereof and the institution of judicial
proceedings for its investigation and punishment.
The prescription shall be interrupted when proceedings are instituted against the guilty persons
and shall begin to run again if the proceedings are dismissed for reasons not constituting jeopardy.
The term of prescription shall not run when the offender is absent from the Philippines.
LIM VS CA

VIII. APPEAL OF RULING TO DOF, NON RETROACTIVITY
A. Power of review sec 4, 1st paragraph
SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The

power to interpret the provisions of this Code and other tax laws shall be under the exclusive and
original jurisdiction of the Commissioner, subject to review by the Secretary of Finance.
CIR VS LEAL
B. Non retroactivity of revocation of rulings/regulation
sec 246
SEC. 246. Non- Retroactivity of Rulings. - Any revocation, modification or reversal of any of the
rules and regulations promulgated in accordance with the preceding Sections or any of the rulings
or circulars promulgated by the Commissioner shall not be given retroactive application if the
revocation, modification or reversal will be prejudicial to the taxpayers, except in the following
cases:
(a) Where the taxpayer deliberately misstates or omits material facts from his return or any
document required of him by the Bureau of Internal Revenue;
(b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially
different from the facts on which the ruling is based; or
(c) Where the taxpayer acted in bad faith.

CIR VS BURROUGHS

PBCOM VS CIR

ABSCBN VS CTA


ESTATE TAX

Gross Estate
RR 02-2003
governed by the statute at the time of death
Who are liable?
1. Residents and citizens - within and without
2. Nonresident alien - within only

Valuation - FMV at the time of death
Deductions:
Ordinary deductions:
1. Expenses
a. Funeral expenses - after burial not included
b. Substantiated by receipt and invoices
2. Judicial expenses
3. Claims against the estate
Requisites:
a. Personal obligation of the decedent
b. Good faith/adequate consideration
c. valid and enforceable in court
d. was not condoned/has not yet prescribed
Substantiation:
a. notarized debt instrument
b. duly notarized certificate
c. creditors proof of financial capacity
d. contracted within 3 years before death - administrator must give a
statement under oath of the disposition of the funds
4. Claims against insolvent persons (as long as debt is included in the GE)
5. Unpaid mortgages, taxes and casualty losses
Special deductions
1. Family home
2. Standard deductions
3. Medical expenses
4. Amount received by heirs under RA 4917
5. Capital of surviving spouse

Time to file - 6 months from death (maybe extended but not exceeding 30 days)
Place to file - domicile of the decedent at the time of death
Payment - upon filing
-5 years - judicial
-2 years - extrajudicial
No extension when:
1. Negligence
2. Intentional disregard of rules and regulation
3. Fraud
ET must be made before the distribution of property to the heirs by the executor/administrator

LORENZO VS POSADAS
BEAM VS YATCO

B. General definition of Gross Estate

SEC. 85. Gross Estate. - the value of the gross estate of the decedent shall be determined by
including the value at the time of his death of all property, real or personal, tangible or intangible,
wherever situated: Provided, however, that in the case of a nonresident decedent who at the time of
his death was not a citizen of the Philippines, only that part of the entire gross estate which is
situated in the Philippines shall be included in his taxable estate.
(A) Decedent's Interest. - To the extent of the interest therein of the decedent at the time of his
death;
(B) Transfer in Contemplation of Death. - To the extent of any interest therein of which the
decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to
take effect in possession or enjoyment at or after death, or of which he has at any time made a
transfer, by trust or otherwise, under which he has retained for his life or for any period which does
not in fact end before his death (1) the possession or enjoyment of, or the right to the income from
the property, or (2) the right, either alone or in conjunction with any person, to designate the
person who shall possess or enjoy the property or the income therefrom; except in case of a
bonafide sale for an adequate and full consideration in money or money's worth.
(C) Revocable Transfer. -
(1) To the extent of any interest therein, of which the decedent has at any time made a
transfer (except in case of a bona fide sale for an adequate and full consideration in money or
money's worth) by trust or otherwise, where the enjoyment thereof was subject at the date
of his death to any change through the exercise of a power (in whatever capacity
exerciseable) by the decedent alone or by the decedent in conjunction with any other person
(without regard to when or from what source the decedent acquired such power), t o alter,
amend, revoke, or terminate, or where any such power is relinquished in contemplation of
the decedent's death.
(2) For the purpose of this Subsection, the power to alter, amend or revoke shall be
considered to exist on the date of the decedent's death even though the exercise of the power
is subject to a precedent giving of notice or even though the alteration, amendment or
revocation takes effect only on the expiration of a stated period after the exercise of the
power, whether or not on or before the date of the decedent's death notice has been given or
the power has been exercised. In such cases, proper adjustment shall be made representing
the interests which would have been excluded from the power if the decedent had lived, and
for such purpose if the notice has not been given or the power has not been exercised on or
before the date of his death, such notice shall be considered to have been given, or the power
exercised, on the date of his death.
(D) Property Passing Under General Power of Appointment. - To the extent of any property
passing under a general power of appointment exercised by the decedent: (1) by will, or (2) by
deed executed in contemplation of, or intended to take effect in possession or enjoyment at, or after
his death, or (3) by deed under which he has retained for his life or any period not ascertainable
without reference to his death or for any period which does not in fact end before his death (a) the
possession or enjoyment of, or the right to the income from, the property, or (b) the right, either
alone or in conjunction with any person, to designate the persons who shall possess or enjoy the
property or the income therefrom; except in case of a bona fide sale for an adequate and full
consideration in money or money's worth.
(E) Proceeds of Life Insurance. - To the extent of the amount receivable by the estate of the
deceased, his executor, or administrator, as insurance under policies taken out by the decedent
upon his own life, irrespective of whether or not the insured retained the power of revocation, or to
the extent of the amount receivable by any beneficiary designated in the policy of insurance, except
when it is expressly stipulated that the designation of the beneficiary is irrevocable.
(F) Prior Interests. - Except as otherwise specifically provided therein, Subsections (B), (C) and (E)
of this Section shall apply to the transfers, trusts, estates, interests, rights, powers and
relinquishment of powers, as severally enumerated and described therein, whether made, created,

arising, existing, exercised or relinquished before or after the effectivity of this Code.
(G) Transfers of Insufficient Consideration. - If any one of the transfers, trusts, interests, rights
or powers enumerated and described in Subsections (B), (C) and (D) of this Section is made,
created, exercised or relinquished for a consideration in money or money's worth, but is not a bona
fide sale for an adequate and full consideration in money or money's worth, there shall be included
in the gross estate only the excess of the fair market value, at the time of death, of the property
otherwise to be included on account of such transaction, over the value of the consideration
received therefor by the decedent.
(H) Capital of the Surviving Spouse. - The capital of the surviving spouse of a decedent shall not,
for the purpose of this Chapter, be deemed a part of his or her gross estate.
CIR VS CAMPOS-RUEDA
Campos-Rueda is seeking the exemption of the estate of Cerdeira, a Spanish national and a resident
of Morocco, with regard to the intangible personal property of the decedent in the Philippines.
WON Tangier is a foreign country within the meaning of Sec 122? Yes.
To be exempted from estate taxes regarding intangible personal property, it must be proven that: a.
the country does not impose such taxes to Filipino citizens or b. the country does not impose taxes
on intangible personal properties. It is already settled that Tangier, Morroco does not impose such
taxes, the only issue is the personality of Tangier. The foreign country need not be a country in the
strictest sense as long as the requisites are complied with. CIR vs. De Lara: held California as a
foreign country for purposes of exemption despite lacking international personality.
C. Constitution
1. Property in Which the Decedent had an interest
C.
Constitution
1. Property in Which Decedent Had an Interest
Sec. 85(A), NIRC
(A) Decedent's Interest. - To the extent of the interest therein of the decedent at the time of his
death;
Interest - beneficial or legal ownership
2. Transfers in Contemplation of Death
Sec. 85(B), NIRC
1. possession or enjoyment of, or the right to income from the property
2. the right, either alone or in conjunction with any person, to designate the person who shall
possess or enjoy the property or the income therefrom (except in case of a bonfire sale for an
adequate and full consideration in money or moneys worth)

3. Transfers Taking Effect at Death
Sec. 85(B), NIRC


BIR Rul. No. 81 98, May 28, 1998
Carino requests for exemption from donors tax of a donation mortsi cause of a property to her
sister. Conditions: 1. to take effect upon her death and that 2. she reserves the right to amend or
revoke

WON the donation is exempt from donors tax? YES but not from estate tax.

Donations to take effect upon the death of the donor partake the nature of a testamentary
provision. such property shall remain part of the donors GE at the time of death despite it being
donated to the sister. Thus, the provision on estate taxes shall apply.

BIR Rul. No. 1003, Sept. 8, 2003
Request for confirmation of opinion that a survivorship agreement executed by joint depositors
under a joint account expressly stipulating that upon the death of any one of the joint depositors,
the entire remaining balance of the deposit shall belong to the surviving depositor.

WON such deposit in relation to the survivorship agreement is subject to tax? YES

Funds are co-owned and the shares are presumed equal, absent evidence to the contrary. the
agreement is valid and binding between the parties however, in taxes, such arrangement shall be
deemed a donation mortis cause. According to the NIRC, transfer in contemplation of death shall be
included in the computation of the gross estate, in this case, the 50% of the balance.

4. Transfers with Retained Interest
Sec. 85(B), NIRC
a. Period for Which Interest is Retained
i. For life
ii. For any period which does not in fact end before death

b. Nature of Interest Retained
i. Possession or enjoyment
ii. Right to income
iii. Right to designate person who shall have possession or enjoyment
iv. Right to designate person who shall receive income
*FMV, at the time of death - actual consideration
Two-fold test:
5. Revocable Transfers
Sec. 85(C), NIRC
(C) Revocable Transfer. -
(1) To the extent of any interest therein, of which the decedent has at any time made a
transfer (except in case of a bona fide sale for an adequate and full consideration in money or

money's worth) by trust or otherwise, where the enjoyment thereof was subject at the date
of his death to any change through the exercise of a power (in whatever capacity
exerciseable) by the decedent alone or by the decedent in conjunction with any other person
(without regard to when or from what source the decedent acquired such power), t o alter,
amend, revoke, or terminate, or where any such power is relinquished in contemplation of
the decedent's death.
(2) For the purpose of this Subsection, the power to alter, amend or revoke shall be
considered to exist on the date of the decedent's death even though the exercise of the power
is subject to a precedent giving of notice or even though the alteration, amendment or
revocation takes effect only on the expiration of a stated period after the exercise of the
power, whether or not on or before the date of the decedent's death notice has been given or
the power has been exercised. In such cases, proper adjustment shall be made representing
the interests which would have been excluded from the power if the decedent had lived, and
for such purpose if the notice has not been given or the power has not been exercised on or
before the date of his death, such notice shall be considered to have been given, or the power
exercised, on the date of his death.
BIR Rul. No. 013 2005, Aug. 16, 2005
WON the transfer of a real property under a revocable trust agreement is exempt from transfer tax?
YES.
Where the enjoyment was subject at the date of his death to any change through the exercise of
power by the decedent to alter, amend, revoke, or terminate or where any such power is
relinquished in contemplation of death. Such must be part of the decedents gross estate and shall
be subject to estate taxes upon the death of either of the spouses.

BIR Rul. No. DA 279-2006, April 25, 2006
a. Nature of Power
i. Power to alter or amend
ii. Power to revoke
iii. Power to terminate
b. Meaning of Power in Whatever Capacity
c. Meaning of Power Exercisable in Conjunction with any Other Person
d.Meaning of Relinquishment of Power in Contemplation of Death

6. Power of Appointment
Sec. 85(D), NIRC
(D) Property Passing Under General Power of Appointment. - To the extent of any property
passing under a general power of appointment exercised by the decedent: (1) by will, or (2) by
deed executed in contemplation of, or intended to take effect in possession or enjoyment at, or after
his death, or (3) by deed under which he has retained for his life or any period not ascertainable
without reference to his death or for any period which does not in fact end before his death (a) the
possession or enjoyment of, or the right to the income from, the property, or (b) the right, either
alone or in conjunction with any person, to designate the persons who shall possess or enjoy the
property or the income therefrom; except in case of a bona fide sale for an adequate and full
consideration in money or money's worth.
a. Meaning of Power of Appointment
b. Applicability in the Philippines
7. Proceeds of Life Insurance
Sec.85(E), NIRC
(E) Proceeds of Life Insurance. - To the extent of the amount receivable by the estate of the
deceased, his executor, or administrator, as insurance under policies taken out by the decedent
upon his own life, irrespective of whether or not the insured retained the power of revocation, or to
the extent of the amount receivable by any beneficiary designated in the policy of insurance, except

when it is expressly stipulated that the designation of the beneficiary is irrevocable.
a. Estate as Beneficiary
b. Third person as beneficiary

II. Valuation
Sec 85 G and Sec 88
(G) Transfers of Insufficient Consideration. - If any one of the transfers, trusts, interests, rights
or powers enumerated and described in Subsections (B), (C) and (D) of this Section is made,
created, exercised or relinquished for a consideration in money or money's worth, but is not a bona
fide sale for an adequate and full consideration in money or money's worth, there shall be included
in the gross estate only the excess of the fair market value, at the time of death, of the property
otherwise to be included on account of such transaction, over the value of the consideration
received therefor by the decedent.
SEC. 88. Determination of the Value of the Estate. -
(A) Usufruct. - To determine the value of the right of usufruct, use or habitation, as well as that of
annuity, there shall be taken into account the probable life of the beneficiary in accordance with the
latest Basic Standard Mortality Table, to be approved by the Secretary of Finance, upon
recommendation of the Insurance Commissioner.
(B) Properties. - The estate shall be appraised at its fair market value as of the time of death.
However, the appraised value of real property as of the time of death shall be, whichever is higher
of -
(1) The fair market value as determined by the Commissioner, or
(2) The fair market value as shown in the schedule of values fixed by the Provincial and City
Assessors.
G - transfer of insufficient consideration = FMV, at the time of death - value of consideration
received by the decedent

Sec 88
A. Usufruct
B. Properties - shall be appraised as of the time of death which is the higher of:
1. FMV as determined by the Commissioner
2. FMV as shown in the schedule of values by the Provincial and City Assessors.

III. Exempt Transfers
Sec 87.
a. The merger of usufruct in the owner of the naked title
b. the transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the
fideicommissary
c. the transmission from the first heir, legatee or donee in favor of another beneficiary, in
accordance with the desire of the predecessor
d. all bequest, devises, legacies or transfer to social welfare, cultural and charitable institutions, no
part of the net income of which inures to the benefit of any individual. Provided, however, that
not more than 30% of the said bequests, devises, legacies, or transfers shall be used by such
institutions for administration purposes.

IV. EXCLUSION OF CONJUGAL SHARE OF SURVIVING SPOUSE
SEC 85 (H)
(H) Capital of the Surviving Spouse. - The capital of the surviving spouse of a decedent shall not,
for the purpose of this Chapter, be deemed a part of his or her gross estate.

V. DEDUCTIONS FROM GROSS ESTATE
SEC 86 Computation of Net estate

SEC. 86. Computation of Net Estate. - For the purpose of the tax imposed in this Chapter, the value
of the net estate shall be determined:
(A) Deductions Allowed to the Estate of Citizen or a Resident. - In the case of a citizen or
resident of the Philippines, by deducting from the value of the gross estate -
(1) Expenses, Losses, Indebtedness, and taxes. - Such amounts -
(a) For actual funeral expenses or in an amount equal to five percent (5%) of the gross
estate, whichever is lower, but in no case to exceed Two hundred thousand pesos
(P200,000);
(b) For judicial expenses of the testamentary or intestate proceedings;
(c) For claims against the estate: Provided, That at the time the indebtedness was
incurred the debt instrument was duly notarized and, if the loan was contracted within
three (3) years before the death of the decedent, the administrator or executor shall
submit a statement showing the disposition of the proceeds of the loan;
(d) For claims of the deceased against insolvent persons where the value of decedent's
interest therein is included in the value of the gross estate; and
(e) For unpaid mortgages upon, or any indebtedness in respect to, property where the
value of decedent's interest therein, undiminished by such mortgage or indebtedness,
is included in the value of the gross estate, but not including any income tax upon
income received after the death of the decedent, or property taxes not accrued before
his death, or any estate tax. The deduction herein allowed in the case of claims against
the estate, unpaid mortgages or any indebtedness shall, when founded upon a promise
or agreement, be limited to the extent that they were contracted bona fide and for an
adequate and full consideration in money or money's worth. There shall also be
deducted losses incurred during the settlement of the estate arising from fires, storms,
shipwreck, or other casualties, or from robbery, theft or embezzlement, when such
losses are not compensated for by insurance or otherwise, and if at the time of the
filing of the return such losses have not been claimed as a deduction for the income tax
purposes in an income tax return, and provided that such losses were incurred not
later than the last day for the payment of the estate tax as prescribed in Subsection (A)
of Section 91.
(2) Property Previously Taxed. - An amount equal to the value specified below of any
property forming a part of the gross estate situated in the Philippines of any person who died
within five (5) years prior to the death of the decedent, or transferred to the decedent by gift
within five (5) years prior to his death, where such property can be identified as having been
received by the decedent from the donor by gift, or from such prior decedent by gift, bequest,
devise or inheritance, or which can be identified as having been acquired in exchange for
property so received:
One hundred percent (100%) of the value, if the prior decedent died within one (1) year
prior to the death of the decedent, or if the property was transferred to him by gift within the
same period prior to his death;
Eighty percent (80%) of the value, if the prior decedent died more than one (1) year but not
more than two (2) years prior to the death of the decedent, or if the property was transferred
to him by gift within the same period prior to his death;
Sixty percent (60%) of the value, if the prior decedent died more than two (2) years but not
more than three (3) years prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to his death;
Forty percent (40%) of the value, if the prior decedent died more than three (3) years but not
more than four (4) years prior to the death of the decedent, or if the property was
Twenty percent (20%) of the value, if the prior decedent died more than four (4) years but
not more than five (5) years prior to the death of the decedent, or if the property was

These deductions shall be allowed only where a donor's tax or estate tax imposed under this
Title was finally determined and paid by or on behalf of such donor, or the estate of such
prior decedent, as the case may be, and only in the amount finally determined as the value of
such property in determining the value of the gift, or the gross estate of such prior decedent,
and only to the extent that the value of such property is included in the decedent's gross
estate, and only if in determining the value of the estate of the prior decedent, no deduction
was allowable under paragraph (2) in respect of the property or properties given in
exchange therefor. Where a deduction was allowed of any mortgage or other lien in
determining the donor's tax, or the estate tax of the prior decedent, which was paid in whole
or in part prior to the decedent's death, then the deduction allowable under said Subsection
shall be reduced by the amount so paid. Such deduction allowable shall be reduced by an
amount which bears the same ratio to the amounts allowed as deductions under paragraphs
(1) and (3) of this Subsection as the amount otherwise deductible under said paragraph (2)
bears to the value of the decedent's estate. Where the property referred to consists of two or
more items, the aggregate value of such items shall be used for the purpose of computing the
deduction.
(3) Transfers for Public Use. - The amount of all the bequests, legacies, devises or transfers to
or for the use of the Government of the Republic of the Philippines, or any political
subdivision thereof, for exclusively public purposes.
(4) The Family Home. - An amount equivalent to the current fair market value of the
decedent's family home: Provided, however, That if the said current fair market value
exceeds One million pesos (P1,000,000), the excess shall be subject to estate tax. As a sine
qua non condition for the exemption or deduction, said family home must have been the
decedent's family home as certified by the barangay captain of the locality.
(5) Standard Deduction. - An amount equivalent to One million pesos (P1,000,000).
(6) Medical Expenses. - Medical Expenses incurred by the decedent within one (1) year prior
to his death which shall be duly substantiated with receipts: Provided, That in no case shall
the deductible medical expenses exceed Five Hundred Thousand Pesos (P500,000).
(7) Amount Received by Heirs Under Republic Act No. 4917. - Any amount received by the
heirs from the decedent - employee as a consequence of the death of the decedent-employee
in accordance with Republic Act No. 4917: Provided, That such amount is included in the
gross estate of the decedent.
(B) Deductions Allowed to Nonresident Estates. - In the case of a nonresident not a citizen of the
Philippines, by deducting from the value of that part of his gross estate which at the time of his
death is situated in the Philippines:
(1) Expenses, Losses, Indebtedness and Taxes. - That proportion of the deductions specified
in paragraph (1) of Subsection (A) of this Section which the value of such part bears to the
value of his entire gross estate wherever situated;
(2) Property Previously Taxed. - An amount equal to the value specified below of any
property forming part of the gross estate situated in the Philippines of any person who died
within five (5) years prior to the death of the decedent, or transferred to the decedent by gift
within five (5) years prior to his death, where such property can be identified as having been
received by the decedent from the donor by gift, or from such prior decedent by gift, bequest,
devise or inheritance, or which can be identified as having been acquired in exchange for
property so received:
One hundred percent (100%) of the value if the prior decedent died within one (1) year prior
to the death of the decedent, or if the property was transferred to him by gift, within the
same period prior to his death;
Eighty percent (80%) of the value, if the prior decedent died more than one (1) year but not
more than two (2) years prior to the death of the decedent, or if the property was transferred
to him by gift within the same period prior to his death;
Sixty percent (60%) of the value, if the prior decedent died more than two (2) years but not

more than three (3) years prior to the death of the decedent, or if the property was
Forty percent (40%) of the value, if the prior decedent died more than three (3) years but not
more than four (4) years prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to his death; and
Twenty percent (20%) of the value, if the prior decedent died more than four (4) years but
not more than five (5) years prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to his death.
These deductions shall be allowed only where a donor's tax, or estate tax imposed under this
Title is finally determined and paid by or on behalf of such donor, or the estate of such prior
decedent, as the case may be, and only in the amount finally determined as the value of such
property in determining the value of the gift, or the gross estate of such prior decedent, and
only to the extent that the value of such property is included in that part of the decedent's
gross estate which at the time of his death is situated in the Philippines; and only if, in
determining the value of the net estate of the prior decedent, no deduction is allowable under
paragraph (2) of Subsection (B) of this Section, in respect of the property or properties given
in exchange therefore. Where a deduction was allowed of any mortgage or other lien in
determining the donor's tax, or the estate tax of the prior decedent, which was paid in whole
or in part prior to the decedent's death, then the deduction allowable under said paragraph
shall be reduced by the amount so paid. Such deduction allowable shall be reduced by an
amount which bears the same ratio to the amounts allowed as deductions under paragraphs
(1) and (3) of this Subsection as the amount otherwise deductible under paragraph (2) bears
to the value of that part of the decedent's gross estate which at the time of his death is
situated in the Philippines. Where the property referred to consists of two (2) or more items,
the aggregate value of such items shall be used for the purpose of computing the deduction.
(3) Transfers for Public Use. - The amount of all bequests, legacies, devises or transfers to or
for the use of the Government of the Republic of the Philippines or any political subdivision
thereof, for exclusively public purposes.
(C) Share in the Conjugal Property. - the net share of the surviving spouse in the conjugal
partnership property as diminished by the obligations properly chargeable to such property shall,
for the purpose of this Section, be deducted from the net estate of the decedent.
(D) Miscellaneous Provisions. - No deduction shall be allowed in the case of a nonresident not a
citizen of the Philippines, unless the executor, administrator, or anyone of the heirs, as the case may
be, includes in the return required to be filed under Section 90 the value at the time of his death of
that part of the gross estate of the nonresident not situated in the Philippines.
(E) Tax Credit for Estate Taxes paid to a Foreign Country. -
(1) In General. - The tax imposed by this Title shall be credited with the amounts of any
estate tax imposed by the authority of a foreign country.
(2) Limitations on Credit. - The amount of the credit taken under this Section shall be subject
to each of the following limitations:
(a) The amount of the credit in respect to the tax paid to any country shall not exceed
the same proportion of the tax against which such credit is taken, which the decedent's
net estate situated within such country taxable under this Title bears to his entir net
estate; and
(b) The total amount of the credit shall not exceed the same proportion of the tax
against which such credit is taken, which the decedent's net estate situated outside the
Philippines taxable under this Title bears to his entire net estate.
A. Deductions allowed to the estate of Citizens or a resident
1. ELIT
a. Funeral expenses - actual funeral expenses or 5% of the GE or P200,000
whichever is lower
b. Judicial expenses

c. Claims against the estate
d. Claims against insolvent persons
e. Unpaid mortgages
2. Property previously taxed
3. Transfers for Public Use
4. The family home
5. Standard deduction
6. Medical expenses
a. incurred within one year prior to his death
b. substantiated by receipts
c. not exceeding P500,000
7. Amount received by heirs under RA 4917
a. recevied by the heirs from decedent-employee under RA 4917
b. included in the GE of the decedent

B. Deductions allowed to non-resident estates
1. ELIT
2. Property previously taxed
3. Transfer for Public Use

C. Share in conjugal property

D. Deductions shall only be allowed if the executor, administrator or any of the heirs includes in the
return the value at the time of his death of that part of gross estate of the nonresident not situated
in the Philippines

E. Tax credit
1. taxes imposed shall be credited with amounts of any estate tax imposed by the authority of
a foreign country
2. limit
a. shall not exceed the same proportion of the estate located here bears to his
entire net estate
b.

A. ELIT
1. Funeral Expense - cut off - burial
2. Expense for testamentary or intestate proceedings - cut off - filing of ETR
3. claims against the estate - values at the time of death

DIZON VS CTA

WON the claims of the creditors be allowed a s deductions to the GE despite the fact that it has been
condoned/compromised by the decents creditors?

Date of death valuation rule - no post-death development shall be considered in determining the
net value of the estate. Generally, this rule is construed to mean that debts or demand of pecuniary
nature which could be enforced against the deceased in his lifetime or liability contracted by the
deceased before his death shall be the basis of the allowable deduction.

4. Claims against insolvent persons
5. Unpaid debts/mortgages
6. Lossess

B. Vanishing deduction
C. Transfer for Public Use
D. Family Home
E. Standard deduction
BIR Ruling 009-99
All deduction enumerated are separate and distinct from the standard deductions
F. Medical Expenses
G. Retirment Benefits and Separation Pay under Sec 32. (B) (6) (a) and (b)

Foreign tax credit
A. Per country limitation
B. Global limitation

VII. Special rules for NRA
A. Meaning of resident or non-resident
B. Inclusion in gross estate

VIII. ADMINISTRATIVE PROVISIONS
A. Tax rates
B. Notice of death
Sec 89. Where the gross value of the estate exceeds P20,000 - the executor, administrator or
any of the legal heirs within 2 months after death or after qualifying as such, shall give a written
notice of death to the CIR.
C. Estate tax return -SEC 90
A. File a return under oath
-Gross value of the estate exceeds P200,000
-Or regardless of gross value, where the said estate consists of registered/
registrable property such as real property, MV, shares of stock or others
1. Value of gross estate
2. Deductions under Sec 86
3. Supplemental data
***Gross value of estate exceeds P2M shall be supported with a statement duly certified by a CPA
a. itemized asset
b. itemized deduction
c. amount of tax due whether paid or still outstanding

B. Time for filing - within 6 months from the death of the decedent

C. Extension - CIR have authority to grant a reasonable extension not exceeding 30 days

D. Place of filing -
a. AAB or
b. RDO, CO
c. duly authorised Treasurer of city/municipality or
d. if no legal residence in the Phil - Office of the CIR
D. Payment of Estate taxes
A. Time of payment - at the same time the return is filed
B. Extension - if payment shall cause undue hardship
a. not to exceed 5 years - if estate is settled thru the courts
b. not to exceed 2 years - if estate is settled extrajudicially
Effect: Statute of Limitations shall be suspended

May be required to file a bond equal to such taxes due but not exceeding double the
amount of tax

No extension shall be granted if:
1. negligence
2. intentional disregard of rules and regulations
3. fraud
C. Liability for payment -

- the executor/administrator before delivery to any beneficiary of his distributive share of the
estate shall pay
- beneficiary shall be subsidiarily liable for payment to the extent of his distributive share for the
payment of such portion of the tax as his distributive share bears to the value of the total net
estate
- executor or administrator -

E. Consequences of non payment of estate taxes
Sec 248, 249, 94 - 97

DONORS TAX
SEC 104
SEC. 104. Definitions. - For purposes of this Title, the terms 'gross estate' and 'gifts' include real
and personal property, whether tangible or intangible, or mixed, wherever situated: Provided,
however, That where the decedent or donor was a nonresident alien at the time of his death or
donation, as the case may be, his real and personal property so transferred but which are situated
outside the Philippines shall not be included as part of his'gross estate' or 'gross gift': Provided,
further, That franchise which must be exercised in the Philippines; shares, obligations or bonds
issued by any corporation or sociedad anonima organized or constituted in the Philippines in
accordance with its laws; shares, obligations or bonds by any foreign corporation eighty-five
percent (85%) of the business of which is located in the Philippines; shares, obligations or bonds
issued by any foreign corporation if such shares, obligations or bonds have acquired a business
situs in the Philippines; shares or rights in any partnership, business or industry established in the
Philippines, shall be considered as situated in the Philippines: Provided, still further, that no tax
shall be collected under this Title in respect of intangible personal property:
(a) if the decedent at the time of his death or the donor at the time of the donation was a
citizen and resident of a foreign country which at the time of his death or donation did not
impose a transfer tax of any character, in respect of intangible personal property of citizens
of the Philippines not residing in that foreign country, or
(b) if the laws of the foreign country of which the decedent or donor was a citizen and
resident at the time of his death or donation allows a similar exemption from transfer or
death taxes of every character or description in respect of intangible personal property
owned by citizens of the Philippines not residing in that foreign country.
The term 'deficiency' means:
(a) the amount by which tax imposed by this Chapter exceeds the amount shown as the tax
by the donor upon his return; but the amount so shown on the return shall first be increased
by the amount previously assessed (or Collected without assessment) as a deficiency, and
decreased by the amounts previously abated, refunded or otherwise repaid in respect of such
tax, or
(b) if no amount is shown as the tax by the donor, then the amount by which the tax exceeds
the amounts previously assessed, (or collected without assessment) as a deficiency, but such
amounts previously assessed, or collected without assessment, shall first be decreased by the
amount previously abated, refunded or otherwise repaid in respect of such tax.

CIR VS DUBERSTEIN

Duberstein gave a corporation names of potential customers and since the referrals proved to be
fruitful, the later gave him a Cadillac which was charged to its expense account. Duberstein then did
not include this to his income and deemed it a gift. He was assessed for deficiency income by the
CIR

WON the Cadillac was a gift? NO, should be part of his income.

GIfts are proceeds from a detached and disinterested generosity out of affection, respect and
admiration. The controlling test in every case is the transferors donative intent in giving the gift.
Here, the car was a recompense for Dubersteins past services or an inducement for him to be of
future service.

PIROVANO VS CIR

WON the proceeds of the life insurance was a donation? YES.

In this case, it was not a renumerated donation. There is no evidence that the deceased was not
fully compensated for his part services. Further, the resolution giving the proceeds to the children
of Pirovano specifies that the the money was to be given out of gratitude for his services and not
the services itself which has been rendered long before the gift was ceded.
II. VALUATION OF GIFTS
Sec 102 - FMV at the time of the gift
SEC. 102. Valuation of Gifts Made in Property. - If the gift is made in property, the fair market
value thereof at the time of the gift shall be considered the amount of the gift. In case of real
property, the provisions of Section 88(B) shall apply to the valuation thereof.

III. TRANSFER FOR LESS THAN ADEQUATE CONSIDERATION
Sec 100 - FMV - consideration = gift
SEC. 100. Transfer for Less Than Adequate and full Consideration. - Where property, other
than real property referred to in Section 24(D), is transferred for less than an adequate and full
consideration in money or money's worth, then the amount by which the fair market value of the
property exceeded the value of the consideration shall, for the purpose of the tax imposed by this
Chapter, be deemed a gift, and shall be included in computing the amount of gifts made during the
calendar year.

IV. EXEMPT GIFTS
Sec 101
SEC. 101. Exemption of Certain Gifts. - The following gifts or donations shall be exempt from the
tax provided for in this Chapter:
(A) In the Case of Gifts Made by a Resident. -
(1) Dowries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate, recognized natural, or adopted children
to the extent of the first Ten thousand pesos (P10,000):
(2) Gifts made to or for the use of the National Government or any entity created by any of its
agencies which is not conducted for profit, or to any political subdivision of the said
Government; and (3) Gifts in favor of an educational and/or charitable, religious, cultural or
social welfare corporation, institution, accredited nongovernment organization, trust or
philanthrophic organization or research institution or organization: Provided, however, That
not more than thirty percent (30%) of said gifts shall be used by such donee for
administration purposes. For the purpose of the exemption, a 'non-profit educational and/or

charitable corporation, institution, accredited nongovernment organization, trust or
philanthrophic organization and/or research institution or organization' is a school, college
or university and/or charitable corporation, accredited nongovernment organization, trust
or philanthrophic organization and/or research institution or organization, incorporated as a
nonstock entity, paying no dividends, governed by trustees who receive no compensation,
and devoting all its income, whether students' fees or gifts, donation, subsidies or other
forms of philanthrophy, to the accomplishment and promotion of the purposes enumerated
in its Articles of Incorporation.
(B) In the Case of Gifts Made by a Nonresident not a Citizen of the Philippines. -
(1) Gifts made to or for the use of the National Government or any entity created by any of its
agencies which is not conducted for profit, or to any political subdivision of the said
Government.
(2) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare
corporation, institution, foundation, trust or philanthrophic organization or research
institution or organization: Provided, however, That not more than thirty percent (30% of
said gifts shall be used by such donee for administration purposes.
(C) Tax Credit for Donor's Taxes Paid to a Foreign Country. -
(1) In General. - The tax imposed by this Title upon a donor who was a citizen or a resident
at the time of donation shall be credited with the amount of any donor's tax of any character
and description imposed by the authority of a foreign country.
(2) Limitations on Credit. - The amount of the credit taken under this Section shall be
subject to each of the following limitations:
(a) The amount of the credit in respect to the tax paid to any country shall not exceed
the same proportion of the tax against which such credit is taken, which the net gifts
situated within such country taxable under this Title bears to his entire net gifts; and
(b) The total amount of the credit shall not exceed the same proportion of the tax
against which such credit is taken, which the donor's net gifts situated outside the
Philippines taxable under this title bears to his entire net gifts.
A. Residents
1. Dowries or gifts made on account of maariage
a. before or within one year of marriage
b. given to legitimate, recognised natural, or adopted children
c. first P10,000 only
2.
B. Non Resident
1.
2.

C. Tax credit for donors taxes paid to a foreign country
1.
2.

V. FOREIGN TAX CREDIT
Sec 101 (C)
A. Per country limitation
B. b. Global limitation

VI. ON WHOM IMPOSED
Sec 98 (A)
SEC. 98. Imposition of Tax. -
(A) There shall be levied, assessed, collected and paid upon the transfer by any person,
resident or nonresident, of the property by gift, a tax, computed as provided in Section 99.

VII. ADMINISTRATIVE
A. TAX RATES
A.
B. Tax payable by donor if donee is a stranger - 30%
Stranger is a person who is not a:
1. Brother, sister (whether half/fullblood), spouse, ancestor and lineal descendant
2. Relative by consanguinity within the 4th degree

*Any contribution to any candidate, political party, or coalition for campaign purposes shall be
governed by the Election Code

B. Donors tax return
Sec 103 (A)
A. Requirements
SEC. 103. Filing of Return and Payment of Tax. -
(A) Requirements. - any individual who makes any transfer by gift (except those which,
under Section 101, are exempt from the tax provided for in this Chapter) shall, for the
purpose of the said tax, make a return under oath in duplicate. The return shall se forth:
(1) Each gift made during the calendar year which is to be included in computing net
gifts;
(2) The deductions claimed and allowable;
(3) Any previous net gifts made during the same calendar year;
(4) The name of the donee; and
(5) Such further information as may be required by rules and regulations made
pursuant to law.
C. Payment of Donors tax
Sec 103 B Time and Place of filing and payment
(B) Time and Place of Filing and Payment. - The return of the donor required in this
Section shall be filed within thirty (30) days after the date the gift is made and the tax due
thereon shall be paid at the time of filing. Except in cases where the Commissioner otherwise
permits, the return shall be filed and the tax paid to an authorized agent bank, the Revenue
District Officer, Revenue Collection Officer or duly authorized Treasurer of the city or
municipality where the donor was domiciled at the time of the transfer, or if there be no legal
residence in the Philippines, with the Office of the Commissioner. In the case of gifts made by
a nonresident, the return may be filed with the Philippine Embassy or Consulate in the
country where he is domiciled at the time of the transfer, or directly with the Office of the
Commissioner.

D. Consequences of Non Payment

VALUE-ADDED TAX
I. TAXABLE TRANSACTIONS
A. In General
Sec. 105, NIRC
Section 105. Persons Liable. - Any person who, in the course of trade or business, sells barters,
exchanges, leases goods or properties, renders services, and any person who imports goods shall be
subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code.
The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the
buyer, transferee or lessee of the goods, properties or services. This rule shall likewise apply to
existing contracts of sale or lease of goods, properties or services at the time of the effectivity of

Republic Act No. 7716.
The phrase 'in the course of trade or business' means the regular conduct or pursuit of a
commercial or an economic activity, including transactions incidental thereto, by any person
regardless of whether or not the person engaged therein is a nonstock, nonprofit private
organization (irrespective of the disposition of its net income and whether or not it sells exclusively
to members or their guests), or government entity.
The rule of regularity, to the contrary notwithstanding, services as defined in this Code rendered in
the Philippines by nonresident foreign persons shall be considered as being course of trade or
business.

Requisites:
1. There is a sale; and
2. The sale is made in the course of trade or business

BIR Rul. 98-97, Aug. 28, 1997
Request for an opinion of the BIR for the early termination and cancellation of option to purchase.

WON subject to VAT? NO

Not subject to VAT since there is no sale, barter or exchange of goods and properties in the ordinary
course of business. The proceeds shall be subject to corporate income tax and DST.

BIR Rul. No. 18-05, Sept. 16, 2005
Condominium corporations are organized for limited purposes, which essentially are: to hold
title to the common areas, to manage the project and to such other purposes as may be necessary,
incidental or convenient to the accomplishment of said purposes.
Condominium Corporations are registered with the SEC and they are governed primarily by the
Condominium Act. These statutory limitations are important factors in determining
whether or not Condominium Corporations, "in the course of trade or business",
render services to their unit members, which they manage and act as trustee for.
Regional Directors do not have the delegated power and jurisdiction to issue RMCs, the same lies
within the exclusive jurisdiction of the Office of the CIR.
Considering that a condominium corporation will not sell, barter, exchange, lease any good or
property and will not render service for a fee but merely implements the
administration of the required services to collect the association dues from the unit
owners pursuant to its corporate purpose/s as 'trustee' of the fund thereof, it is not subject
to VAT
VAT Rul. No. 444-88
Basic commodities even sold at cost shall not be qualified as zero-rated since they do not meet the
conditions set under Sec 100 of the NIRC. The absence of profit and value added to the goods sold
does not make a person operating a consumer store selling basic commodities at cost exempt from
VAT.

VAT Rul. No. 207-90, Nov. 8, 1990
WON a person is engaged in business is determined by his intent for doing an act or series of act. An
initial or single act may be constituted done in the course of business if the same is done with intent
on carrying on a business. Even assuming that the TPs transaction with the buyer is isolated, it
does not detract from the fact that the same was entered into because it was, as it is presently, its
line of business.

CIR Rul. No. 10-98, Feb. 5, 1998
While corporation primarily operates for the purpose of providing technical, research, management

and personnel assistance to its affiliated companies and receive payments for such
assistance on a reimbursement-of-cost basis without any intention of realizing profit, it
is still a corporation subject to income tax.
Being a stock corporation, it is not prohibited from engaging in profitable activities and
consequently from distributing dividends to its stockholders.
An entity that renders services to its affiliated companies and receives payments for such
assistance, although on a reimbursement-of-cost basis, it is subject to VAT on such
services rendered
CIR v. Commonwealth Mgt. & Services Corp.,
WON COMARSECO was engaged in the sale of services thus liable to pay VAT thereon? YES.

VAT is a tax on transactions, imposed at every stage of distribution process on the sale, barter,
exchange of goods or property and on the performance of services even in the absence of profit
attributable thereto. In the course of trade or business requires regular conduct or pursuit of a
commercial or an economic activity, regardless of WON the entity is profit-oriented. As long as the
entity provides service for a fee, remuneration or consideration, then the service rendered is
subject to VAT.

VAT Rul. No. 26-97, April 1, 1997
WON TP is liable for VAT? NO.

Reimbursements is not subject to VAT since the TP does not sell, barter, exchange or lease goods or
property or renders services. It merely pays for its co-lessees share of utilities then collects it from
them without profit or markup.

Tourist Trade and Travel Corp. v. CIR
Reimbursements received by the mall owner for advances it had made for the payment of electric,
water, and telephone bills and for the janitorial services provided were held to be not subject to
VAT since the TP was engaged in the business of providing electricity, water, security and janitorial
services to the lessees.

BIR Rul. No. 113-98, July 23, 1998
The sale by a telecom company of its microwave backbone transmission network to another
wireless communications carrier is not in the course of the TPs trade or business of selling
telecommunication services. The BIR explained that the sale is not subject to VAT because it is an
isolated transaction and that the transaction does not necessarily follow the primary function of
selling telecom services.

Magsaysay Lines, Inc. v. CIR,
WON the sale of the vessels is subject to VAT? NO.
To be subjected to VAT, the transaction should be in the course of business, doing business which
connotes regularity of activity. In this case however, the sale was an isolated transaction. It was
involuntary on the part of NDC as it was required to privatise and its actual normal course of
business is leasing and not selling. Just because one is subject to VAT doesnt mean that all of its
other activities are too, likewise, subject to VAT despite not being specified by law. Incidental
means depending upon or appertaining.

The mere fact that a transaction is isolated will not necessarily disqualify it from being made
incidentally in the course of trade or business. Thus an isolated transaction - if at the same time is
an incidental transaction will be characterised a entered into the course of trade or business hence
subject to VAT,


Lapanday Foods Corp. v. CIR, CTA Case No. 7097, Oct. 18, 2007
TP received a FAN for alleged deficiency VAT resulting from the interest income it derived from
inter-company loans to affiliates as a form of financial assistance in the course of its trade and
business.

WON the interest on loan extended to it affiliates is subject to VAT? YES.

Any person, who, in the course of his trade or business, sells, barters and exchanges, or leases goods
or services or renders services shall be liable to VAT. Regular connotes regularity of activity while
incidental means depending or appertaining to something neessary, or depending upon another
which is termed the principal. In this case, the loans are incidental to its main activity. Further,
when the main activity is subject to VAT, the incidental activities are most likely too. Profit, as held
before, is immaterial.

B. Sale of Goods or Properties
1. Transactions Covered
a. Actual Sale
Sec. 106(A)(1), NIRC, as amended by Rep. Act. No. 9337
"SEC. 106. Value-Added Tax on Sale of Goods or Properties. -
"(A) Rate and Base of Tax. - There shall be levied, assessed and collected on every sale, barter or
exchange of goods or properties, a value-added tax equivalent to ten percent (10%) of the gross
selling price or gross value in money of the goods or properties sold, bartered or exchanged, such
tax to be paid by the seller or transferor: Provided, That the President, upon the recommendation of
the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve
percent (12%), after any of the following conditions has been satisfied:
"(i) Value-added tax collection as a percentage of Gross Domestic product (GDP) of the
previous year exceeds two and four-fifth percent (2 4/5%); or
"(ii) National government deficit as a percentage of GDP of the previous year exceeds one
and one-half percent (1 1/2%).
"(1) The term 'goods or properties' shall mean all tangible and intangible objects which are
capable of pecuniary estimation and shall include:
"(a) Real properties held primarily for sale to customers or held for lease in the ordinary
course of trade or business;
"(b) The right or the privilege to use patent, copyright, design or model, plan secret formula
or process, goodwill, trademark, trade brand or other like property or right;
"(c) The right or the privilege to use in the Philippines of any industrial, commercial or
scientific equipment;
"(d) The right or the privilege to use motion picture films, films, tapes and discs; and
"(e) Radio, television, satellite transmission and cable television time.
"The term 'gross selling price' means the total amount of money or its equivalent which
the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or
exchange of the goods or properties, excluding the value-added tax. The excise tax, if any, on
such goods or properties shall form part of the gross selling price.

b. Transactions Deemed Sale - to recapture/recoup claimed input tax attributable to the taxable
goods withdrawn for personal or non-business use

Sec. 106(B), NIRC, as amended by Rep. Act No. 9337
"(B) Transactions Deemed Sale. - The following transactions shall be deemed sale:
"(1) Transfer, use or consumption not in the course of business of goods or properties
originally intended for sale or for use in the course of business;
"(2) Distribution or transfer to:

"(a) Shareholders or investors as share in the profits of the VAT-registered persons: or
"(b) Creditors in payment of debt;
"(3) Consignment of goods if actual sale is not made within sixty (60) days following the
date such goods, were consigned; and
"(4) Retirement from or cessation of business, with respect to inventories of taxable aoods
existing as of such retirement or cessation.

Sec. 4.106-7, Rev. Regs. No. 16-2005, Sept. 1, 2005, as amended by Rev.

Regs. No. 4-2007, Feb. 7, 2007

c. Changes in or Cessation of Status of a VAT-Registered Person
Sec. 106(C), NIRC, as amended by Rep. Act. No. 9337
"(C) Changes in or Cessation of Status of a VAT-registered Person. - The tax imposed in Subsection (A)
of this Section shall also apply to goods disposed of or existing as of a certain date if under
circumstances to be prescribed in rules and regulations to be promulgated by the Secretary of
Finance, upon recommendation of the Commissioner, the status of a person as a VAT-registered
person changes or is terminated.
Sec. 4.106-8, Rev. Regs. No. 16-2005, Sept. 1, 2005, as amended by Rev. Regs. No. 4-2007, Feb. 7,
2007

BIR Rul. No. 24-2005, Dec. 23, 2005

2. Taxable Base
a. Gross Selling Price
Sec. 106(A)(1), 2nd par., NIRC, as amended by Rep. Act No. 9337
The term 'gross selling price' means the total amount of money or its equivalent which the
purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of
the goods or properties, excluding the value-added tax. The excise tax, if any, on such goods or
properties shall form part of the gross selling price.

When VAT accrues?
sale of goods/properties - accrual method
Sale of services - cash method


Regs. No. 4-2007, Feb. 7, 2007

b. Sales Discounts, Returns and Allowances
Sec. 106(D), NIRC, as amended by Rep. Act No. 9337
"(D) Sales Returns, Allowances and Sales Discounts. - The value of goods or properties sold and
subsequently returned or for which allowances were granted by a VAT-registered person may be
deducted from the gross sales or receipts for the quarter in which a refund is made or a credit
memorandum or refund is issued. Sales discount granted and indicated in the invoice at the time of
sale and the grant of which does not depend upon the happening of a future event may be excluded
from the gross sales within the same quarter it was given.

*Sales discount - must be indicated in the invoice at the time of sale, the grant of which is not
dependent upon the happening of a future event.
*Sales returns and allowances - proper credit or refund was made during the month or quarter to
the buyer for sales previously recorded as taxable sales.

Sec. 4.106-9, Rev. Regs. No. 16-2005, Sept. 1, 2005

VAT Ruling No. 204-90, Oct. 16, 1990

c. Taxable Base for Transactions Deemed Sale and Below Market Gross
Selling Price
Sec. 4.106-7(b), Rev. Regs. No. 16-2005, Sept. 1, 2005, as amended by Rev. Regs. No. 4-2007, Feb. 7,
2007
Output tax shall be based on the market value of the goods deemed sold as of the time of the
occurrence of the deemed sale transactions.

Retirement or cessation from business - acquisition cost or the current market price of the goods or
properties, whichever is lower.

Sale where the GSP is unreasonably lower than FMV, the actual market value shall be the tax base
unreasonably lower - if GSP is lower by more than 30% of the actual market value of the same
goods of the same quantity and quality sold in the immediate locality on or nearest date of sale.

C. Importation of Goods
Sec. 107, NIRC, as amended by Rep. Act. No. 9337
SEC. 107. Value-Added Tax on Importation of Goods. -
"(A) In General. - There shall be levied, assessed and collected on every importation of goods a
value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of
Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and
other charges, such tax to be paid by the importer prior to the release of such goods from customs
custody: Provided, That where the customs duties are determined on the basis of the quantity or
volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, if any:
Provided, further, That the President, upon the recommendation of the Secretary of Finance, shall,
effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the
following conditions has been satisfied:
"(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
"(B) Transfer of Goods by Tax-exempt Persons. - In the case of tax free importation of goods into the
Philippines by persons, entities or agencies exempt from tax where such goods are subsequently
sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers,
transferees or recipients shall be considered the importers thereof, who shall be liable for any
internal revenue tax on such importation. The tax due on such importation shall constitute a lien on
the goods superior to all charges or liens on the goods, irrespective of the possessor thereof."

D. Sale of Services
1. Meaning of Sale or Exchange of Service
Requisites:
a. The service must be in the course of trade or business
b. The service must have been performed in the Philippines
c. The consideration is actually or constructively received
***NRA - considered as always in the course of trade or business

Sec. 108(A), NIRC, as amended by Rep. Act. No. 9337
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -

(A) Rate and Base of Tax. - There shall be levied, assessed and collected, a value-added tax
equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services,
including the use or lease of properties: Provided, That the President, upon the recommendation of
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
(ii) National government deficit as a percentage of GDP of the previous year exceeds one
"The phrase 'sale or exchange of services' means the performance of all kinds of services in the
Philippines for others for a fee, remuneration or consideration, including those performed or
rendered by construction and service contractors; stock, real estate, commercial, customs and
immigration brokers; lessors of property, whether personal or real; warehousing services; lessors
or distributors of cinematographic films; persons engaged in milling, processing, manufacturing or
repacking goods for others; proprietors, operators or keepers of hotels, motels, rest-houses,
pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes
and other eating places, including clubs and caterers; dealers in securities; lending investors;
transportation contractors on their transport of goods or cargoes, including persons who transport
goods or cargoes for hire and other domestic common carriers by land relative to their transport of
goods or cargoes; common carriers by air and sea relative to their transport of passengers, goods or
cargoes from one place in the Philippines to another place in the Philippines; sales of electricity by
generation companies, transmission, and distribution companies; services of franchise grantees of
electric utilities, telephone and telegraph, radio and television broadcasting and all other franchise
grantees except those under Section 119 of this Code and non-life insurance companies (except
their crop insurances), including surety, fidelity, indemnity and bonding companies; and similar
services regardless of whether or not the performance thereof calls for the exercise or use of the
physical or mental faculties. The phrase 'sale or exchange of services' shall likewise include:
"(1) The lease or the use of or the right or privilege to use any copyright, patent, design or
model plan, secret formula or process, goodwill, trademark, trade brand or other like
property or right;
"(2) The lease or the use of, or the right to use of any industrial, commercial or, scientific
equipment;
"(3) The supply of scientific, technical, industrial or commercial knowledge or information;
"(4) The supply of any assistance that is ancillary and subsidiary to and is furnished as a
means of enabling the application or enjoyment of any such property, or right as is
mentioned in subparagraph (2) or any such knowledge or information as is mentioned in
subparagraph (3);
"(5) The supply of services by a nonresident person or his employee in connection with the
use of property or rights belonging to, or the installation or operation of any brand,
machinery or other apparatus purchased from such nonresident person;
"(6) The supply of technicai advice, assistance or services rendered in connection with
technical management or administration of any scientific, industrial or commercial
undertaking, venture, project or scheme;
"(7) The lease of motion picture films, films, tapes and discs; and
"(8) The lease or the use of or the right to use radio, television, satellite transmission and
cable television time.
"Lease of properties shall be subject to the tax herein imposed irrespective of the place where the
contract of lease or licensing agreement was executed if the property is leased or used in the
Philippines.
"The term 'gross receipts' means the total amount of money or its equivalent representing the
contract price, compensation, service fee, rental or royalty, including the amount charged for
materials supplied with the services and deposits and advanced payments actually or

constructively received during the taxable quarter for the services performed or to be performed
for another person, excluding value-added tax.


Lhuillier v. CIR, CTA Case No. 6533, May 16, 2003

2. Taxable Base: Gross Receipts Actually and Constructively Received
Gross receipt:
-refers to total amount of money or its equivalent representing the contract price,
compensation, service fee, rental or royalty
-including the amount charged for materials supplied with the services and deposits applied
as payments for services rendered and advance payment
-for the services performed or to be performed for another person
-excluding VAT

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -
(A) Rate and Base of Tax. - There shall be levied, assessed and collected, a value-added tax
equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services,
including the use or lease of properties: Provided, That the President, upon the recommendation of
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the
(ii) National government deficit as a percentage of GDP of the previous year exceeds one
"The phrase 'sale or exchange of services' means the performance of all kinds of services in the
Philippines for others for a fee, remuneration or consideration, including those performed or
rendered by construction and service contractors; stock, real estate, commercial, customs and
immigration brokers; lessors of property, whether personal or real; warehousing services; lessors
or distributors of cinematographic films; persons engaged in milling, processing, manufacturing or
repacking goods for others; proprietors, operators or keepers of hotels, motels, rest-houses,
pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes
and other eating places, including clubs and caterers; dealers in securities; lending investors;
transportation contractors on their transport of goods or cargoes, including persons who transport
goods or cargoes for hire and other domestic common carriers by land relative to their transport of
goods or cargoes; common carriers by air and sea relative to their transport of passengers, goods or
cargoes from one place in the Philippines to another place in the Philippines; sales of electricity by
generation companies, transmission, and distribution companies; services of franchise grantees of
electric utilities, telephone and telegraph, radio and television broadcasting and all other franchise
grantees except those under Section 119 of this Code and non-life insurance companies (except
their crop insurances), including surety, fidelity, indemnity and bonding companies; and similar
services regardless of whether or not the performance thereof calls for the exercise or use of the
physical or mental faculties. The phrase 'sale or exchange of services' shall likewise include:
"(1) The lease or the use of or the right or privilege to use any copyright, patent, design or
model plan, secret formula or process, goodwill, trademark, trade brand or other like
property or right;
"(2) The lease or the use of, or the right to use of any industrial, commercial or, scientific
equipment;
"(3) The supply of scientific, technical, industrial or commercial knowledge or information;
"(4) The supply of any assistance that is ancillary and subsidiary to and is furnished as a

means of enabling the application or enjoyment of any such property, or right as is
mentioned in subparagraph (2) or any such knowledge or information as is mentioned in
subparagraph (3);
"(5) The supply of services by a nonresident person or his employee in connection with the
use of property or rights belonging to, or the installation or operation of any brand,
machinery or other apparatus purchased from such nonresident person;
"(6) The supply of technicai advice, assistance or services rendered in connection with
technical management or administration of any scientific, industrial or commercial
undertaking, venture, project or scheme;
"(7) The lease of motion picture films, films, tapes and discs; and
"(8) The lease or the use of or the right to use radio, television, satellite transmission and
cable television time.
"Lease of properties shall be subject to the tax herein imposed irrespective of the place where the
contract of lease or licensing agreement was executed if the property is leased or used in the
Philippines.
"The term 'gross receipts' means the total amount of money or its equivalent representing the
contract price, compensation, service fee, rental or royalty, including the amount charged for
materials supplied with the services and deposits and advanced payments actually or
constructively received during the taxable quarter for the services performed or to be performed
for another person, excluding value-added tax.

Sec. 4.108-4, Rev. Regs. No. 16-2005, Sept. 1, 2005, as amended by Rev.Regs. No. 4-2007, Feb. 7,
2007

BIR Rul. No. 195-89, Sept. 8, 1989
Excludes, however, receivables.

VAT Rul. No. 111-88, April 25, 1989
Gross receipts includes amounts billed to clients intended to recover costs and expenses as well as
profit markup.

VAT Rul. No. 205-90, Oct. 16, 1990
Includes management fee, expenses incurred in connection with services rendered and
reimbursement by managed company of salaries and fringe benefits of seconded employees.

a. Amounts Earmarked for Payment to Third Parties
2007

CIR v. Tours Specialists, Inc., G.R. 66416, March 21, 1990
Excludes amounts earmarked for payment to third parties as well as reimbursement of out-of-
pocket expenses. Gross receipts do not include monies or receipts entrusted to the TP which do not
belong to them and do not redound to the TPs benefit.

BIR Rul. No. DA-069-2006, March 1, 2006

b. Reimbursement of Expenses
2007

VAT Rul. No. 283-88, July 4, 1988


VAT Rul. No. 87-88, April 14, 1988

VAT Rul. No. 97-88, April 15, 1988

II. RELIEF FROM VAT: ZERO-RATING AND EXEMPTIONS
A. Difference Between Zero-Rating and Exemption
Sec. 4.106-5, 1st par., and 4.108-5(a), Rev. Regs. No. 16-2005, Sept. 1, 2005

Cf. Sec. 4.109-1(A), Rev. Regs. No. 16-2005, Sept. 1, 2005

CIR v. Seagate Tech. (Phil.), G.R. 153866, Feb. 11, 2005

Contex Corp. v. CIR, G.R. No. 151135, July 2, 2004

B. Automatically Zero-Rated Transactions
1. Sale of Goods and Properties
Sec. 106(A)(2)(a)(1), (2), (4) and (b), NIRC, as amended by Rep. Act. No.9337
"SEC. 106. Value-Added Tax on Sale of Goods or Properties. -
"(A) Rate and Base of Tax. - There shall be levied, assessed and collected on every sale, barter or
exchange of goods or properties, a value-added tax equivalent to ten percent (10%) of the gross
selling price or gross value in money of the goods or properties sold, bartered or exchanged, such
tax to be paid by the seller or transferor: Provided, That the President, upon the recommendation of
"(i) Value-added tax collection as a percentage of Gross Domestic product (GDP) of the
"(2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:
"(a) Export Sales. - The term 'export sales' means:
"(1) The sale and actual shipment of goods from the Philippines to a foreign country,
irrespective of any shipping arrangement that may be agreed upon which may influence or
determine the transfer of ownership of the goods so exported and paid for in acceptable
foreign currency or its equivalent in goods or services, and accounted for in accordance with
the rules and regulations of the Bangko Sentral ng Pilipinas,(BSP);
"(2) Sale of raw materials or packaging materials to a nonresident buyer for delivery to a
resident local export-oriented enterprise to be used in manufacturing, processing, packing
or repacking in the Philippines of the said buyer's goods and paid for in acceptable foreign
currency and accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP):
"(4) Sale of gold to the Bangko Sentral ng Pilipinas (BSP);

"(b) Foreign Currency Denominated Sale. - The phrase 'foreign currency denominated sale' means
sale to a nonresident of goods, except those mentioned in Sections 149 and 150, assembled or
manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP).

2. Sale of Services
Sec. 108(B)(1), (2), (6) and (7), NIRC, as amended by Rep. Act. No. 9337
"(1) Processing, manufacturing or repacking goods for other persons doing business outside the
Philippines which goods are subsequently exported, where the services are paid for in acceptable

foreign currency and accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP);

"(2) Services other than those mentioned in the preceding paragraph rendered to a person engaged
in business conducted outside the Philippines or to a nonresident person not engaged in business
who is outside the Philippines when the services are performed, the consideration for which is paid
for in acceptable foreign currency and accounted for in accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP);

"(6) Transport of passengers and cargo by air or sea vessels from the Philippines to a foreign
country; and

"(7) Sale of power or fuel generated through renewable sources of energy such as, but not limited
to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy
sources using technologies such as fuel cells and hydrogen fuels.

CIR v. American Express Intl, Inc. (Phil.), G.R. 152609, June 29, 2005
WON AMEX is entitled to refund? YES

As a general rule, our VAT system follows the destination principle however an exception to this is
supply of services shall be zero-rated when:
a. services is performed in the Philippines
b. falls under the category provided in the tax code
c. pain in foreign currency accounted for by the BSP
A VAT registered person that facilitates the collection and payment of receivables belonging to its
NRA for which it gets paid in acceptable foreign currency inwardly remitted and accounted for in
conformity with BSP rules and regulations.

CIR v. Burmeister & Wain Scandinavian Contractor Mindanao, Inc., G.R.153205, Jan. 22, 2007
WON TP is entitled to refund of taxes it erroneously paid? YES

It is entitled to refund because it relied on a BIR Ruling otherwise it would have been liable for VAT.
The tax code requires that:
1. Services is performed in the Philippines by VAT registered persons
2. Services other than processing, manufacturing, or repacking of goods
3. Payment in acceptable foreign currency in accordance with BSP rules and regulations
4. Recipient of services is doing business outside the Philippines.
In this case, even thought he consortium is a non resident foreign corporation, its is doing business
in the Philippines. Therefore, it does not qualify for the zero-rated VAT as the consortium has a 15-
year contract to operate and maintain NAPOCORs barges.

3. Meaning of Accounted for in Accordance with the Rules and Regulations of the BSP
BIR Rul. No. 176-94
Export sales paid for in acceptable foreign currency and accounted for in accordance with the rules
and regulations of the BSP qualify as zero-rated sales even if the proceeds are not converted to
Philippine Peso.

VAT Rul. No. 47-00, Oct. 26, 2000
May be:
1. Sold for Php to AABs or outside the banking system
2. Retained, or deposited in foreign currency accounts, whether in the Philippines or abroad and
may be used freely for any purpose.

C. Effectively Zero-Rated Transactions
1. Sale of Goods and Properties
Sec. 106(A)(2)(3), (5), (6) and (c), NIRC, as amended by Rep. Act No. 9337
"(3) Sale of raw materials or packaging materials to export-oriented enterprise whose export sales
exceed seventy percent (70%) of total annual production;

"(5) Those considered export sales under Executive Order No. 226, otherwise known as the
Omnibus Investment Code of 1987, and other special laws; and

"(6) The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or
international air transport operations;

"(C) Changes in or Cessation of Status of a VAT-registered Person. - The tax imposed in Subsection (A)
of this Section shall also apply to goods disposed of or existing as of a certain date if under
circumstances to be prescribed in rules and regulations to be promulgated by the Secretary of
Finance, upon recommendation of the Commissioner, the status of a person as a VAT-registered
person changes or is terminated.

2. Sale of Services
Sec. 106(B)(3), (4) and (5), NIRC, as amended by Rep. Act No. 9337


3. Requirement to Obtain Approved Application for Effective Zero-Rating:
Deleted by Rev. Regs. No. 4-2007, Feb. 7, 2007
Regs. No. 4-2007, Feb. 7, 2007 (which deleted par. requiring approved application for effective
zero-rating)

D. Exempt Transactions
Sec. 109(1), NIRC, as amended by Rep. Act. No. 9337
"SEC. 109. Exempt Transactions. - (1) Subject to the provisions of subsection (2) hereof, the
following transactions shall be exempt from the value-added tax:
"(A) Sale or importation of agricultural and marine food products in their original state, livestock
and poultry of a kind generally used as, or yielding or producing foods for human consumption; and
breeding stock and genetic materials therefor.
"Products classified under this paragraph shall be considered in their original state even if they
have undergone the simple processes of preparation or preservation for the market, such as
freezing, drying, salting, broiling, roasting, smoking or stripping. Polished and/or husked rice, corn
grits, raw cane sugar and molasses, ordinary salt, and copra shall be considered in their original
state;
"(B) Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and
poultry feeds, including ingredients, whether locally produced or imported, used in the
manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish,
zoo animals and other animals generally considered as pets);
"(C) Importation of personal and household effects belonging to the residents of the Philippines
returning from abroad and nonresident citizens coming to resettle in the Philippines: Provided,
That such goods are exempt from customs duties under the Tariff and Customs Code of the
Philippines;
"(D) Importation of professional instruments and implements, wearing apparel, domestic animals,

and personal household effects (except any vehicle, vessel, aircraft, machinery, other goods for use
in the manufacture and merchandise of any kind in commercial quantity) belonging to persons
coming to settle in the Philippines, for their own use and not for sale, barter or exchange,
accompanying such persons, or arriving within ninety (90) days before or after their arrival, upon
the production of evidence satisfactory to the Commissioner, that such persons are actually coming
to settle in the Philippines and that the change of residence is bona fide;
"(E) Services subject to percentage tax under Title V;
"(F) Services by agricultural contract growers and milling for others of palay into rice, corn into
grits and sugar cane into raw sugar;
"(G) Medical, dental, hospital and veterinary services except those rendered by professionals;
"(H) Educational services rendered by private educational institutions, duly accredited by the
Department of Education (DEPED), the Commission on Higher Education (CHED), the Technical
Education And Skills Development Authority (TESDA) and those rendered by government
educational institutions;
"(I) Services rendered by individuals pursuant to an employer-employee relationship;
"(J) Services rendered by regional or area headquarters established in the Philippines by
multinational corporations which act as supervisory, communications and coordinating centers for
their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn or derive income
from the Philippines;
"(K) Transactions which are exempt under international agreements to which the Philippines is a
signatory or under special laws, except those under Presidential Decree No. 529;
"(L) Sales by agricultural cooperatives duly registered with the Cooperative Development Authority
to their members as well as sale of their produce, whether in its original state or processed form, to
non-members; their importation of direct farm inputs, machineries and equipment, including spare
parts thereof, to be used directly and exclusively in the production and/or processing of their
produce;
"(M) Gross receipts from lending activities by credit or multi-purpose cooperatives duly registered
with the Cooperative Development Authority;
"(N) Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with the
Cooperative Development Authority: Provided, That the share capital contribution of each member
does not exceed Fifteen thousand pesos (P15,000) and regardless of the aggregate capital and net
surplus ratably distributed among the members;
"(O) Export sales by persons who are not VAT-registered;
"(P) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary
course of trade or business, or real property utilized for low-cost and socialized housing as defined
by Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992,
and other related laws, residential lot valued at One million five hundred thousand pesos
(P1,500,000) and below, house and lot, and other residential dwellings valued at Two million five
hundred thousand pesos (P2,500,000) and below: Provided, That not later than January 31, 2009
and every three (3) years thereafter, the amounts herein stated shall be adjusted to their present
values using the Consumer Price Index, as published by the National Statistics Office (NSO);
"(Q) Lease of a residential unit with a monthly rental not exceeding Ten thousand pesos
(P10,000)Provided, That not later than January 31, 2009 and every three (3) years thereafter, the
amount herein stated shall be adjusted to its present value using the Consumer Price Index as
published by the National Statistics Office (NSO);
"(R) Sale, importation, printing or publication of books and any newspaper, magazine, review or
bulletin which appears at regular intervals with fixed prices for subscription and sale and which is
not devoted principally to the publication of paid advertisements;
"(S) Sale, importation or lease of passenger or cargo vessels and aircraft, including engine,
equipment and spare parts thereof for domestic or international transport operations;
"(T) Importation of fuel, goods and supplies by persons engaged in international shipping or air
transport operations;

"(U) Services of banks, non-bank financial intermediaries performing quasi-banking functions, and
other non-bank financial intermediaries; and
"(V) Sale or lease of goods or properties or the performance of services other than the transactions
mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the
amount of One million five hundred thousand pesos (P1,500,000): Provided, That not later than
January 31, 2009 and every three (3) years thereafter, the amount herein stated shall be adjusted to
its present value using the Consumer Price Index as published by the National Statistics Office
(NSO);

1. Coverage of Exemption
a. General Rule
Philippine Acetylene Co., Inc. v. CIR, 20 SCRA 1056 (1967)
Exemption covers only taxes for which party favoured by the exemption is directly liable,
exemption does not extend to indirect taxes like VAT. Being an indirect tax, once VAT is shifted to
the buyer, it is no longer a tax but an additional cost which becomes a part of the amount of the
contract price to be paid by the buyer.

Phil. Natl Police Multi-Purpose Cooperative, Inc. v. CIR, CTA Case No. 4845, March 10, 1994
The tax code provides that cooperatives which do not transact with non members or general public
shall not be subject to any government taxes or fees. In other words, TP is not liable for VAT output
taxes on sled made to its members but is liable for VAT input tax passed on to it by its suppliers. For
a TP to be exempt from indirect taxes, there should be a clear intention on the part of the
legislature. Further it ruled that VAT are paid by sellers or suppliers and being the
buyer/purchaser, PNP Coop had no legal standing.

BIR Rul. No. 155-98, Oct. 21, 1998

BIR Rul. No. 47-99, April 13, 1999

b. Exception
CIR v. John Gotamco & Sons, Inc., 148 SCRA 36 (1987)
Indirect taxes are those which are demanded in the first instance from one person in the
expectation and intention that he can shift the burden to someone else. Even if the 3% is payable by
the contractor, it is the owner of the building which shoulders as the former shifts it to the latter.
And according tot he Host Agreement, WHO is exempted from direct and indirect taxes.

Maceda v. Macaraig, Jr., 223 SCRA 217 (1993)
The law expressly states that the NPC is exempted from direct and indirect taxes which includes
taxes, fees, impost, other charges, an indication that NPC is to be exempted from all forms of taxes.
The reason for this is to enable NPC to pay off all of its debt which already amounts to billions of
pesos. By the very nature of indirect taxation, the economic birden of such taxation is expected to
be passed on thru the channels of commerce to the use or consumer of goods. But since NPC has
been exempted from both direct and indirect taxation, the NPC will not absorb the economic
burden of indirect taxation. This means that the oil companies have to absorb the taxes if it wants to
sell oil to NPC. Futher, NPC may refuse the part of the price which pertains to the tax. However, it is
it to buy oil with taxes due to convenience of price with taxes still, it shall be entitled to a refund
from the BIR.

2. Waiver of VAT Exemption/Election to be Subject to VAT
Sec. 109(2), NIRC, as amended by Rep. Act No. 9337
SEC. 109. Exempt Transactions. - (1) Subject to the provisions of subsection (2) hereof, the following
transactions shall be exempt from the value-added tax:

xxxxx
(2) A VAT-registered person may elect that Subsection (1) not apply to its sale of goods or
properties or services: Provided, That an election made under this Subsection shall be irrevocable
for a period of three (3) years from the quarter the election was made."

III. RATES OF VAT
A. For Output Tax
1. Standard Rate 12%
2. Zero-Rated Transactions 0%
B. For Input Tax
1. Standard Rate 12%
2. Zero-Rated Transactions 0%
3. Transitional Input Tax 2% or actual VAT paid, whichever is higher
4. Presumptive Input Tax 4%
5. Final Withholding VAT on Government or GOCCs 5%

IV. TAX CREDITS & REFUNDS
A. Input Tax Credit
Sec. 110, NIRC, as amended by Rep. Act. No. 9337, as further amended by Rep. Act. No. 9361
SEC. 110. Tax Credits. -
"(A) Creditable Input Tax. -
"(1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section
113 hereof on the following transactions shall be creditable against the output tax:
"(a) Purchase or importation of goods:
"(i) For sale; or
"(ii) For conversion into or intended to form part of a finished product for sale including
packaging materials; or
"(iii) For use as supplies in the course of business; or
"(iv) For use as materials supplied in the sale of service; or
"(v) For use in trade or business for which deduction for depreciation or amortization is
allowed under this Code.
"(b) Purchase of services on which a value-added tax has actually been paid.
"(2) The input tax on domestic purchase or importation of goods or properties by a VAT-registered
person shall be creditable:
"(a) To the purchaser upon consummation of sale and on importation of goods or
properties; and
"(b) To the importer upon payment of the value-added tax prior to the release of the goods
from the custody of the Bureau of Customs.
"Provided, That the input tax on goods purchased or imported in a calendar month for use in trade
or business for which deduction for depreciation is allowed under this Code, shall be spread evenly
over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition
cost for such goods, excluding the VAT component thereof, exceeds One million pesos
(P1,000,000): Provided, however, That if the estimated useful life of the capital good is less than five
(5) years, as used for depreciation purposes, then the input VAT shall be spread over such a shorter
period: Provided, finally, that in the case of purchase of services, lease or use of properties, the input
tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation,
rental, royalty or fee.
"(3) A VAT-registered person who is also engaged in transactions not subject to the value-added tax
shall be allowed tax credit as follows:
"(a) Total input tax which, can be directly attributed to transactions subject to value-add
tax; and
"(b) A ratable portion of any input tax which cannot be directly attributed to either activity.

"The term 'input tax' means the value-added tax due from or paid by a VAT-registered person in
the course of his trade or business on importation of goods or local purchase of goods or services,
including lease or use of property, from a VAT-registered person. It shall also include the
transitional input tax determined in accordance with Section 111 of this Code.
"The term 'output tax' means the value-added tax due on the sale or lease of taxable goods or
properties or services by any person registered or required to register under Section 236 of this
Code.
"(B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the
input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output
tax, the excess shall be carried over to the succeeding quarter or quarters: Provided, That the input
tax inclusive of input VAT carried over from the previous quarter that may be credited in every
quarter shall not exceed seventy percent (70%) of the output VAT: Provided, however, That any
input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded
or credited against other internal revenue taxes, subject to the provisions of Section 112.
"(C) Determination of Creditable Input Tax. - The sum of the excess input tax carried over from the
preceeding month or quarter and the input tax creditable to a VAT-registered person during the
taxable month or quarter shall be reduced by the amount of claim for refund or tax credit for value-
added tax and other adjustments, such as purchase returns or allowances and input tax attributable
to exempt sale.
"The claim for tax credit referred to in the foregoing paragraph shall include not only those filed
with the Bureau of Internal Revenue but also those filed with other government agencies, such as
the Board of Investments and the Bureau of Customs."

1. Persons Who Can Avail of the Input Tax Credit
Sec. 110(A)(1)(b) and (A)(2), NIRC, as amended by Rep. Act. No. 9337
"(b) Purchase of services on which a value-added tax has actually been paid
"(2) The input tax on domestic purchase or importation of goods or properties by a VAT-registered
person shall be creditable:
"(a) To the purchaser upon consummation of sale and on importation of goods or properties; and
"(b) To the importer upon payment of the value-added tax prior to the release of the goods from the
custody of the Bureau of Customs.


2. Special Rules on Amortization of Input Tax on Depreciable Goods
Sec. 110(A), proviso, NIRC, as amended by Rep. Act. No. 9337

Sec. 4.110-3, Rev. Regs. No. 16-2005, Sept. 1, 2005, as amended by Rev. Regs. No. 4-2007, Feb. 7,
2007

3. Special Rules on Apportionment of Input Tax on Mixed Transactions
Sec. 110(A)(3), NIRC, as amended by Rep. Act. No. 9337
"(3) A VAT-registered person who is also engaged in transactions not subject to the value-added tax
shall be allowed tax credit as follows:
"(a) Total input tax which, can be directly attributed to transactions subject to value-add tax; and
"(b) A ratable portion of any input tax which cannot be directly attributed to either activity.
"The term 'input tax' means the value-added tax due from or paid by a VAT-registered person in
the course of his trade or business on importation of goods or local purchase of goods or services,
including lease or use of property, from a VAT-registered person. It shall also include the
transitional input tax determined in accordance with Section 111 of this Code.
"The term 'output tax' means the value-added tax due on the sale or lease of taxable goods or
properties or services by any person registered or required to register under Section 236 of this
Code.

2007

4. Substantiation of Input Tax Credits

BIR Rul. No. 61-00, Nov. 8, 2000

B. Transitional Input Tax
"(A) Transitional Input Tax Credits. - A person who becomes liable to value-added tax or any person
who elects to be a VAT-registered person shall, subject to the filing of an inventory according to
rules and regulations prescribed by the Secretary of Finance, upon recommendation of the
Commissioner, be allowed input tax on his beginning inventory of goods, materials and supplies
equivalent to two percent (2%) of the value of such inventory or the actual value-added tax paid on
such goods, materials and supplies, whichever is higher, which shall be creditable against the
output tax.
Sec. Sec. 4.111-1(a), Rev. Regs. No. 16-2005, Sept. 1, 2005
C. Presumptive Input Tax
Sec. 111(B), NIRC, as amended by Rep. Act. No. 9337
"(B) Presumptive Input Tax Credits. -
"Persons or firms engaged in the processing of sardines, mackerel and milk, and in manufacturing
refined sugar, cooking oil and packed noodle based instant meals, shall be allowed a presumptive
input tax, creditable against the output tax, equivalent to four percent (4%) of the gross value in
money of their purchases of primary agricultural products which are used as inputs to their
production.
"As used in this Subsection, the term 'processing' shall mean pasteurization, canning and activities
which through physical or chemical process alter the exterior texture or form or inner substance of
a product in such manner as to prepare it for special use to which it could not have been put in its
original form or condition."

Sec. Sec. 4.111-1(b), Rev. Regs. No. 16-2005, Sept. 1, 2005

D. Final Withholding VAT
"(C) Withholding of Value-Added Tax. - The Government or any of its political subdivisions,
instrumentalities or agencies, including government-owned or -controlled corporations (GOCCs)
shall, before making payment on account of each purchase of goods and services which are subject
to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold a final
value-added tax at the rate of five percent (5%) of the gross payment thereof: Provided, That the
payment for lease or use of properties or property rights to nonresident owners shall be subject to
ten percent (10%) withholding tax at the time of payment. For purposes of this Section, the payor
or person in control of the payment shall be considered as the withholding agent.
"The value-added tax withheld under this Section shall be remitted within ten (10) days following
the end of the month the withholding was made."

Sec. Sec. 4.114-2(a), Rev. Regs. No. 16-2005, Sept. 1, 2005, as amended by Rev. Regs. No. 4-2007,
Feb. 7, 2007
See Illustration in Sec. Sec. 4.110-4, Rev. Regs. No. 16-2005, Sept. 1, 2005, as amended by Rev. Regs.
No. 4-2007, Feb. 7, 2007

E. Claims for Refund or Issuance of Tax Credit Certificates
Sec. 112, NIRC, as amended by Rep. Act. No. 9337
"SEC. 112. Refunds or Tax Credits of Input Tax. -
"(A) Zero-Rated or Effectively Zero-Rated Sales. - Any VAT-registered person, whose sales are zero-
rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when
the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input
tax due or paid attributable to such sales, except transitional input tax, to the extent that such input
tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales
under Section 106(A)(2)(a)(1), (2) and (b) and Section 108 (B)(1) and (2), the acceptable foreign
currency exchange proceeds thereof had been duly accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is
engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of
properties or services, and the amount of creditable input tax due or paid cannot be directly and
entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis
of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under
Section 108 (B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-
rated sales.
"(B) Cancellation of VAT Registration. - A person whose registration has been cancelled due to
retirement from or cessation of business, or due to changes in or cessation of status under Section
106(C) of this Code may, within two (2) years from the date of cancellation, apply for the issuance
of a tax credit certificate for any unused input tax which may be used in payment of his other
internal revenue taxes.
"(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes
within one hundred twenty (120) days from the date of submission of complete documents in
support of the application filed in accordance with Subsection (A) hereof.
"In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of
the Commissioner to act on the application within the period prescribed above, the taxpayer
affected may, within thirty (30) days from the receipt of the decision denying the claim or after the
expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the
Court of Tax Appeals.
"(D) Manner of Giving Refund. - Refunds shall be made upon warrants drawn by the Commissioner

or by his duly authorized representative without the necessity of being countersigned by the
Chairman, Commission on Audit, the provisions of the Administrative Code of 1987 to the contrary
notwithstanding: Provided, That refunds under this paragraph shall be subject to post audit by the
Commission on Audit."

1. Zero-Rated or Effectively Zero-Rated Transactions
"(A) Zero-Rated or Effectively Zero-Rated Sales. - Any VAT-registered person, whose sales are zero-
rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when
the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input
tax due or paid attributable to such sales, except transitional input tax, to the extent that such input
tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales
under Section 106(A)(2)(a)(1), (2) and (b) and Section 108 (B)(1) and (2), the acceptable foreign
currency exchange proceeds thereof had been duly accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is
engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of
properties or services, and the amount of creditable input tax due or paid cannot be directly and
entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis
of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under
Section 108 (B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-
rated sales.

2. Cancellation of VAT Registration
Sec. 112(B), NIRC, as amended by Rep. Act. No. 9337
"(B) Cancellation of VAT Registration. - A person whose registration has been cancelled due to
retirement from or cessation of business, or due to changes in or cessation of status under Section
106(C) of this Code may, within two (2) years from the date of cancellation, apply for the issuance
of a tax credit certificate for any unused input tax which may be used in payment of his other
internal revenue taxes.

3. Period within which Refund or Tax Credit of Input Tax shall be Made
C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes
within one hundred twenty (120) days from the date of submission of complete documents in
support of the application filed in accordance with Subsection (A) hereof.
"In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of
the Commissioner to act on the application within the period prescribed above, the taxpayer
affected may, within thirty (30) days from the receipt of the decision denying the claim or after the
expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the
Court of Tax Appeals.

Correlate with Sec. 229, NIRC
Section 229. Recovery of Tax Erroneously or Illegally Collected. - no suit or proceeding shall be

refund or credit any tax, where on the face of the return upon which payment was made, such
payment appears clearly to have been erroneously paid.

CIR vs Mirant Pagbilao
The two years is reckoned from the close of the taxable quarter when the relevant sales were made
pertaining to the input VAT regardless of whether the taxes were paid or not. Thus at the latest, the
claim should have been filed in 1998, as it was filed only in 1999, claim has already prescribed. Sec
204 and 229 cant apply in this case because such provisions applies only to instances of erroneous
payment or illegal collection.

Commissioner of Internal Revenue v. Aichi Forging Co. of Asia, Inc., G.R. No. 184823, Oct. 6, 2010
WON the claim for refund was filed out of time? YES.
As held in Mirant Pagbilao, the two years should be reckoned from the close of the taxable quarter
when the sales were made. And as ruled in Primetown, a year is composed of 12 months.

WON an admin claim is a condition precedent and filing both admin and judicial violates the
doctrine of exhaustion of administrative remedies? YES

The TP shall first file for an administrative claim and the CIR shall have 120days to act upon it. The
TP then has 30 days upon receiving the decision of the CIR or if the request was not acted upon, he
also has 30 days to bring the suit before the CTA. The 2 years said in the Code is not the filing with
the CTA but the filing of refund claim with the CIR. Further the case cited by the respondent does
not apply to this case because Sec 229 does not apply to application for refund of input VAT.

CIR vs San Roque Power Corp

V. COMPLIANCE REQUIREMENTS
A. Registration with the BIR
Sec. 236, NIRC, as amended by Rep. Act No. 9337
"SEC. 236. Registration Requirements. -
"(A) Requirements. - Every person subject to any internal revenue tax shall register once with the
appropriate Revenue District Officer:
"(1) Within ten (10) days from date of employment, or
"(2) On or before the commencement of business, or
"(3) Before payment of any tax due, or
"(4) Upon filing of a return, statement or declaration as required in this Code.
"The registration shall contain the taxpayer's name, style, place of residence, business, and such
other information as may be required by the Commissioner in the form prescribed therefor.
"A person maintaining a head office, branch or facility shall register with the Revenue District
Officer having jurisdiction over the head office, branch or facility. For purposes of this Section, the
term 'facility' may include but not be limited to sales outlets, places of production, warehouses or
storage places.
"(B) Annual Registration Fee. - An annual registration fee in the amount of Five hundred pesos
(P500) for every separate or distinct establishment or place of business, including facility types
where sales transactions occur, shall be paid upon registration and every year thereafter on or
before the last day of January: Provided, however, That cooperatives, individuals earning purely
compensation income, whether locally or abroad, and overseas workers are not liable to the
registration fee herein imposed.
"The registration fee shall be paid to an authorized agent bank located within the revenue district,
or to the Revenue Collection Officer, or duly authorized Treasurer of the city or municipality where

each place of business or branch is registered.
"(C) Registration of Each Type of Internal Revenue Tax. - Every person who is required to register
with the Bureau of Internal Revenue under Subsection (A) hereof, shall register each type of
internal revenue tax for which he is obligated, shall file a return and shall pay such taxes, and shall
update such registration of any changes in accordance with Subsection (E) hereof.,
"(D) Transfer of Registration. - In case a registered person decides to transfer his place of business
or his head office or branches, it shall be his duty to update his registration status by filing an
application for registration information update in the form prescribed therefor.
"(E) Other Updates. - Any person registered in accordance with this Section shall, whenever
applicable, update his registration information with the Revenue District Office where he is
registered, specifying therein any change in tax type and other taxpayer details.
"(F) Cancellation of Registration. -
"(1) General Rule. - The registration of any person who ceases to be liable to a tax type shall
be cancelled upon filing with the Revenue District Office where he is registered, an
application for registration information update in a form prescribed therefor;
"(2) Cancellation of Value-Added Tax Registration. - A VAT-registered person may cancel his
registration for VAT if:
"(a) He makes written application and can demonstrate to the Commissioner's satisfaction
that his gross sales or receipts for the following twelve (12) months, other than those that
are exempt under Section 109 (A) TO (U), will not exceed One million five hundred
thousand pesos (P1,500,000); or
"(b) He has ceased to carry on his trade or business, and does not expect to recommence any
trade or business within the next twelve (12) months.
"The cancellation of registration will be effective from the first day of the following month.
"(G) Persons Required to Register for Value-added Tax. -
"(1) Any person who, in the course of trade or business, sells, barters or exchanges goods or
properties, or engages in the sale or exchange of services, shall be liable to register for
Value-added tax if:
"(a) His gross sales or receipts for the past twelve (12) months, other than those that are
exempt under section 109 (a) to (u), have exceeded One million five hundred thousand
pesos (P1,500,000); or
"(b) There are reasonable grounds to believe that his gross sales or receipts for the next
twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will
exceed one million five hundred thousand pesos (P1,500,000).
"(2) Every person who becomes liable to be registered under paragraph (1) of this
Subsection shall register with the Revenue District Office which has jurisdiction over the
head office or branch of that person, and shall pay the annual registration fee prescribed in
Subsection (B) hereof. If he fails to register, he shall be liable to pay the tax under Title IV as
if he were a VAT-registered person, but without the benefit of input tax credits for the
period in which he was not properly registered.
"(H) Optional Registration for Value-added Tax of Exempt Person. -
(1) Any person who is not required to register for Value-added tax under Subsection (G)
hereof may elect to register for Value-added tax by registering with the Revenue District
Office that has jurisdiction over the head office of that person, and paying the annual
registration fee in Subsection (B) hereof.
(2) Any person who elects to register under this Subsection shall not be entitled to cancel
his registration under Subsection (F)(2) for the next three (3) years.
"For purposes of Title IV of this Code, any person who has registered value-added tax as a tax type
in accordance with the provisions of Subsection (C) hereof shall be referred to as a "VAT-registered
person" who shall be assigned only one Taxpayer Identification Number (TIN).
"(I) Supplying of Taxpayer Identification Number (TIN). - Any person required under the authority of
this Code to make, render or file a return, statement or other document shall be supplied with or

assigned a Taxpayer Identification Number (TIN) which he shall indicate in such return, statement
or document filed with the Bureau of Internal Revenue for his proper identification for tax
purposes, and which he shall indicate in certain documents, such as, but not limited to, the
following:
"(1) Sugar quedans, refined sugac release order or similar instruments;
"(2) Domestic bills of lading;
"(3) Documents to be registered with the Register of Deeds or Assessor's Office;
"(4) Registration certificate of transportation equipment by land, sea or air;
"(5) Documents to be registered with the Securities and Exchange Commission;
"(6) Building construction permits;
"(7) Application for loan with banks, financial institutions, or other financial intermedieries;
"(8) Application for mayor's permit;
"(9) Application for business license with the Department of Trade and Industry; and
"(10) Such other documents which may hereafter be required under rules and regulations
to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.
"In cases where a registered taxpayer dies, the administrator or executor shall register the estate of
the decedent in accordance with Subsection (A) hereof and a new Taxpayer Identification Number
(TIN) shall be supplied in accordance with the provisions of this Section.
"In the case of a nonresident decedent, the executor or administrator of the estate shall register the
estate with the Revenue District Office where he is registered: Provided, however; That in case such
executor or administrator is not registered, registration of the estate shall be made with and the
Taxpayer Identification Number (TIN) supplied by the Revenue District Office having jurisdiction
over his legal residence.
"Only one Taxpayer Identification Number (TIN) shall be assigned to a taxpayer. Any person who
shall secure more than one Taxpayer Identification Number shall be criminally liable under the
provisions of Section 275 on 'Violation of Other Provisions of this Code or Regulations in General.'"

1. Mandatory VAT Registration
Sec. 236(G), NIRC, as amended by Rep. Act No. 9337
Sec 236. Registration Requirements:
Xxx
(G) Persons Required to Register for Value-added Tax. -
"(1) Any person who, in the course of trade or business, sells, barters or exchanges goods or
properties, or engages in the sale or exchange of services, shall be liable to register for Value-
added tax if:
"(a) His gross sales or receipts for the past twelve (12) months, other than those that
are exempt under section 109 (a) to (u), have exceeded One million five hundred
thousand pesos (P1,500,000); or
"(b) There are reasonable grounds to believe that his gross sales or receipts for the next
twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will
exceed one million five hundred thousand pesos (P1,500,000).
"(2) Every person who becomes liable to be registered under paragraph (1) of this Subsection
shall register with the Revenue District Office which has jurisdiction over the head office or
branch of that person, and shall pay the annual registration fee prescribed in Subsection (B)
hereof. If he fails to register, he shall be liable to pay the tax under Title IV as if he were a
VAT-registered person, but without the benefit of input tax credits for the period in which he
was not properly registered.

Sec. Sec. 9.236-1(b), Rev. Regs. No. 16-2005, Sept. 1, 2005

2. Optional VAT Registration
Sec. 236(H), NIRC, as amended by Rep. Act No. 9337

(H) Optional Registration for Value-added Tax of Exempt Person.
(1) Any person who is not required to register for Value-added tax under Subsection (G)
hereof may elect to register for Value-added tax by registering with the Revenue District
Office that has jurisdiction over the head office of that person, and paying the annual
registration fee in Subsection (B) hereof.
(2) Any person who elects to register under this Subsection shall not be entitled to cancel
his registration under Subsection (F)(2) for the next three (3) years.
"For purposes of Title IV of this Code, any person who has registered value-added tax as a
tax type in accordance with the provisions of Subsection (C) hereof shall be referred to as a
"VAT-registered person" who shall be assigned only one Taxpayer Identification Number
(TIN).

Sec. Sec. 9.236-1(c), Rev. Regs. No. 16-2005, Sept. 1, 2005

3. Consequence of Failure to Register as a VAT Person
Sec. 236(G)(2), NIRC, as amended by Rep. Act No. 9337
"(2) Every person who becomes liable to be registered under paragraph (1) of this Subsection shall
register with the Revenue District Office which has jurisdiction over the head office or branch of
that person, and shall pay the annual registration fee prescribed in Subsection (B) hereof. If he fails
to register, he shall be liable to pay the tax under Title IV as if he were a VAT-registered person, but
without the benefit of input tax credits for the period in which he was not properly registered.
4. Cancellation of VAT Registration
Sec. 236(F), NIRC, as amended by Rep. Act No. 9337
(F) Cancellation of Registration. -
"(1) General Rule. - The registration of any person who ceases to be liable to a tax type shall
be cancelled upon filing with the Revenue District Office where he is registered, an
application for registration information update in a form prescribed therefor;
"(2) Cancellation of Value-Added Tax Registration. - A VAT-registered person may cancel his
registration for VAT if:
"(a) He makes written application and can demonstrate to the Commissioner's
satisfaction that his gross sales or receipts for the following twelve (12) months, other
than those that are exempt under Section 109 (A) TO (U), will not exceed One million
five hundred thousand pesos (P1,500,000); or
"(b) He has ceased to carry on his trade or business, and does not expect to
recommence any trade or business within the next twelve (12) months.
"The cancellation of registration will be effective from the first day of the following
month.

Sec. Sec. 9.236-6, Rev. Regs. No. 16-2005, Sept. 1, 2005

B. Record Keeping Requirements
Sec. 113(C), NIRC, as amended by Rep. Act No. 9337
Sec 113. Invoicing and Accounting Requirements for VAT Registered Persons
Xxx
(C) Accounting Requirements. - Notwithstanding the provisions of Section 233, all persons subject to
the value-added tax under Sections 106 and 108 shall, in addition to the regular accounting records
required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily
sales and purchases are recorded. The subsidiary journals shall contain such information as may be
required by the Secretary of Finance.

Sec. Sec. 4.113-3, Rev. Regs. No. 16-2005, Sept. 1, 2005


C. Invoices and Receipts
SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. -
"(A) Invoicing Requirements. - A VAT-registered person shall issue:
"(1) A VAT invoice for every sale, barter or exchange of goods or properties; and
"(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or
exchange of services.
"(B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information
shall be indicated in the VAT invoice or VAT official receipt:
"(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification
number (TIN);
"(2) The total amount which the purchaser pays or is obligated to pay to the seller with the
indication that such amount includes the value-added tax: Provided, That:
"(a) The amount of the tax shall be shown as a separate item in the invoice or receipt;
"(b) If the sale is exempt from value-added tax, the term "VAT-exempt sale" shall be written or
printed prominently on the invoice or receipt;
"(c) If the sale is subject to zero percent (0%) value-added tax, the term "zero-rated sale" shall be
written or printed prominently on the invoice or receipt;
"(d) If the sale involves goods, properties or services some of which are subject to and some of
which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the
breakdown of the sale price between its taxable, exempt and zero-rated components, and the
calculation of the value-added tax on each portion of the sale shall be shown on the invoice or
receipt: "Provided, That the seller may issue separate invoices or receipts for the taxable, exempt,
and zero-rated components of the sale.
"(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature
of the service; and
"(4) In the case of sales in the amount of one thousand pesos (P1,000) or more where the sale or
transfer is made to a VAT-registered person, the name, business style, if any, address and taxpayer
identification number (TIN) of the purchaser, customer or client.
"(C) Accounting Requirements. - Notwithstanding the provisions of Section 233, all persons subject
to the value-added tax under Sections 106 and 108 shall, in addition to the regular accounting
records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the
daily sales and purchases are recorded. The subsidiary journals shall contain such information as
may be required by the Secretary of Finance.
"(D) Consequence of Issuing Erroneous Vat Invoice or Vat Official Receipt. -
"(1) If a person who is not a VAT-registered person issues an invoice or receipt showing his
Taxpayer Identification Number (TIN), followed by the word "VAT":
"(a) The issuer shall, in addition to any liability to other percentage taxes, be liable to:
"(i) The tax imposed in Section 106 or 108 without the benefit of any input tax credit; and
"(ii) A 50% surcharge under Section 248 (B) of this code;
"(b) The VAT shall, if the other requisite information required under Subsection (B) hereof is shown
on the invoice or receipt, be recognized as an input tax credit to the purchaser under Section 110 of
this Code.
"(2) If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt
transaction, but fails to display prominently on the invoice or receipt the term "VAT-exempt Sale",
the issuer shall be liable to account for the tax imposed in Section 106 or 108 as if Section 109 did
not apply.
"(E) Transitional Period. - Notwithstanding Subsection (B) hereof, taxpayers may continue to issue
VAT invoices and VAT official receipts for the period July 1, 2005 to December 31, 2005, in
accordance with Bureau of Internal Revenue administrative practices that existed as of December
31, 2004."


1. General Requirements
Sec. 113(A) and (B), NIRC, as amended by Rep. Act No. 9337
"(A) Invoicing Requirements. - A VAT-registered person shall issue:
"(1) A VAT invoice for every sale, barter or exchange of goods or properties; and
"(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or
exchange of services.

"(B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information
shall be indicated in the VAT invoice or VAT official receipt:
"(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification
number (TIN);
"(2) The total amount which the purchaser pays or is obligated to pay to the seller with the
indication that such amount includes the value-added tax: Provided, That:
"(a) The amount of the tax shall be shown as a separate item in the invoice or receipt;
"(b) If the sale is exempt from value-added tax, the term "VAT-exempt sale" shall be written or
printed prominently on the invoice or receipt;
"(c) If the sale is subject to zero percent (0%) value-added tax, the term "zero-rated sale" shall be
written or printed prominently on the invoice or receipt;
"(d) If the sale involves goods, properties or services some of which are subject to and some of
which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the
breakdown of the sale price between its taxable, exempt and zero-rated components, and the
calculation of the value-added tax on each portion of the sale shall be shown on the invoice or
receipt: "Provided, That the seller may issue separate invoices or receipts for the taxable, exempt,
and zero-rated components of the sale.
"(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature
of the service; and
"(4) In the case of sales in the amount of one thousand pesos (P1,000) or more where the sale or
transfer is made to a VAT-registered person, the name, business style, if any, address and taxpayer
identification number (TIN) of the purchaser, customer or client.

Sec. Sec. 4.113-1(A) and (B), Rev. Regs. No. 16-2005, Sept. 1, 2005

2. Invoicing and Recording of Deemed Sale Transactions

3. Consequences of Erroneous Issuance of VAT Invoice or O/R
Sec. 113(D), NIRC, as amended by Rep. Act No. 9337
(D) Consequence of Issuing Erroneous Vat Invoice or Vat Official Receipt. -
"(1) If a person who is not a VAT-registered person issues an invoice or receipt showing his
Taxpayer Identification Number (TIN), followed by the word "VAT":
"(a) The issuer shall, in addition to any liability to other percentage taxes, be liable to:
"(i) The tax imposed in Section 106 or 108 without the benefit of any input tax credit; and
"(ii) A 50% surcharge under Section 248 (B) of this code;
"(b) The VAT shall, if the other requisite information required under Subsection (B) hereof is shown
on the invoice or receipt, be recognized as an input tax credit to the purchaser under Section 110 of
this Code.
"(2) If a VAT-registered person issues a VAT invoice or VAT official receipt for a VAT-exempt
transaction, but fails to display prominently on the invoice or receipt the term "VAT-exempt Sale",
the issuer shall be liable to account for the tax imposed in Section 106 or 108 as if Section 109 did
not apply.



D. Creditable Withholding Tax
Sec. 4.114-2(b), Rev. Regs. No. 16-2005, Sept. 1, 2005

VI. FILING OF RETURN AND PAYMENT OF TAX
Section 114. Return and Payment of Value-Added Tax. -
(A) In General. - Every person liable to pay the value-added tax imposed under this Title shall file a
quarterly return of the amount of his gross sales or receipts within twenty-five (25) days following
the close of each taxable quarter prescribed for each taxpayer: Provided, however, That VAT-
registered persons shall pay the value-added tax on a monthly basis.
Any person, whose registration has been cancelled in accordance with Section 236, shall file a
return and pay the tax due thereon within twenty-five (25) days from the date of cancellation of
registration: Provided, That only one consolidated return shall be filed by the taxpayer for his
principal place of business or head office and all branches.
(B) Where to File the Return and Pay the Tax. - Except as the Commissioner otherwise permits, the
return shall be filed with and the tax paid to an authorized agent bank, Revenue Collection Officer
or duly authorized city or municipal Treasurer in the Philippines located within the revenue district
where the taxpayer is registered or required to register.
(C) Withholding of Creditable Value-added Tax. - The Government or any of its political subdivisions,
instrumentalities or agencies, including government-owned or -controlled corporations (GOCCs)
shall, before making payment on account of each purchase of goods from sellers and services
rendered by contractors which are subject to the value-added tax imposed in Sections 106 and 108
of this Code, deduct and withhold the value-added tax due at the rate of three percent (3%) of the
gross payment for the purchase of goods and six percent (6%) on gross receipts for services
rendered by contractors on every sale or installment payment which shall be creditable against the
value-added tax liability of the seller or contractor: Provided, however, That in the case of
government public works contractors, the withholding rate shall be eight and one-half percent
(8.5%): Provided, further, That the payment for lease or use of properties or property rights to
nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment.
For this purpose, the payor or person in control of the payment shall be considered as the
withholding agent.
The value-added tax withheld under this Section shall be remitted within ten (10) days following
the end of the month the withholding was made.

Sec. Sec. 4.114-1(A), Rev. Regs. No. 16-2005, Sept. 1, 2005

LOCAL TAXATION
I. GENERAL PRINCIPLES
A. Local Autonomy
Sec. 129, Local Government Code of 1991 (LGC)
Section 129. Power to Create Sources of Revenue. - Each local government unit shall exercise its
power to create its own sources of revenue and to levy taxes, fees, and charges subject to the
provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local government units.

B. Fundamental Principles
Sec. 130, LGC
Section 130. Fundamental Principles. - The following fundamental principles shall govern the
exercise of the taxing and other revenue-raising powers of local government units:
(a) Taxation shall be uniform in each local government unit;

(b) Taxes, fees, charges and other impositions shall:
(1) be equitable and based as far as practicable on the taxpayer's ability to pay;
(2) be levied and collected only for public purposes;
(3) not be unjust, excessive, oppressive, or confiscatory;
(4) not be contrary to law, public policy, national economic policy, or in the restraint of
trade;
(c) The collection of local taxes, fees, charges and other impositions shall in no case be let to any
private person;
(d) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of,
and be subject to the disposition by, the local government unit levying the tax, fee, charge or other
imposition unless otherwise specifically provided herein; and,
(e) Each local government unit shall, as far as practicable, evolve a progressive system of taxation.

C. Common Limitations on Taxing Powers of LGUs
Sec. 133, LGC
Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:
(a) Income tax, except when levied on banks and other financial institutions;
(b) Documentary stamp tax;
(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as
otherwise provided herein;
(d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other
kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained
by the local government unit concerned;
(e) Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing
through, the territorial jurisdictions of local government units in the guise of charges for wharfage,
tolls for bridges or otherwise, or other taxes, fees, or charges in any form whatsoever upon such
goods or merchandise;
(f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or
fishermen;
(g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-
pioneer for a period of six (6) and four (4) years, respectively from the date of registration;
(h) Excise taxes on articles enumerated under the national Internal Revenue Code, as amended, and
taxes, fees or charges on petroleum products;
(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on
goods or services except as otherwise provided herein;
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water, except as
provided in this Code;
(k) Taxes on premiums paid by way or reinsurance or retrocession;
(l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of
licenses or permits for the driving thereof, except tricycles;
(m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise
provided herein;
(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives
duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight
(R.A. No. 6938) otherwise known as the "Cooperative Code of the Philippines" respectively; and
(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, and local government units.


II. SCOPE OF TAXING POWERS OF LGUS
A. Province
Secs. 135-141, LGC
Section 135. Tax on Transfer of Real Property Ownership.
(a) The province may impose a tax on the sale , donation, barter, or on any other mode of
transferring ownership or title of real property at the rate of not more than fifty percent (50%) of
the one percent (1%) of the total consideration involved in the acquisition of the property or of the
fair market value in case the monetary consideration involved in the transfer is not substantial,
whichever is higher. The sale, transfer or other disposition of real property pursuant to R.A. No.
6657 shall be exempt from this tax.
(b) For this purpose, the Register of Deeds of the province concerned shall, before registering any
deed, require the presentation of the evidence of payment of this tax. The provincial assessor shall
likewise make the same requirement before cancelling an old tax declaration and issuing a new one
in place thereof, Notaries public shall furnish the provincial treasurer with a copy of any deed
transferring ownership or title to any real property within thirty (30) days from the date of
notarization.
It shall be the duty of the seller, donor, transferor, executor or administrator to pay the tax herein
imposed within sixty (60) days from the date of the execution of the deed or from the date of the
decedent's death.

Section 136. Tax on Business of Printing and Publication. - The province may impose a tax on the
business of persons engaged in the printing and/or publication of books, cards, posters, leaflets,
handbills, certificates, receipts, pamphlets, and others of similar nature, at a rate not exceeding fifty
percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year.
In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent
(1%) of the capital investment. In the succeeding calendar year, regardless of when the business
started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or
any fraction thereof, as provided herein.
The receipts from the printing and/or publishing of books or other reading materials prescribed by
the Department of Education, Culture and Sports as school texts or references shall be exempt from
the tax herein imposed.

Section 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other special
law, the province may impose a tax on businesses enjoying a franchise, at the rate not exceeding
fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year
based on the incoming receipt, or realized, within its territorial jurisdiction.
any fraction thereon, as provided herein.

Section 138. Tax on Sand, Gravel and Other Quarry Resources. - The province may levy and collect
not more than ten percent (10%) of fair market value in the locality per cubic meter of ordinary
stones, sand, gravel, earth, and other quarry resources, as defined under the National Internal
Revenue Code, as amended, extracted from public lands or from the beds of seas, lakes, rivers,
streams, creeks, and other public waters within its territorial jurisdiction.
The permit to extract sand, gravel and other quarry resources shall be issued exclusively by the
provincial governor, pursuant to the ordinance of the sangguniang panlalawigan.
The proceeds of the tax on sand, gravel and other quarry resources shall be distributed as follows:
(1) Province - Thirty percent (30%);
(2) Component City or Municipality where the sand, gravel, and other quarry resources are
extracted - Thirty percent (30%); and

(3) Barangay where the sand, gravel, and other quarry resources are extracted - Forty percent
(40%).

Section 139. Professional Tax. -
(a) The province may levy an annual professional tax on each person engaged in the exercise or
practice of his profession requiring government examination at such amount and reasonable
classification as the sangguniang panlalawigan may determine but shall in no case exceed Three
hundred pesos (P300.00).
(b) Every person legally authorized to practice his profession shall pay the professional tax to the
province where he practices his profession or where he maintains his principal office in case he
practices his profession in several places: Provided, however, That such person who has paid the
corresponding professional tax shall be entitled to practice his profession in any part of the
Philippines without being subjected to any other national or local tax, license, or fee for the practice
of such profession.
(c) Any individual or corporation employing a person subject to professional tax shall require
payment by that person of the tax on his profession before employment and annually thereafter.
(d) The professional tax shall be payable annually, on or before the thirty-first (31st) day of
January. Any person first beginning to practice a profession after the month of January must,
however, pay the full tax before engaging therein. A line of profession does not become exempt
even if conducted with some other profession for which the tax has been paid. Professionals
exclusively employed in the government shall be exempt from the payment of this tax.
(e) Any person subject to the professional tax shall write in deeds, receipts, prescriptions, reports,
books of account, plans and designs, surveys and maps, as the case may be, the number of the
official receipt issued to him.

Section 140. Amusement Tax. -
(a) The province may levy an amusement tax to be collected from the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of
amusement at a rate of not more than thirty percent (30%) of the gross receipts from admission
fees.
(b) In the case of theaters or cinemas, the tax shall first be deducted and withheld by their
proprietors, lessees, or operators and paid to the provincial treasurer before the gross receipts are
divided between said proprietors, lessees, or operators and the distributors of the cinematographic
films.
(c) The holding of operas, concerts, dramas, recitals, painting and art exhibitions, flower shows,
musical programs, literary and oratorical presentations, except pop, rock, or similar concerts shall
be exempt from the payment of the tax hereon imposed.
(d) The sangguniang panlalawigan may prescribe the time, manner, terms and conditions for the
payment of tax. In case of fraud or failure to pay the tax, the sangguniang panlalawigan may impose
such surcharges, interest and penalties as it may deem appropriate.
(e) The proceeds from the amusement tax shall be shared equally by the province and the
municipality where such amusement places are located.

Section 141. Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or Producers,
Wholesalers of, Dealers, or Retailers in, Certain Products. -
(a) The province may levy an annual fixed tax for every truck, van or any vehicle used by
manufacturers, producers, wholesalers, dealers or retailers in the delivery or distribution of
distilled spirits, fermented liquors, soft drinks, cigars and cigarettes, and other products as may be
determined by the sangguniang panlalawigan, to sales outlets, or consumers, whether directly or
indirectly, within the province in an amount not exceeding Five hundred pesos (P500.00).
(b) The manufacturers, producers, wholesalers, dealers and retailers referred to in the immediately
foregoing paragraph shall be exempt from the tax on peddlers prescribed elsewhere in this Code.

B. Municipality
Secs 142-143, LGC
Section 142. Scope of Taxing Powers. - Except as otherwise provided in this Code, municipalities
may levy taxes, fees, and charges not otherwise levied by provinces.

C. City
Sec. 151, LGC
Section 151. Scope of Taxing Powers. - Except as otherwise provided in this Code, the city, may levy
the taxes, fees, and charges which the province or municipality may impose: Provided, however,
That the taxes, fees and charges levied and collected by highly urbanized and independent
component cities shall accrue to them and distributed in accordance with the provisions of this
Code.
The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or
municipality by not more than fifty percent (50%) except the rates of professional and amusement
taxes.

Art. 237, IRR
ARTICLE 237. Scope of Taxing and Other Revenue-Raising Powers of Cities. The city may:
(a) Levy and collect any of the taxes, fees, charges and other impositions that the province and the
municipality may impose. The rates of taxes that the city may levy may exceed the maximum rates
allowed for the province or municipality by not more than fifty percent (50%) except the rates of
professional and amusement taxes; and
(b) Levy and collect a percentage tax on any business not otherwise specified under paragraphs (a)
to (g), Article 233 of this Rule, at rates not exceeding three percent (3%) of the gross sales or
receipts of the preceding calendar year.

D. Barangay
Sec. 152, LGC
Section 152. Scope of Taxing Powers. - The barangays may levy taxes, fees, and charges, as provided
in this Article, which shall exclusively accrue to them:
(a) Taxes - On stores or retailers with fixed business establishments with gross sales of receipts of
the preceding calendar year of Fifty thousand pesos (P50,000.00) or less, in the case of cities and
Thirty thousand pesos (P30,000.00) or less, in the case of municipalities, at a rate not exceeding one
percent (1%) on such gross sales or receipts.
(b) Service Fees or Charges. - Barangays may collect reasonable fees or charges for services
rendered in connection with the regulations or the use of barangay-owned properties or service
facilities such as palay, copra, or tobacco dryers.
(c) Barangay Clearance. - No city or municipality may issue any license or permit for any business
or activity unless a clearance is first obtained from the barangay where such business or activity is
located or conducted. For such clearance, the sangguniang barangay may impose a reasonable fee.
The application for clearance shall be acted upon within seven (7) working days from the filing
thereof. In the event that the clearance is not issued within the said period, the city or municipality
may issue the said license or permit.
(d) Other fees and Charges. - The barangay may levy reasonable fees and charges:
(1) On commercial breeding of fighting cocks, cockfights and cockpits;
(2) On places of recreation which charge admission fees; and
(3) On billboards, signboards, neon signs, and outdoor advertisements.

III. COMMUNITY TAX CERTIFICATE (CTC)
A. Who are liable
Secs. 157-159, LGC

Section 157. Individuals Liable to Community Tax. - Every inhabitant of the Philippines eighteen
(18) years of age or over who has been regularly employed on a wage or salary basis for at least
thirty (30) consecutive working days during any calendar year, or who is engaged in business or
occupation, or who owns real property with an aggregate assessed value of One thousand pesos
(P1,000.00) or more, or who is required by law to file an income tax return shall pay an annual
additional tax of Five pesos (P5.00) and an annual additional tax of One peso (P1.00) for every One
thousand pesos (P1,000.00) of income regardless of whether from business, exercise of profession
or from property which in no case shall exceed Five thousand pesos (P5,000.00).
In the case of husband and wife, the additional tax herein imposed shall be based upon the total
property owned by them and the total gross receipts or earnings derived by them.

Section 158. Juridical Persons Liable to Community Tax. - Every corporation no matter how created
or organized, whether domestic or resident foreign, engaged in or doing business in the Philippines
shall pay an annual community tax of Five hundred pesos (P500.00) and an annual additional tax,
which, in no case, shall exceed Ten thousand pesos (P10,000.00) in accordance with the following
schedule:
(1) For every Five thousand pesos (P5,000.00) worth of real property in the Philippines owned by it
during the preceding year based on the valuation used for the payment of real property tax under
existing laws, found in the assessment rolls of the city or municipality where the real property is
situated - Two pesos (P2.00); and
(2) For every Five thousand pesos (P5,000.00) of gross receipts or earnings derived by it from its
business in the Philippines during the preceding year - Two pesos (P2.00).
The dividends received by a corporation from another corporation however shall, for the purpose
of the additional tax, be considered as part of the gross receipts or earnings of said corporation.

Section 159. Exemptions. - The following are exempt from the community tax:
(1) Diplomatic and consular representatives; and
(2) Transient visitors when their stay in the Philippines does not exceed three (3) months.

Art. 246, IRR
ARTICLE 246. Levy or Imposition. The levy or imposition of community tax by a city or
municipality
shall be governed by the following rules and guidelines: (a) Individuals liable to the payment of
community tax
(1) Every inhabitant of the Philippines eighteen (18) years of age or over who has been regularly
employed on a wage or salary basis for at least thirty (30) consecutive working days during any
calendar years;
(2) An individual who is engaged in business or occupation;
(3) An individual who owns real property with an aggregate assessed value of One Thousand Pesos
(P1,000.00) or more;
(4) An individual who is required by law to file an income tax return. (b) Rate of community tax
payable by individuals
(1) The rate of community tax that may be levied and collected from said individuals shall be Five
Pesos (P5.00) plus an additional tax of One Peso (P1.00) for every One Thousand Pesos (P1,000.00)
of income regardless of whether from business, exercise of profession, or from property but which
in no case shall exceed Five Thousand Pesos (P5,000.00).
(2) In case of husband and wife, each of them shall be liable to pay the basic tax of Five Pesos
(P5.00), but the additional tax imposable on the husband and wife shall be One Peso (P1.00) for
every One Thousand Pesos (P1,000.00) of income from the total property owned by them and/or
the total gross receipts or earnings derived by them.
(c) Juridical persons liable to the payment of community tax Every corporation, no matter how
created or organized, whether domestic or resident foreign, engaged in or doing business in the

Philippines shall pay community tax of Five Hundred Pesos (P500.00) and an additional tax, which,
in no case, shall exceed Ten Thousand Pesos (P10,000.00) in accordance with the following
schedule:
(1) For every Five Thousand Pesos (P5,000.00) worth of real property in the Philippines owned by
the juridical entity during the preceding year, based on the assessed value used for the payment of
the real property tax under existing laws Two pesos (P2.00); and
(2) For every Five Thousand Pesos (P5,000.00) of gross receipts or earnings derived from the
business in the Philippines during the preceding year Two pesos (P2.00).
The dividends received by a corporation from another corporation shall, for the purpose of the
additional tax, be considered as part of the gross receipts or earnings of said corporation.
(d) Exemptions The following are exempt from the payment of community tax:
(e) Place of Payment
(1) Community tax shall be paid in the city or municipality where the residence of the individual is
located, or in the city or municipality where the principal office of the juridical entity is located.
(2) It shall be unlawful for any city or municipal treasurer to collect community tax outside the
territorial jurisdiction of the city or the municipality.
(3) In case of branch, sales office or warehouse where sales are made and recorded, corresponding
community tax shall be paid to the LGU where such branch, sales office or warehouse is located.
(4) Any person, natural or juridical, who pays community tax to a city or municipality other than
the city or municipality where his residence, or principal office in the case of juridical persons, is
located shall remain liable to pay such tax to the city or municipality concerned.
(f) Time for Payment
(1) Community tax shall accrue on the first (1st) day of January of each year and shall be paid not
later than the last day of February of each year.
(2) If a person reaches the age of eighteen (18) years or otherwise loses the benefit of exemption on
or before the last day of June, he shall be liable for the payment of community tax on the day he
reaches such age or upon the day the exemption on or before the last day of March, he shall have
twenty (20) days within which to pay the community tax without becoming delinquent.
(3) Persons who come to reside in the Philippines or reach the age of eighteen (18) years on or
after the first (1st) day of July of any year, or who cease to belong to an exempt class on or after the
same date, shall not be subject to community tax for that year.
(4) Corporations established and organized on or before the last day of June shall be liable for the
payment of community tax for that year. Corporations established and organized on or before the
last day of March shall have twenty (20) days within which to pay the community tax without
becoming delinquent. Corporations established and organized on or after the first day of July shall
not be subject to community tax for that year.
(g) Penalties for the payment If the tax is not paid within the prescribed period, there shall be
added to the unpaid amount an interest of twenty-four percent (24%) per annum from the due date
until it is paid.

B. Exemptions
Sec. 159, LGC

C. Place and time of payment of tax
Secs. 160-161, LGC
Section 160. Place of Payment. - The community tax shall be paid in the place of residence of the
individual, or in the place where the principal office of the juridical entity is located.

Section 161. Time for Payment; Penalties for Delinquency. -
(a) The community tax shall accrue on the first (1st) day of January of each year which shall be paid
not later than the last day of February of each year. If a person reaches the age of eighteen (18)
years or otherwise loses the benefit of exemption on or before the last day of June, he shall be liable
for the community tax on the day he reaches such age or upon the day the exemption ends.
However, if a person reaches the age of eighteen (18) years or loses the benefit of exemption on or
before the last day of March, he shall have twenty (20) days to pay the community tax without
becoming delinquent.
Persons who come to reside in the Philippines or reach the age of eighteen (18) years on or after
the first (1st) day of July of any year, or who cease to belong to an exempt class or after the same
date, shall not be subject to the community tax for that year.
(b) Corporations established and organized on or before the last day of June shall be liable for the
community tax for that year. But corporations established and organized on or before the last day
of March shall have twenty (20) days within which to pay the community tax without becoming
delinquent. Corporations established and organized on or after the first day of July shall not be
subject to the community tax for that year.
If the tax is not paid within the time prescribed above, there shall be added to the unpaid amount an
interest of twenty-four percent (24%) per annum from the due date until it is paid.

IV. TIME, MANNER AND PLACE OF PAYMENT OF LOCAL BUSINESS TAX
A. Time of payment
1. General rule
Secs. 165-167, LGC
Section 165. Tax Period and Manner of Payment. - Unless otherwise provided in this Code, the tax
period of all local taxes, fees and charges shall be the calendar year. Such taxes, fees and charges
may be paid in quarterly installments.

Section 166. Accrual of Tax. - Unless otherwise provided in this Code, all local taxes, fees, and
charges shall accrue on the first (1st) day of January of each year. However, new taxes, fees or
charges, or changes in the rates thereof, shall accrue on the first (1st) day of the quarter next
following the effectivity of the ordinance imposing such new levies or rates.

Section 167. Time of Payment. - Unless otherwise provided in this Code, all local taxes, fees, and
charges shall be paid within the first twenty (20) days of January or of each subsequent quarter, as
the case may be. The sanggunian concerned may, for a justifiable reason or cause, extend the time
for payment of such taxes, fees, or charges without surcharges or penalties, but only for a period
not exceeding six (6) months.

2. In case of new ordinance levying new tax or increasing rates
Sec. 166, LGC

3. In case of retirement of business
Sec. 145, LGC
Section 145. Retirement of Business. - A business subject to tax pursuant to the preceding sections
shall, upon termination thereof, submit a sworn statement of its gross sales or receipts for the
current year. If the tax paid during the year be less than the tax due on said gross sales or receipts
of the current year, the difference shall be paid before the business is considered officially retired.

Art. 241, IRR
ARTICLE 241. Retirement of Business. (a) Any person natural or juridical, subject to the tax on
businesses under Article 233 of this Rule shall, upon termination of the business, submit a sworn
statement of the gross sales or receipts for the calendar year.
For purposes hereof, termination shall mean that business operations are stopped completely. Any
change in ownership, management and/or name of the business shall not constitute termination as
contemplated in this Article. Unless stated otherwise, assumption of the business by any new owner
or manager or registration of the same business under a new name will only be considered by the
LGU concerned for record purposes in the course of the renewal of the permit or license to operate
the business.
The local treasurer concerned shall see to it that the payment of taxes of a business is not avoided
by simulating the termination or retirement thereof. For this purpose, the following procedural
guidelines shall be strictly observed:
(1) The local treasurer shall assign every application for the termination or retirement of business
to an inspector in his office who shall go to the address of the business on record to verify if it is
really no longer operating. If the inspector finds that the business is simply placed under a new
name, manager and/or new owner, the local treasurer shall recommend to the mayor the
disapproval of the application for the
termination or retirement of said business. Accordingly, the business continues to become liable for
the payment of all taxes, fees, and charges imposed thereon under existing local tax ordinances; and
(2) In the case of a new owner to whom the business was transferred by sale or other form of
conveyance, said new owner shall be liable to pay the tax or fee for the transfer of the business to
him if there is an existing ordinance prescribing such transfer tax.
(b) If it is found that the retirement or termination of the business is legitimate, and the tax due
therefrom be less than the tax due for the current year based on the gross sales or receipts, the
difference in the amount of the tax shall be paid before the business is considered officially retired
or terminated.
(c) The permit issued to a business retiring or terminating its operations shall be surrendered to
the local treasurer who shall forthwith cancel the same and record such cancellation in his books.

B. Manner of payment
Sec. 146, LGC
Section 146. Payment of Business Taxes. -
(a) The taxes imposed under Section 143 shall be payable for every separate or distinct
establishment or place where business subject to the tax is conducted and one line of business does
not become exempt by being conducted with some other business for which such tax has been paid.
The tax on a business must be paid by the person conducting the same.
(b) In cases where a person conducts or operates two (2) or more of the businesses mentioned in
Section 143 of this Code which are subject to the same rate of tax, the tax shall be computed on the
combined total gross sales or receipts of the said two (2) or more related businesses.
(c) In cases where a person conducts or operates two (2) or more businesses mentioned in Section
143 of this Code which are subject to different rates of tax, the gross sales or receipts of each
business shall be separately reported for the purpose of computing the tax due from each business.

Art. 242, IRR
C. Place of payment
1. Location of branch or sales outlet
Sec. 150(a), LGC
Section 150. Situs of the Tax. -
(a) For purposes of collection of the taxes under Section 143 of this Code, manufacturers,
assemblers, repackers, brewers, distillers, rectifiers and compounders of liquor, distilled spirits and

wines, millers, producers, exporters, wholesalers, distributors, dealers, contractors, banks and
other financial institutions, and other businesses, maintaining or operating branch or sales outlet
elsewhere shall record the sale in the branch or sales outlet making the sale or transaction, and the
tax thereon shall accrue and shall be paid to the municipality where such branch or sales outlet is
located. In cases where there is no such branch or sales outlet in the city or municipality where the
sale or transaction is made, the sale shall be duly recorded in the principal office and the taxes due
shall accrue and shall be paid to such city or municipality.

Art. 243, IRR
ARTICLE 243. Situs of the Tax. (a) Definition of Terms
(1) Principal Office the head or main office of the business appearing in the pertinent documents
submitted to the Securities and Exchange Commission, or the Department of Trade and Industry, or
other appropriate agencies, as the case may be.
The city or municipality specifically mentioned in the articles of incorporation of official
registration papers as being the official address of said principal office shall be considered as the
situs thereof.
In case there is a transfer or relocation of the principal office to another city or municipality, it shall
be the duty of the owner, operator or manager of the business to give due notice of such transfer or
relocation to the local chief executives of the cities or municipalities concerned within fifteen (15)
days after such transfer or relocation is effected.
(2) Branch or Sales Office a fixed place in a locality which conducts operations of the business as
an extension of the principal office. Offices used only as display areas of the products where no
stocks or items are stored for sale, although orders for the products may be received thereat, are
not branch or sales offices as herein contemplated. A warehouse which accepts orders and/or
issues sales invoices independent of a branch with sales office shall be considered as a sales office.
(3) Warehouse a building utilized for the storage of products for sale and from which goods or
merchandise are withdrawn for delivery to customers or dealers, or by persons acting in behalf of
the business. A warehouse that does not accept orders and/or issue sales invoices as
aforementioned shall not be considered a branch or sales office.
(4) Plantation a tract of agricultural land planted to trees or seedlings whether fruit bearing or
not, uniformly spaced or seeded by broadcast methods or normally arranged to allow highest
production. For purposes of this Article, inland fishing ground shall be considered as plantation.
(5) Experimental Farms agricultural land utilized by a business or corporation to conduct
studies, tests, researches or experiments involving agricultural, agribusiness, marine, or aquatic,
livestock, poultry, dairy
and other similar products for the purpose of improving the quality and quantity of goods or
products.
On-site sales of commercial quantity made in experimental farms shall be similarly imposed the
corresponding tax under Article 233 and allocated in paragraph (b) of this Article.
(b) Sales Allocation
(1) All sales made in a locality where there is a branch or sales office or warehouse shall be
recorded in said branch or sales office or warehouse and the tax shall be payable to the city or
municipality where the same is located.
(2) In cases where there is no such branch, sales office, or warehouse in the locality where the sale
is made, the sale shall be recorded in the principal office along with the sales made by said principal
office and the tax shall accrue to the city or municipality where said principal office is located.
(3) In cases where there is a factory, project office, plant or plantation in pursuit of business, thirty
percent (30%) of all sales recorded in the principal office shall be taxable by the city or municipality
where the principal office is located and seventy percent (70%) of all sales recorded in the principal
office shall be taxable by the city or municipality where the factory, project office, plant or
plantation is located. LGUs where only experimental farms are located shall not entitled to the sales
allocation provided in this subparagraph.

(4) In case of a plantation located in a locality other than that where the factory is located, the
seventy percent (70%) sales allocation shall be divided as follows:
(i) Sixty percent (60%) to the city or municipality where the factory is located; and (ii) Forty
percent (40%) to the city or municipality where the plantation is located.
(5) In cases where there are two (2) or more factories, project offices, plants or plantations located
in different localities, the seventy percent (70%) sales allocation shall be prorated among the
localities where such factories, project offices, plants, and plantations are located in proportion to
their respective volumes of production during the period for which the tax is due. In the case of
project offices of service and other independent contractors, the term production shall refer to the
cost of projects actually undertaken during the tax period.
(6) The sales allocation in paragraph (b) hereof shall be applied irrespective of whether or not sales
are made in the locality where the factory, project office, plant or plantation is located. In case of
sales made by the factory, project office, plant or plantation, the sale shall be covered by
subparagraphs (1) or (2) above.
(7) In case of manufacturers or producers which engage the services of an independent contractor
to produce or manufacture some of their products, these rules on situs of taxation shall apply
except that the factory or plant and warehouse of the contractor utilized for the production and
storage of the manufacturers' products shall be considered as the factory or plant and warehouse of
the manufacturer.
(c) Port of Loading The city or municipality where the port of loading is located shall not levy
and collect the tax imposable in Article 233 of this Rule unless the exporter maintains in said city or
municipality its principal office, a branch, sales office or warehouse, factory, plant, or plantation in
which case, the rule on the matter shall apply accordingly.
(d) Sales made by route trucks, vans, or vehicles
(1) For route sales made in a locality where a manufacturer, producer, wholesaler, retailer or dealer
has a branch or sales office or warehouse, the sale are recorded in the branch, sales office or
warehouse and the tax due thereon is paid to the LGU where such branch, sales office or warehouse
is located.
has no branch, sales office or warehouse the sales are recorded in the branch, sales office or
warehouse from where the route trucks withdraw their products for sale, and the tax due on such
sales is paid to the LGU where such branch, sales office or warehouse is located.
(3) Based on subparagraphs (1) and (2) above, LGUs where route trucks deliver merchandise
cannot impose any tax on said trucks except the annual fixed tax authorized to be imposed by the
province in Article 231 of this Rule on every delivery truck or van or any motor vehicle used by
manufacturers, producers, wholesalers, dealers, or retailers, in the delivery or distribution of
determined by the sangguniang panlalawigan, and by the city, pursuant to Article 223 of this Rule.
(4) In addition to this annual fixed tax, cities may also collect from same manufacturers, producers,
wholesalers, retailers, and dealers using route trucks a mayor's permit fee which shall be imposed
in a local tax ordinance pursuant to Article 234 in relation to Article 223 of this Rule.

2. Allocation to 2 or more LGUs
Sec. 150(b) to (e), LGC
(b) The following sales allocation shall apply to manufacturers, assemblers, contractors, producers,
and exporters with factories, project offices, plants, and plantations in the pursuit of their business:
(1) Thirty percent (30%) of all sales recorded in the principal office shall be taxable by the
city or municipality where the principal office is located; and
(2) Seventy percent (70%) of all sales recorded in the principal office shall be taxable by the
city or municipality where the factory, project office, plant, or plantation is located.
(c) In case of a plantation located at a place other than the place where the factory is located, said

seventy percent (70%) mentioned in subparagraph (b) of subsection (2) above shall be divided as
follows:
(1) Sixty percent (60%) to the city or municipality where the factory is located; and
(2) Forty percent (40%) to the city or municipality where the plantation is located.
(d) In cases where a manufacturer, assembler, producer, exporter or contractor has two (2) or
more factories, project offices, plants, or plantations located in different localities, the seventy
percent (70%) sales allocation mentioned in subparagraph (b) of subsection (2) above shall be
prorated among the localities where the factories, project offices, plants, and plantations are
located in proportion to their respective volumes of production during the period for which the tax
is due.
(e) The foregoing sales allocation shall be applied irrespective of whether or not sales are made in
the locality where the factory, project office, plant, or plantation is located.

Art. 243, IRR

situs thereof.
products.

the manufacturer.
is located.

3. Sales by route trucks or vans
Art. 243(d), IRR
ARTICLE 243. Situs of the Tax. (a) Definition of Terms (d) Sales made by route trucks, vans, or
vehicles

is located.

V. ENACTMENT OF TAX ORDINANCES AND OTHER REVENUE MEASURES
A. Public hearing
Sec. 186, last proviso, LGC
Section 186. Power To Levy Other Taxes, Fees or Charges. - Local government units may exercise the
power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated
herein or taxed under the proviions of the National Internal Revenue Code, as amended, or other
applicable laws: Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive,
confiscatory or contrary to declared national policy: Provided, further, That the ordinance
levying such taxes, fees or charges shall not be enacted without any prior public hearing
conducted for the purpose.

Sec. 187, LGC
Section 187. Procedure for Approval and Effectivity of Tax, Ordinances and Revenue Measures;
Mandatory Public Hearings. - The procedure for approval of local tax ordinances and revenue
measures shall be in accordance with the provisions of this Code: Provided, That public hearings
shall be conducted for the purpose prior to the enactment thereof: Provided, further, That any
question on the constitutionality or legality of tax ordinances or revenue measures may be raised
on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice who shall
render a decision within sixty (60) days from the date of receipt of the appeal: Provided, however,
That such appeal shall not have the effect of suspending the effectivity of the ordinance and the
accrual and payment of the tax, fee, or charge levied therein: Provided, finally, That within thirty
(30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of
Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of
competent jurisdiction.

Art. 275, IRR
ARTICLE 275. Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures.
The procedure for approval of local tax ordinances and revenue measures shall be in accordance
with the provisions of this Rule provided that public hearings shall be conducted for the purpose
prior to the enactment thereof provided further that any question on the constitutionality or
legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days
from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60)
days from the date of receipt of the appeal provided furthermore that such appeal shall not have the
effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or

charge levied therein and provided finally that within thirty (30) days after receipt of the decision
or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the
aggrieved party may file appropriate proceedings with a court of competent jurisdiction.
All tax ordinances or revenue measures shall be numbered consecutively throughout the calendar
year and continuously from year to year, using the last two (2) digits of the calendar year in which
it is enacted, followed by denominated number. For example, an ordinance is passed in January,
1992, and it is the first ordinance for that year. The ordinance shall be denominated and numbered
as Tax Ordinance No. 92-001. The next shall be Tax Ordinance No. 92-002, Tax Ordinance No. 92-
003, and so forth.

B. Publication
Sec. 188, LGC
Section 188. Publication of Tax Ordinances and Revenue Measures. - Within ten (10) days after their
approval, certified true copies of all provincial, city, and municipal tax ordinances or revenue
measures shall be published in full for three (3) consecutive days in a newspaper of local
circulation: Provided, however, That in provinces, cities and municipalities where there are no
newspapers of local circulation, the same may be posted in at least two (2) conspicuous and
publicly accessible places.

Art. 276, IRR
ARTICLE 276. Publication of Tax Ordinances and Revenue Measures. (a) Within ten (10) days
after
their approval, certified true copies of all provincial, city, and municipal tax ordinances or revenue
measures shall be published in full for three (3) consecutive days in a newspaper of local circulation
provided that in provinces, cities, and municipalities where there are no newspapers of local
circulation, the same may be posted in at least two (2) conspicuous and publicly accessible places.
If the tax ordinance or revenue measure contains penal provisions as authorized in Article 280 of
this Rule, the gist of such tax ordinance or revenue measure shall be published in a newspaper of
general circulation within the province where the sanggunian concerned belongs. In the absence of
any newspaper of general circulation within the province, posting of such ordinance or measure
shall be made in accessible and conspicuous public places in all municipalities and cities of the
province to which the sanggunian enacting the ordinance or revenue measure belongs.
In case the effectivity of any tax ordinance or revenue measure falls on any date other than the
beginning of the quarter, the same shall be considered as falling at the beginning of the next ensuing
quarter and the taxes, fees, or charges due shall begin to accrue therefrom.
(b) The conduct of public hearings shall be governed by the following procedure:
(1) Within ten (10) days from filing of any proposed tax ordinance or revenue measure, the same
shall first be published for three (3) consecutive days in a newspaper of local circulation or shall be
posted simultaneously in at least four (4) conspicuous public places within the territorial
jurisdiction of the LGU concerned.
(2) In addition to the requirement for publication or posting, the sanggunian concerned shall cause
the sending of written notices of the proposed ordinance, enclosing a copy thereof, to the interested
or affected parties operating or doing business within the territorial jurisdiction of the LGU
concerned.
(3) The notice or notices shall specify the date or dates and venue of the public hearing or hearing.
The initial public hearing shall be held not earlier than ten (10) days from the sending out of notice
or notices, or the last day of publication, or date of posting thereof, whichever is later.
(4) At the public hearing or hearings, all affected or interested parties shall be accorded an
opportunity to appear and present or express their views, comments and recommendations, and
such public hearing or hearings shall continue until all issues have been presented and fully
deliberated upon and/or consensus is obtained, whether for or against the enactment of the
proposed tax ordinance or revenue measure.

(5) The secretary of the sanggunian concerned shall prepare the minutes of such public hearing and
shall attach to the minutes the position papers, memoranda, and other documents submitted by
those who participated.
(c) No tax ordinance or revenue measure shall be enacted or approved in the absence of a public
hearing duly conducted in the manner provided in this Article.

C. Appeal to Secretary of Justice
Sec. 187, LGC

D. Appeal to court of competent jurisdiction
Id.

E. Effect of appeal
Id.

VI. REMEDIES OF LOCAL GOVERNMENT AND TAXPAYER
A. Remedies of local government
1. Examination of taxpayers books of accounts
Sec. 171, LGC
Section 171. Examination of Books of Accounts and Pertinent Records of Businessmen by Local
Treasurer. - The provincial, city, municipal or barangay treasurer may, by himself or through any of
his deputies duly authorized in writing, examine the books, accounts, and other pertinent records of
any person, partnership, corporation, or association subject to local taxes, fees and charges in order
to ascertain. assess, and collect the correct amount of the tax, fee, or charge. Such examination shall
be made during regular business hours, only once for every tax period, and shall be certified to by
the examining official. Such certificate shall be made of record in the books of accounts of the
taxpayer examined.
In case the examination herein authorized is made by a duly authorized deputy of the local
treasurer, the written authority of the deputy concerned shall specifically state the name, address,
and business of the taxpayer whose books, accounts, and pertinent records are to be examined, the
date and place of such examination and the procedure to be followed in conducting the same.
For this purpose, the records of the revenue district office of the Bureau of Internal Revenue shall
be made available to the local treasurer, his deputy or duly authorized representative.

2. Issuance of deficiency assessment
Sec. 195, LGC
Section 195. Protest of Assessment. - When the local treasurer or his duly authorized representative
finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment
stating the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and
penalties. Within sixty (60) days from the receipt of the notice of assessment, the taxpayer may file

a written protest with the local treasurer contesting the assessment; otherwise, the assessment
shall become final and executory. The local treasurer shall decide the protest within sixty (60) days
from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious,
he shall issue a notice cancelling wholly or partially the assessment. However, if the local treasurer
finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with
notice to the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the
protest or from the lapse of the sixty (60) day period prescribed herein within which to appeal with
the court of competent jurisdiction otherwise the assessment becomes conclusive and
unappealable.

Sec. 194, LGC
Section 194. Periods of Assessment and Collection. -
(a) Local taxes, fees, or charges shall be assessed within five (5) years from the date they became
due. No action for the collection of such taxes, fees, or charges, whether administrative or judicial,
shall be instituted after the expiration of such period: Provided, That. taxes, fees or charges which
have accrued before the effectivity of this Code may be assessed within a period of three (3) years
from the date they became due.
(b) In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may be
assessed within ten (10) years from discovery of the fraud or intent to evade payment.
(c) Local taxes, fees, or charges may be collected within five (5) years from the date of assessment
by administrative or judicial action. No such action shall be instituted after the expiration of said
period: Provided, however, That, taxes, fees or charges assessed before the effectivity of this Code
may be collected within a period of three (3) years from the date of assessment.
(d) The running of the periods of prescription provided in the preceding paragraphs shall be
suspended for the time during which:
(1) The treasurer is legally prevented from making the assessment of collection;
(2) The taxpayer requests for a reinvestigation and executes a waiver in writing before expiration
of the period within which to assess or collect; and
(3) The taxpayer is out of the country or otherwise cannot be located.

3. Imposition of surcharge and interest
Secs. 168-169, LGC
Section 168. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges. - The sanggunian may
impose a surcharge not exceeding twenty-five (25%) of the amount of taxes, fees or charges not
paid on time and an interest at the rate not exceeding two percent (2%) per month of the unpaid
taxes, fees or charges including surcharges, until such amount is fully paid but in no case shall the
total thirty-six (36%) months.

Section 169. Interests on Other Unpaid Revenues. - Where the amount of any other revenue due a
local government unit, except voluntary contributions or donations, is not paid on the date fixed in
the ordinance, or in the contract, expressed or implied, or upon the occurrence of the event which
has given rise to its collection, there shall be collected as part of that amount an interest thereon at
the rate not exceeding two percent (2%) per month from the date it is due until it is paid, but in no
case shall the total interest on the unpaid amount or a portion thereof exceed thirty-six (36)
months.

4. Summary remedies
a. Distraint of personal property
Sec. 175, LGC
Section 175. Distraint of Personal Property. - The remedy by distraint shall proceed as follows:
(a) Seizure - Upon failure of the person owing any local tax, fee, or charge to pay the same at the

time required, the local treasurer or his deputy may, upon written notice, seize or confiscate any
personal property belonging to that person or any personal property subject to the lien in sufficient
quantity to satisfy the tax, fee, or charge in question, together with any increment thereto incident
to delinquency and the expenses of seizure. In such case, the local treasurer or his deputy shall
issue a duly authenticated certificate based upon the records of his office showing the fact of
delinquency and the amounts of the tax, fee, or charge and penalty due. Such certificate shall serve
as sufficient warrant for the distraint of personal property aforementioned, subject to the
taxpayer's right to claim exemption under the provisions of existing laws. Distrained personal
property shall be sold at public auction in the manner hereon provided for.
(b) Accounting of distrained goods. - The officer executing the distraint shall make or cause to be
made an account of the goods, chattels or effects distrained, a copy of which signed by himself shall
be left either with the owner or person from whose possession the goods, chattels or effects are
taken, or at the dwelling or place or business of that person and with someone of suitable age and
discretion, to which list shall be added a statement of the sum demanded and a note of the time and
place of sale.
(c) Publication - The officer shall forthwith cause a notification to be exhibited in not less than three
(3) public and conspicuous places in the territory of the local government unit where the distraint
is made, specifying the time and place of sale, and the articles distrained. The time of sale shall not
be less than twenty (20) days after the notice to the owner or possessor of the property as above
specified and the publication or posting of the notice. One place for the posting of the notice shall be
at the office of the chief executive of the local government unit in which the property is distrained.
(d) Release of distrained property upon payment prior to sale - If at any time prior to the
consummation of the sale, all the proper charges are paid to the officer conducting the sale, the
goods or effects distrained shall be restored to the owner.
(e) Procedure of sale - At the time and place fixed in the notice, the officer conducting the sale shall
sell the goods or effects so distrained at public auction to the highest bidder for cash. Within five (5)
days after the sale, the local treasurer shall make a report of the proceedings in writing to the local
chief executive concerned.
Should the property distrained be not disposed of within one hundred and twenty (120) days from
the date of distraint, the same shall be considered as sold to the local government unit concerned
for the amount of the assessment made thereon by the Committee on Appraisal and to the extent of
the same amount, the tax delinquencies shall be cancelled.
Said Committee on Appraisal shall be composed of the city or municipal treasurer as chairman, with
a representative of the Commission on Audit and the city or municipal assessor as members.
(f) Disposition of proceeds - The proceeds of the sale shall be applied to satisfy the tax, including the
surcharges, interest, and other penalties incident to delinquency, and the expenses of the distraint
and sale. The balance over and above what is required to pay the entire claim shall be returned to
the owner of the property sold. The expenses chargeable upon the seizure and sale shall embrace
only the actual expenses of seizure and preservation of the property pending the sale, and no
charge shall be imposed for the services of the local officer or his deputy. Where the proceeds of the
sale are insufficient to satisfy the claim, other property may, in like manner, be distrained until the
full amount due, including all expenses, is collected.

b. Levy on real property
Secs. 176, 178-182, LGC
Section 176. Levy on Real Property. - After the expiration of the time required to pay the delinquent
tax, fee, or charge, real property may be levied on before, simultaneously, or after the distraint of
personal property belonging to the delinquent taxpayer. To this end, the provincial, city or
municipal treasurer, as the case may be, shall prepare a duly authenticated certificate showing the
name of the taxpayer and the amount of the tax, fee, or charge, and penalty due from him. Said
certificate shall operate with the force of a legal execution throughout the Philippines. Levy shall be
effected by writing upon said certificate the description of the property upon which levy is made. At

the same time, written notice of the levy shall be mailed to or served upon the assessor and the
Register of Deeds of the province or city where the property is located who shall annotate the levy
on the tax declaration and certificate of title of the property, respectively, and the delinquent
taxpayer or, if he be absent from the Philippines, to his agent or the manager of the business in
respect to which the liability arose, or if there be none, to the occupant of the property in question.
In case the levy on real property is not issued before or simultaneously with the warrant of
distraint on personal property, and the personal property of the taxpayer is not sufficient to satisfy
his delinquency, the provincial, city or municipal treasurer, as the case may be, shall within thirty
(30) days after execution of the distraint, proceed with the levy on the taxpayer's real property.
A report on any levy shall, within ten (10) days after receipt of the warrant, be submitted by the
levying officer to the sanggunian concerned.

Section 178. Advertisement and Sale. - Within thirty (30) days after the levy, the local treasurer
shall proceed to publicly advertise for sale or auction the property or a usable portion thereof as
may be necessary to satisfy the claim and cost of sale; and such advertisement shall cover a period
of at least thirty (30) days. It shall be effected by posting a notice at the main entrance of the
municipal building or city hall, and in a public and conspicuous place in the barangay where the real
property is located, and by publication once a week for three (3) weeks in a newspaper of general
circulation in the province, city or municipality where the property is located. The advertisement
shall contain the amount of taxes, fees or charges, and penalties due thereon, and the time and place
of sale, the name of the taxpayer against whom the taxes, fees, or charges are levied, and a short
description of the property to be sold. At any time before the date fixed for the sale, the taxpayer
may stay they proceedings by paying the taxes, fees, charges, penalties and interests. If he fails to do
so, the sale shall proceed and shall be held either at the main entrance of the provincial, city or
municipal building, or on the property to be sold, or at any other place as determined by the local
treasurer conducting the sale and specified in the notice of sale.
Within thirty (30) days after the sale, the local treasurer or his deputy shall make a report of the
sale to the sanggunian concerned, and which shall form part of his records. After consultation with
the sanggunian, the local treasurer shall make and deliver to the purchaser a certificate of sale,
showing the proceeding of the sale, describing the property sold, stating the name of the purchaser
and setting out the exact amount of all taxes, fees, charges, and related surcharges, interests, or
penalties: Provided, however, That any excess in the proceeds of the sale over the claim and cost of
sales shall be turned over to the owner of the property.
The local treasurer may, by ordinance duly approved, advance an amount sufficient to defray the
costs of collection by means of the remedies provided for in this Title, including the preservation or
transportation in case of personal property, and the advertisement and subsequent sale, in cases of
personal and real property including improvements thereon.

Section 179. Redemption of Property Sold. - Within one (1) year from the date of sale, the
delinquent taxpayer or his representative shall have the right to redeem the property upon
payment to the local treasurer of the total amount of taxes, fees, or charges, and related surcharges,
interests or penalties from the date of delinquency to the date of sale, plus interest of not more than
two percent (2%) per month on the purchase price from the date of purchase to the date of
redemption. Such payment shall invalidate the certificate of sale issued to the purchaser and the
owner shall be entitled to a certificate of redemption from the provincial, city or municipal
treasurer or his deputy.
The provincial, city or municipal treasurer or his deputy, upon surrender by the purchaser of the
certificate of sale previously issued to him, shall forthwith return to the latter the entire purchase
price paid by him plus the interest of not more than two percent (2%) per month herein provided
for, the portion of the cost of sale and other legitimate expenses incurred by him, and said property
thereafter shall be free from the lien of such taxes, fees, or charges, related surcharges, interests,
and penalties.

The owner shall not, however, be deprived of the possession of said property and shall be entitled
to the rentals and other income thereof until the expiration of the time allowed for its redemption.

Section 180. Final Deed to Purchaser. - In case the taxpayer fails to redeem the property as
provided herein, the local treasurer shall execute a deed conveying to the purchaser so much of the
property as has been sold, free from liens of any taxes, fees, charges, related surcharges, interests,
and penalties. The deed shall succinctly recite all the proceedings upon which the validity of the
sale depends.

Section 181. Purchase of Property By the Local Government Units for Want of Bidder. - In case there
is no bidder for the real property advertised for sale as provided herein, or if the highest bid is for
an amount insufficient to pay the taxes, fees, or charges, related surcharges, interests, penalties and
costs, the local treasurer conducting the sale shall purchase the property in behalf of the local
government unit concerned to satisfy the claim and within two (2) days thereafter shall make a
report of his proceedings which shall be reflected upon the records of his office. It shall be the duty
of the Registrar of Deeds concerned upon registration with his office of any such declaration of
forfeiture to transfer the title of the forfeited property to the local government unit concerned
without the necessity of an order from a competent court.
Within one (1) year from the date of such forfeiture, the taxpayer or any of his representative, may
redeem the property by paying to the local treasurer the full amount of the taxes, fees, charges, and
related surcharges, interests, or penalties, and the costs of sale. If the property is not redeemed as
provided herein, the ownership thereof shall be fully vested on the local government unit
concerned.

Section 182. Resale of Real Estate Taken for Taxes, Fees, or Charges. - The sanggunian concerned
may, by ordinance duly approved, and upon notice of not less than twenty (20) days, sell and
dispose of the real property acquired under the preceding section at public auction. The proceeds of
the sale shall accrue to the general fund of the local government unit concerned.

c. Further distraint and levy
Sec. 184, LGC
Section 184. Further Distraint or Levy. - The remedies by distraint and levy may be repeated if
necessary until the full amount due, including all expenses, is collected.

5. Judicial remedy (Collection)
Sec. 183, LGC
Section 183. Collection of Delinquent Taxes, Fees, Charges or other Revenues through Judicial
Action. - The local government unit concerned may enforce the collection of delinquent taxes, fees,
charges or other revenues by civil action in any court of competent jurisdiction. The civil action
shall be filed by the local treasurer within the period prescribed in Section 194 of this Code.

B. Remedies of taxpayer
1. Protest of assessment
Sec. 195, LGC

unappealable.

Art. 285, IRR
ARTICLE 285. Protest on Assessment. When the local treasurer or his duly authorized
representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of
assessment stating the nature of the tax, fee, or charge the amount of deficiency, the surcharges,
interests, and penalties. Within sixty (60) days from receipt of the notice of assessment, the
taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise,
the assessment shall become final
and executory. The local treasurer shall decide the protest within sixty (60) days from the time of
its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a
notice cancelling wholly or partially the assessment. If the local treasurer finds the assessment to be
wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer.
The taxpayer shall have thirty (30) days from receipt of the denial of the protest or from the lapse
of the sixty-day period prescribed in this Article within which to appeal with the court of competent
jurisdiction; otherwise, the assessment becomes conclusive and unappealable.

2. Claim for refund or tax credit
Sec. 196, LGC
Section 196. Claim for Refund of Tax Credit. - No case or proceeding shall be maintained in any
court for the recovery of any tax, fee, or charge erroneously or illegally collected until a written
claim for refund or credit has been filed with the local treasurer. No case or proceeding shall be
entertained in any court after the expiration of two (2) years from the date of the payment of such
tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit.

Art. 286, IRR
ARTICLE 286. Claim for Refund or Tax Credit. All taxpayers entitled to a refund or tax credit
provided in this Rule shall file with the local treasurer a claim in writing duly supported by
evidence of payment (e.g., official receipts, tax clearance, and such other proof evidencing
overpayment within two (2) years from payment of the tax, fee, or charge. No case or proceeding
shall be entertained in any court without this claim in writing, and after the expiration of two (2)
years from the date of payment of such tax, fee, or charge, or from the date the taxpayer is entitled
to a refund or tax credit.
The tax credit granted a taxpayer shall not be refundable in cash but shall only be applied to future
tax obligations of the same taxpayer for the same business. If a taxpayer has paid in full the tax due
for the entire year and he shall have no other tax obligation payable to the LGU concerned during
the year, his tax credits, if any, shall be applied in full during the first quarter of the next calendar
year on the tax due from him for the same business of said calendar year.
Any unapplied balance of the tax credit shall be refunded in cash in the event that he terminates
operation of the business involved within the locality.

VII. AUTHORITY OF LGUS TO GRANT TAX EXEMPTION PRIVILEGES
Sec. 192, LGC and Art. 282, IRR
Section 192. Authority to Grant Tax Exemption Privileges. - Local government units may, through
ordinances duly approved, grant tax exemptions, incentives or reliefs under such terms and
conditions as they may deem necessary.


ARTICLE 282. Authority to Grant Tax Exemption Privileges or Incentives. (a) While sanggunians
may grant tax exemption, tax incentive, or tax relief, such grant shall not apply to regulatory fees
which are levied under the police power of LGUs. Tax exemptions shall be conferred through the
issuance of a tax exemption certificate, which shall be non-transferable.
(b) The sanggunians granting tax exemptions, tax incentives and tax reliefs may be guided by the
following:
(1) On the grant of tax exemptions or tax reliefs:
(i) Tax exemption or tax relief may be granted in cases of natural calamities, civil disturbance,
general failure of crops, or adverse economic conditions such as substantial decrease in the prices
of agricultural or agri-based products;
(ii) The grant of exemption or relief shall be through an ordinance.
(iii) Any exemption or relief granted to a type or kind of business shall apply to all business
similarly situated; and
(iv) Any exemption or relief granted shall take effect only during the next calendar year for a period
not exceeding twelve (12) months as may be provided in the ordinance. In the case of shared
revenues, the exemption or relief shall only extend to the LGU granting such exemption or relief.
(2) On the grant of tax incentives:
(i) The tax incentive shall be granted only to new investments in the locality and the ordinance shall
prescribe the terms and conditions therefore;
(ii) The grant of the tax incentive shall be for a definite period not exceeding one (1) calendar year;
(iii) The grant of tax incentives shall be by ordinance passed prior to the first (1st) day of January of
any year; and
(iv) Any tax incentive granted to a type or kind of business shall apply to all businesses similarly
situated.

See also Sec. 193, LGC and Art. 283, IRR re. withdrawal of existing tax exemption Privileges

Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of this Code.

ARTICLE 283. Withdrawal of Tax Exemption Privileges or Incentives. Unless otherwise provided
in this Rule, beginning January 1, 1992, all local tax exemption privileges or incentives granted to
and presently enjoyed by any person, whether natural or juridical, including GOCCs, are considered
withdrawn, except the following:
(a) Local water districts;
(b) Cooperatives duly registered under RA 6938, otherwise known as the Cooperative Code of the
Philippines;
(c) Non-stock and non-profit hospitals and educational institutions;
(d) Business enterprises certified by the Board of Investments (BOI) as pioneer or non-pioneer for
a period of six (6) and four (4) years, respectively, from the date of registration;
(e) Business entity, association, or cooperatives registered under RA 6810; and
(f) Printer and/or publisher of books or other reading materials prescribed by DECS as school texts
or references, insofar as receipts from the printing and/or publishing thereof are concerned.
Unless otherwise repealed by law, business and economic enterprises operating within export
processing zones administered by the Export Processing Zone Authority shall continue to enjoy the
tax exemption privileges and tax incentives granted in PD 66, as amended.

REAL PROPERTY TAXATION
I. GENERAL PRINCIPLES AND DEFINITIONS

Sec. 198, LGC
Sec. 199, LGC

Section 198. Fundamental Principles. - The appraisal, assessment, levy and collection of real
property tax shall be guided by the following fundamental principles:
(a) Real property shall be appraised at its current and fair market value;
(b) Real property shall be classified for assessment purposes on the basis of its actual use;
(c) Real property shall be assessed on the basis of a uniform classification within each local
government unit;
(d) The appraisal, assessment, levy and collection of real property tax shall not be let to any private
person; and
(e) The appraisal and assessment of real property shall be equitable.

Section 199. Definitions. - When used in this Title:
(a) "Acquisition Cost" for newly-acquired machinery not yet depreciated and appraised within the
year of its purchase, refers to the actual cost of the machinery to its present owner, plus the cost of
transportation, handling, and installation at the present site;
(b) "Actual Use" refers to the purpose for which the property is principally or predominantly
utilized by the person in possession thereof;
(c) "Ad Valorem Tax" is a levy on real property determined on the basis of a fixed proportion of the
value of the property;
(d) "Agricultural Land" is land devoted principally to the planting of trees, raising of crops, livestock
and poultry, dairying, salt making, inland fishing and similar aquacultural activities, and other
agricultural activities, and is not classified as mineral, timber, residential, commercial or industrial
land;
(e) "Appraisal" is the act or process of determining the value of property as of a specified date for a
specific purpose;
(f) "Assessment" is the act or process of determining the value of a property, or proportion thereof
subject to tax, including the discovery, listing, classification, and appraisal of properties;
(g) "Assessment Level" is the percentage applied to the fair market value to determine the taxable
(h) "Assessed Value" is the fair market value of the real property multiplied by the assessment level.
It is synonymous to taxable value;
(i) "Commercial Land" is land devoted principally for the object of profit and is not classified as
agricultural, industrial, mineral, timber, or residential land;
(j) "Depreciated Value" is the value remaining after deducting depreciation from the acquisition
cost;
(k) "Economic Life" is the estimated period over which it is anticipated that a machinery or
equipment may be profitably utilized;
(l) "Fair Market Value" is the price at which a property may be sold by a seller who is not compelled
to sell and bought by a buyer who is not compelled to buy;
(m) "Improvement" is a valuable addition made to a property or an amelioration in its condition,
amounting to more than a mere repair or replacement of parts involving capital expenditures and
labor, which is intended to enhance its value, beauty or utility or to adapt it for new or further
purposes;
(n) "Industrial Land" is land devoted principally to industrial activity as capital investment and is
not classified as agricultural, commercial, timber, mineral or residential land;
(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances
or apparatus which may or may not be attached, permanently or temporarily, to the real property.
It includes the physical facilities for production, the installations and appurtenant service facilities,
those which are mobile, self-powered or self-propelled, and those not permanently attached to the
real property which are actually, directly, and exclusively used to meet the needs of the particular

industry, business or activity and which by their very nature and purpose are designed for, or
necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes;
(p) "Mineral Lands" are lands in which minerals, metallic or non-metallic, exist in sufficient quantity
or grade to justify the necessary expenditures to extract and utilize such materials;
(q) "Reassessment" is the assigning of new assessed values to property, particularly real estate, as
the result of a general, partial, or individual reappraisal of the property;
(r) "Remaining Economic Life" is the period of time expressed in years from the date of appraisal to
the date when the machinery becomes valueless;
(s) "Remaining Value" is the value corresponding to the remaining useful life of the machinery;
(t) "Replacement or Reproduction Cost" is the cost that would be incurred on the basis of current
prices, in acquiring an equally desirable substitute property, or the cost of reproducing a new
replica of the property on the basis of current prices with the same or closely similar material; and
(u) "Residential Land" is land principally devoted to habitation.
II. REAL PROPERTY TAX AND ADDITIONAL OR SPECIAL LEVIES
A. Basic real property tax
Sec. 233, LGC
Section 233. Rates of Levy. - A province or city or a municipality within the Metropolitan Manila
Area shall fix a uniform rate of basic real property tax applicable to their respective localities as
follows:
(a) In the case of a province, at the rate not exceeding one percent (1%) of the assessed value of real
property; and
(b) In the case of a city or a municipality within the Metropolitan Manila Area, at the rate not
exceeding two percent (2%) of the assessed value of real property.

B. Special Education Fund (SEF)
Sec. 235, LGC
Section 235. Additional Levy on Real Property for the Special Education Fund. - A province or city, or
a municipality within the Metropolitan Manila Area, may levy and collect an annual tax of one
percent (1%) on the assessed value of real property which shall be in addition to the basic real
property tax. The proceeds thereof shall exclusively accrue to the Special Education Fund (SEF).

C. Tax on idle lands
Secs. 236-237, LGC

Section 236. Additional Ad Valorem Tax on Idle Lands. - A province or city, or a municipality within
the Metropolitan Manila Area, may levy an annual tax on idle lands at the rate not exceeding five
percent (5%) of the assessed value of the property which shall be in addition to the basic real
property tax.

Section 237. Idle Lands, Coverage. - For purposes of real property taxation, idle lands shall include
the following:
(a) Agricultural lands, more than one (1) hectare in area, suitable for cultivation, dairying, inland
fishery, and other agricultural uses, one-half (1/2) of which remain uncultivated or unimproved by
the owner of the property or person having legal interest therein. Agricultural lands planted to
permanent or perennial crops with at least fifty (50) trees to a hectare shall not be considered idle
lands. Lands actually used for grazing purposes shall likewise not be considered idle lands.
(b) Lands, other than agricultural, located in a city or municipality, more than one thousand (1,000)
square meters in area one-half (1/2) of which remain unutilized or unimproved by the owner of the
property or person having legal interest therein.
Regardless of land area, this Section shall likewise apply to residential lots in subdivisions duly
approved by proper authorities, the ownership of which has been transferred to individual owners,
who shall be liable for the additional tax: Provided, however, That individual lots of such

subdivisions, the ownership of which has not been transferred to the buyer shall be considered as
part of the subdivision, and shall be subject to the additional tax payable by subdivision owner or
operator.

D. Special levy due to improvements
Secs. 240-243, LGC

Section 240. Special Levy by Local Government Units. - A province, city or municipality may impose
a special levy on the lands comprised within its territorial jurisdiction specially benefited by public
works projects or improvements funded by the local government unit concerned: Provided,
however, That the special levy shall not exceed sixty percent (60%) of the actual cost of such
projects and improvements, including the costs of acquiring land and such other real property in
connection therewith: Provided, further, That the special levy shall not apply to lands exempt from
basic real property tax and the remainder of the land portions of which have been donated to the
local government unit concerned for the construction of such projects or improvements.

Section 241. Ordinance Imposing a Special Levy. - A tax ordinance imposing a special levy shall
describe with reasonable accuracy the nature, extent, and location of the public works projects or
improvements to be undertaken, state the estimated cost thereof, specify the metes and bounds by
monuments and lines and the number of annual installments for the payment of the special levy
which in no case shall be less than five (5) nor more than ten (10) years. The sanggunian concerned
shall not be obliged, in the apportionment and computation of the special levy, to establish a
uniform percentage of all lands subject to the payment of the tax for the entire district, but it may
fix different rates for different parts or sections thereof, depending on whether such land is more or
less benefited by proposed work.

Section 242. Publication of Proposed Ordinance Imposing a Special Levy. - Before the enactment of
an ordinance imposing a special levy, the sanggunian concerned shall conduct a public hearing
thereon; notify in writing the owners of the real property to be affected or the persons having legal
interest therein as to the date and place thereof and afford the latter the opportunity to express
their positions or objections relative to the proposed ordinance.

Section 243. Fixing the Amount of Special Levy. - The special levy authorized herein shall be
apportioned, computed, and assessed according to the assessed valuation of the lands affected as
shown by the books of the assessor concerned, or its current assessed value as fixed by said
assessor if the property does not appear of record in his books. Upon the effectivity of the
ordinance imposing special levy, the assessor concerned shall forthwith proceed to determine the
annual amount of special levy assessed against each parcel of land comprised within the area
especially benefited and shall send to each landowner a written notice thereof by mail, personal
service or publication in appropriate cases.

III. EXEMPTIONS FROM REAL PROPERTY TAX
Sec. 234, LGC
Section 234. Exemptions from Real Property Tax. - The following are exempted from payment of the
real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-
profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and
exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by local water

districts and government owned or controlled corporations engaged in the supply and distribution
of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938;
and
(e) Machinery and equipment used for pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property tax previously granted to,
or presently enjoyed by, all persons, whether natural or juridical, including all government-owned
or controlled corporations are hereby withdrawn upon the effectivity of this Code.

Light Rail Transit Authority v. CBAA, 342 SCRA 692 (2000)
IV. PAYMENT OF REAL PROPERTY TAX AND SPECIAL LEVIES
A. Date of accrual
Sec. 246, LGC
Section 245. Accrual of Special Levy. - The special levy shall accrue on the first day of the quarter
next following the effectivity of the ordinance imposing such levy.

Sec. 245, LGC

B. Payment on installment
Sec. 250, LGC
Section 250. Payment of Real Property Taxes in Installments. - The owner of the real property or the
person having legal interest therein may pay the basic real property tax and the additional tax for
Special Education Fund (SEF) due thereon without interest in four (4) equal installments; the first
installment to be due and payable on or before March Thirty-first (31st); the second installment, on
or before June Thirty (30); the third installment, on or before September Thirty (30); and the last
installment on or before December Thirty-first (31st), except the special levy the payment of which
shall be governed by ordinance of the sanggunian concerned.
The date for the payment of any other tax imposed under this Title without interest shall be
prescribed by the sanggunian concerned.
Payments of real property taxes shall first be applied to prior years delinquencies, interests, and
penalties, if any, and only after said delinquencies are settled may tax payments be credited for the
current period.

C. Discount for Advance Payment
Sec. 251, LGC
Section 251. Tax Discount for Advanced Prompt Payment. - If the basic real property tax and the
additional tax accruing to the Special Education Fund (SEF) are paid in advance in accordance with
the prescribed schedule of payment as provided under Section 250, the sanggunian concerned may
grant a discount not exceeding twenty percent (20%) of the annual tax due.

V. APPRAISAL AND ASSESSMENT OF REAL PROPERTY
A. Appraisal
Sec. 201, LGC (Real Property)
Section 201. Appraisal of Real Property. - All real property, whether taxable or exempt, shall be
appraised at the current and fair market value prevailing in the locality where the property is
situated. The Department of Finance shall promulgate the necessary rules and regulations for the
classification, appraisal, and assessment of real property pursuant to the provisions of this Code.

Secs. 224-225, LGC (Machineries)

Section 224. Appraisal and Assessment of Machinery. -
(a) The fair market value of a brand-new machinery shall be the acquisition cost. In all other cases,
the fair market value shall be determined by dividing the remaining economic life of the machinery
by its estimated economic life and multiplied by the replacement or reproduction cost.
(b) If the machinery is imported, the acquisition cost includes freight, insurance, bank and other
charges, brokerage, arrastre and handling, duties and taxes, plus charges at the present site. The
cost in foreign currency of imported machinery shall be converted to peso cost on the basis of
foreign currency exchange rates as fixed by the Central Bank.

Section 225. Depreciation Allowance for Machinery. - For purposes of assessment, a depreciation
allowance shall be made for machinery at a rate not exceeding five percent (5%) of its original cost
or its replacement or reproduction cost, as the case may be, for each year of use: Provided,
however, That the remaining value for all kinds of machinery shall be fixed at not less than twenty
percent (20%) of such original, replacement, or reproduction cost for so long as the machinery is
useful and in operation.

1. Voluntary
Secs. 202-203, LGC
Section 202. Declaration of real Property by the Owner or Administrator. - It shall be the duty of all
persons, natural or juridical, owning or administering real property, including the improvements
therein, within a city or municipality, or their duly authorized representative, to prepare, or cause
to be prepared, and file with the provincial, city or municipal assessor, a sworn statement declaring
the true value of their property, whether previously declared or undeclared, taxable or exempt,
which shall be the current and fair market value of the property, as determined by the declarant.
Such declaration shall contain a description of the property sufficient in detail to enable the
assessor or his deputy to identify the same for assessment purposes. The sworn declaration of real
property herein referred to shall be filed with the assessor concerned once every three (3) years
during the period from January first (1st) to June thirtieth (30th) commencing with the calendar
year 1992.
See also Sec. 208, LGC

Section 203. Duty of Person Acquiring Real Property or Making Improvement Thereon. - It shall also
be the duty of any person, or his authorized representative, acquiring at any time real property in
any municipality or city or making any improvement on real property, to prepare, or cause to be
prepared, and file with the provincial, city or municipal assessor, a sworn statement declaring the
true value of subject property, within sixty (60) days after the acquisition of such property or upon
completion or occupancy of the improvement, whichever comes earlier.
Section 208. Notification of Transfer of Real Property Ownership. - Any person who shall transfer
real property ownership to another shall notify the provincial, city or municipal assessor concerned
within sixty (60) days from the date of such transfer. The notification shall include the mode of
transfer, the description of the property alienated, the name and address of the transferee.

2. Involuntary
Sec. 204, LGC
Section 204. Declaration of Real Property by the Assessor. - When any person, natural or juridical,
by whom real property is required to be declared under Section 202 hereof, refuses or fails for any
reason to make such declaration within the time prescribed, the provincial, city or municipal
assessor shall himself declare the property in the name of the defaulting owner, if known, or against
an unknown owner, as the case may be, and shall assess the property for taxation in accordance
with the provision of this Title. No oath shall be required of a declaration thus made by the
provincial, city or municipal assessor.


Section 213. Authority of Assessor to Take Evidence. - For the purpose of obtaining information on
which to base the market value of any real property, the assessor of the province, city or
municipality or his deputy may summon the owners of the properties to be affected or persons
having legal interest therein and witnesses, administer oaths, and take deposition concerning the
property, its ownership, amount, nature, and value.

B. Assessment
1. Classifying real property
Sec. 217, LGC
Section 217. Actual Use of Real Property as Basis for Assessment. - Real property shall be classified,
valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and
whoever uses it.

Secs. 215-216, LGC
Section 215. Classes of Real Property for Assessment Purposes. - For purposes of assessment, real
property shall be classified as residential, agricultural, commercial, industrial, mineral, timberland
or special.
The city or municipality within the Metropolitan Manila Area, through their respective sanggunian,
shall have the power to classify lands as residential, agricultural, commercial, industrial, mineral,
timberland, or special in accordance with their zoning ordinances.

Section 216. Special Classes of Real Property. - All lands, buildings, and other improvements
thereon actually, directly and exclusively used for hospitals, cultural, or scientific purposes, and
those owned and used by local water districts, and government-owned or controlled corporations
rendering essential public services in the supply and distribution of water and/or generation and
transmission of electric power shall be classified as special.

2. Assessment levels
Sec. 218, LGC
Section 218. Assessment Levels. - The assessment levels to be applied to the fair market value of
real property to determine its assessed value shall be fixed by ordinances of the sangguniang
panlalawigan, sangguniang panlungsod or sangguniang bayan of a municipality within the
Metropolitan Manila Area, at the rates not exceeding the following:
(a) On Lands:
CLASS ASSESSMENT LEVELS
Residential 20%
Agricultural 40%
Commercial 50%
Industrial 50%
Mineral 50%
Timberland 20%
(b) On Buildings and Other Structures:
<td </td
(1) Residential Fair market Value
Over Not Over Assessment Levels
P175,000.00 0%
P175,000.00 300,000.00 10%
300,000.00 500,000.00 20%
500,000.00 750,000.00 25%
750,000.00 1,000,000.00 30%
1,000,000.00 2,000,000.00 35%

2,000,000.00 5,000,000.00 40%
5,000,000.00 10,000,000.00 50%
10,000,000.00 60%
(2) Agricultural Fair Market Value
P300,000.00 25%
P300,000.00 500,000.00 30%
500,000.00 750,000.00 35%
750,000.00 1,000,000.00 40%
1,000,000.00 2,000,000.00 45%
2,000,000.00 50%
(3) Commercial / Industrial Fair Market Value
P300,000.00 30%
P300,000.00 500,000.00 35%
500,000.00 750,000.00 40%
750,000.00 1,000,000.00 50%
1,000,000.00 2,000,000.00 60%
2,000,000.00 5,000,000.00 70%
5,000,000.00 10,000,000.00 75%
10,000,000.00 80%
(4) Timberland Fair Market Value
P300,000.00 45%
P300,000.00 500,000.00 50%
500,000.00 750,000.00 55%
750,000.00 1,000,000.00 60%
5,000,000.00 2,000,000.00 65%
2,000,000.00 70%
(c) On Machineries
Class Assessment Levels
Agricultural 40%
Residential 50%
Commercial 80%
Industrial 80%
(d) On Special Classes: The assessment levels for all lands buildings, machineries and other
improvements;
Actual Use Assessment Level
Cultural 15%
Scientific 15%
Hospital 15%
Local water districts 10%
Government-owned or controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power 10%

3. General revision
Sec. 219, LGC
Section 219. General Revision of Assessment and Property Classification. - The provincial, city or
municipal assessor shall undertake a general revision of real property assessments within two (2)
years after the effectivity of this Code and every three (3) years thereafter.


Art. 310, IRR
ARTICLE 310. General Revision of Assessments and Property Classification. (a) The provincial,
city, or municipal assessor shall undertake a general revision of real property assessment within
two (2) years after the effectivity of the Code and every three (3) years thereafter.
(b) For this purpose, the provincial assessors, the city assessors, and the municipal assessors of
MMA shall prepare the schedule of fair market values for the different kinds and classes of real
property located within their respective territorial jurisdictions within one (1) year from the
effectivity of the Code in accordance with such rules and regulations issued by DOF.
(c) The general revision of assessments and property classification shall commence upon the
enactment of an ordinance by the sanggunian concerned adopting the schedule of fair market
values but not later than two (2) years from the effectivity of the Code. Thereafter, the provincial,
city, or municipal assessor shall undertake the general revision of real property assessment and
property classification once every three (3) years.

4. Reassessment
Sec. 220, LGC
Section 220. Valuation of Real Property. - In cases where (a) real property is declared and listed for
taxation purposes for the first time; (b) there is an ongoing general revision of property
classification and assessment; or (c) a request is made by the person in whose name the property is
declared, the provincial, city or municipal assessor or his duly authorized deputy shall, in
accordance with the provisions of this Chapter, make a classification, appraisal and assessment or
taxpayer's valuation thereon: Provided, however, That the assessment of real property shall not be
increased oftener than once every three (3) years except in case of new improvements substantially
increasing the value of said property or of any change in its actual use.

Sec. 221, LGC
Section 221. Date of Effectivity of Assessment or Reassessment. - All assessments or reassessments
made after the first (1st) day of January of any year shall take effect on the first (1st) day of January
of the succeeding year: Provided, however, That the reassessment of real property due to its partial
or total destruction, or to a major change in its actual use, or to any great and sudden inflation or
deflation of real property values, or to the gross illegality of the assessment when made or to any
other abnormal cause, shall be made within ninety (90) days from the date any such cause or
causes occurred, and shall take effect at the beginning of the quarter next following the
reassessment.

VI. REMEDIES OF LOCAL GOVERNMENT
A. Posting of notice of delinquency
Sec. 254, LGC
Section 254. Notice of Delinquency in the Payment of the Real Property Tax. -
(a) When the real property tax or any other tax imposed under this Title becomes delinquent, the
provincial, city or municipal treasurer shall immediately cause a notice of the delinquency to be
posted at the main hall and in a publicly accessible and conspicuous place in each barangay of the
local government unit concerned. The notice of delinquency shall also be published once a week for
two (2) consecutive weeks, in a newspaper of general circulation in the province, city, or
municipality.
(b) Such notice shall specify the date upon which the tax became delinquent and shall state that
personal property may be distrained to effect payment. It shall likewise state that any time before
the distraint of personal property, payment of the tax with surcharges, interests and penalties may
be made in accordance with the next following Section, and unless the tax, surcharges and penalties
are paid before the expiration of the year for which the tax is due except when the notice of
assessment or special levy is contested administratively or judicially pursuant to the provisions of
Chapter 3, Title II, Book II of this Code, the delinquent real property will be sold at public auction,

and the title to the property will be vested in the purchaser, subject, however, to the right of the
delinquent owner of the property or any person having legal interest therein to redeem the
property within one (1) year from the date of sale.

B. Imposition of interest
Sec. 255, LGC
Section 255. Interests on Unpaid Real Property Tax. - In case of failure to pay the basic real property
tax or any other tax levied under this Title upon the expiration of the periods as provided in Section
250, or when due, as the case may be, shall subject the taxpayer to the payment of interest at the
rate of two percent (2%) per month on the unpaid amount or a fraction thereof, until the
delinquent tax shall have been fully paid: Provided, however, That in no case shall the total interest
on the unpaid tax or portion thereof exceed thirty-six (36) months.

C. Administrative remedies
Secs. 256-257, LGC
Section 256. Remedies For The Collection Of Real Property Tax. - For the collection of the basic real
property tax and any other tax levied under this Title, the local government unit concerned may
avail of the remedies by administrative action thru levy on real property or by judicial action.

Section 257. Local Governments Lien. - The basic real property tax and any other tax levied under
this Title constitutes a lien on the property subject to tax, superior to all liens, charges or
encumbrances in favor of any person, irrespective of the owner or possessor thereof, enforceable
by administrative or judicial action, and may only be extinguished upon payment of the tax and the
related interests and expenses.

Secs. 258-265, LGC
Section 258. Levy on Real Property. - After the expiration of the time required to pay the basic real
property tax or any other tax levied under this Title, real property subject to such tax may be levied
upon through the issuance of a warrant on or before, or simultaneously with, the institution of the
civil action for the collection of the delinquent tax. The provincial or city treasurer, or a treasurer of
a municipality within the Metropolitan Manila Area, as the case may be, when issuing a warrant of
levy shall prepare a duly authenticated certificate showing the name of the delinquent owner of the
property or person having legal interest therein, the description of the property, the amount of the
tax due and the interest thereon. The warrant shall operate with the force of a legal execution
throughout the province, city or a municipality, within the Metropolitan Manila Area. The warrant
shall be mailed to or served upon the delinquent owner of the real property or person having legal
interest therein, or in case he is out of the country or cannot be located, the administrator or
occupant of the property. At the same time, written notice of the levy with the attached warrant
shall be mailed to or served upon the assessor and the Registrar of Deeds of the province, city or
municipality within the Metropolitan Manila Area where the property is located, who shall annotate
the levy on the tax declaration and certificate of title of the property, respectively.
The levying officer shall submit a report on the levy to the sanggunian concerned within ten (10)
days after receipt of the warrant by the owner of the property or person having legal interest
therein.

Section 259. Penalty for Failure to Issue and Execute Warrant. - Without prejudice to criminal
prosecution under the Revised Penal Code and other applicable laws, any local treasurer or his
deputy who fails to issue or execute the warrant of levy within one (1) year from the time the tax
becomes delinquent or within thirty (30) days from the date of the issuance thereof, or who is
found guilty of abusing the exercise thereof in an administrative or judicial proceeding shall be
dismissed from the service.


Section 260. Advertisement and Sale. - Within thirty (30) days after service of the warrant of levy,
the local treasurer shall proceed to publicly advertise for sale or auction the property or a usable
portion thereof as may be necessary to satisfy the tax delinquency and expenses of sale. The
advertisement shall be effected by posting a notice at the main entrance of the provincial, city or
municipal building, and in a publicly accessible and conspicuous place in the barangay where the
real property is located, and by publication once a week for two (2) weeks in a newspaper of
general circulation in the province, city or municipality where the property is located. The
advertisement shall specify the amount of the delinquent tax, the interest due thereon and expenses
of sale, the date and place of sale, the name of the owner of the real property or person having legal
interest therein, and a description of the property to be sold. At any time before the date fixed for
the sale, the owner of the real property or person having legal interest therein may stay the
proceedings by paying the delinquent tax, the interest due thereon and the expenses of sale. The
sale shall be held either at the main entrance of the provincial, city or municipal building, or on the
property to be sold, or at any other place as specified in the notice of the sale.
sale to the sanggunian concerned, and which shall form part of his records. The local treasurer shall
likewise prepare and deliver to the purchaser a certificate of sale which shall contain the name of
the purchaser, a description of the property sold, the amount of the delinquent tax, the interest due
thereon, the expenses of sale and a brief description of the proceedings: Provided, however, That
proceeds of the sale in excess of the delinquent tax, the interest due thereon, and the expenses of
sale shall be remitted to the owner of the real property or person having legal interest therein.
costs of collection thru the remedies provided for in this Title, including the expenses of
advertisement and sale.

Section 261. Redemption of Property Sold. - Within one (1) year from the date of sale, the owner of
the delinquent real property or person having legal interest therein, or his representative, shall
have the right to redeem the property upon payment to the local treasurer of the amount of the
delinquent tax, including the interest due thereon, and the expenses of sale from the date of
delinquency to the date of sale, plus interest of not more than two percent (2%) per month on the
purchase price from the date of sale to the date of redemption. Such payment shall invalidate the
certificate of sale issued to the purchaser and the owner of the delinquent real property or person
having legal interest therein shall be entitled to a certificate of redemption which shall be issued by
the local treasurer or his deputy.
From the date of sale until the expiration of the period of redemption, the delinquent real property
shall remain in possession of the owner or person having legal interest therein who shall be entitled
to the income and other fruits thereof.
The local treasurer or his deputy, upon receipt from the purchaser of the certificate of sale, shall
forthwith return to the latter the entire amount paid by him plus interest of not more than two
percent (2%) per month. Thereafter, the property shall be free from lien of such delinquent tax,
interest due thereon and expenses of sale.

Section 262. Final Deed to Purchaser. - In case the owner or person having legal interest fails to
redeem the delinquent property as provided herein, the local treasurer shall execute a deed
conveying to the purchaser said property, free from lien of the delinquent tax, interest due thereon
and expenses of sale. The deed shall briefly state the proceedings upon which the validity of the sale
rests.

is no bidder for the real property advertised for sale as provided herein, the real property tax and
the related interest and costs of sale the local treasurer conducting the sale shall purchase the
property in behalf of the local government unit concerned to satisfy the claim and within two (2)

days thereafter shall make a report of his proceedings which shall be reflected upon the records of
his office. It shall be the duty of the Registrar of Deeds concerned upon registration with his office of
any such declaration of forfeiture to transfer the title of the forfeited property to the local
government unit concerned without the necessity of an order from a competent court.
redeem the property by paying to the local treasurer the full amount of the real property tax and
the related interest and the costs of sale. If the property is not redeemed as provided herein, the
ownership thereof shall be vested on the local government unit concerned.


Section 265. Further Distraint or Levy. - Levy may be repeated if necessary until the full amount
due, including all expenses, is collected.

D. Judicial action (collection)
Sec. 256, LGC

Sec. 266, LGC
Section 266. Collection of Real Property Tax Through the Courts. - The local government unit
concerned may enforce the collection of the basic real property tax or any other tax levied under
this Title by civil action in any court of competent jurisdiction. The civil action shall be filed by the
local treasurer within the period prescribed in Section 270 of this Code.

Sec. 270, LGC
Section 270. Periods Within Which To Collect Real Property Taxes. - The basic real property tax and
any other tax levied under this Title shall be collected within five (5) years from the date they
become due. No action for the collection of the tax, whether administrative or judicial, shall be
instituted after the expiration of such period. In case of fraud or intent to evade payment of the tax,
such action may be instituted for the collection of the same within ten (10) years from the discovery
of such fraud or intent to evade payment.
The period of prescription within which to collect shall be suspended for the time during which:
(1) The local treasurer is legally prevented from collecting the tax;
(2) The owner of the property or the person having legal interest therein requests for
reinvestigation and executes a waiver in writing before the expiration of the period within which to
collect; and
(3) The owner of the property or the person having legal interest therein is out of the country or
otherwise cannot be located.

E. Unpaid tax constitutes a lien
Sec. 257, LGC


VII. REMEDIES OF TAXPAYER
A. Dispute assessment
1. Appeal to local Board of Assessment Appeals
Sec. 226, LGC
Section 226. Local Board of Assessment Appeals. - Any owner or person having legal interest in the
property who is not satisfied with the action of the provincial, city or municipal assessor in the
assessment of his property may, within sixty (60) days from the date of receipt of the written notice
of assessment, appeal to the Board of Assessment Appeals of the provincial or city by filing a
petition under oath in the form prescribed for the purpose, together with copies of the tax
declarations and such affidavits or documents submitted in support of the appeal.

2. If denied, appeal to Central Board of Assessment Appeals
Sec. 229(c), LGC
Section 229. Action by the Local Board of Assessment Appeals. -
(c) The secretary of the Board shall furnish the owner of the property or the person having legal
interest therein and the provincial or city assessor with a copy of the decision of the Board. In case
the provincial or city assessor concurs in the revision or the assessment, it shall be his duty to
notify the owner of the property or the person having legal interest therein of such fact using the
form prescribed for the purpose. The owner of the property or the person having legal interest
therein or the assessor who is not satisfied with the decision of the Board, may, within thirty (30)
days after receipt of the decision of said Board, appeal to the Central Board of Assessment Appeals,
as herein provided. The decision of the Central Board shall be final and executory.

3. If denied, appeal to Court of Tax Appeals
Internal Revenue;

"b. Jurisdiction over cases involving criminal offenses as herein provided:
"1. Exclusive original jurisdiction over all criminal offenses arising from violations of the National
Internal Revenue Code or Tariff and Customs Code and other laws administered by the Bureau of
Internal Revenue or the Bureau of Customs: Provided, however, That offenses or felonies
mentioned in this paragraph where the principal amount o taxes and fees, exclusive of charges and
penalties, claimed is less than One million pesos (P1,000,000.00) or where there is no specified
amount claimed shall be tried by the regular Courts and the jurisdiction of the CTA shall be
appellate. Any provision of law or the Rules of Court to the contrary notwithstanding, the criminal
action and the corresponding civil action for the recovery of civil liability for taxes and penalties
shall at all times be simultaneously instituted with, and jointly determined in the same proceeding
by the CTA, the filing of the criminal action being deemed to necessarily carry with it the filing of
the civil action, and no right to reserve the filling of such civil action separately from the criminal
action will be recognized.
"2. Exclusive appellate jurisdiction in criminal offenses:
"a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases
originally decided by them, in their respected territorial jurisdiction.
"b. Over petitions for review of the judgments, resolutions or orders of the Regional Trial Courts in
the exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan
Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in their respective
jurisdiction.
"1. Exclusive original jurisdiction in tax collection cases involving final and executory assessments
for taxes, fees, charges and penalties: Provided, however, That collection cases where the principal
amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos
(P1,000,000.00) shall be tried by the proper Municipal Trial Court, Metropolitan Trial Court and
Regional Trial Court.
"a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax
collection cases originally decided by them, in their respective territorial jurisdiction.
the Exercise of their appellate jurisdiction over tax collection cases originally decided by the
Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in their
respective jurisdiction."
4. Effect of appeal
Sec. 231, LGC
Section 231. Effect of Appeal on the Payment of Real Property Tax. - Appeal on assessments of real
property made under the provisions of this Code shall, in no case, suspend the collection of the
corresponding realty taxes on the property involved as assessed by the provincial or city assessor,
without prejudice to subsequent adjustment depending upon the final outcome of the appeal.

B. Payment under protest
Sec. 252, LGC
Section 252. Payment Under Protest. -
(a) No protest shall be entertained unless the taxpayer first pays the tax. There shall be annotated
on the tax receipts the words "paid under protest". The protest in writing must be filed within thirty
(30) days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the
case of a municipality within Metropolitan Manila Area, who shall decide the protest within sixty
(60) days from receipt.
(b) The tax or a portion thereof paid under protest, shall be held in trust by the treasurer
concerned.
(c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of

the tax protested shall be refunded to the protestant, or applied as tax credit against his existing or
future tax liability.
(d) In the event that the protest is denied or upon the lapse of the sixty day period prescribed in
subparagraph (a), the taxpayer may avail of the remedies as provided for in Chapter 3, Title II, Book
II of this Code.

Art. 343, IRR
ARTICLE 343. Payment Under Protest. (a) No protest shall be entertained unless the taxpayer
first pays the tax. There shall be annotated on the tax receipts the words paid under protest. The
protest in writing must be filed within thirty (30) days from payment of the tax to the provincial or
city treasurer, or municipal treasurer, in the case of a municipality within MMA, who shall decide
the protest within sixty
(b) The tax or a portion thereof paid under protest shall be held in trust by the local treasurer
concerned. Fifty percent (50%) of the tax paid under protest shall, however, be distributed in
accordance with the provisions of this Rule on the distribution of proceeds.
(d) In the event that the protest is denied or upon the lapse of the sixty-day period prescribed in
paragraph (a) hereof, the taxpayer may avail of the remedies provided in Articles 317 and 320 of
this Rule.

C. Claim for refund or credit
Sec. 253, LGC
Section 253. Repayment of Excessive Collections. - When an assessment of basic real property tax, or
any other tax levied under this Title, is found to be illegal or erroneous and the tax is accordingly
reduced or adjusted, the taxpayer may file a written claim for refund or credit for taxes and
interests with the provincial or city treasurer within two (2) years from the date the taxpayer is
entitled to such reduction or adjustment.
The provincial or city treasurer shall decide the claim for tax refund or credit within sixty (60) days
from receipt thereof. In case the claim for tax refund or credit is denied, the taxpayer may avail of
the remedies as provided in Chapter 3, Title II, Book II of this Code.
LOCAL TAXATION
I. GENERAL PRINCIPLES
A. Local Autonomy
Sec. 129, Local Government Code of 1991 (LGC)
Section 129. Power to Create Sources of Revenue. - Each local government unit shall exercise its
power to create its own sources of revenue and to levy taxes, fees, and charges subject to the
provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local government units.

B. Fundamental Principles
Sec. 130, LGC
Section 130. Fundamental Principles. - The following fundamental principles shall govern the
exercise of the taxing and other revenue-raising powers of local government units:
(a) Taxation shall be uniform in each local government unit;
(b) Taxes, fees, charges and other impositions shall:
(1) be equitable and based as far as practicable on the taxpayer's ability to pay;
(2) be levied and collected only for public purposes;
(3) not be unjust, excessive, oppressive, or confiscatory;
(4) not be contrary to law, public policy, national economic policy, or in the restraint of

trade;
(c) The collection of local taxes, fees, charges and other impositions shall in no case be let to any
private person;
(d) The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of,
and be subject to the disposition by, the local government unit levying the tax, fee, charge or other
imposition unless otherwise specifically provided herein; and,
(e) Each local government unit shall, as far as practicable, evolve a progressive system of taxation.

C. Common Limitations on Taxing Powers of LGUs
Sec. 133, LGC
Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:
(a) Income tax, except when levied on banks and other financial institutions;
(b) Documentary stamp tax;
(c) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as
otherwise provided herein;
(d) Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other
kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained
by the local government unit concerned;
(e) Taxes, fees, and charges and other impositions upon goods carried into or out of, or passing
through, the territorial jurisdictions of local government units in the guise of charges for wharfage,
tolls for bridges or otherwise, or other taxes, fees, or charges in any form whatsoever upon such
goods or merchandise;
(f) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or
fishermen;
(g) Taxes on business enterprises certified to by the Board of Investments as pioneer or non-
pioneer for a period of six (6) and four (4) years, respectively from the date of registration;
(h) Excise taxes on articles enumerated under the national Internal Revenue Code, as amended, and
taxes, fees or charges on petroleum products;
(i) Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on
goods or services except as otherwise provided herein;
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water, except as
provided in this Code;
(k) Taxes on premiums paid by way or reinsurance or retrocession;
(l) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of
licenses or permits for the driving thereof, except tricycles;
(m) Taxes, fees, or other charges on Philippine products actually exported, except as otherwise
provided herein;
(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives
duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight
(R.A. No. 6938) otherwise known as the "Cooperative Code of the Philippines" respectively; and
(o) Taxes, fees or charges of any kind on the National Government, its agencies and
instrumentalities, and local government units.

II. SCOPE OF TAXING POWERS OF LGUS
A. Province
Secs. 135-141, LGC
Section 135. Tax on Transfer of Real Property Ownership.
(a) The province may impose a tax on the sale , donation, barter, or on any other mode of

transferring ownership or title of real property at the rate of not more than fifty percent (50%) of
the one percent (1%) of the total consideration involved in the acquisition of the property or of the
fair market value in case the monetary consideration involved in the transfer is not substantial,
whichever is higher. The sale, transfer or other disposition of real property pursuant to R.A. No.
6657 shall be exempt from this tax.
(b) For this purpose, the Register of Deeds of the province concerned shall, before registering any
deed, require the presentation of the evidence of payment of this tax. The provincial assessor shall
likewise make the same requirement before cancelling an old tax declaration and issuing a new one
in place thereof, Notaries public shall furnish the provincial treasurer with a copy of any deed
transferring ownership or title to any real property within thirty (30) days from the date of
notarization.
It shall be the duty of the seller, donor, transferor, executor or administrator to pay the tax herein
imposed within sixty (60) days from the date of the execution of the deed or from the date of the
decedent's death.

Section 136. Tax on Business of Printing and Publication. - The province may impose a tax on the
business of persons engaged in the printing and/or publication of books, cards, posters, leaflets,
handbills, certificates, receipts, pamphlets, and others of similar nature, at a rate not exceeding fifty
percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year.
any fraction thereof, as provided herein.
The receipts from the printing and/or publishing of books or other reading materials prescribed by
the Department of Education, Culture and Sports as school texts or references shall be exempt from
the tax herein imposed.

Section 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other special
law, the province may impose a tax on businesses enjoying a franchise, at the rate not exceeding
fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year
based on the incoming receipt, or realized, within its territorial jurisdiction.
any fraction thereon, as provided herein.

Section 138. Tax on Sand, Gravel and Other Quarry Resources. - The province may levy and collect
not more than ten percent (10%) of fair market value in the locality per cubic meter of ordinary
stones, sand, gravel, earth, and other quarry resources, as defined under the National Internal
Revenue Code, as amended, extracted from public lands or from the beds of seas, lakes, rivers,
streams, creeks, and other public waters within its territorial jurisdiction.
The permit to extract sand, gravel and other quarry resources shall be issued exclusively by the
provincial governor, pursuant to the ordinance of the sangguniang panlalawigan.
The proceeds of the tax on sand, gravel and other quarry resources shall be distributed as follows:
(1) Province - Thirty percent (30%);
(2) Component City or Municipality where the sand, gravel, and other quarry resources
are extracted - Thirty percent (30%); and
(3) Barangay where the sand, gravel, and other quarry resources are extracted - Forty
percent (40%).

Section 139. Professional Tax. -
(a) The province may levy an annual professional tax on each person engaged in the exercise or

practice of his profession requiring government examination at such amount and reasonable
classification as the sangguniang panlalawigan may determine but shall in no case exceed Three
hundred pesos (P300.00).
(b) Every person legally authorized to practice his profession shall pay the professional tax to the
province where he practices his profession or where he maintains his principal office in case he
practices his profession in several places: Provided, however, That such person who has paid the
corresponding professional tax shall be entitled to practice his profession in any part of the
Philippines without being subjected to any other national or local tax, license, or fee for the practice
of such profession.
(c) Any individual or corporation employing a person subject to professional tax shall require
payment by that person of the tax on his profession before employment and annually thereafter.
(d) The professional tax shall be payable annually, on or before the thirty-first (31st) day of
January. Any person first beginning to practice a profession after the month of January must,
however, pay the full tax before engaging therein. A line of profession does not become exempt
even if conducted with some other profession for which the tax has been paid. Professionals
exclusively employed in the government shall be exempt from the payment of this tax.
(e) Any person subject to the professional tax shall write in deeds, receipts, prescriptions, reports,
books of account, plans and designs, surveys and maps, as the case may be, the number of the
official receipt issued to him.

Section 140. Amusement Tax. -
(a) The province may levy an amusement tax to be collected from the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of
amusement at a rate of not more than thirty percent (30%) of the gross receipts from admission
fees.
(b) In the case of theaters or cinemas, the tax shall first be deducted and withheld by their
proprietors, lessees, or operators and paid to the provincial treasurer before the gross receipts are
divided between said proprietors, lessees, or operators and the distributors of the cinematographic
films.
(c) The holding of operas, concerts, dramas, recitals, painting and art exhibitions, flower shows,
musical programs, literary and oratorical presentations, except pop, rock, or similar concerts shall
be exempt from the payment of the tax hereon imposed.
(d) The sangguniang panlalawigan may prescribe the time, manner, terms and conditions for the
payment of tax. In case of fraud or failure to pay the tax, the sangguniang panlalawigan may impose
such surcharges, interest and penalties as it may deem appropriate.
(e) The proceeds from the amusement tax shall be shared equally by the province and the
municipality where such amusement places are located.

Section 141. Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or Producers,
Wholesalers of, Dealers, or Retailers in, Certain Products. -
(a) The province may levy an annual fixed tax for every truck, van or any vehicle used by
manufacturers, producers, wholesalers, dealers or retailers in the delivery or distribution of
determined by the sangguniang panlalawigan, to sales outlets, or consumers, whether directly or
indirectly, within the province in an amount not exceeding Five hundred pesos (P500.00).
(b) The manufacturers, producers, wholesalers, dealers and retailers referred to in the immediately
foregoing paragraph shall be exempt from the tax on peddlers prescribed elsewhere in this Code.

B. Municipality
Secs 142-143, LGC
Section 142. Scope of Taxing Powers. - Except as otherwise provided in this Code, municipalities
may levy taxes, fees, and charges not otherwise levied by provinces.

Sec. 143.

C. City
Sec. 151, LGC
Section 151. Scope of Taxing Powers. - Except as otherwise provided in this Code, the city, may levy
the taxes, fees, and charges which the province or municipality may impose: Provided, however,
That the taxes, fees and charges levied and collected by highly urbanized and independent
component cities shall accrue to them and distributed in accordance with the provisions of this
Code.
The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or
municipality by not more than fifty percent (50%) except the rates of professional and amusement
taxes.

Art. 237, IRR
ARTICLE 237. Scope of Taxing and Other Revenue-Raising Powers of Cities. The city may:
(a) Levy and collect any of the taxes, fees, charges and other impositions that the province and the
municipality may impose. The rates of taxes that the city may levy may exceed the maximum rates
allowed for the province or municipality by not more than fifty percent (50%) except the rates of
professional and amusement taxes; and
(b) Levy and collect a percentage tax on any business not otherwise specified under paragraphs (a)
to (g), Article 233 of this Rule, at rates not exceeding three percent (3%) of the gross sales or
receipts of the preceding calendar year.

D. Barangay
Sec. 152, LGC
Section 152. Scope of Taxing Powers. - The barangays may levy taxes, fees, and charges, as provided
in this Article, which shall exclusively accrue to them:
(a) Taxes - On stores or retailers with fixed business establishments with gross sales of receipts of
the preceding calendar year of Fifty thousand pesos (P50,000.00) or less, in the case of cities and
Thirty thousand pesos (P30,000.00) or less, in the case of municipalities, at a rate not exceeding one
percent (1%) on such gross sales or receipts.
(b) Service Fees or Charges. - Barangays may collect reasonable fees or charges for services
rendered in connection with the regulations or the use of barangay-owned properties or service
facilities such as palay, copra, or tobacco dryers.
(c) Barangay Clearance. - No city or municipality may issue any license or permit for any business
or activity unless a clearance is first obtained from the barangay where such business or activity is
located or conducted. For such clearance, the sangguniang barangay may impose a reasonable fee.
The application for clearance shall be acted upon within seven (7) working days from the filing
thereof. In the event that the clearance is not issued within the said period, the city or municipality
may issue the said license or permit.
(d) Other fees and Charges. - The barangay may levy reasonable fees and charges:
(1) On commercial breeding of fighting cocks, cockfights and cockpits;
(2) On places of recreation which charge admission fees; and
(3) On billboards, signboards, neon signs, and outdoor advertisements.

III. COMMUNITY TAX CERTIFICATE (CTC)
A. Who are liable
Secs. 157-159, LGC
Section 157. Individuals Liable to Community Tax. - Every inhabitant of the Philippines eighteen
(18) years of age or over who has been regularly employed on a wage or salary basis for at least
thirty (30) consecutive working days during any calendar year, or who is engaged in business or

occupation, or who owns real property with an aggregate assessed value of One thousand pesos
(P1,000.00) or more, or who is required by law to file an income tax return shall pay an annual
additional tax of Five pesos (P5.00) and an annual additional tax of One peso (P1.00) for every One
thousand pesos (P1,000.00) of income regardless of whether from business, exercise of profession
or from property which in no case shall exceed Five thousand pesos (P5,000.00).
In the case of husband and wife, the additional tax herein imposed shall be based upon the total
property owned by them and the total gross receipts or earnings derived by them.

Section 158. Juridical Persons Liable to Community Tax. - Every corporation no matter how created
or organized, whether domestic or resident foreign, engaged in or doing business in the Philippines
shall pay an annual community tax of Five hundred pesos (P500.00) and an annual additional tax,
which, in no case, shall exceed Ten thousand pesos (P10,000.00) in accordance with the following
schedule:
(1) For every Five thousand pesos (P5,000.00) worth of real property in the Philippines owned by it
during the preceding year based on the valuation used for the payment of real property tax under
existing laws, found in the assessment rolls of the city or municipality where the real property is
situated - Two pesos (P2.00); and
(2) For every Five thousand pesos (P5,000.00) of gross receipts or earnings derived by it from its
business in the Philippines during the preceding year - Two pesos (P2.00).
The dividends received by a corporation from another corporation however shall, for the purpose
of the additional tax, be considered as part of the gross receipts or earnings of said corporation.


Art. 246, IRR
ARTICLE 246. Levy or Imposition. The levy or imposition of community tax by a city or
municipality
shall be governed by the following rules and guidelines:
(a) Individuals liable to the payment of community tax
(1) Every inhabitant of the Philippines eighteen (18) years of age or over who has been
regularly employed on a wage or salary basis for at least thirty (30) consecutive working days
during any calendar years;
(2) An individual who is engaged in business or occupation;
(3) An individual who owns real property with an aggregate assessed value of One Thousand
Pesos (P1,000.00) or more;
(4) An individual who is required by law to file an income tax return. (
b) Rate of community tax payable by individuals
(1) The rate of community tax that may be levied and collected from said individuals shall
be Five Pesos (P5.00) plus an additional tax of One Peso (P1.00) for every One Thousand
Pesos (P1,000.00) of income regardless of whether from business, exercise of profession, or
from property but which in no case shall exceed Five Thousand Pesos (P5,000.00).
(2) In case of husband and wife, each of them shall be liable to pay the basic tax of Five
Pesos (P5.00), but the additional tax imposable on the husband and wife shall be One Peso
(P1.00) for every One Thousand Pesos (P1,000.00) of income from the total property owned
by them and/or the total gross receipts or earnings derived by them.
(c) Juridical persons liable to the payment of community tax Every corporation, no
matter how created or organized, whether domestic or resident foreign, engaged in or doing
business in the Philippines shall pay community tax of Five Hundred Pesos (P500.00) and
an additional tax, which, in no case, shall exceed Ten Thousand Pesos (P10,000.00) in
accordance with the following schedule:

(1) For every Five Thousand Pesos (P5,000.00) worth of real property in the
Philippines owned by the juridical entity during the preceding year, based on the
assessed value used for the payment of the real property tax under existing laws
Two pesos (P2.00); and
(2) For every Five Thousand Pesos (P5,000.00) of gross receipts or earnings derived
from the business in the Philippines during the preceding year Two pesos (P2.00).
The dividends received by a corporation from another corporation shall, for the
purpose of the additional tax, be considered as part of the gross receipts or earnings of
said corporation.
(d) Exemptions The following are exempt from the payment of community tax:
(e) Place of Payment
(1) Community tax shall be paid in the city or municipality where the residence of the
individual is located, or in the city or municipality where the principal office of the juridical
entity is located.
(2) It shall be unlawful for any city or municipal treasurer to collect community tax outside
the territorial jurisdiction of the city or the municipality.
(3) In case of branch, sales office or warehouse where sales are made and recorded,
corresponding community tax shall be paid to the LGU where such branch, sales office or
warehouse is located.
(4) Any person, natural or juridical, who pays community tax to a city or municipality other
than the city or municipality where his residence, or principal office in the case of juridical
persons, is located shall remain liable to pay such tax to the city or municipality concerned.
(f) Time for Payment
(1) Community tax shall accrue on the first (1st) day of January of each year and shall be paid
not later than the last day of February of each year.
(2) If a person reaches the age of eighteen (18) years or otherwise loses the benefit of
exemption on or before the last day of June, he shall be liable for the payment of community
tax on the day he reaches such age or upon the day the exemption on or before the last day of
March, he shall have twenty (20) days within which to pay the community tax without
(3) Persons who come to reside in the Philippines or reach the age of eighteen (18) years on
or after the first (1st) day of July of any year, or who cease to belong to an exempt class on or
after the same date, shall not be subject to community tax for that year.
(4) Corporations established and organized on or before the last day of June shall be liable for
the payment of community tax for that year. Corporations established and organized on or
before the last day of March shall have twenty (20) days within which to pay the community
tax without becoming delinquent. Corporations established and organized on or after the first
day of July shall not be subject to community tax for that year.
(g) Penalties for the payment If the tax is not paid within the prescribed period, there shall be
added to the unpaid amount an interest of twenty-four percent (24%) per annum from the due date
until it is paid.

B. Exemptions
Sec. 159, LGC

C. Place and time of payment of tax
Secs. 160-161, LGC

Section 160. Place of Payment. - The community tax shall be paid in the place of residence of the
individual, or in the place where the principal office of the juridical entity is located.

Section 161. Time for Payment; Penalties for Delinquency. -
(a) The community tax shall accrue on the first (1st) day of January of each year which shall be paid
not later than the last day of February of each year. If a person reaches the age of eighteen (18)
years or otherwise loses the benefit of exemption on or before the last day of June, he shall be liable
for the community tax on the day he reaches such age or upon the day the exemption ends.
However, if a person reaches the age of eighteen (18) years or loses the benefit of exemption on or
before the last day of March, he shall have twenty (20) days to pay the community tax without
Persons who come to reside in the Philippines or reach the age of eighteen (18) years on or after
the first (1st) day of July of any year, or who cease to belong to an exempt class or after the same
date, shall not be subject to the community tax for that year.
(b) Corporations established and organized on or before the last day of June shall be liable for the
community tax for that year. But corporations established and organized on or before the last day
of March shall have twenty (20) days within which to pay the community tax without becoming
delinquent. Corporations established and organized on or after the first day of July shall not be
subject to the community tax for that year.
If the tax is not paid within the time prescribed above, there shall be added to the unpaid amount an
interest of twenty-four percent (24%) per annum from the due date until it is paid.

IV. TIME, MANNER AND PLACE OF PAYMENT OF LOCAL BUSINESS TAX
A. Time of payment
1. General rule
Secs. 165-167, LGC
Section 165. Tax Period and Manner of Payment. - Unless otherwise provided in this Code, the tax
period of all local taxes, fees and charges shall be the calendar year. Such taxes, fees and charges
may be paid in quarterly installments.


Section 167. Time of Payment. - Unless otherwise provided in this Code, all local taxes, fees, and
charges shall be paid within the first twenty (20) days of January or of each subsequent quarter, as
the case may be. The sanggunian concerned may, for a justifiable reason or cause, extend the time
for payment of such taxes, fees, or charges without surcharges or penalties, but only for a period
not exceeding six (6) months.

2. In case of new ordinance levying new tax or increasing rates
Sec. 166, LGC

3. In case of retirement of business
Sec. 145, LGC
Section 145. Retirement of Business. - A business subject to tax pursuant to the preceding sections
shall, upon termination thereof, submit a sworn statement of its gross sales or receipts for the

current year. If the tax paid during the year be less than the tax due on said gross sales or receipts
of the current year, the difference shall be paid before the business is considered officially retired.

Art. 241, IRR
ARTICLE 241. Retirement of Business. (a) Any person natural or juridical, subject to the tax on
businesses under Article 233 of this Rule shall, upon termination of the business, submit a sworn
statement of the gross sales or receipts for the calendar year.
For purposes hereof, termination shall mean that business operations are stopped completely. Any
change in ownership, management and/or name of the business shall not constitute termination as
contemplated in this Article. Unless stated otherwise, assumption of the business by any new owner
or manager or registration of the same business under a new name will only be considered by the
LGU concerned for record purposes in the course of the renewal of the permit or license to operate
the business.
The local treasurer concerned shall see to it that the payment of taxes of a business is not avoided
by simulating the termination or retirement thereof. For this purpose, the following procedural
guidelines shall be strictly observed:
(1) The local treasurer shall assign every application for the termination or retirement of
business to an inspector in his office who shall go to the address of the business on record to
verify if it is really no longer operating. If the inspector finds that the business is simply
placed under a new name, manager and/or new owner, the local treasurer shall recommend
to the mayor the disapproval of the application for the
termination or retirement of said business. Accordingly, the business continues to become
liable for the payment of all taxes, fees, and charges imposed thereon under existing local tax
ordinances; and
(2) In the case of a new owner to whom the business was transferred by sale or other form of
conveyance, said new owner shall be liable to pay the tax or fee for the transfer of the
business to him if there is an existing ordinance prescribing such transfer tax.
(b) If it is found that the retirement or termination of the business is legitimate, and the tax due
therefrom be less than the tax due for the current year based on the gross sales or receipts, the
difference in the amount of the tax shall be paid before the business is considered officially retired
or terminated.
(c) The permit issued to a business retiring or terminating its operations shall be surrendered to
the local treasurer who shall forthwith cancel the same and record such cancellation in his books.

B. Manner of payment
Sec. 146, LGC
Section 146. Payment of Business Taxes. -
(a) The taxes imposed under Section 143 shall be payable for every separate or distinct
establishment or place where business subject to the tax is conducted and one line of business does
not become exempt by being conducted with some other business for which such tax has been paid.
The tax on a business must be paid by the person conducting the same.
(b) In cases where a person conducts or operates two (2) or more of the businesses mentioned in
Section 143 of this Code which are subject to the same rate of tax, the tax shall be computed on the
combined total gross sales or receipts of the said two (2) or more related businesses.
(c) In cases where a person conducts or operates two (2) or more businesses mentioned in Section
143 of this Code which are subject to different rates of tax, the gross sales or receipts of each
business shall be separately reported for the purpose of computing the tax due from each business.

Art. 242, IRR
C. Place of payment
1. Location of branch or sales outlet
Sec. 150(a), LGC

(a) For purposes of collection of the taxes under Section 143 of this Code, manufacturers,
assemblers, repackers, brewers, distillers, rectifiers and compounders of liquor, distilled spirits and
wines, millers, producers, exporters, wholesalers, distributors, dealers, contractors, banks and
other financial institutions, and other businesses, maintaining or operating branch or sales outlet
elsewhere shall record the sale in the branch or sales outlet making the sale or transaction, and the
tax thereon shall accrue and shall be paid to the municipality where such branch or sales outlet is
located. In cases where there is no such branch or sales outlet in the city or municipality where the
sale or transaction is made, the sale shall be duly recorded in the principal office and the taxes due
shall accrue and shall be paid to such city or municipality.

Art. 243, IRR
situs thereof.




products.








the manufacturer.


is located.





2. Allocation to 2 or more LGUs
Sec. 150(b) to (e), LGC
(b) The following sales allocation shall apply to manufacturers, assemblers, contractors, producers,
and exporters with factories, project offices, plants, and plantations in the pursuit of their business:
(1) Thirty percent (30%) of all sales recorded in the principal office shall be taxable by the
city or municipality where the principal office is located; and
(2) Seventy percent (70%) of all sales recorded in the principal office shall be taxable by the
city or municipality where the factory, project office, plant, or plantation is located.
(c) In case of a plantation located at a place other than the place where the factory is located, said
seventy percent (70%) mentioned in subparagraph (b) of subsection (2) above shall be divided as
follows:
(1) Sixty percent (60%) to the city or municipality where the factory is located; and
(2) Forty percent (40%) to the city or municipality where the plantation is located.
(d) In cases where a manufacturer, assembler, producer, exporter or contractor has two (2) or
more factories, project offices, plants, or plantations located in different localities, the seventy
percent (70%) sales allocation mentioned in subparagraph (b) of subsection (2) above shall be
prorated among the localities where the factories, project offices, plants, and plantations are
located in proportion to their respective volumes of production during the period for which the tax
is due.
(e) The foregoing sales allocation shall be applied irrespective of whether or not sales are made in
the locality where the factory, project office, plant, or plantation is located.

Art. 243, IRR

situs thereof.

products.

the manufacturer.



is located.

3. Sales by route trucks or vans
Art. 243(d), IRR
ARTICLE 243. Situs of the Tax. (a) Definition of Terms (d) Sales made by route trucks, vans, or
vehicles
is located.

V. ENACTMENT OF TAX ORDINANCES AND OTHER REVENUE MEASURES
A. Public hearing
Sec. 186, last proviso, LGC
Section 186. Power To Levy Other Taxes, Fees or Charges. - Local government units may exercise the
power to levy taxes, fees or charges on any base or subject not otherwise specifically enumerated
herein or taxed under the proviions of the National Internal Revenue Code, as amended, or other
applicable laws: Provided, That the taxes, fees, or charges shall not be unjust, excessive, oppressive,
confiscatory or contrary to declared national policy: Provided, further, That the ordinance
levying such taxes, fees or charges shall not be enacted without any prior public hearing
conducted for the purpose.

Sec. 187, LGC


Art. 275, IRR
ARTICLE 275. Procedure for Approval and Effectivity of Tax Ordinances and Revenue Measures.
The procedure for approval of local tax ordinances and revenue measures shall be in accordance
with the provisions of this Rule provided that public hearings shall be conducted for the purpose
prior to the enactment thereof provided further that any question on the constitutionality or
legality of tax ordinances or revenue measures may be raised on appeal within thirty (30) days
from the effectivity thereof to the Secretary of Justice who shall render a decision within sixty (60)
days from the date of receipt of the appeal provided furthermore that such appeal shall not have the
effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or
charge levied therein and provided finally that within thirty (30) days after receipt of the decision
or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the
aggrieved party may file appropriate proceedings with a court of competent jurisdiction.
All tax ordinances or revenue measures shall be numbered consecutively throughout the calendar
year and continuously from year to year, using the last two (2) digits of the calendar year in which
it is enacted, followed by denominated number. For example, an ordinance is passed in January,
1992, and it is the first ordinance for that year. The ordinance shall be denominated and numbered
as Tax Ordinance No. 92-001. The next shall be Tax Ordinance No. 92-002, Tax Ordinance No. 92-
003, and so forth.

B. Publication
Sec. 188, LGC
Section 188. Publication of Tax Ordinances and Revenue Measures. - Within ten (10) days after their
approval, certified true copies of all provincial, city, and municipal tax ordinances or revenue
measures shall be published in full for three (3) consecutive days in a newspaper of local
circulation: Provided, however, That in provinces, cities and municipalities where there are no
newspapers of local circulation, the same may be posted in at least two (2) conspicuous and
publicly accessible places.

Art. 276, IRR
ARTICLE 276. Publication of Tax Ordinances and Revenue Measures. (a) Within ten (10) days
after their approval, certified true copies of all provincial, city, and municipal tax ordinances or
revenue measures shall be published in full for three (3) consecutive days in a newspaper of local
circulation provided that in provinces, cities, and municipalities where there are no newspapers of
local circulation, the same may be posted in at least two (2) conspicuous and publicly accessible
places.
If the tax ordinance or revenue measure contains penal provisions as authorized in Article 280 of
this Rule, the gist of such tax ordinance or revenue measure shall be published in a newspaper of
general circulation within the province where the sanggunian concerned belongs. In the absence of
any newspaper of general circulation within the province, posting of such ordinance or measure

shall be made in accessible and conspicuous public places in all municipalities and cities of the
province to which the sanggunian enacting the ordinance or revenue measure belongs.
In case the effectivity of any tax ordinance or revenue measure falls on any date other than the
beginning of the quarter, the same shall be considered as falling at the beginning of the next ensuing
quarter and the taxes, fees, or charges due shall begin to accrue therefrom.

(b) The conduct of public hearings shall be governed by the following procedure:
(1) Within ten (10) days from filing of any proposed tax ordinance or revenue measure, the same
shall first be published for three (3) consecutive days in a newspaper of local circulation or shall be
posted simultaneously in at least four (4) conspicuous public places within the territorial
jurisdiction of the LGU concerned.
(2) In addition to the requirement for publication or posting, the sanggunian concerned shall cause
the sending of written notices of the proposed ordinance, enclosing a copy thereof, to the interested
or affected parties operating or doing business within the territorial jurisdiction of the LGU
concerned.
(3) The notice or notices shall specify the date or dates and venue of the public hearing or hearing.
The initial public hearing shall be held not earlier than ten (10) days from the sending out of notice
or notices, or the last day of publication, or date of posting thereof, whichever is later.
(4) At the public hearing or hearings, all affected or interested parties shall be accorded an
opportunity to appear and present or express their views, comments and recommendations, and
such public hearing or hearings shall continue until all issues have been presented and fully
deliberated upon and/or consensus is obtained, whether for or against the enactment of the
proposed tax ordinance or revenue measure.
(5) The secretary of the sanggunian concerned shall prepare the minutes of such public hearing and
shall attach to the minutes the position papers, memoranda, and other documents submitted by
those who participated.
(c) No tax ordinance or revenue measure shall be enacted or approved in the absence of a public
hearing duly conducted in the manner provided in this Article.

C. Appeal to Secretary of Justice
Sec. 187, LGC

D. Appeal to court of competent jurisdiction
Id.

E. Effect of appeal
Id.

VI. REMEDIES OF LOCAL GOVERNMENT AND TAXPAYER
A. Remedies of local government

1. Examination of taxpayers books of accounts
Sec. 171, LGC
Section 171. Examination of Books of Accounts and Pertinent Records of Businessmen by Local
Treasurer. - The provincial, city, municipal or barangay treasurer may, by himself or through any of
his deputies duly authorized in writing, examine the books, accounts, and other pertinent records of
any person, partnership, corporation, or association subject to local taxes, fees and charges in order
to ascertain. assess, and collect the correct amount of the tax, fee, or charge. Such examination shall
be made during regular business hours, only once for every tax period, and shall be certified to by
the examining official. Such certificate shall be made of record in the books of accounts of the
taxpayer examined.
In case the examination herein authorized is made by a duly authorized deputy of the local
treasurer, the written authority of the deputy concerned shall specifically state the name, address,
and business of the taxpayer whose books, accounts, and pertinent records are to be examined, the
date and place of such examination and the procedure to be followed in conducting the same.
For this purpose, the records of the revenue district office of the Bureau of Internal Revenue shall
be made available to the local treasurer, his deputy or duly authorized representative.

2. Issuance of deficiency assessment
Sec. 195, LGC
unappealable.

Sec. 194, LGC
Section 194. Periods of Assessment and Collection. -
(a) Local taxes, fees, or charges shall be assessed within five (5) years from the date they became
due. No action for the collection of such taxes, fees, or charges, whether administrative or judicial,
shall be instituted after the expiration of such period: Provided, That. taxes, fees or charges which
have accrued before the effectivity of this Code may be assessed within a period of three (3) years
from the date they became due.
(b) In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may be
assessed within ten (10) years from discovery of the fraud or intent to evade payment.
(c) Local taxes, fees, or charges may be collected within five (5) years from the date of assessment
by administrative or judicial action. No such action shall be instituted after the expiration of said
period: Provided, however, That, taxes, fees or charges assessed before the effectivity of this Code
may be collected within a period of three (3) years from the date of assessment.
(d) The running of the periods of prescription provided in the preceding paragraphs shall be
suspended for the time during which:
(1) The treasurer is legally prevented from making the assessment of collection;
(2) The taxpayer requests for a reinvestigation and executes a waiver in writing before
expiration of the period within which to assess or collect; and
(3) The taxpayer is out of the country or otherwise cannot be located.

3. Imposition of surcharge and interest
Secs. 168-169, LGC
Section 168. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges. - The sanggunian may
impose a surcharge not exceeding twenty-five (25%) of the amount of taxes, fees or charges not
paid on time and an interest at the rate not exceeding two percent (2%) per month of the unpaid
taxes, fees or charges including surcharges, until such amount is fully paid but in no case shall the
total thirty-six (36%) months.

Section 169. Interests on Other Unpaid Revenues. - Where the amount of any other revenue due a
local government unit, except voluntary contributions or donations, is not paid on the date fixed in
the ordinance, or in the contract, expressed or implied, or upon the occurrence of the event which
has given rise to its collection, there shall be collected as part of that amount an interest thereon at
the rate not exceeding two percent (2%) per month from the date it is due until it is paid, but in no
case shall the total interest on the unpaid amount or a portion thereof exceed thirty-six (36)
months.

4. Summary remedies
a. Distraint of personal property
Sec. 175, LGC
Section 175. Distraint of Personal Property. - The remedy by distraint shall proceed as follows:
(a) Seizure - Upon failure of the person owing any local tax, fee, or charge to pay the same at the
time required, the local treasurer or his deputy may, upon written notice, seize or confiscate any
personal property belonging to that person or any personal property subject to the lien in sufficient
quantity to satisfy the tax, fee, or charge in question, together with any increment thereto incident
to delinquency and the expenses of seizure. In such case, the local treasurer or his deputy shall
issue a duly authenticated certificate based upon the records of his office showing the fact of
delinquency and the amounts of the tax, fee, or charge and penalty due. Such certificate shall serve
as sufficient warrant for the distraint of personal property aforementioned, subject to the
taxpayer's right to claim exemption under the provisions of existing laws. Distrained personal
property shall be sold at public auction in the manner hereon provided for.
(b) Accounting of distrained goods. - The officer executing the distraint shall make or cause to be
made an account of the goods, chattels or effects distrained, a copy of which signed by himself shall
be left either with the owner or person from whose possession the goods, chattels or effects are
taken, or at the dwelling or place or business of that person and with someone of suitable age and
discretion, to which list shall be added a statement of the sum demanded and a note of the time and
place of sale.
(c) Publication - The officer shall forthwith cause a notification to be exhibited in not less than three
(3) public and conspicuous places in the territory of the local government unit where the distraint
is made, specifying the time and place of sale, and the articles distrained. The time of sale shall not
be less than twenty (20) days after the notice to the owner or possessor of the property as above
specified and the publication or posting of the notice. One place for the posting of the notice shall be
at the office of the chief executive of the local government unit in which the property is distrained.
(d) Release of distrained property upon payment prior to sale - If at any time prior to the
consummation of the sale, all the proper charges are paid to the officer conducting the sale, the
goods or effects distrained shall be restored to the owner.
(e) Procedure of sale - At the time and place fixed in the notice, the officer conducting the sale shall
sell the goods or effects so distrained at public auction to the highest bidder for cash. Within five (5)
days after the sale, the local treasurer shall make a report of the proceedings in writing to the local
chief executive concerned.
Should the property distrained be not disposed of within one hundred and twenty (120) days from

the date of distraint, the same shall be considered as sold to the local government unit concerned
for the amount of the assessment made thereon by the Committee on Appraisal and to the extent of
the same amount, the tax delinquencies shall be cancelled.
Said Committee on Appraisal shall be composed of the city or municipal treasurer as chairman, with
a representative of the Commission on Audit and the city or municipal assessor as members.
(f) Disposition of proceeds - The proceeds of the sale shall be applied to satisfy the tax, including the
surcharges, interest, and other penalties incident to delinquency, and the expenses of the distraint
and sale. The balance over and above what is required to pay the entire claim shall be returned to
the owner of the property sold. The expenses chargeable upon the seizure and sale shall embrace
only the actual expenses of seizure and preservation of the property pending the sale, and no
charge shall be imposed for the services of the local officer or his deputy. Where the proceeds of the
sale are insufficient to satisfy the claim, other property may, in like manner, be distrained until the
full amount due, including all expenses, is collected.

b. Levy on real property
Secs. 176, 178-182, LGC
Section 176. Levy on Real Property. - After the expiration of the time required to pay the delinquent
tax, fee, or charge, real property may be levied on before, simultaneously, or after the distraint of
personal property belonging to the delinquent taxpayer. To this end, the provincial, city or
municipal treasurer, as the case may be, shall prepare a duly authenticated certificate showing the
name of the taxpayer and the amount of the tax, fee, or charge, and penalty due from him. Said
certificate shall operate with the force of a legal execution throughout the Philippines. Levy shall be
effected by writing upon said certificate the description of the property upon which levy is made. At
the same time, written notice of the levy shall be mailed to or served upon the assessor and the
Register of Deeds of the province or city where the property is located who shall annotate the levy
on the tax declaration and certificate of title of the property, respectively, and the delinquent
taxpayer or, if he be absent from the Philippines, to his agent or the manager of the business in
respect to which the liability arose, or if there be none, to the occupant of the property in question.
In case the levy on real property is not issued before or simultaneously with the warrant of
distraint on personal property, and the personal property of the taxpayer is not sufficient to satisfy
his delinquency, the provincial, city or municipal treasurer, as the case may be, shall within thirty
(30) days after execution of the distraint, proceed with the levy on the taxpayer's real property.
A report on any levy shall, within ten (10) days after receipt of the warrant, be submitted by the
levying officer to the sanggunian concerned.

Section 178. Advertisement and Sale. - Within thirty (30) days after the levy, the local treasurer
shall proceed to publicly advertise for sale or auction the property or a usable portion thereof as
may be necessary to satisfy the claim and cost of sale; and such advertisement shall cover a period
of at least thirty (30) days. It shall be effected by posting a notice at the main entrance of the
municipal building or city hall, and in a public and conspicuous place in the barangay where the real
property is located, and by publication once a week for three (3) weeks in a newspaper of general
circulation in the province, city or municipality where the property is located. The advertisement
shall contain the amount of taxes, fees or charges, and penalties due thereon, and the time and place
of sale, the name of the taxpayer against whom the taxes, fees, or charges are levied, and a short
description of the property to be sold. At any time before the date fixed for the sale, the taxpayer
may stay they proceedings by paying the taxes, fees, charges, penalties and interests. If he fails to do
so, the sale shall proceed and shall be held either at the main entrance of the provincial, city or
municipal building, or on the property to be sold, or at any other place as determined by the local
treasurer conducting the sale and specified in the notice of sale.
sale to the sanggunian concerned, and which shall form part of his records. After consultation with
the sanggunian, the local treasurer shall make and deliver to the purchaser a certificate of sale,

showing the proceeding of the sale, describing the property sold, stating the name of the purchaser
and setting out the exact amount of all taxes, fees, charges, and related surcharges, interests, or
penalties: Provided, however, That any excess in the proceeds of the sale over the claim and cost of
sales shall be turned over to the owner of the property.
costs of collection by means of the remedies provided for in this Title, including the preservation or
transportation in case of personal property, and the advertisement and subsequent sale, in cases of
personal and real property including improvements thereon.

Section 179. Redemption of Property Sold. - Within one (1) year from the date of sale, the
delinquent taxpayer or his representative shall have the right to redeem the property upon
payment to the local treasurer of the total amount of taxes, fees, or charges, and related surcharges,
interests or penalties from the date of delinquency to the date of sale, plus interest of not more than
two percent (2%) per month on the purchase price from the date of purchase to the date of
redemption. Such payment shall invalidate the certificate of sale issued to the purchaser and the
owner shall be entitled to a certificate of redemption from the provincial, city or municipal
treasurer or his deputy.
The provincial, city or municipal treasurer or his deputy, upon surrender by the purchaser of the
certificate of sale previously issued to him, shall forthwith return to the latter the entire purchase
price paid by him plus the interest of not more than two percent (2%) per month herein provided
for, the portion of the cost of sale and other legitimate expenses incurred by him, and said property
thereafter shall be free from the lien of such taxes, fees, or charges, related surcharges, interests,
and penalties.
The owner shall not, however, be deprived of the possession of said property and shall be entitled
to the rentals and other income thereof until the expiration of the time allowed for its redemption.

Section 180. Final Deed to Purchaser. - In case the taxpayer fails to redeem the property as
provided herein, the local treasurer shall execute a deed conveying to the purchaser so much of the
property as has been sold, free from liens of any taxes, fees, charges, related surcharges, interests,
and penalties. The deed shall succinctly recite all the proceedings upon which the validity of the
sale depends.

is no bidder for the real property advertised for sale as provided herein, or if the highest bid is for
an amount insufficient to pay the taxes, fees, or charges, related surcharges, interests, penalties and
costs, the local treasurer conducting the sale shall purchase the property in behalf of the local
government unit concerned to satisfy the claim and within two (2) days thereafter shall make a
report of his proceedings which shall be reflected upon the records of his office. It shall be the duty
of the Registrar of Deeds concerned upon registration with his office of any such declaration of
forfeiture to transfer the title of the forfeited property to the local government unit concerned
without the necessity of an order from a competent court.
redeem the property by paying to the local treasurer the full amount of the taxes, fees, charges, and
related surcharges, interests, or penalties, and the costs of sale. If the property is not redeemed as
provided herein, the ownership thereof shall be fully vested on the local government unit
concerned.



c. Further distraint and levy
Sec. 184, LGC
Section 184. Further Distraint or Levy. - The remedies by distraint and levy may be repeated if
necessary until the full amount due, including all expenses, is collected.

5. Judicial remedy (Collection)
Sec. 183, LGC
Section 183. Collection of Delinquent Taxes, Fees, Charges or other Revenues through Judicial
Action. - The local government unit concerned may enforce the collection of delinquent taxes, fees,
charges or other revenues by civil action in any court of competent jurisdiction. The civil action
shall be filed by the local treasurer within the period prescribed in Section 194 of this Code.

B. Remedies of taxpayer
1. Protest of assessment
Sec. 195, LGC
unappealable.

Art. 285, IRR
ARTICLE 285. Protest on Assessment. When the local treasurer or his duly authorized
representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of
assessment stating the nature of the tax, fee, or charge the amount of deficiency, the surcharges,
interests, and penalties. Within sixty (60) days from receipt of the notice of assessment, the
taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise,
the assessment shall become final
and executory. The local treasurer shall decide the protest within sixty (60) days from the time of
its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a
notice cancelling wholly or partially the assessment. If the local treasurer finds the assessment to be
wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer.
The taxpayer shall have thirty (30) days from receipt of the denial of the protest or from the lapse
of the sixty-day period prescribed in this Article within which to appeal with the court of competent
jurisdiction; otherwise, the assessment becomes conclusive and unappealable.

2. Claim for refund or tax credit
Sec. 196, LGC
Section 196. Claim for Refund of Tax Credit. - No case or proceeding shall be maintained in any
court for the recovery of any tax, fee, or charge erroneously or illegally collected until a written
claim for refund or credit has been filed with the local treasurer. No case or proceeding shall be
entertained in any court after the expiration of two (2) years from the date of the payment of such
tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit.

Art. 286, IRR
ARTICLE 286. Claim for Refund or Tax Credit. All taxpayers entitled to a refund or tax credit
provided in this Rule shall file with the local treasurer a claim in writing duly supported by
evidence of payment (e.g., official receipts, tax clearance, and such other proof evidencing
overpayment within two (2) years from payment of the tax, fee, or charge. No case or proceeding
shall be entertained in any court without this claim in writing, and after the expiration of two (2)
years from the date of payment of such tax, fee, or charge, or from the date the taxpayer is entitled
to a refund or tax credit.
The tax credit granted a taxpayer shall not be refundable in cash but shall only be applied to future
tax obligations of the same taxpayer for the same business. If a taxpayer has paid in full the tax due
for the entire year and he shall have no other tax obligation payable to the LGU concerned during
the year, his tax credits, if any, shall be applied in full during the first quarter of the next calendar
year on the tax due from him for the same business of said calendar year.
Any unapplied balance of the tax credit shall be refunded in cash in the event that he terminates
operation of the business involved within the locality.

VII. AUTHORITY OF LGUS TO GRANT TAX EXEMPTION PRIVILEGES
Sec. 192, LGC and Art. 282, IRR
Section 192. Authority to Grant Tax Exemption Privileges. - Local government units may, through
ordinances duly approved, grant tax exemptions, incentives or reliefs under such terms and
conditions as they may deem necessary.

ARTICLE 282. Authority to Grant Tax Exemption Privileges or Incentives. (a) While sanggunians
may grant tax exemption, tax incentive, or tax relief, such grant shall not apply to regulatory fees
which are levied under the police power of LGUs. Tax exemptions shall be conferred through the
issuance of a tax exemption certificate, which shall be non-transferable.
(b) The sanggunians granting tax exemptions, tax incentives and tax reliefs may be guided by the
following:
(1) On the grant of tax exemptions or tax reliefs:
(i) Tax exemption or tax relief may be granted in cases of natural calamities, civil disturbance,
general failure of crops, or adverse economic conditions such as substantial decrease in the prices
of agricultural or agri-based products;
(ii) The grant of exemption or relief shall be through an ordinance.
(iii) Any exemption or relief granted to a type or kind of business shall apply to all business
similarly situated; and
(iv) Any exemption or relief granted shall take effect only during the next calendar year for a period
not exceeding twelve (12) months as may be provided in the ordinance. In the case of shared
revenues, the exemption or relief shall only extend to the LGU granting such exemption or relief.
(2) On the grant of tax incentives:
(i) The tax incentive shall be granted only to new investments in the locality and the ordinance shall
prescribe the terms and conditions therefore;
(ii) The grant of the tax incentive shall be for a definite period not exceeding one (1) calendar year;
(iii) The grant of tax incentives shall be by ordinance passed prior to the first (1st) day of January of
any year; and
(iv) Any tax incentive granted to a type or kind of business shall apply to all businesses similarly
situated.

See also Sec. 193, LGC and Art. 283, IRR re. withdrawal of existing tax exemption Privileges

Section 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or

juridical, including government-owned or controlled corporations, except local water districts,
cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, are hereby withdrawn upon the effectivity of this Code.

ARTICLE 283. Withdrawal of Tax Exemption Privileges or Incentives. Unless otherwise provided
in this Rule, beginning January 1, 1992, all local tax exemption privileges or incentives granted to
and presently enjoyed by any person, whether natural or juridical, including GOCCs, are considered
withdrawn, except the following:
(a) Local water districts;
(b) Cooperatives duly registered under RA 6938, otherwise known as the Cooperative Code of the
Philippines;
(c) Non-stock and non-profit hospitals and educational institutions;
(d) Business enterprises certified by the Board of Investments (BOI) as pioneer or non-pioneer for
a period of six (6) and four (4) years, respectively, from the date of registration;
(e) Business entity, association, or cooperatives registered under RA 6810; and
(f) Printer and/or publisher of books or other reading materials prescribed by DECS as school texts
or references, insofar as receipts from the printing and/or publishing thereof are concerned.
Unless otherwise repealed by law, business and economic enterprises operating within export
processing zones administered by the Export Processing Zone Authority shall continue to enjoy the
tax exemption privileges and tax incentives granted in PD 66, as amended.

REAL PROPERTY TAXATION
I. GENERAL PRINCIPLES AND DEFINITIONS
Sec. 198, LGC
Sec. 199, LGC

Section 198. Fundamental Principles. - The appraisal, assessment, levy and collection of real
property tax shall be guided by the following fundamental principles:
(a) Real property shall be appraised at its current and fair market value;
(b) Real property shall be classified for assessment purposes on the basis of its actual use;
(c) Real property shall be assessed on the basis of a uniform classification within each local
government unit;
(d) The appraisal, assessment, levy and collection of real property tax shall not be let to any private
person; and
(e) The appraisal and assessment of real property shall be equitable.

Section 199. Definitions. - When used in this Title:
(a) "Acquisition Cost" for newly-acquired machinery not yet depreciated and appraised within the
year of its purchase, refers to the actual cost of the machinery to its present owner, plus the cost of
transportation, handling, and installation at the present site;
(b) "Actual Use" refers to the purpose for which the property is principally or predominantly
utilized by the person in possession thereof;
(c) "Ad Valorem Tax" is a levy on real property determined on the basis of a fixed proportion of the
(d) "Agricultural Land" is land devoted principally to the planting of trees, raising of crops, livestock
and poultry, dairying, salt making, inland fishing and similar aquacultural activities, and other
agricultural activities, and is not classified as mineral, timber, residential, commercial or industrial
land;
(e) "Appraisal" is the act or process of determining the value of property as of a specified date for a
specific purpose;
(f) "Assessment" is the act or process of determining the value of a property, or proportion thereof
subject to tax, including the discovery, listing, classification, and appraisal of properties;

(g) "Assessment Level" is the percentage applied to the fair market value to determine the taxable
(h) "Assessed Value" is the fair market value of the real property multiplied by the assessment level.
It is synonymous to taxable value;
(i) "Commercial Land" is land devoted principally for the object of profit and is not classified as
agricultural, industrial, mineral, timber, or residential land;
(j) "Depreciated Value" is the value remaining after deducting depreciation from the acquisition
cost;
(k) "Economic Life" is the estimated period over which it is anticipated that a machinery or
equipment may be profitably utilized;
(l) "Fair Market Value" is the price at which a property may be sold by a seller who is not compelled
to sell and bought by a buyer who is not compelled to buy;
(m) "Improvement" is a valuable addition made to a property or an amelioration in its condition,
amounting to more than a mere repair or replacement of parts involving capital expenditures and
labor, which is intended to enhance its value, beauty or utility or to adapt it for new or further
purposes;
(n) "Industrial Land" is land devoted principally to industrial activity as capital investment and is
not classified as agricultural, commercial, timber, mineral or residential land;
(o) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances
or apparatus which may or may not be attached, permanently or temporarily, to the real property.
It includes the physical facilities for production, the installations and appurtenant service facilities,
those which are mobile, self-powered or self-propelled, and those not permanently attached to the
real property which are actually, directly, and exclusively used to meet the needs of the particular
industry, business or activity and which by their very nature and purpose are designed for, or
necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes;
(p) "Mineral Lands" are lands in which minerals, metallic or non-metallic, exist in sufficient quantity
or grade to justify the necessary expenditures to extract and utilize such materials;
(q) "Reassessment" is the assigning of new assessed values to property, particularly real estate, as
the result of a general, partial, or individual reappraisal of the property;
(r) "Remaining Economic Life" is the period of time expressed in years from the date of appraisal to
the date when the machinery becomes valueless;
(s) "Remaining Value" is the value corresponding to the remaining useful life of the machinery;
(t) "Replacement or Reproduction Cost" is the cost that would be incurred on the basis of current
prices, in acquiring an equally desirable substitute property, or the cost of reproducing a new
replica of the property on the basis of current prices with the same or closely similar material; and
(u) "Residential Land" is land principally devoted to habitation.
II. REAL PROPERTY TAX AND ADDITIONAL OR SPECIAL LEVIES
A. Basic real property tax
Sec. 233, LGC
Section 233. Rates of Levy. - A province or city or a municipality within the Metropolitan Manila
Area shall fix a uniform rate of basic real property tax applicable to their respective localities as
follows:
(a) In the case of a province, at the rate not exceeding one percent (1%) of the assessed value of real
property; and
(b) In the case of a city or a municipality within the Metropolitan Manila Area, at the rate not
exceeding two percent (2%) of the assessed value of real property.

B. Special Education Fund (SEF)
Sec. 235, LGC
Section 235. Additional Levy on Real Property for the Special Education Fund. - A province or city, or
a municipality within the Metropolitan Manila Area, may levy and collect an annual tax of one
percent (1%) on the assessed value of real property which shall be in addition to the basic real

property tax. The proceeds thereof shall exclusively accrue to the Special Education Fund (SEF).

C. Tax on idle lands
Secs. 236-237, LGC

Section 236. Additional Ad Valorem Tax on Idle Lands. - A province or city, or a municipality within
the Metropolitan Manila Area, may levy an annual tax on idle lands at the rate not exceeding five
percent (5%) of the assessed value of the property which shall be in addition to the basic real
property tax.

Section 237. Idle Lands, Coverage. - For purposes of real property taxation, idle lands shall include
the following:
(a) Agricultural lands, more than one (1) hectare in area, suitable for cultivation, dairying, inland
fishery, and other agricultural uses, one-half (1/2) of which remain uncultivated or unimproved by
the owner of the property or person having legal interest therein. Agricultural lands planted to
permanent or perennial crops with at least fifty (50) trees to a hectare shall not be considered idle
lands. Lands actually used for grazing purposes shall likewise not be considered idle lands.
(b) Lands, other than agricultural, located in a city or municipality, more than one thousand (1,000)
square meters in area one-half (1/2) of which remain unutilized or unimproved by the owner of the
property or person having legal interest therein.
Regardless of land area, this Section shall likewise apply to residential lots in subdivisions duly
approved by proper authorities, the ownership of which has been transferred to individual owners,
who shall be liable for the additional tax: Provided, however, That individual lots of such
subdivisions, the ownership of which has not been transferred to the buyer shall be considered as
part of the subdivision, and shall be subject to the additional tax payable by subdivision owner or
operator.

D. Special levy due to improvements
Secs. 240-243, LGC

Section 240. Special Levy by Local Government Units. - A province, city or municipality may impose
a special levy on the lands comprised within its territorial jurisdiction specially benefited by public
works projects or improvements funded by the local government unit concerned: Provided,
however, That the special levy shall not exceed sixty percent (60%) of the actual cost of such
projects and improvements, including the costs of acquiring land and such other real property in
connection therewith: Provided, further, That the special levy shall not apply to lands exempt from
basic real property tax and the remainder of the land portions of which have been donated to the
local government unit concerned for the construction of such projects or improvements.

Section 241. Ordinance Imposing a Special Levy. - A tax ordinance imposing a special levy shall
describe with reasonable accuracy the nature, extent, and location of the public works projects or
improvements to be undertaken, state the estimated cost thereof, specify the metes and bounds by
monuments and lines and the number of annual installments for the payment of the special levy
which in no case shall be less than five (5) nor more than ten (10) years. The sanggunian concerned
shall not be obliged, in the apportionment and computation of the special levy, to establish a
uniform percentage of all lands subject to the payment of the tax for the entire district, but it may
fix different rates for different parts or sections thereof, depending on whether such land is more or
less benefited by proposed work.

Section 242. Publication of Proposed Ordinance Imposing a Special Levy. - Before the enactment of
an ordinance imposing a special levy, the sanggunian concerned shall conduct a public hearing
thereon; notify in writing the owners of the real property to be affected or the persons having legal

interest therein as to the date and place thereof and afford the latter the opportunity to express
their positions or objections relative to the proposed ordinance.

Section 243. Fixing the Amount of Special Levy. - The special levy authorized herein shall be
apportioned, computed, and assessed according to the assessed valuation of the lands affected as
shown by the books of the assessor concerned, or its current assessed value as fixed by said
assessor if the property does not appear of record in his books. Upon the effectivity of the
ordinance imposing special levy, the assessor concerned shall forthwith proceed to determine the
annual amount of special levy assessed against each parcel of land comprised within the area
especially benefited and shall send to each landowner a written notice thereof by mail, personal
service or publication in appropriate cases.

III. EXEMPTIONS FROM REAL PROPERTY TAX
Sec. 234, LGC
Section 234. Exemptions from Real Property Tax. - The following are exempted from payment of the
real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person;
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-
profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and
exclusively used for religious, charitable or educational purposes;
(c) All machineries and equipment that are actually, directly and exclusively used by local water
districts and government owned or controlled corporations engaged in the supply and distribution
of water and/or generation and transmission of electric power;
(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938;
and
(e) Machinery and equipment used for pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property tax previously granted to,
or presently enjoyed by, all persons, whether natural or juridical, including all government-owned
or controlled corporations are hereby withdrawn upon the effectivity of this Code.

Light Rail Transit Authority v. CBAA, 342 SCRA 692 (2000)
IV. PAYMENT OF REAL PROPERTY TAX AND SPECIAL LEVIES
A. Date of accrual
Sec. 246, LGC

Sec. 245, LGC

B. Payment on installment
Sec. 250, LGC
Section 250. Payment of Real Property Taxes in Installments. - The owner of the real property or the
person having legal interest therein may pay the basic real property tax and the additional tax for
Special Education Fund (SEF) due thereon without interest in four (4) equal installments; the first
installment to be due and payable on or before March Thirty-first (31st); the second installment, on
or before June Thirty (30); the third installment, on or before September Thirty (30); and the last
installment on or before December Thirty-first (31st), except the special levy the payment of which
shall be governed by ordinance of the sanggunian concerned.

The date for the payment of any other tax imposed under this Title without interest shall be
prescribed by the sanggunian concerned.
Payments of real property taxes shall first be applied to prior years delinquencies, interests, and
penalties, if any, and only after said delinquencies are settled may tax payments be credited for the
current period.

C. Discount for Advance Payment
Sec. 251, LGC
Section 251. Tax Discount for Advanced Prompt Payment. - If the basic real property tax and the
additional tax accruing to the Special Education Fund (SEF) are paid in advance in accordance with
the prescribed schedule of payment as provided under Section 250, the sanggunian concerned may
grant a discount not exceeding twenty percent (20%) of the annual tax due.

V. APPRAISAL AND ASSESSMENT OF REAL PROPERTY
A. Appraisal
Sec. 201, LGC (Real Property)
Section 201. Appraisal of Real Property. - All real property, whether taxable or exempt, shall be
appraised at the current and fair market value prevailing in the locality where the property is
situated. The Department of Finance shall promulgate the necessary rules and regulations for the
classification, appraisal, and assessment of real property pursuant to the provisions of this Code.

Secs. 224-225, LGC (Machineries)
Section 224. Appraisal and Assessment of Machinery. -
(a) The fair market value of a brand-new machinery shall be the acquisition cost. In all other cases,
the fair market value shall be determined by dividing the remaining economic life of the machinery
by its estimated economic life and multiplied by the replacement or reproduction cost.
(b) If the machinery is imported, the acquisition cost includes freight, insurance, bank and other
charges, brokerage, arrastre and handling, duties and taxes, plus charges at the present site. The
cost in foreign currency of imported machinery shall be converted to peso cost on the basis of
foreign currency exchange rates as fixed by the Central Bank.

Section 225. Depreciation Allowance for Machinery. - For purposes of assessment, a depreciation
allowance shall be made for machinery at a rate not exceeding five percent (5%) of its original cost
or its replacement or reproduction cost, as the case may be, for each year of use: Provided,
however, That the remaining value for all kinds of machinery shall be fixed at not less than twenty
percent (20%) of such original, replacement, or reproduction cost for so long as the machinery is
useful and in operation.

1. Voluntary
Secs. 202-203, LGC
Section 202. Declaration of real Property by the Owner or Administrator. - It shall be the duty of all
persons, natural or juridical, owning or administering real property, including the improvements
therein, within a city or municipality, or their duly authorized representative, to prepare, or cause
to be prepared, and file with the provincial, city or municipal assessor, a sworn statement declaring
the true value of their property, whether previously declared or undeclared, taxable or exempt,
which shall be the current and fair market value of the property, as determined by the declarant.
Such declaration shall contain a description of the property sufficient in detail to enable the
assessor or his deputy to identify the same for assessment purposes. The sworn declaration of real
property herein referred to shall be filed with the assessor concerned once every three (3) years
during the period from January first (1st) to June thirtieth (30th) commencing with the calendar
year 1992.


Section 203. Duty of Person Acquiring Real Property or Making Improvement Thereon. - It shall also
be the duty of any person, or his authorized representative, acquiring at any time real property in
any municipality or city or making any improvement on real property, to prepare, or cause to be
prepared, and file with the provincial, city or municipal assessor, a sworn statement declaring the
true value of subject property, within sixty (60) days after the acquisition of such property or upon
completion or occupancy of the improvement, whichever comes earlier.
Section 208. Notification of Transfer of Real Property Ownership. - Any person who shall transfer
real property ownership to another shall notify the provincial, city or municipal assessor concerned
within sixty (60) days from the date of such transfer. The notification shall include the mode of
transfer, the description of the property alienated, the name and address of the transferee.

2. Involuntary
Sec. 204, LGC
Section 204. Declaration of Real Property by the Assessor. - When any person, natural or juridical,
by whom real property is required to be declared under Section 202 hereof, refuses or fails for any
reason to make such declaration within the time prescribed, the provincial, city or municipal
assessor shall himself declare the property in the name of the defaulting owner, if known, or against
an unknown owner, as the case may be, and shall assess the property for taxation in accordance
with the provision of this Title. No oath shall be required of a declaration thus made by the
provincial, city or municipal assessor.

Section 213. Authority of Assessor to Take Evidence. - For the purpose of obtaining information on
which to base the market value of any real property, the assessor of the province, city or
municipality or his deputy may summon the owners of the properties to be affected or persons
having legal interest therein and witnesses, administer oaths, and take deposition concerning the
property, its ownership, amount, nature, and value.

B. Assessment
1. Classifying real property
Sec. 217, LGC
Section 217. Actual Use of Real Property as Basis for Assessment. - Real property shall be classified,
valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and
whoever uses it.

Secs. 215-216, LGC
Section 215. Classes of Real Property for Assessment Purposes. - For purposes of assessment, real
property shall be classified as residential, agricultural, commercial, industrial, mineral, timberland
or special.
The city or municipality within the Metropolitan Manila Area, through their respective sanggunian,
shall have the power to classify lands as residential, agricultural, commercial, industrial, mineral,
timberland, or special in accordance with their zoning ordinances.

Section 216. Special Classes of Real Property. - All lands, buildings, and other improvements
thereon actually, directly and exclusively used for hospitals, cultural, or scientific purposes, and
those owned and used by local water districts, and government-owned or controlled corporations
rendering essential public services in the supply and distribution of water and/or generation and
transmission of electric power shall be classified as special.

2. Assessment levels

Sec. 218, LGC
Section 218. Assessment Levels. - The assessment levels to be applied to the fair market value of
real property to determine its assessed value shall be fixed by ordinances of the sangguniang
panlalawigan, sangguniang panlungsod or sangguniang bayan of a municipality within the
Metropolitan Manila Area, at the rates not exceeding the following:
(a) On Lands:
CLASS ASSESSMENT LEVELS
Residential 20%
Agricultural 40%
Commercial 50%
Industrial 50%
Mineral 50%
Timberland 20%
(b) On Buildings and Other Structures:
<td </td
(1) Residential Fair market Value
P175,000.00 0%
P175,000.00 300,000.00 10%
300,000.00 500,000.00 20%
500,000.00 750,000.00 25%
750,000.00 1,000,000.00 30%
1,000,000.00 2,000,000.00 35%
2,000,000.00 5,000,000.00 40%
5,000,000.00 10,000,000.00 50%
10,000,000.00 60%
(2) Agricultural Fair Market Value
P300,000.00 25%
P300,000.00 500,000.00 30%
500,000.00 750,000.00 35%
750,000.00 1,000,000.00 40%
1,000,000.00 2,000,000.00 45%
2,000,000.00 50%
(3) Commercial / Industrial Fair Market Value
P300,000.00 30%
P300,000.00 500,000.00 35%
500,000.00 750,000.00 40%
750,000.00 1,000,000.00 50%
1,000,000.00 2,000,000.00 60%
2,000,000.00 5,000,000.00 70%
5,000,000.00 10,000,000.00 75%
10,000,000.00 80%
(4) Timberland Fair Market Value
P300,000.00 45%
P300,000.00 500,000.00 50%
500,000.00 750,000.00 55%
750,000.00 1,000,000.00 60%
5,000,000.00 2,000,000.00 65%
2,000,000.00 70%

(c) On Machineries
Class Assessment Levels
Agricultural 40%
Residential 50%
Commercial 80%
Industrial 80%
(d) On Special Classes: The assessment levels for all lands buildings, machineries and other
improvements;
Actual Use Assessment Level
Cultural 15%
Scientific 15%
Hospital 15%
Local water districts 10%
Government-owned or controlled corporations engaged in the supply and distribution of water
and/or generation and transmission of electric power 10%

3. General revision
Sec. 219, LGC
Section 219. General Revision of Assessment and Property Classification. - The provincial, city or
municipal assessor shall undertake a general revision of real property assessments within two (2)
years after the effectivity of this Code and every three (3) years thereafter.

Art. 310, IRR
ARTICLE 310. General Revision of Assessments and Property Classification. (a) The provincial,
city, or municipal assessor shall undertake a general revision of real property assessment within
two (2) years after the effectivity of the Code and every three (3) years thereafter.
(b) For this purpose, the provincial assessors, the city assessors, and the municipal assessors of
MMA shall prepare the schedule of fair market values for the different kinds and classes of real
property located within their respective territorial jurisdictions within one (1) year from the
effectivity of the Code in accordance with such rules and regulations issued by DOF.
(c) The general revision of assessments and property classification shall commence upon the
enactment of an ordinance by the sanggunian concerned adopting the schedule of fair market
values but not later than two (2) years from the effectivity of the Code. Thereafter, the provincial,
city, or municipal assessor shall undertake the general revision of real property assessment and
property classification once every three (3) years.

4. Reassessment
Sec. 220, LGC
Section 220. Valuation of Real Property. - In cases where (a) real property is declared and listed for
taxation purposes for the first time; (b) there is an ongoing general revision of property
classification and assessment; or (c) a request is made by the person in whose name the property is
declared, the provincial, city or municipal assessor or his duly authorized deputy shall, in
accordance with the provisions of this Chapter, make a classification, appraisal and assessment or
taxpayer's valuation thereon: Provided, however, That the assessment of real property shall not be
increased oftener than once every three (3) years except in case of new improvements substantially
increasing the value of said property or of any change in its actual use.

Sec. 221, LGC
Section 221. Date of Effectivity of Assessment or Reassessment. - All assessments or reassessments
made after the first (1st) day of January of any year shall take effect on the first (1st) day of January
of the succeeding year: Provided, however, That the reassessment of real property due to its partial

or total destruction, or to a major change in its actual use, or to any great and sudden inflation or
deflation of real property values, or to the gross illegality of the assessment when made or to any
other abnormal cause, shall be made within ninety (90) days from the date any such cause or
causes occurred, and shall take effect at the beginning of the quarter next following the
reassessment.

VI. REMEDIES OF LOCAL GOVERNMENT
A. Posting of notice of delinquency
Sec. 254, LGC
Section 254. Notice of Delinquency in the Payment of the Real Property Tax. -
(a) When the real property tax or any other tax imposed under this Title becomes delinquent, the
provincial, city or municipal treasurer shall immediately cause a notice of the delinquency to be
posted at the main hall and in a publicly accessible and conspicuous place in each barangay of the
local government unit concerned. The notice of delinquency shall also be published once a week for
two (2) consecutive weeks, in a newspaper of general circulation in the province, city, or
municipality.
(b) Such notice shall specify the date upon which the tax became delinquent and shall state that
personal property may be distrained to effect payment. It shall likewise state that any time before
the distraint of personal property, payment of the tax with surcharges, interests and penalties may
be made in accordance with the next following Section, and unless the tax, surcharges and penalties
are paid before the expiration of the year for which the tax is due except when the notice of
assessment or special levy is contested administratively or judicially pursuant to the provisions of
Chapter 3, Title II, Book II of this Code, the delinquent real property will be sold at public auction,
and the title to the property will be vested in the purchaser, subject, however, to the right of the
delinquent owner of the property or any person having legal interest therein to redeem the
property within one (1) year from the date of sale.

B. Imposition of interest
Sec. 255, LGC
Section 255. Interests on Unpaid Real Property Tax. - In case of failure to pay the basic real property
tax or any other tax levied under this Title upon the expiration of the periods as provided in Section
250, or when due, as the case may be, shall subject the taxpayer to the payment of interest at the
rate of two percent (2%) per month on the unpaid amount or a fraction thereof, until the
delinquent tax shall have been fully paid: Provided, however, That in no case shall the total interest
on the unpaid tax or portion thereof exceed thirty-six (36) months.

C. Administrative remedies
Secs. 256-257, LGC


Secs. 258-265, LGC
Section 258. Levy on Real Property. - After the expiration of the time required to pay the basic real
property tax or any other tax levied under this Title, real property subject to such tax may be levied
upon through the issuance of a warrant on or before, or simultaneously with, the institution of the

civil action for the collection of the delinquent tax. The provincial or city treasurer, or a treasurer of
a municipality within the Metropolitan Manila Area, as the case may be, when issuing a warrant of
levy shall prepare a duly authenticated certificate showing the name of the delinquent owner of the
property or person having legal interest therein, the description of the property, the amount of the
tax due and the interest thereon. The warrant shall operate with the force of a legal execution
throughout the province, city or a municipality, within the Metropolitan Manila Area. The warrant
shall be mailed to or served upon the delinquent owner of the real property or person having legal
interest therein, or in case he is out of the country or cannot be located, the administrator or
occupant of the property. At the same time, written notice of the levy with the attached warrant
shall be mailed to or served upon the assessor and the Registrar of Deeds of the province, city or
municipality within the Metropolitan Manila Area where the property is located, who shall annotate
the levy on the tax declaration and certificate of title of the property, respectively.
The levying officer shall submit a report on the levy to the sanggunian concerned within ten (10)
days after receipt of the warrant by the owner of the property or person having legal interest
therein.

Section 259. Penalty for Failure to Issue and Execute Warrant. - Without prejudice to criminal
prosecution under the Revised Penal Code and other applicable laws, any local treasurer or his
deputy who fails to issue or execute the warrant of levy within one (1) year from the time the tax
becomes delinquent or within thirty (30) days from the date of the issuance thereof, or who is
found guilty of abusing the exercise thereof in an administrative or judicial proceeding shall be
dismissed from the service.

Section 260. Advertisement and Sale. - Within thirty (30) days after service of the warrant of levy,
the local treasurer shall proceed to publicly advertise for sale or auction the property or a usable
portion thereof as may be necessary to satisfy the tax delinquency and expenses of sale. The
advertisement shall be effected by posting a notice at the main entrance of the provincial, city or
municipal building, and in a publicly accessible and conspicuous place in the barangay where the
real property is located, and by publication once a week for two (2) weeks in a newspaper of
general circulation in the province, city or municipality where the property is located. The
advertisement shall specify the amount of the delinquent tax, the interest due thereon and expenses
of sale, the date and place of sale, the name of the owner of the real property or person having legal
interest therein, and a description of the property to be sold. At any time before the date fixed for
the sale, the owner of the real property or person having legal interest therein may stay the
proceedings by paying the delinquent tax, the interest due thereon and the expenses of sale. The
sale shall be held either at the main entrance of the provincial, city or municipal building, or on the
property to be sold, or at any other place as specified in the notice of the sale.
sale to the sanggunian concerned, and which shall form part of his records. The local treasurer shall
likewise prepare and deliver to the purchaser a certificate of sale which shall contain the name of
the purchaser, a description of the property sold, the amount of the delinquent tax, the interest due
thereon, the expenses of sale and a brief description of the proceedings: Provided, however, That
proceeds of the sale in excess of the delinquent tax, the interest due thereon, and the expenses of
sale shall be remitted to the owner of the real property or person having legal interest therein.
costs of collection thru the remedies provided for in this Title, including the expenses of
advertisement and sale.

Section 261. Redemption of Property Sold. - Within one (1) year from the date of sale, the owner of
the delinquent real property or person having legal interest therein, or his representative, shall
have the right to redeem the property upon payment to the local treasurer of the amount of the
delinquent tax, including the interest due thereon, and the expenses of sale from the date of

delinquency to the date of sale, plus interest of not more than two percent (2%) per month on the
purchase price from the date of sale to the date of redemption. Such payment shall invalidate the
certificate of sale issued to the purchaser and the owner of the delinquent real property or person
having legal interest therein shall be entitled to a certificate of redemption which shall be issued by
the local treasurer or his deputy.
From the date of sale until the expiration of the period of redemption, the delinquent real property
shall remain in possession of the owner or person having legal interest therein who shall be entitled
to the income and other fruits thereof.
The local treasurer or his deputy, upon receipt from the purchaser of the certificate of sale, shall
forthwith return to the latter the entire amount paid by him plus interest of not more than two
percent (2%) per month. Thereafter, the property shall be free from lien of such delinquent tax,
interest due thereon and expenses of sale.

Section 262. Final Deed to Purchaser. - In case the owner or person having legal interest fails to
redeem the delinquent property as provided herein, the local treasurer shall execute a deed
conveying to the purchaser said property, free from lien of the delinquent tax, interest due thereon
and expenses of sale. The deed shall briefly state the proceedings upon which the validity of the sale
rests.

is no bidder for the real property advertised for sale as provided herein, the real property tax and
the related interest and costs of sale the local treasurer conducting the sale shall purchase the
property in behalf of the local government unit concerned to satisfy the claim and within two (2)
days thereafter shall make a report of his proceedings which shall be reflected upon the records of
his office. It shall be the duty of the Registrar of Deeds concerned upon registration with his office of
any such declaration of forfeiture to transfer the title of the forfeited property to the local
government unit concerned without the necessity of an order from a competent court.
redeem the property by paying to the local treasurer the full amount of the real property tax and
the related interest and the costs of sale. If the property is not redeemed as provided herein, the
ownership thereof shall be vested on the local government unit concerned.


Section 265. Further Distraint or Levy. - Levy may be repeated if necessary until the full amount
due, including all expenses, is collected.

D. Judicial action (collection)
Sec. 256, LGC

Sec. 266, LGC
Section 266. Collection of Real Property Tax Through the Courts. - The local government unit
concerned may enforce the collection of the basic real property tax or any other tax levied under
this Title by civil action in any court of competent jurisdiction. The civil action shall be filed by the
local treasurer within the period prescribed in Section 270 of this Code.


Sec. 270, LGC
Section 270. Periods Within Which To Collect Real Property Taxes. - The basic real property tax and
any other tax levied under this Title shall be collected within five (5) years from the date they
become due. No action for the collection of the tax, whether administrative or judicial, shall be
instituted after the expiration of such period. In case of fraud or intent to evade payment of the tax,
such action may be instituted for the collection of the same within ten (10) years from the discovery
of such fraud or intent to evade payment.
The period of prescription within which to collect shall be suspended for the time during which:
(1) The local treasurer is legally prevented from collecting the tax;
(2) The owner of the property or the person having legal interest therein requests for
reinvestigation and executes a waiver in writing before the expiration of the period within which to
collect; and
(3) The owner of the property or the person having legal interest therein is out of the country or
otherwise cannot be located.

E. Unpaid tax constitutes a lien
Sec. 257, LGC

VII. REMEDIES OF TAXPAYER
A. Dispute assessment
1. Appeal to local Board of Assessment Appeals
Sec. 226, LGC
Section 226. Local Board of Assessment Appeals. - Any owner or person having legal interest in the
property who is not satisfied with the action of the provincial, city or municipal assessor in the
assessment of his property may, within sixty (60) days from the date of receipt of the written notice
of assessment, appeal to the Board of Assessment Appeals of the provincial or city by filing a
petition under oath in the form prescribed for the purpose, together with copies of the tax
declarations and such affidavits or documents submitted in support of the appeal.

2. If denied, appeal to Central Board of Assessment Appeals
Sec. 229(c), LGC
Section 229. Action by the Local Board of Assessment Appeals. -
(c) The secretary of the Board shall furnish the owner of the property or the person having legal
interest therein and the provincial or city assessor with a copy of the decision of the Board. In case
the provincial or city assessor concurs in the revision or the assessment, it shall be his duty to
notify the owner of the property or the person having legal interest therein of such fact using the
form prescribed for the purpose. The owner of the property or the person having legal interest
therein or the assessor who is not satisfied with the decision of the Board, may, within thirty (30)
days after receipt of the decision of said Board, appeal to the Central Board of Assessment Appeals,
as herein provided. The decision of the Central Board shall be final and executory.

3. If denied, appeal to Court of Tax Appeals

Internal Revenue;
"b. Jurisdiction over cases involving criminal offenses as herein provided:
"1. Exclusive original jurisdiction over all criminal offenses arising from violations of the National
Internal Revenue Code or Tariff and Customs Code and other laws administered by the Bureau of
Internal Revenue or the Bureau of Customs: Provided, however, That offenses or felonies
mentioned in this paragraph where the principal amount o taxes and fees, exclusive of charges and
penalties, claimed is less than One million pesos (P1,000,000.00) or where there is no specified
amount claimed shall be tried by the regular Courts and the jurisdiction of the CTA shall be
appellate. Any provision of law or the Rules of Court to the contrary notwithstanding, the criminal
action and the corresponding civil action for the recovery of civil liability for taxes and penalties
shall at all times be simultaneously instituted with, and jointly determined in the same proceeding
by the CTA, the filing of the criminal action being deemed to necessarily carry with it the filing of
the civil action, and no right to reserve the filling of such civil action separately from the criminal
action will be recognized.
"2. Exclusive appellate jurisdiction in criminal offenses:
"a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax cases
originally decided by them, in their respected territorial jurisdiction.
the exercise of their appellate jurisdiction over tax cases originally decided by the Metropolitan
Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in their respective
jurisdiction.
"1. Exclusive original jurisdiction in tax collection cases involving final and executory assessments
for taxes, fees, charges and penalties: Provided, however, That collection cases where the principal
amount of taxes and fees, exclusive of charges and penalties, claimed is less than One million pesos
(P1,000,000.00) shall be tried by the proper Municipal Trial Court, Metropolitan Trial Court and
Regional Trial Court.
"a. Over appeals from the judgments, resolutions or orders of the Regional Trial Courts in tax

collection cases originally decided by them, in their respective territorial jurisdiction.
the Exercise of their appellate jurisdiction over tax collection cases originally decided by the
Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts, in their
respective jurisdiction."
4. Effect of appeal
Sec. 231, LGC
Section 231. Effect of Appeal on the Payment of Real Property Tax. - Appeal on assessments of real
property made under the provisions of this Code shall, in no case, suspend the collection of the
corresponding realty taxes on the property involved as assessed by the provincial or city assessor,
without prejudice to subsequent adjustment depending upon the final outcome of the appeal.

B. Payment under protest
Sec. 252, LGC
Section 252. Payment Under Protest. -
(a) No protest shall be entertained unless the taxpayer first pays the tax. There shall be annotated
on the tax receipts the words "paid under protest". The protest in writing must be filed within thirty
(30) days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the
case of a municipality within Metropolitan Manila Area, who shall decide the protest within sixty
(b) The tax or a portion thereof paid under protest, shall be held in trust by the treasurer
concerned.
(d) In the event that the protest is denied or upon the lapse of the sixty day period prescribed in
subparagraph (a), the taxpayer may avail of the remedies as provided for in Chapter 3, Title II, Book
II of this Code.

Art. 343, IRR
ARTICLE 343. Payment Under Protest. (a) No protest shall be entertained unless the taxpayer
first pays the tax. There shall be annotated on the tax receipts the words paid under protest. The
protest in writing must be filed within thirty (30) days from payment of the tax to the provincial or
city treasurer, or municipal treasurer, in the case of a municipality within MMA, who shall decide
the protest within sixty
(b) The tax or a portion thereof paid under protest shall be held in trust by the local treasurer
concerned. Fifty percent (50%) of the tax paid under protest shall, however, be distributed in
accordance with the provisions of this Rule on the distribution of proceeds.
(d) In the event that the protest is denied or upon the lapse of the sixty-day period prescribed in
paragraph (a) hereof, the taxpayer may avail of the remedies provided in Articles 317 and 320 of
this Rule.

C. Claim for refund or credit
Sec. 253, LGC
Section 253. Repayment of Excessive Collections. - When an assessment of basic real property tax, or
any other tax levied under this Title, is found to be illegal or erroneous and the tax is accordingly
reduced or adjusted, the taxpayer may file a written claim for refund or credit for taxes and
interests with the provincial or city treasurer within two (2) years from the date the taxpayer is

entitled to such reduction or adjustment.
The provincial or city treasurer shall decide the claim for tax refund or credit within sixty (60) days
from receipt thereof. In case the claim for tax refund or credit is denied, the taxpayer may avail of
the remedies as provided in Chapter 3, Title II, Book II of this Code.


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RIGHTS

AND REMEDIES OF THE GOVERNMENT UNDER

Bianca Mendoza/ALS 3B 2016/Tax II-Atty. Bello 2

Bianca Mendoza/ALS 3B 2016/Tax II-Atty. Bello 4

Bianca Mendoza/ALS 3B 2016/Tax II-Atty. Bello 6

Bianca Mendoza/ALS 3B 2016/Tax II-Atty. Bello 7

Bianca Mendoza/ALS 3B 2016/Tax II-Atty. Bello 8

Bianca Mendoza/ALS 3B 2016/Tax II-Atty. Bello 13

Bianca Mendoza/ALS 3B 2016/Tax II-Atty. Bello 23

Bianca Mendoza/ALS 3B 2016/Tax II-Atty. Bello 37

Bianca Mendoza/ALS 3B 2016/Tax II-Atty. Bello 42

Bianca Mendoza/ALS 3B 2016/Tax II-Atty. Bello 44

Bianca Mendoza/ALS 3B 2016/Tax II-Atty. Bello 51

Bianca Mendoza/ALS 3B 2016/Tax II-Atty. Bello 168

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