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Taxation Law
Jurisprudence dictates that a taxpayer may be allowed to sue where there is a claim that
public funds are illegally disbursed or that public money is being deflected to any improper
purpose, or that public funds are wasted through the enforcement of an invalid or
unconstitutional law or ordinance (Landbank vs. Cacayuran, G.R. No. 191667, April 17, 2013).
c. Requisites of a Taxpayers suit challenging the constitutionality of a tax measure or act of a taxing
authority; concept of locus standi, doctrine of transcendental importance and ripeness for judicial
determination
Criteria of being ripe for judicial determination - a closely related requirement is ripeness, that
is, the question must be ripe for adjudication. And a constitutional question is ripe for
adjudication when the governmental act being challenged has a direct adverse effect on the
2017 Bar Examinations
Taxation Law
individual challenging it (ABAKADA Guro Party List, etc., vs. Purisima, etc., et al., G. R. No.
166715, August 14, 2008).
b. Power of the Commissioner to interpret tax laws and to decide tax cases the power to
interpret the provisions of the National Internal Revenue Code (NIRC) and other tax laws shall
be under the exclusive and original jurisdiction of the Commissioner, subject to review by the
Secretary of Finance. The power to decide disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising
under the NIRC or other laws or portions thereof administered by the bureau is vested in the
Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals
(CTA). (p.54-55 Ampongan IT)
c. Non-retroactivity of rulings
1. Income taxation
a. Definition, Nature and General Principles
a.1 Income Tax systems
o Global a system or tax treatment which views, indifferently the tax base, and
generally treats in common all categories of taxable income of the taxpayer (Tan vs.
del Rosario) (p.2 Dimaampao IT)
Provides for uniform tax rules/tax rates
Income Tax of Corporations (Secs. 27 and 28) generally does not
categorize/classify income
Imposes uniform corporate tax rates
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Taxation Law
o Schedular system in law, where the income tax rules/treatment varies and made to
depend on the kind/category of taxable income of the taxpayer (Tan vs. del Rosario).
It operates under the following characteristics: (p.1 Dimaampao IT)
Categorizes/classifies income: Sec. 32a; Secs. 24, 25 and 26 (imposes different
tax rates) categorizes income of individual taxpayers
Provides for different tax treatment
Imposes different tax rates
A.6.1. Individuals
Citizens
o Resident Citizens all sources inside and outside; net income.
o Engaged in trade or business or profession entitled to deductions on
his business income and personal and additional exemptions
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Taxation Law
NOTA BENE: For purposes of income tax, an overseas contract worker who is a Filipino citizen and
deriving income from abroad is deemed a non-resident citizen and therefore taxed only on income
sourced within the Philippines. However, in order to qualify as a non-resident citizen, the worker must be
physically present abroad most of the time or at least 183 days (continuous or not) during the calendar
year.
ADDENDUM: Certain aliens are entitled to preferential tax rates if they are employed by: (1) regional or
area headquarters and regional operating headquarters of multinational companies in the Philippines;
(2) offshore banking units established in the Philippines; and (3) foreign service-contractor or sub-
contractor engaged in petroleum operations in the Philippines. This is provided that their Filipino
counterparts are also afforded the same preferential tax rate. These Filipinos have the option to be taxed
under the preferential tax rate or under the graduated tax rates.
NOTA BENE: Co-ownership is considered a separate taxable entity like estates and trusts. The co-owners
are subject to income tax on their individual distributive share only. However, if the co-owners, after
partition of property invest the income of co-ownership in any income-producing properties, this
constitutes an unregistered partnership and subject to income tax as a corporation. But if it is merely an
isolated transaction, then it cannot be said that a partnership has been formed.
Foreign
A.6.4. Partnerships
Taxable Partnership treated as corporations
NOTA BENE: The principle of constructive receipt of income is applied in partnerships. This means that
the partners are taxable on their distributive shares in the taxable year that the profit was made,
regardless of whether such has already been distributed and received by the partners.
Exempt Partnership
o General professional partnership partnerships formed by
persons for the sole purpose of exercising their common
profession; exempt from income tax but must still file an income
tax return - the partners are the ones liable for income tax based
on their respective distributive shares