Taxation Law

SanBedaCol
legeofLaw
1
MEMORYAI
DIN TAXATI
ON LAW
TAXATI
ONLAW
6. l
evi
edf
orapubl
i
cpur
pose.
I
.GENERALPRI
NCI
PLES
REQUI TESOFAVALI
SI DTAX
POWEROFTAXATI
ON 1. shoul dbef orapubl i
cpur pose
TAXATI ON – power by whi ch the 2. ther uleoft axat i
onshall beuni f
or m
sovereign thr
ough itslaw-
making body 3. thatei thert he person orpr oper t
y
rai
sesr ev
enuet o defr
aythenecessary taxedbewi t
hint hej
urisdi cti
onoft he
expenses ofgov ernmentfrom among taxingaut hori
ty
those who i n some measur e are 4. thatt heassessmentandcol lectionof
pri
vil
egedt oenjoyitsbenefi
tsandmust certai n kinds oft axes guar ant ees
bearitsburdens. against i nj
ust i
ce t o i ndividual s,
especi ally by way of not ice and
TwoFol dNat ureofthePowerof oppor t
unityf orhearingbepr ovided
Taxati
on 5. the t ax mustnoti mpi nge on t he
1.Iti
saninherentatt
ri
buteofsover
eignt
y inher ent and Const i
tutional
2. I ti
slegislati
veincharact
er li
mi tationsont hepoweroft axation
ExtentofTaxingPower THEORIESANDBASESOFTAXATI ON
Subjectt
oconsti
tut
ionalandinher
ent 1. Li f
ebl
oodTheor y
restri
cti
ons,the power of taxati
on is Taxesar ewhatwepayf orci v
il
ized
regarded as comprehensive,unli
mit
ed, society.Withoutt axes,t he gov ernment
plenaryandsupreme. woul dbepar al
yzedf orlackoft hemot iv
e
powert oact iv
ateandoper ateit.Hence,
SCOPEOFLEGI SLATIVETAXI NGPOWER despite t he nat ural r eluct
ance t o
1. Amountorr ateoft ax surrender par t of one' s har d-earned
2. Appor ti
onmentoft hetax i
ncome t ot he taxing aut horit
ies,ev ery
3. Kindoft ax personwhoi sabl et omustcont ributehis
4. Met hodofcol lecti
on sharei nther unni
ngoft hegov er nment .
5. Pur pose/sofi tslevy,providedi
tisfor (
CIRv.Al
gue,
Inc.
)
publ i
cpur pose
6. Subj ectt o be t axed,pr ovi
ded i
ti s 2. Necessi t
yTheor y
withinitsjurisdicti
on Thepowert ot axisanat tr
ibuteof
7. Situsoft axat i
on sovereigntyemanat i
ngfrom necessi t
y .It
i
s a necessar ybur den to preservet he
TAXES – enf or
ced pr opor
ti
onal State'
ssov erei
gntyandameanst ogi v e
contri
butions fr
om t he persons and the ci ti
zenry an ar my t o resist an
propertylevi
edbyt helaw-
makingbodyof aggression,anav yt odefendi tsshor es
theSt atebyv i
rtueofi tssov
er ei
gntyi
n from i
nv asion,acor psofcivi
lser v
antst o
suppor tofgov ernmentand f orpubli
c serve,publici mprovementsdesi gnedf or
needs. theenj oymentoft hecit
izenryandt hose
whichcomewi thi
nt heSt ate'
st err
itory,
CHARACTERI CSOFTAXES
STI and f acil
it
ies and pr ot
ect i
on whi ch a
1. forcedchar ge; governmenti ssupposedt oprov de.(
i Phi l
.
2. pecuni ar
ybur denpay ableinmoney ; Guar
ant
yCo.
,I
nc.v.CI
R)
3. levi
edbyt hel egisl
atur
e;
4. assessedwi thsomer easonablerul
e 3. Benefit
s-Pr
otecti
on / Reci pr
ocity
of appor ti
onment ;( see theoret
ical Theory
justi
ce) Taxat
ionisdescrbedasasy
i mbi oti
c
5. imposed by t he State wi t
hin it
s rel
ati
onshi
pwher ebyinexchangeoft he
juri
sdicti
on; benefit
sandpr ot
ecti
onthatthecit
izens
getfrom t
heGov er
nment,tax
esarepaid.
(
CIRv.Al
gue,
Inc.
)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
neTorres ASST.CHAI
RPERSON:
RhohailCastr
o EDP:Rachel
leSaya SUBJECTHEADS:Jemi
naSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
res :MEMBERS:Mari
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 2
MEMORYAI
DIN TAXATI
ON LAW
Not
e: Whi
l
e t
axes ar
e i
ntended f
or amountt o be raised ort he per sons,
general benefi
ts, special benef
it
s t o pr
opertyorotherpr
iv i
legest
obet axed.
taxpayer
s ar e not r equi
red. The The court’
s power i nt axation is
Gov er
nment r enders no speci al or l
imit
ed onl y to t he applicati
on and
commensur atebenefittoanypar t
icul
ar i
nter
pretat
ionofthel aw.
personorproperty
.
Note: The pri
ncipl
e of j
udi
cial non-
IS THE POWER TO TAX THE POWER TO i
nterf
erenceext
endstot
headminist
rat
ive
DESTROY? r
eal
m.
1. “Power t o t ax is t he power t o
destroy
”( Mar shal
lDi ctum)– r efer
st o ASPECTSOFTAXATION
theunli
mi t
ednessandt hedegr eeorv i
gor 1. Levyori mposit
ion ofthe t
ax (t
ax
with which the t axi
ng powermay be legi
slati
on)
employedt oraiserevenue. 2. Enforcement or tax admini
str
ati
on
-thef i
nancialneedsoft heSt at emay (taxadminist
rat
ion)
outr
un any human cal cul
ation,so t he
powert omeett hoseneedsbyt axat
ion BASIC PRINCI PLESOFA SOUND TAX SYSTEM
mustnotbel imit
edev enthought axes (KEY:FAT)
becomebur densomeorconf iscatory. 1. Fi scalAdequacy – suf f
iciency to
meetgov er
nmentexpendi tures and
2. “Powertot axisnott hepowert o otherpubl i
cneeds.
destr
oywhiletheSupr emeCour tsits” 2. Admi nist r
ative Feasibi
lit
y/
(Hol
mes Dictum) – t he powert otax Conv eni ence – capabili
ty ofbei ng
knows no l
imitexceptt hose expr
essly effecti
v elyenforced.
stat
edint
heConstit
ution. 3. Theor eticalJust i
ce– basedont he
taxpay er’s abil
it
yt o pay;mustbe
Mar
shal
landHol
mesDi
ctum Reconci
l
ed progressi ve.(Abil
it
ytoPayTheor y)
Althought hepowert ot axisal most
unli
mi t
ed,itmustnotbeexer cisedinan POLI
CE EMI
NENT
TAXATI
ON
arbi
trarymanner .I ft
heabuseissogr eat POWER DOMAIN
so as t o dest roy the natur al and 1.Pur
pose
fundament alr i
ghts ofpeople,itist he Torai
se Topr omote Tof acil
itate
dutyoft hej udi
ciarytohol
dsuchanact rev
enue public theSt ate’s
purpose needof
unconstit
utional. through proper t
yf or
regulat
ions publicuse
PURPOSESANDOBJECTI VESOFTAXATI ON 2. AmountofExaction
1. Rev enue– basi call
y,thepur poseof Nol
i
mit Limitedtothe Noexact i
on;
taxation i s to pr ovi
de f unds or costof butpri
v at
e
proper ty wi th whi ch the St at
e regulat
ion, propertyi
s
promot es the gener alwel fare and i
ssuanceof takenbythe
theli
censeor St atefor
protect i
onofi t
sci t
izens. surveil
l
ance publi
c
2.Non- Rev enue(Key :PR2EP) purpose
a. Pr omot i
onofgener alwelf are
b. Regul ati
on
c. Reduct ionofsoci ali
nequal it
y
d. Encour ageeconomi cgrowt h
3. Benefi
tsRecei
ved
e. Pr otecti
oni
sm Nospeci
al Nodirect Adir
ect
ordirect benef i
tis benefi
tresult
s
POWEROFJUDI ALREVI
CI N TAXATI
EW I ON benefitis received;a i
nt heform of
Asl ongast helegislature,inimposing receivedby healthy j
ust
a t ax, does not v i
olate appl icabl
e thetaxpay er
; economi c compensation
mer el
y standardof tothe
consti
tutionalli
mit
ationsorr estri
cti
ons,i
t
general societyis proper
ty
i
snotwi thi
nt hepr
ov inceoft hecour t
sto benefitof attai
ned owner
i
nquirei ntothewisdom orpol i
cyoft he protecti
on
exacti
on,t he mot i
ves behi nd it
,t he
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
leSaya SUBJECTHEADS:
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 3
MEMORYAI
DIN TAXATI
ON LAW
t
heeffectt
hatmotorvehicl
eregist
rat
ion
4.Non-
impai
rmentofCont
ract
s f
ees areregul
ator
y exacti
ons and not
Cont
racts Cont
racts Contr
act
smay r
evenuemeasur
es.
maynotbe maybe beimpai
red
i
mpaired i
mpaired
b.The t aximposed on v i
deogram
5.Tr
ansf
erofProper
tyRi
ght
s establi
shment si
snotonl yregul
atorybut
Taxespaid Notr
ansf
er Tr
ansferi
s
becomepar
t butonly effect
edi
n
arev enuemeasur ebecausetheear ni
ngs
ofpubli
c rest
rai
ntini
ts favoroft
he ofsuch est abli
shments have notbeen
funds exerci
se State subjecttotaxdepr i
v i
ngthegov ernment
6.Scope ofanaddi t
ionalsourceofincome.( Ti
ov.
All persons, All per sons, Onlyupona Videogr
am Regul
ator
yBoar
d,151SCRA
propert
yand pr opert
y, parti
cul
ar 208)
excises ri
ghts and pr opert
y
pri
vil
eges c.The“ coconutl evyf unds”wereall
rai
sedundert hest ate’staxingandpolice
SYSTEMSOFTAXATION power s.
Gl
obalSyst
em SchedularSy
stem Thest ate’sconcer nt omakeita
strongandsecur esour cenotonl yinthe
A system A sy stem empl oyed l
iveli
hoodoft hesi gnifi
cantsegmentof
empl oy ed wher e wheret hei ncomet ax
the popul ati
on, but al so of expor t
the t ax sy stem treat
mentv ariesandis
views i ndiff erent l
y madet odependont he
earnings,t hesust ai
nedgr owthofwhi ch
the t ax base and kind or cat egory of i
soneoft heimper ati
vesoft heeconomic
gener allyt reat si n taxabl
ei ncomeoft he growt ” Phi
h. l
ippine CoconutPr oducers
common al
l taxpayer. Feder
ation,I nc.Cocof
ed v.Presi
dent
ial
categor ies of Commi ssiononGoodGover nment(178
taxabl ei ncomeof SCRA236, 252)
theindi vidual .
A sy stem whi ch A sy st
em which CONSTRUCTI ONOFTAXL AWS
taxes al
l i
temizes the di
ff
erent 1. Publ icpur posei sal wayspr esumed.
categor ies of i
ncomesandpr ov i
des 2. Ift hel aw i scl ear,appl yt hel aw i n
i
ncome except forvari
edpercentages
accor dancet oi t
spl ain and si mpl e
certain passi ve oftaxes,tobeappl i
ed
i
ncomes and ther
eto.
tenor .
capitalgai ns. I t 3. A st atut ewi llnotbeconst rued as
prescr i
bes a imposi ng a t ax unl ess i tdoes so
unitary but clearly, expressl yandunambi guousl y
.
progr essive r at e 4. Incaseofdoubt ,itisconst ruedmost
for t he t axabl e strongl yagai nsttheGov ernment ,and
aggr egat e li
ber allyi nfav oroft het axpay er.
i
ncomes and f lat 5. Prov isionsofat axingactar enott o
rates f or cer tain
beext endedbyi mpl ication.
passi ve i ncomes
derived by
6. Tax l aws oper at e pr ospect i
vely
i
ndi viduals. unl esst hepur poseoft hel egislature
to gi v e r etrospect iv
e ef fect i s
EXAMPLES OF TAXES LEVI
ED WI
TH A expr essl ydecl aredormaybei mpl ied
REGULATORY PURPOSE, OR COMBI
NED from t hel anguageused.
EXERCI
SEOFPOLI
CEPOWERANDTHEPOWER 7. Taxl awsar especi allawsandpr ev ail
OFTAXATION. ov eragener al l
aw.
a.Motorvehicl
eregi
str
ati
onfeesare NATUREOFTAXLAWS
now consi dered r ev
enue or t ax 1. Notpoli
ti
cali
ncharacter
measur (
es.Palv.Edu,G.R No.L-41383, 2. Civi
linnat
ure,notsubjectt
oexpost
August15,
1988) fact
olawprohibi
ti
ons
This case rever
sed the doctr
ine 3. Notpenali
ncharacter
prev
iousl
yheldi nRepubl
icv.Phil
i
ppine
RabbitBusLines,I
nc.,32SCRA 211,to
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 4
MEMORYAI
DIN TAXATI
ON LAW
TAXESAREPERSONALTOTHETAXPAYER fal
ls on one per son but t he
1. A cor porati
on’s t ax del inquency burdent hereofcanbeshi ft
edor
cannot be enf orced agai nst its passedont oanot her .
stockholders. ( Corporate Ent it
y 3. Astopur pose:
Doct r
ine) a. Gener alTax – l ev ied f or t he
Except i
on:St ockholdersmaybehel d gener aloror di nar ypur posesof
li
ablef orunpaidtaxesofadi ssol
ved theGov er nment
corporation: b. SpecialTax– l eviedf orspeci al
a. ifi tappear st hatthecor por
ate purposes
assets hav e passed i ntot hei
r 4. Astomannerofcomput ation:
handsor a. Specif icTax– t hecomput ation
b. when t he st ockholders hav e ofthet axort her at esoft het ax
unpaid subscr i
pti
ons t o the i
sal r
eadypr ov idedf orbyl aw.
capitalofthecorporation b. AdVal orem Tax–t axupont he
val
ue of t he ar ticle or t hing
2. Estatet axes ar e obli
gations that subject t o t ax at ion; t he
mustbe pai d by the executoror i
ntervent i
on ofanot herpar tyi s
admi ni
stratoroutoft henetasset s needed f ort he comput ation of
andcannotbeassessedagai nstt he thetax.
heir
s. 5. Astotaxingaut hor ity :
Excepti
on:I fpri
ortothepay mentof a. NationalTax – l ev ied by t he
theestatet axdue,t hepropertiesof National Gov er nment
thedeceasedar edi st
ri
butedt ot he b. LocalTax– l ev i
edbyt hel ocal
heir
s,t hen t he l
att
eri s subsidiary gover nment
l
iableforthepay mentofsuchpor ti
on 6. Astorate:
oftheest atetaxashi sdi str
ibutive a. Progressi ve Tax – r ate or
sharebear st othetotalvalueoft he amountoft axi ncr easesast he
netestate.( Sec.9,Rev.Regs.No.2- amountoft hei ncomeorear ning
2003;seeCI
Rvs.PinedaG.R.No.L- tobet axedi ncr eases.
22734.Sept
ember15,1967)
) b. Regressi ve Tax – t ax r ate
decreases as t he amount of
CLASSI
FICATI ONOFTAXES i
ncomet obet axedi ncr eases.
1. Ast osubj ectmat t
er: c. Propor t i
onat eTax–basedona
a. Per sonalTax–t axesar eoff i
xed fi
xedpr opor tionoft hev alueof
amountupon al lper sons ofa thepr oper t
yassessed.
cer tain cl ass wi thi
n t he
jurisdict i
on wi thout r egard t o IMPOSI
TIONS NOT STRI CTLY CONSIDERED AS
pr oper ty,occupat i
onorbusi ness TAXES
inwhi cht heymaybeengaged. 1. Tol l–amountchar gedf ort hecost
b. Pr oper ty Tax – assessed on and mai ntenance of t he pr oper t
y
pr oper tyofacer tainclass used.
c. Exci se Tax – i mposed on t he 2. Penal ty – puni shment f or t he
exer ciseofapr ivil
ege commi ssionofacr i
me.
d. Cust oms Dut i
es – dut i
es 3. Compr omi se Penal t
y – amount
char ged upon t he commodi ti
es coll
ect ed i n l i
eu of cr iminal
on t heirbei ng i
mpor ted into or prosecut i
oni ncasesoft axv iolati
ons.
expor tedf r
om acount ry . 4. Speci alAssessment–l eviedonl yon
2. Ast obur den: l
and based whol ly on benef i
t
a. Di rectTax– bot hthei ncidence accr ui
ng t hereon as a r esult of
oforl iabil
it
yf orthepay mentof i
mpr ovement s or publ ic wor ks
thet axaswel last hei mpactor under takenbygov ernmentwi thint he
bur den oft he tax falls on the vi
cini t
y.
sameper son. 5. Li cense or Fee – r egul atory
b. I ndi rectTax-Thei nci
denceofor i
mposi ti
on int he exer cise oft he
liabilit
yf orthepay mentoft hetax policepower .
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 5
MEMORYAI
DIN TAXATI
ON LAW
6. Mar gi nFee– exact iondesi gnedt o andsur

vei
l
lance
stabilizethecur rency .
7. Debt– asum ofmoneydueupon Normall
ypaid af
ter Normal l
y paid
cont ractoronewhi chi sev idenced the start of a bef ore
busi
ness commencement of
byjudgment .
business
8. Subsi dy – a l egislati
ve gr ant of
moneyi nai dofapr i
vateent erprise Taxes, bei ng t he Li
censefeemaybe
deemed t o pr omot e the publ i
c l
ifeblood of t he wi
th or wi t
hout
welfar e. State, cannot be consi der
ati
on
9. Cust omsdut iesandf ees– dut ies surrendered except
char geduponcommodi ti
esont heir for l
awf ul
being t r
anspor t
ed i nto orexpor ted considerati
on
fr
om acount r
y.
10.Rev enue – a br oad t erm t hat Non-payment does Non- pay
ment
i
ncludes t axes and i ncome f rom not make t he makesthebusi
ness
businessill
egalbut i
ll
egal
othersour cesaswel l. may beagr oundfor
11.Impost– i ni t
s gener alsense,i t cri
mi nal
prosecut
ion
signifiesanyt ax, t
ri
but eordut y.Inits
l
imi ted sense,i tmeans a dut yon TESTI
N DETERMI
NING I
FTHEI
MPOSI
TION I
SA
i
mpor tedgoodsandmer chandise. TAXORALI
CENSEFEE
Ifthepur posei sprimar
il
yrevenueor
Tax Speci
al i
frev enuei s,atleast,oneoftherealand
Assessment substant i
alpurposes, t
hentheexacti
onis
at ax. I ft he purpose isregul
atoryin
Imposedonpersons, Lev
iedonl
yonl
and nature,iti
sal icense.(PALv.Edu)
pr
opert
yandexcises
Personal li
abi
l
ity Cannotbe made a Tax Debt
att
aches on t he per sonalli
abil
it
y of
person assessed i
n t hepersonassessed An obli
gat
ion Cr
eat
edbycont
ract
caseofnon-payment i
mposedbylaw
Not based on any Based whol

l
y on Due t
o the Maybe due t othe
speci
al or di r
ect benef
it gover
nment i n it
s government butin
benef
it sov
ereigncapaci
ty its cor
por
ate
capacit
y
Levi
ed and pai
d Except
ionalboth as
annual
l
y toti
meandl ocal
i
ty Pay
abl
einmoney Payabl
e in money ,
proper
tyorser
vices
Exempti
on granted Exempt ondoesnot
i
i
sappli
cable(
Art.VI
, apply. Does not dr aw Dr
aws i nt
erest i f
Sec. 28(3) 1987 N. B.I fpropert
yis i
nterest except i
n st
ipul
atedordelay
ed
Const
it
uti
on) exempt f r
om Real caseofdeli
nquency
Propert
y Tax ,i
tis
also exempt from Notassi
gnabl
e Assi
gnabl
e
Special
Assessment .
Not subj
ect t
o Subj
ect to
compensat
ion or compensat
ionorset
Tax Li
censeFee set
-of
f -of
f
Basedont hepower Emanat

es f
rom Non-pay ment is No i
mpr
isonmenti
n
oftaxat
ion pol
i
cepower punished by case of non-
i
mpr isonment payment (Ar
t. III
,
Togener
ater
evenue Regul
ator
y exceptinpoll
tax Sec. 20 1987
Const
it
uti
on)
Amounti
sunl
i
mit
ed Amountisli
mi t
edt o
the cost of ( 1) I
mposed onl
y by Canbei mposedby
i
ssui
ng thelicense, publ
i
caut
hor
it
y pr
ivat
eindi
vi
dual
and (
2) inspecti
on TESTI
N DETERMI
NING I
FTHEI
MPOSI
TION I
SA
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 6
MEMORYAI
DIN TAXATI
ON LAW
TAXORALI
CENSEFEE DOCTRINE OF E QUITABLE RECOUPMENT NOT
I
fthepur poseispr i
maril
yrevenueor FOLLOWEDI NTHEPHI LI
PPINES
i
frev enueis,atleast
,oneoft herealand A t ax pr esent l
y bei ng assessed
substanti
alpurposes,thentheexacti
onis againstat axpay erwhi chhaspr escri
bed
at ax. Ift he purpose isregul
atoryin maynotber ecoupedorset -
offagainst
nature,i
tisalicense.(PALv.Edu) anov erpaidt axt her efundofwhi chi s
al
sobar redbypr escript
ion.Itisagainst
Tax Debt publi
cpol i
cysi ncebot hparti
esaregui l
ty
ofnegligence.
An obli
gat
ion Cr
eat
edbycont
ract
i
mposedbylaw
Tax Tol
l
Due t
o the Maybeduet ot he Enforced Asum ofmoneyf or
gover
nment i n it
s government butin proporti
onal the use of
sov
ereigncapaci
ty its cor
porate contri
buti
ons f rom somethi
ng, a
capacit
y personsandpropert
y consi
derati
on whi ch
i
spaidfort heuseof
Pay
abl
einmoney Payabl
ei n money , aproper
tywhi chisof
proper
tyorser
vices apublicnat ure;e.
g.
road,
bri
dge
Does not dr aw Drawsi nt
erest if
i
nterest except i
n sti
pulat
ed or A demand of A demand of
caseofdeli
nquency delay
ed sov
ereignt
y pr
opr
iet
orshi
p
Notassi
gnabl
e Assi
gnabl
e No li
mitas tot
he Amount of t oll
amountoft
ax depends upon t he
costofconst r
uction
Not subj
ect t
o Subj
ect to
or mai nt
enance of
compensat
ion or compensat
ion or the publi
c
set
-of
f set
-of
f i
mpr ovementused
Non-pay ment is Noi

mpr
isonmenti
n I
mposedonl
ybyt
he Maybeimposedby:
punished by case of non- St
ate (
1) Government
i
mpr isonment payment (Ar
t.I
II
, (
2) Pri
vate
exceptinpoll
tax Sec. 20 1987 i
ndivi
dual
s or
Const
it
uti
on) enti
ti
es
I
mposed onl
y by Canbei mposedby Tax Penal
ty
publ
i
caut
hor
it
y pr
ivat
eindi
vi
dual
Enforced Sanct i
oni mposedas
COMPENSATI
ONORSET-OFF proporti
onal a puni shment for
General Rul
e: Taxes cannot be t
he contri
butions f
rom violati
onofal aw or
subj
ectofcompensati
onorset-
off
. persons and act s deemed
property i
nj uri
ous;viol
ati
onof
Reasons:
tax laws may gi ve
1. l
ifebl
oodt heory ri
set oi mpositi
onof
2. taxes ar e not cont r
actual penal t
y
obli
gati
onbutar iseoutofdutyt o
thegovernment I
ntended t
o r
aise Designedt
oregul
ate
3. thegovernmentandt hetaxpayer r
evenue conduct
are notmut ual
ly cr
edit
ors and
debtor
sofeachot her.(
Franciav. May be i mposed Maybei mposedby:
I
AC) onl
y by the ( 1)Gover
nment
Except
ion: When bot
h obl
i
gat
ions ar
e gov
ernment (2) Pri
vate
i
ndivi
dual
s or
due and demandable as wellas full
y
enti
ti
es
l
iquidat
edandallt
herequisit
esforavali
d
compensationar
epresent,compensat
ion
takes place by oper ati
on of l aw. Tax Tar
if
f
(
Domi
ngov.Gar
li
tos)
Al
lembr
aci
ngt
erm Aki
ndoft
ax
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 7
MEMORYAI
DIN TAXATI
ON LAW
toincl
udev ar
ious i
mposedonar ti
cles Taxi
ngPowersupr
, a)
kindsofenforced whicharetraded -ref
erst
otaxl
egi
slat
ion
contri
but
ionsupon i
nternat
ionall
y Except
ionst
oNon-
del
egabi
l
ity:
personsforthe 1. Fl
exibleTar
iffClause:Authori
tyoft
he
attai
nmentofpublic
Presi
denttof i
xt ari
ffrates,import
purposes
and export quot as, tonnage and
wharfagedues,andot herdut i
esor
TAXPAYERS’
SUIT
i
mpost s. (
Art.VI ,Sec. 28(
2),1987
Acase wher etheactcomplainedof
Const
it
uti
on)
di
rectl
yinvolv
estheill
egaldi
sbursement
2. Powerofl ocalgover
nmentunit
st o
of publi
cf unds deri
vef r
om t axati
on
l
evytaxes,
f ees, ges.(
andchar Art
.X,
(
Just
iceMelo,dissent
ing i
nKi
l
osbayan,
Sec.5,
1987Const
it
uti
on)
I
ncvsGui
ngona,Jr.)
3. Delegati
ontoadmi ni
str
ati
veagenci
es
forimplementati
onandcoll
ecti
on.
TAXPAYERS AND PUBLI
C OFFCI
ALS HAVE
- mer el
yrefer
st otaxadmini
str
ati
onor
LOCUSSTANDI
i
mpl ementati
on
REQUI
SITESFORTAXPAYERS’SUI
T
a. Thet axmoneyi sbeingextract
edand
(3)SI TUSORTERRI
TORI
ALITYOFTAXATION
spent i n v iol
ati
on of speci fi
c
Thepowert otaxisl i
mitedonl yto
constit
uti
onal protecti
ons agai nst
persons,propertyorbusi nesses withi
n
abusesoflegisl
ati
vepower .
thej uri
sdi
cti
onort er
rit
oryoft hetaxing
b. Thatpublicmoneyi sbeingdef l
ected
power .
toanyi mproperpurpose( Pascualvs
Secr
etar
yofPubl
i
cWor
ks)
FACTORSTHATDETERMI NETHESI TUS:
c. Thatt hepeti
ti
onerseekstorest
rai
n
a. Kindorcl assif
icationoft hetaxbei ng
respondents fr
om wast i
ng publi
c
levied
fundst hr
oughtheenfor
cementofan
b. Situsoft het hi
ngorpr opertytaxed
i
nv al
idorunconst
it
uti
onall
aw
c. Citizenshipoft het axpayer
d. Resi denceoft het axpayer
LI
MITATI
ONSONTHETAXI
NG e. Sour ceoft heincomet axed
POWER f. Situsoft heexci se, pr
ivi
lege,business
oroccupat i
onbei ngt axed
A. I
NHERENTL IMI ONS(
TATI KEY:SPINE)
1. Terr
itori
ali
tyorSitusoft axati
on APPLI ONOFSI
CATI TUSOFTAXATI
ON
2. Publi
cpur poseoft axes Ki
ndofTax Sit
us
3. I
nternati
onal comity
4. Non- del
egabili
tyofthet axi
ngpower Per
sonal
or Residence or
5. TaxExempt i
onoft hegov ernment Communit
ytax domi ci
le of t
he
taxpayer
(1)TESTSIN DETERMI
NINGPUBLICPURPOSE
a. Dut yTest–whet herthet hi
ngt obe Real
proper
tyt
ax Locat
ionofpr
oper
ty
fur
thered by the appropr i
ati
on of (
Lexr
eisi
tae)
publi
cr evenueissomet hing,which
Personal pr
oper
ty -
tangi
ble:whereiti
s
i
st he duty of the St ate,as a tax physi
call
ylocat
edor
government ,
toprovi
de. permanentl
y kept
(
Lexr
eisi
tae)
b. PromotionofGeneralWelfareTest -
intangi
ble: subj
ect
– whethertheproceedsoft hetax to Sec.104 oft he
wil
ldir
ectl
ypr omotethewelfareof NIRC and the
thecommuni t
yinequalmeasure. pri
nci e of mobi
pl li
a
sequunt
urper
sonam
(2)NON-DELEGABI
LITY OF THE TAXI NG
POWER Busi
nesst
ax Pl
aceofbusi
ness
GeneralRule:Thepoweroft axat
ionis
peculi
arl
y and exclusi
vel
y exerci
sed by Exci
se orPr
ivi
l
ege Wher
e t
he act i
s
thelegi
slat
ure.(SeeScopeofLegi sl
ati
ve
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 8
MEMORYAI
DIN TAXATI
ON LAW
t
ax perf
ormed or where (4)EXEMPTIONOFTHEGOVERNMENT
occupat
ioni
spur
sued Asamat terofpubli
cpoli
cy,property
of the St ate and of its muni cipal
Sal
est
ax Wherethe sal
eis subdi
visionsdevot
edt ogov
ernmentuses
consummat
ed
andpur posesisdeemedt obeexempt
from t axati
on although no expr ess
I
ncomeTax Consider
(1)cit
izenship, provi
sioninthelawismadetherefor.
(2)residence,and
(3)sour ceofincome Gener
alRul
e:The Gover
nmenti
stax
(
Sec.42,
1997NI
RC) exempt
.
-However
,itcanal
sot
axi
tsel
f.
Tr
ansf
ert
ax Residenceor
cit
izenshi
poft he RULES:
taxpayerorlocat
ion 1. Administr
ati
veAgencies
ofproperty
a.Gov ernmental functi
on - t ax
exempt unless when t he l
aw
Fr
anchi
seTax Stat
ewhichgrant
ed
thefr
anchi
se expressl
yprovi
desf ortax. (
Sec.
32B7)
SITUSOFTAXATIONOFI BLEPERSONAL
NTANGI
b. Propri
etaryfuncti
on – t
axabl
e
PROPERTY unless exempt aw.(
ed byl Sec.
GeneralRule:Domi ci
le of t
he owner 27C)
pursuanttothepr i
ncipl
eoft hemobi l
ia 2. GOCCs
sequunturpersonam ormovablesfoll
ow Gener
alRul
e:I
ncome i
staxabl
e at
theperson. ther ateimposeduponcor por ati
ons
Except
ions: orassoci ati
onsengagedi nasi mi l
ar
1. When t he pr oper tyhas acqui red a business, i
ndust r
y,oract ivi
ty.
businesssi tusinanot herj urisdiction; Except i
on:GSI S,SSS,PHI C,PCSO
2. When an expr ess pr ov i
sion oft he andPAGCOR.( Sec.27( C) ,NIRC)
statutepr ov i
def oranot herr ule. 3. Gover nmentEducat ionalInst i
tut i
ons
Il
lustration: Forpur posesofest ate a. Pr operty or r ealest atet ax –
and donor ’
s t axes, t he f oll
owi ng pr operty act ually, directly and
i
nt angibl epr oper t
iesar edeemedwi th excl usi
velyusedf oreducat i
onal
asi t
usi nt hePhi li
ppines: pur poses– exemptbuti ncome
(1)f ranchi se whi ch must be ofwhat everki nd and char acter
exer cisedi nt hePhi li
ppi nes; f rom anyoft heirpr oper t
ies,r eal
(2)shar es, obl i
gations or bonds orper sonal ,regar dless oft he
issued by any cor poration di sposit
ion,ist axable.( Sec.30,
organi zed orconst it
ut ed int he l
astpar
.,NI
RC)
Phi li
ppi nesi naccor dancewi thits b. I ncomer eceivedbyt hem assuch
laws; ar eexemptf rom t axes.Howev er,
(3)shar es,obl igati
onsorbondsby theirincome f rom anyoft heir
any f or ei
gn cor por ation ei ght y- act i
vi
ties conduct ed f or pr ofit
five per cent ( 85%) of t he regardlessoft hedi sposi t
ion,is
busi nessofwhi chi sl ocat edi n taxable.( Sec.30, lastpar .,NI
RC)
thePhi l
ippines; 4. Incomeder i
vedfrom anypubl icutil
ity
(4)shar es, obl i
gations or bonds orfrom t heexer ciseofanyessent ial
issuedbyanyf oreigncor poration gover nment alf unction accr uing to
if such shar es,obl igat ions or theGov ernmentoft hePhi li
ppinesor
bondshav eacqui r edabusi ness toanypol iti
calsubdi visi
ont hereofis
situsi nt hePhi l
i
ppi nes; and noti ncl
uded i n gross i ncome and
(5)shar es or r ight s i n any exempt f rom taxat ion. ( Sec.
par tner ship,busi nessori ndust r
y 32(
B)(
7)(
b),
NIRC)
est ablished i nt he Phi l
ippines. 5. Donati
onsinf avorofgovernmental
(
Sec.104,
1997NI
RC)
. i
nsti
tut
ionsareconsi
deredasincome
onthepartofthedonee.Howev er
,it
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 9
MEMORYAI
DIN TAXATI
ON LAW
snotconsi
i der
edastaxabl
eincome A.GENERALORINDI
RECT
becausei sanexcl
ti usionfrom the CONSTITUTI
ONALLI
MITATI
ONS
computat
ion of gross i ncome.
(
Sec.
32(
B)(
3),
NIRC) 1. DuePr ause(
ocessCl Art
.II
I,Sec.1,
6. Theamountofal lbequest s,legacies, 1987Const
it
uti
on)
devisesort ransf er
st oorf ort heuse Requisites:
oft he Gov ernmentoranypol i
ti
cal a.The i nterest
s of the publ
i
c as
subdiv i
sion f or excl usively publ i
c disti
ngui shed f rom t
hose of a
purposes i s deduct ible f rom t he par t
icular cl ass requi
re t he
grossest ate.( Sec.86( A)(3),NI RC) intervention of t he St ate.
7. Gift
smadet oorf ort heuseoft he (
Subst
ant
ivel
i
mit
ati
on)
NationalGov ernmentorany ent it
y b.The means empl oy
ed must be
createdbyanyofi t
sagenci eswhi ch reasonably necessary to t he
snotconduct
i edf orpr ofit,ort oany accomplishment of the purpose
poli
tical subdi visi
on of t he sai d and not undul y oppr essive.
Gov ernmentar eexemptf rom donor ’
s (
Procedur
all
i
mit
ati
on)
tax.(Sec.101( A)(2),NIRC) Theconst
it
uti
onal
it
yofal egi
slat
ive
8. Localgov er
nmentuni t
sar eexpr essly taxingactquesti
onedont hegr oundof
prohibitedbyt heLGC f rom l evyi
ng denial of due process r equir
es t he
tax upon Nat ionalGov ernment ,its existence of an act ual case or
agenci es,andi nstr
ument ali
ties,and cont rov
ersy
.
l
ocalgov ernmentuni ts.[Sec.133( o) ,
LGC] 2. EqualPr
otect
ionCl Ar
ause( t
.II
I,Sec.
9. Unless otherwise pr ov i
ded int he 1,
1987Const
it
uti
on
LocalGov ernmentCode ( LGC) ,tax RequisitesofaVali
dClassifi
cat
ion:
exemptions granted t o allpersons, a. based upon subst
antial
whethernaturalorj uri
dical,i
ncluding distincti
ons
GOCC,exceptl ocalwat erdi str
icts, b. ger manet othepur posesoft he
cooperati
ves dulyr egister
ed under law
RA No.6938,non- st
ock and non- c. notl imitedtoexist
ingconditi
ons
profi
ti nsti
tut
ions, ar e wi t
hdrawn only
uponef f
ecti
vit
yoft heLGC.( Sec.193, d. appl yequall
yt o al
lmember sof
LGC) thecl ass
10.Realpr opert
yownedbyt heRepubli
c
of the Phi lippi
nes or any of i t
s 3. Fr
eedom Of Speech And Of The
poli
ti
calsubdi visions except when ess (
Pr Art
. III
, Sec. 4, 1987
thebenef ici
aluset her
eofhasbeen Const
it
uti
on)
granted, f or consi derati
on or Ther ei s curt
ail
ment of pr ess
otherwise,toat axablepersonshall fr
eedom andf reedom ofthoughtand
be exemptf r
om pay mentofr eal expressi
onifat axi
slevi
edinor derto
propertytax.(Sec.234, LGC) suppressthisbasicri
ghtandi mpose
a pr ior rest
rai .(
nt Tol
entino vs.
(5)I NTERNATIONALCOMI TY Secr
etaryofFinance,GRNo.115455,
Thesepr i
ncipleslimittheauthori
tyof August25,1994)
the gov er
nmentt o ef f
ecti
vel
yi mpose
taxes on a sov ereign state and its 4. Non-
Inf
ri
ngement Of Rel igi
ous
i
nst r
ument ali
ti
es, as wel l as on i ts Fr
eedom AndWorshi
p(Ar
t.I
II
,Sec.5,
proper t
yhel dandact ivi
ti
esundertakenin 1987Const
it
uti
on)
thatcapaci ty.Ev enwher eoneent ersthe Alicenset
axorf eeconsti
tut
esa
terr
itoryofanot her,t hereisani mplied curt
ail
mentofr el
i
gious f
reedom if
under standingt hatt hef or
merdoesnot i
mposed as a condi ti
on f or i
ts
therebysubmi titsel
ft otheauthorit
yand exer
cise.(Amer
icanBibl
eSoci et
yvs.
j
ur i
sdictionoft heother . Cit
yofManil
a,GRNo.L-
9637,Apr
il
30,1957)
B. CONSTI ONALL
TUTI I
MITATI
ONS
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 10
MEMORYAI
DIN TAXATI
ON LAW
5. Non-
Impai
rmentOfCont
ract
s(Ar
t.I
II
,
Sec.10,
1987Const
it
uti
on) 1.Non-
Impri
sonmentForDebtOrNon-
Nolawimpai
ri
ngt
heobli
gat
ionof PaymentOfPol
lTax(Ar
t.II
I,Sec.20,
cont
r lbepassed.(
actshal Sec.10, 1987Const
it
uti
on)
Ar
t.I
II
,1987Const
it
uti
on)
Ther ul
e,howev er
,doesnotappl y 2.Rul
e Requiri
ng ThatAppr opri
ati
ons,
to publi
c uti
li
tyf r
anchises orri
ght Revenue And Tar iff Bil
ls Shall
si
ncet heyaresubjecttoamendment , Ori
ginat
eExclusi
v el
yFrom TheHouse
al
terat
ionorr epealbyt heCongress OfRepresentat
ives( Ar
t.VI,Sec.24,
whent hepublicinter
estsor equi
res. 1987Const
it
uti
on)
(CagayanElect
ri
c&Li ghtCo.
,Inc.v.
Commi ssi
oner, GR No. 60216, 3.Unif
or mit
y, Equit
abil
it
y And
September25,1985) Progressi
vit
yOfTaxat
ion(Art
.VI
,Sec.
28(
1),
1987Const
it
uti
on)
RULES: Uniformit
y – alltaxable art
icl
es or
a. When t he exempt ion i s bil
aterall
y kindsofpr opertyoft hesamecl ass
agreed upon between the aretaxedatthesamer at
e.
governmentand t he taxpay er– i t Equitabi
li
ty–t heburdenfal
lstothose
cannot be wi t
hdr awn wi thout whoar emor ecapabletopay.
viol
ati
ngt henon- i
mpai rmentcl ause. Progressi
vit
y–r at
ei ncr
easesast he
b. Wheni suni
ti l
aterall
ygr antedbyl aw, taxbaseincreases.
andthesamei swi thdrawnbyvi rtue
ofanotherlaw–nov i
olati
on. Q:Isat axlaw adopt i
ngar egressive
c. When t he exempt i
on i s gr anted system oftaxat i
onv ali
d?
under a f ranchi
se – i t may be A:Yes.The Const i
tuti
on does not
wit
hdrawn atanyt imet hus,nota reall
ypr ohibitthei mposi t
ionofi ndir
ect
vi
olat
ion oft henon- impairmentof taxeswhi ch,liket heVAT,ar eregressi
v e.
contr
acts The Const it
utional pr ov i
si
on means
simply t hat i ndirect taxes shal l be
6. Presi
denti
alpowert
ograntrepr
iev
es, mi ni
mized.Themandat et oCongr essi s
commut at
ions and pardons and not t o pr escribe, but t o ev olve, a
remitfines and for
fei
tur
es after progressivet axsy stem.( EVATEnBanc
convi
cti
on( ART.VI
I,SEC.19,1987 Resoluti
on,Tolent
ino,etalvsSecr
etar
y
CONSTI
TUTI
ON) ofFinance,Oct
ober30,1995)
Due Equal
Uni
for
mit
y
Pr
ocess Pr
otect
ion 4. Limi
tati
ons On The Congressi
onal
Taxpay er Taxpay er
s Taxabl e PowerToDel egat
eToThePr esi
dent
may not shall be arti
cles, or The Author
it
y To Fi
x Tari
ffRat es,
be tr
eated al i
ke kinds of ImportAndExportQuot
as,Etc.(Art.
deprived under li
ke proper t
y of VI
,Sec.28(
2),
1987Const
it
uti
on)
of l ife, cir
cumst ances the same
l
iberty or andcondi t
ions class, shall
property both i n t he be t axed at
5. Tax Exempt ion Of Pr oper
ti
es
without pri
vil
eges the same Actual
ly
, Dir
ectly And Exclusi
vely
due conferred and rate. Ther e Used ForReli
gious,Chari
tabl
eAnd
process l
iabil
it
ies shoul d Educati
onalPurposes.(
Art.VI,Sec.
of l aw. i
mposed. therefore,be 28(
3)7,
1987Const
it
uti
on)
Not i
ce no dir
ect The const i
tut
ional pr ovi
sion
must , doubl e (above ci ted) which gr ants t ax
therefore, taxation exemptionappl i
esonlytopr opertyor
be gi ven
real
ty t axes assessed on such
i
ncaseof
fai
lure t o
propert
ies used act ual
ly
, di rectl
y
payt axes exclusi
velyf or rel
i
gious,char it
able
andeducat i
onalpurposes.(Lladocvs.
Commissi
oner
,GRNo.L-
19201,June
B.SPECIFI
CORDI RECT
16,
1965)
CONSTITUTIONALLIMI
TATI
ONS
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 11
MEMORYAI
DIN TAXATI
ON LAW
Thepr esentConsti
tut
ionrequired Cont
ri
but
ions.(
Art
.XI
V,Sec.4(
3)
thatf or the exempti
on of “ l
ands, And(
4),
1987Const
it
uti
on)
buil
dings and i mprovements”,t hey
shouldnotonl ybe“ excl
usivel
y”but OTHER SPECI FIC TAX PROVI SIONS I
N
also“ actuall
y”and“di
rectl
y”usedf or THECONSTI TUTI ON
reli
gious and char i
table purposes. 1. Poweroft hePresidenttov et
oany
(
Provi
nceofAbravs.Hernando,GR part
icul
ar i t
em or i t
ems i n an
No.L-
49336,
August31,
1981) appropr
iat
ion,revenue,ort ari
ffbi
ll
.
The t est of exempti
on f r
om (
ArtVI
,Sec.27(
2),
1987Const
it
uti
on)
taxati
onist heuseofthepropert
yf or 2. Necessi
tyofanappr
opri
ati
onbefore
the pur poses ment i
oned i n the moneymaybepai doutofthepubli
c
Const i
tut
ion.(Abr
aValleyCol
legeInc. t
reasur.(
y Ar
t.VI
,Sec.29( 1)
,1987
vs.Aqui
no,GRNo.L-
39086,June15, Const
it
uti
on)
1988) 3. Non- appr
opriat
ionofpubl
icmoneyor
propertyf or the use,benef i
t,or
EXCLUSI VEBUTNOTABSOLUTEUSE suppor t of any sect, church, or
Thet erm “excl
usivel
yused”doesnot system ofr eli
gion.(
Art
.VI ,Sec.29
necessaril
ymeant otalorabsoluteuse (
2),
1987Const
it
uti
on)
forreli
gious,chari
tableandeducational 4. Treat
ment of taxes l
evi
ed for a
purposes. Ifthepr oper
tyisinci
dentall
y speci pose.(
alpur Art
.VI
,Sec.29(3)
,
used f or sai d pur poses, the t ax 1987Const
it
uti
on)
exemptionmayst i
l
lsubsist.(
AbraValley 5. I
nternalrev
enueall
otment
stolocal
Coll
egeI
nc.vs.Aqui
no,GrNo.L-
39086, governmentuni
ts.(Art
.X,Sec.6,
June15,
1988) 1987Const
it
uti
on)
Corol
lar
il
y,if a pr opert
y,although
actuall
yownedbyar el
i
gious,chari
tabl
e
andeducat i
onalinstit
uti
oni susedf ora DOUBLETAXATI
ON
non- exempt pur pose,t he exempt i
on
fr
om t axshall
notattach DOUBLE TAXATI
ON – taxi
ng t
he same
proper
tytwicewhenitshoul
dbet axed
ART.XI
V, ART.VI
, butonce.
SEC4(3) SEC28(3)
Gr
ant
ee Non- st ock, Reli
gious, IS DOUBLE TAXATI
ON PROHIBI
TED IN THE
non profi
t educati
onal, PHILI NES?
PPI
educational chari
table No. Ther e is no const i
tut
ional
i
nst i
tut
ion i
nstit
utions
prohibit
ionagai
nstdoubl
et axat
ion.I ti
s
Taxes Incomet ax Propertytax
notf avoredbutpermi
ssi
ble.(PepsiCola
cover
ed Cust om
Duties Bot
tl
ingCo.v.Ci
tyofBut
uan,
1968)
.
Property t ax
(
DECS Or der KINDSOFDOUBLETAXATI ON
No.137-
187) (1)Di rect Dupl icat
e Taxat i
on /
Obnoxious– doubl etaxat
ioninthe
6. Voti
ng Requi r
ementI n Connecti
on objecti
onabl
eorprohibi
tedsense.
With The Legislat
ive GrantOfTax This constit
utes a v i
olat
ion of
Exemption (Art.VI,Sec.28(4)
,1987 substanti
vedueprocess.
Const
it
uti
on)
7. Non-
Impai
rmentOfTheJuri
sdi
cti
on El
ement s:
OfTheSupremeCour
tInTaxCases a. thesamepr oper
tyorsubj ectmatt
er
(Ar
t.VII
I,Sec.2And5(
2)(
B),1987 i
staxedt wicewhenitshouldbetaxed
Const
it
ution) onlyonce.
b. botht axesarelevied forthesame
8. Exemption Fr
om Taxes Of The purpose
RevenuesAndAssetsOfEducat
ional c. i
mposedbyt hesamet axingaut
hori
ty
I
nstit
uti
ons, I ncl
udi
ng Gr
ants, d. wit
hint hesamejuri
sdi
ction
Endowments, Donat ions And e. duri
ngt hesametaxingper i
od
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 12
MEMORYAI
DIN TAXATI
ON LAW
f
. cov
eri
ngt
hesameki
ndorchar
act
er  Thedonor
’st
axi
mposedupona
oft
ax. cit
izenorar esi
dentshal lbecredit
ed
(
Vil
l
anuevavs.Ci
tyofI
loi
l
o) withtheamountofanydonor ’stax
imposedbyt heaut horityofaf orei
gn
(
2)Indi
rectDuplicate Taxati
on – not country,subjecttocer t
ainlimi
tatons.
i
l
egallyobj
ect
ionable.Theabsenceof
4. TaxExempt i
ons
oneormor eoft heabov e-
menti
oned
5. Princi
pleofReci procity
elementsmakest hedoubletaxati
on
6. Treati
eswi thotherst ates
i
ndirect
.
METHODSRESORTEDTOBYATAXTREATYI
N
(
3)Domest i
c-thisariseswhent hetaxes
ORDERTOELI NATEDOUBLETAXATI
MI ON
arei mposedbyt helocalornati
onal
gov ernment( withinthesamest ate)
FIRSTMETHOD:Thet axt reatyset sout
(
4)Internati
onal-referstotheimposition
ther espect iv
er i
ght stot axbyt hest ateof
ofcompar abl
et axesintwoormor e
sour ce orsi tus and by t he st ate of
statesont hesamet axpayerin
residencewi thr egar dt ocer taincl asses
respectoft hesamesubj ectmatter
ofi ncomeorcapi tal.Insomecases,an
andf oridenti
cal peri
ods.
exclusiver ightt ot axi sconf erredi none
oft he cont racting st ates;howev er,for
REMEDI
ESOFDOUBLETAXATI ON
otheri temsofi ncome orcapi tal,both
1. TaxSpar ingRul e– samedi vidend
statesar egi v ent her ightt ot axal though
earnedbyaNRFCwi thi
nthePhi l.is
theamountoft axt hatmaybei mposed
reducedbyi mposi ngal owerr ateof
byt hest ateofsour ceisl i
mi ted.
15% ( i
nl ieu oft he 35%) ,on t he
SECONDMETHOD:Thest ateofsour ceis
conditi
ont hatthecount rytowhi ch
givenaf ullorl imitedr ighttot axt ogether
theNRFCi sdomi l
icedshallallow a
witht hest ateofr esidence.I nt hiscase,
credi
tagai nstthet axduef r
om t he
thet reatymakesi tincumbentupont he
NRFC,t axesdeemedt ohav ebeen
stateofr esidencet oal l
ow r eli
efi norder
paidinthePhi l
.(Sec.28B5b)( CI Rv s
toav oiddoubl et axation.
Procter& Gambl e)( GR No.66838,
Dec.2,1991) TWO METHODS OF RELI
EF ARE USED UNDER
2. Taxdeductions
THESECONDMETHOD:
Example:vani shi
ngdeduct i
onunder
Secti
on86( A)(
2),NIRC
1.Theexempt ionmet hod-t hei ncomeor
3. Taxcr edit
s
capitalwhi chi st axablei nt hest ateof
I
nst
ancesundert
heNI RC: sourceorsi tusi sexempt edi nt hest ate
 ForVAT pur poses,the t
ax on ofresi dence,al t
houghi nsomei nstances
i
nput s or i tems t hatgo i ntot he i
t may be t aken i nto account i n
manuf act ure of f inished pr oducts determi ningt her ateoft axappl i
cablet o
(whichar eev ent uallysol d)maybe the t ax pay er’sr emai ning i ncome or
credit
edagai nstordeduct edf rom the capital.(
Thismaybedoneusi ngt het ax
outputt ax ort ax on t he f i
nished deduct ionmet hodwhi chal lowsf oreign
product . i
ncomet axest obededuct edf rom gr oss
 For eign i ncome t axes may be i
ncome,i neffectexempt i
ngt hepay ment
credit
edagai nstt hePhi l.Incomet ax, from bei ngfur t
hert axed.)
subject t o cer tai n l i
mi tati
ons, by 2.The cr edi t met hod- al though t he
cit
izens, i ncludi ng member s of i
ncomeorcapi talwhi chi staxedi nt he
generalpr ofessionalpar t
nershipsor stateofsour ceisst i
llt
axabl ei nthest ate
beneficiariesofest atesort rusts(pro ofresi dence.Thet axpai di nthef ormeri s
rata), as wel l as domest i
c credited agai nstt he tax ,lev i
ed i nt he
corporations. l
at t
er.(Commi ssionerofI nternalRevenue
 At axcr edi tisgr ant edf orestate v.S.
CJohnsonandSon,Inc.etal
.,G.
R
taxespai dt oaf or eigncount ryont he No.127105,
June25,
1999)
estateofci ti
zensandr esidental i
ens
subjectt ocer t
ai nl imitations. Exempt
ion Cr
edi
tMet
hod
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 13
MEMORYAI
DIN TAXATI
ON LAW
Met
hod b. Backwar d shifti
ng-when bur
den i s
Focus i
s on the Focusi
sont
het
ax transferr
ed from consumerthr ough
i
ncome or capi
tal factorsofdi stri
but
iontothefactors
i
tsel
f ofpr oducti
on
c. Onwar d shi
fting-when the tax is
NOTE: Computat
ional ill
ust
rati
on shift
ed 2 or mor e t
imes ei t
her
bet
weenat
axdeduct
ionandat
axcredi
t: forwardorbackwar d
Taxdeduct i
onmet hod (2)CAPI TALI
ZATION – ame rei ncreasei n
Gr ossincome thev alueoft hepr oper tyi snoti ncome
Less:allowablededuct
ions but mer ely an unr eal i
zed i ncrease i n
i
ncluding capital.Noi ncomeunt ilaftert heact ual
foreigntaxespai d saleorot herdisposi
tionoft hepr opertyin
Incomesubj ecttotax excessofi tsorigi
nal cost .
Mul ti
pli
edbyr at
e EXCEPT:i fbyreasonofappr aisal,thecost
Incomet axdue basis of pr opertyi ncreased and t he
resultantbasisi susedast henew t ax
Taxcr editmet hod base f or purposes of comput i
ng t he
Grossi ncome all
owabl edepr eciat
ionexpense,t henet
Less: allowablededucti
ons diff
erencebet weent heor i
ginal costbasi s
excludi ng and new basi si st axable under t he
foreignt axespaid economi
c benef
itpri
nci
ple.(
BIR Rul
i
ng
Incomesubj ecttotax No.029,
March19,1998)
Mul tipliedbyr at
e
Incomet axdue (3)TRANSFORMATION – themanuf acturer
Less: foreigntaxespai
d orproduceruponwhom t hetaxhasbeen
Neti ncomet axdue i
mposed,f eari
ngthelossofhi smar ketif
heshouldaddt hetaxtot heprice,pay s
thetaxandendeav orstor ecouphimsel f
FORMSOFESCAPE FROM byimprov i
nghi sprocessofpr oduction,
TAXATI
ON ther
ebyt urni
ngouthi suni t
satal ower
cost.
(1)SHI NG –t
FTI heprocessbywhi chthe
tax burden i s tr
ansferr
ed from t he (4)TAX AVOI DANCE – t heexpl oitati
onby
stat
utorytaxpayer(
impactoftaxati
on)to the t axpayer of l egall
y per missi
ble
another (
incidentof taxati
on) wit
hout alt
ernativ
e t ax r ates or met hods of
viol
ati
ngthelaw. assessingt axabl
epr oper t
yori ncome,i n
ordertoav oidorreducet axli
abili
ty.
I
MPACTOFTAXATI
ON –poi
ntonwhi
cht
ax Exampl e:“ estat
epl anni ng”(conv eyance
i
sori
ginal
l
yimposed. ofpr opertyt oaf ami lycorpor ati
on for
shares)( DelpherTr ades Cor p.vs.I AC,
INCIDENCE OF TAXATI
ON – p oi
ntonwhich 157SCRA349)
the t ax burden fi
nall
yr ests orset
tl
es (
5) TAXEVASION –usebyt
hetaxpayerof
down. i
l
legalorfraudul
entmeanstodef eator
I
llustrat
ion:Val ueaddedt ax.Theseller l
essenthepaymentofthet
ax.
i
sr equired byl aw to paytax,butthe
burdeni sact ual
l
yshift
edorpassedont o FACTORSINTAXE VASI
ON
thebuy er. 1. theendt obeachi eved,i.
e.payment
oflessthanthatknownbyt hetaxpayerto
KI
NDSOFSHI
FTI
NG belegall
ydue,orpay i
ngnot axwheni tis
a. Forwardshi ft
ing-whenburdenoft ax shownt hatthetaxi sdue;
i
s t ransferr
ed f rom a f actor of 2. an accompany ing state of mi nd
producti
on t hrough the factors of whichisdescr i
bedasbei ngev il
,inbad
dist
ri
butionunt ilitf
inal
lyset t
leson fai
th, will
ful, or del iber
ate and not
theulti
mat epurchaserorconsumer coi
ncidental;and
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 14
MEMORYAI
DIN TAXATI
ON LAW
3. acour
seofact
ionwhi
chi
sunl
awf
ul. Dev elopmentDecr eeof1974( PD463
as amended) ,Cot tage IndustryAct
INDI
CIAOFF RAUDI
N TAXEVASION (RA 318, as amended) and
1.Failur
e t o declar
e f or taxation exempt ions i n “ Housi ng for Low
purposestrueandactualincomeder ived Income Gr oup” ( PD 1205, as
from businessfor2 consecut i
vey ears amended)
(
Republ
i
cvsGonzal
es,
L-17962) c. Cont ractual-agr eed t o by t he
2.Substanti
al under -declar
ati
on of taxi ng aut hor i
ty i n contracts
i
ncomet axreturnsofthet axpayerf
or4 lawf ully enter ed i nto by t hem
consecut
ive y ears coupl ed wi th underenabl ingl aws
i
ntenti
onaloverstat
ementofdeduct ions d. Tr eat y
(
CIRvsReyes,
104PHI
L1061) e. Li censi ngOr dinance
2. Ast of or m
TAX TAX (
1)Expr ess– expr esslygrantedby
AVOIDANCE EVASI
ON organi corst at utelaw
(
2)I mpl i
ed – when par ti
cular
Val
i
dit
y Legal and not Il
l
egal and per sons,pr oper t
yorexci sesar e
subject t
o subject to deemed exempt as t hey f al
l
cri
mi nal
penal
ty cri
mi nal
out sidet hescopeoft het axing
penalty
prov i
sionit
sel f.
Ef
fect Mini
mizat
ion of Almost 3. Ast oext ent
t
axes always (1)Tot al–absol utei mmuni t
y
resul
ts i
n (2)Par tial–onewher eacol l
ection
absence of ofapar toft het axisdispensed
taxpayment
s wi th
4. Ast oobj ect
(6) TAX EXEMPTI
ON – a gr ant of (1)Per sonal– gr ant ed dir
ectlyi n
i
mmuni ty to par t
icul
ar persons or fav orofcer tainper sons
corpor
ati
onsfrom theobli
gati
ont opay (2)I mper sonal– gr anteddirectl
yi n
taxes. fav or of a cer t
ain class of
pr oper ty
S: No l
LEGAL BASI aw gr
ant
inganyt
ax
exempti
onshallbepassed wi t
houtthe PRI
NCIPLESGOVERNI NGTAXE XEMPTI ON
concur
rence of a maj
ori
ty of allthe a. Exempt ionsf rom t axat i
onar ehighly
member sofCongress( .SEC 28(
ART VI 4) disf avored i n l aw and ar e not
OFTHE1987CONSTI ON)
TUTI presumed.
b. Hewhocl aimsasexempt ionmust
KI
NDSOFTAXE XEMPTI ON beabl et oj ust ifyhi scl aim byt he
1. Ast osour ce clear estgr antofor ganicorst atute
a. Const itutional–i mmuni t
iesfrom l
aw by wor ds t oo pl ain t o be
taxat i
ont hator i
ginatefrom t he mi staken.I fambi guous,t her eisno
const itut
ion. exempt ion.
b. St atutory–t hosewhi chemanat e c. He who cl aims exempt ion shoul d
from legisl ati
on prov ebyconv inci ngpr ooft hathei s
Exampl esofSt atut
or yExempt i
ons exempt ed.
Sec.27, NIRC d. Taxat i
onist her ule;t axexempt i
oni s
Sec.105 Tar iff and Cust oms theexcept i
on.
Code e. Tax exempt i
on must be st rictl
y
Sec.234Local Gov ernmentCode const r
uedagai nstt het axpay erand
Speci al Laws, such as t he l
iber all
y i n f av or of t he t axing
Omni busI nvest mentCode of1987 aut horit
y .
(EO 226) , Phi l
ippine Ov er
seas f. Taxexempt ionsar enotpr esumed.
Shippi ngAct( RA1407asamended) , g. Const i
tuti
onal gr ants of t ax
Ferti
lizerI ndust r
yAct( RA 3050,as exempt ionar esel f-execut i
ng.
amended) , Mi neral Resour ces h. Taxexempt ionsar eper sonal .
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 15
MEMORYAI
DIN TAXATI
ON LAW
unless t
her
ei s mani
festi
ntentto
THE FOLLOWING PARTAKE THE NATURE OF repeal or al
ter t
he speci
al law
TAXEXEMPTION (Pr
ovince of Misami
s Ori
entalvs
1. Deduct i
onsf orincomet axpurposes CagayanElect
ri
cPowerandLightCo.
2. Clai
msf orrefund I
nc)
3. Taxamnest y
4. Condonat ionofunpai dtaxli
abil
it
ies NATUREOFTAXAMNESTY
NOTE:mustbest ri
ctlyconstr
uedagai nst 1.Gener alorintentionalov erl
ookingby
thet
axpay er thest at
eofi tsaut hor
it
yt oi mpose
penaltiesonper sonsot her wiseguil
ty
WHEN EXEMPTI ONS ARE CONSTRUED ofev asionorv i
olati
onofar evenueor
LI
BERALLYI NFAVOROFGRANTEE taxlaw.
1. Whent helaw sopr ovidesf orsuch 2.Partakesofanabsol uteforgivenessof
li
ber alconstructi
on. waiveroft hegov ernmentofi tsri
ght
2. Exempt i
ons f rom cer tain t axes, tocollect.
grant edunderspeci alcircumst ances 3.Togi vet axevaders, whowi sht orel
ent
tospeci alclassesofper sons. andar ewil
li
ngt or eform achancet o
3. Exempt i
ons i n f avor of t he doso.
gov ernment ,itspoliti
calsubdi vi
sions
orinst r
ument al
it
ies. RULESONTAXAMNESTY
4. Exempt i
onst ot radi
t i
onalexempt ees, 1.Taxamnest y
suchast hosei nf avorofr eli
gious a) l
ike t ax exempt ion,itis never
andchar i
tableinstit
ut i
ons. favorednorpr esumed
5. If exempt i
ons r efert ot he publ i
c b) construed str i
ctl
y agai nst the
proper ty taxpayer ( must show compl ete
compl iancewiththelaw)
Q:Mayat axexempt i
onber evoked?
A: Yes. I ti
sanactofl i
beral
itywhich 2.
Gov ernment not est opped f r
om
couldbet akenbackbyt hegov ernment quest ioni
ng t he tax liabil
it
y ev en if
unless there arer estr
ictions. Si nce amnest yt ax pay ments wer e already
taxati
on is t he rule and exempt ion receiv ed.
theref
rom istheexcepti
on, theexemption Reason: Er roneous appl icat
ion and
maybewi t
hdrawnbyt het axingauthori
ty. enfor cement of t he law by publ i
c
(Mactan Cebu I nter
nat
ional Ai
rpor
t offi
cer s do not bl ock subsequent
Authori
tyvs.Mar
cos,
261SCRA667) correctappl icati
onoft hest atute.The
gover nment i s never est opped by
RESTRI
CTIONS ON REVOCATI ON OF TAX mist akesorer ror
sofi t
sagent s.
EXEMPTIONS Basis:Li f
ebloodTheor y
a. Noni mpai rmentcl ause. Wher et he
exempt ion was gr ant ed t o pr ivate 3.
Defenseoft axamnest y,l
i
kei nsani
ty,i
s
parties based on mat er i
al aper sonaldefense.
consi derat ion of a mut ualnat ure, Reason:Rel at
est ot hecircumstances
whi cht henbecomescont ractualand ofa par t
icul
araccused and nott he
is cov ered by t he non- impai rment characteroft he act
schar ged inthe
clauseoft heConst i
tution. inf
ormat i
on.
b. Adher ence t o form- i ft he t ax
exempt ion i s gr anted by t he Taxamnest
y Taxexempt
ion
Const itution,i tsrevocat i
on maybe
effected t hr
ough Const ituti
onal Immuni t
yf rom al l I
mmunityfr
om ci
vi
l
amendmentonl y cri
minal, ci
vil and li
abi
l
ityonl
y
administ
rati
ve
c. Wher et het axexempt i
ongr anti si n
l
iabil
it
ies ar
isi
ng
thef orm ofaspeci allawandnotbya fr
om non pay ment
gener all aw ev enift het ermsoft he oftaxes
gener alact ar e broad enough t o
includet hecodesi nt hegener all aw Appl
i
esonl
ytopast Pr
ospect
ive
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 16
MEMORYAI
DIN TAXATI
ON LAW
t
ax periods, henceappl
i
cat
ion
r
etr
oact
iveappl
i
cati
on
TAXENFORCEMENTAND
ADMINISTRATI
ON
DOCTRI NEOFI MPRESCRI PTIBILTY
Asar ule,taxesar ei mpr escr i
ptibleas
theyar et hel i
febl oodoft hegov ernment . SOURCES OF TAX LAWS ( Key:SPEC2TRA
Howev er ,t axst at utes maypr ovide f or BLT)
statuteofl imitations. 1. Statutes
Ther ulest hathav ebeenadopt edar e 2. President i
alDecrees
asf oll
ows: 3. Execut i
v eOrders
a.)Nat ionalI nternalRevenueCode 4. Const i
tution
The st atute of l imi tat i
on f or 5. Cour tDeci si
ons
assessmentoft axi far et urni sf il
edi s 6. TaxCodes
withint hr ee( 3)y earsf r
om t hel astday 7. RevenueRegul ati
ons
prescribed byl aw f ort hef i
lli
ng oft he 8. Admi nistrati
veIssuances
returnori ff i
ledaf terthel astday ,wi t
hin 9. BIRRul ings
threey ear sf rom dat eofact ualf il
ling.If 10.Local TaxOr dinance
nor etur nisf i
ledort her etur nf il
edi sf alse 11.TaxTr eat i
esandConv ent
ions
orf raudul ent,t he per i
od t o assess i s
withint en y earsf rom di scov eryoft he REQUI
SITESOFTAXREGULATI
ONS
omi ssion, fraudorf alsity. 1. Reasonable

The per i
od t o col lectt ax i s wi t
hin 2. Withintheaut
hori
tyconfer
red
threey ear sfrom dat eofassessment .In 3. Notcont r
aryt
olaw
thecase, howev er ,ofomi ssi ont of il
eori f 4. Mustbepubl i
shed
ther etur nf il
edi sf alseorf raudul ent ,the
periodt ocol lecti swi thint eny earsf rom NOTE: Admini
str
ati
ver
egulat
ionsmust
discov erywi t
houtneedofanassessment . al
waysbeinharmonywi
ththeprovi
si
ons
oft he l
aw. I n case ofdiscrepancy
b.)Tarif
fandcust omscode between t he basic law and t he
It does not express any general i
mpl ementi
ng rul
e or r egul
ati
on, the
stat
uteofli
mitat
ion;itpr
ovi
ded,however, for
merpr ev
ail
s.
t ’whenar
hat ‘ ticleshaveenter
edand
passedf reeofdut yorfi
naladjust
mentof NON-RETROACTI
VITYOFBIRRULI
NGS
duti
es made,wi t
h subsequentdel i
very, GeneralRule:Rulingsar
enotr et
roact
ive
suchent r
yandpassagef r
eeofdut yor i
ft heyar e pr
ejudici
altothe taxpay
er.
sett
lement of dut ies will, af
ter the (Sec.246,
NIRC)
expi
rationofone( 1)year,from thedate Excepti
ons:
ofthe f inalpaymentofdut i
es,int he 1. Wher e t he t axpayer del
i
berately
absenceoff raudorprotest,befinaland mi sstates oromi t
s materi
alfact s
conclusive upon allparti
es,unless the from hi sr et
urn orany document
l
iqui
dat i
on ofi mportentrywas mer el
y requiredofhi m bytheBIR.
tent
ative.”(Sec1603,TCC) 2. Wher e t he f acts subsequently
gat hered by the BI Ris materi
ally
)LocalGov
c. ernmentCode differentfrom thefactsonwhichthe
LocalTaxes,f ees,orchar gesshallbe ruli
ngi sbased.
assessedwi thinfive( 5)year sfr
om t he 3. Wher ethetaxpayeractedi
nbadfaith.
dat etheybecamedue.I ncaseoff r
audor
i
nt entt o evade t he paymentoft axes, PRINCIPLE OF LEGI VE APPROVALOFAN
SLATI
fees or char ges t he same may be ADMI NI VE I

STRATI NTERPRETATI
ON THROUGH
assessed wi thi
nt en (10) yearsf rom REENACTMENT
discoveryoft hef raudori ntenttoevade Wher east atuteissusceptibleoft he
payment .Theyshal lalso be collected meani ngpl aceduponi tbyar ulingoft he
eitherbyadmi nist
rati
veorj udici
alaction gover nment agency char ged wi th its
within five ( 5) year s from dat e of enforcement and t he l egisl
ature
assessment( Sec.194.LGC) thereaf t
erreenactsthepr ovi
sionwi thout
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 17
MEMORYAI
DIN TAXATI
ON LAW
substant
ialchange,such act ion i
st o conf
err
edt
oitbyt
heCodeorot
her
someext entconfi
rmatorythattheruli
ng l
aws
carr
iesoutthelegi
slat
ivepurpose.
ASSESSMENT – a f inding by the t axi
ng
RULE OF NO ESTOPPEL AGAI NST THE author itythatthetaxpay erhasnotpai d
GOVERNMENT thecor r
ecttaxes. I tisalso awr i
tt
en
Gener alRule:The Gover nmenti s not noticet oataxpayertot heeffectthatthe
estoppedbyt hemi stakesorerrorsofits amountst at
edthereinisdueasat axand
agents; er roneous appl i
cat
ion and cont aining a demand f orthe pay ment
enforcementofl aw bypubl i
coffi
cersdo thereof .
not bar t he subsequent cor r
ect Gener alr ul
e:Taxes ar e self-
assessing
appli
cationofst at es.(
ut E.Rodr
iguez,I
nc. andt hus,donotr equi r
et heissuanceof
vs.Col
lect
or,L-
23041,July31,
1969) an assessment not ice in or der t o
Except
ion: I
ntheinterestofjust
iceand establ ishthetaxl
iabil
ityofataxpay er.
f
airplay,aswherei
njust
icewi
llr
esul
tto
Except
ions:
t
he taxpay .(
er seeCIR vs.CA,GR No.
117982,Feb.6,1997;CI
Rvs.CA,GRNo. 1. Tax per i
od of a t axpay
er is
107135,Feb.3,
1999) ter
minated[Sec.6(D),NI
RC]
2. Defi
ciencytaxliabi
li
tyari
singfr
om a
AGENCI
ESINVOLVEDIN TAXADMINI
STRATI
ON taxauditconductedbyt heBIR[Sec.
1. BureauofInternalRevenue 56(
B),
NIRC]
–inter
nalrevenuet axes 3. Taxlien[Sec.219,
NIRC]
Agent
soft
heCI
R 4. Dissolv
ing corpor
aton [
i Sec.52(
c),
a.Commi ssionerofCust oms wi t
h NI
RC]
respecttotaxesoni mpor t
edgoods
b. head of t he appr opr
iat
e SI
GNI CANCEOFASSESSMENT
FI
governmentof f
ice wi t
hr espectto a. Int hepr operpursuitofj udicialand
energytax extr ajudicial remedies t o enf orce
c.banksdulyaccr edit
edbyt heCIR taxpay er l i
abil
it
ies and cer t
ain
(
Sec.12,
1997NI
RC) mat terst hatrelat
et oi t,suchast he
2. BureauofCust oms– customsl aw i
mposi tion of sur charges and
enforcement i
nt er ests,
3. Provinci
al, cit
y and muni cipal b. In t he appl i
cati
on of st atute of
assessorsandtreasur
ers–l
ocaland l
imi tat i
ons,
realproper
tyt
axes c. Int heest abl
ishmentoft axliens, and
d. Inest imat i
ngt her ev
enuest hatmay
ORGANI ON ANDF
ZATI ON OFTHE
UNCTI be col lected bygov ernmenti nt he
BUREAUOFI NTERNALREVENUE(BI
R) comi ngy ear.(Mamal ateo,Vi ctori
no.
BIR shal
lbeunderthesuperv
isi
on Revi
eweronTaxat
ion,
2004)
andcont
roloftheDept nance(
.ofFi Sec.
2,
NIRC)
KI
NDS
POWERSANDDUTI ESOFTHEBIR 1. SELF-ASSESSMENT-onei nwhi cht he
Assessmentand col l
ecti
on ofal l tax i s assessed by t he taxpayer
nati
onalinternalrevenuetaxes,fees,and himsel f
charges 2. DEFICIENCY ASSESSMENT-ma debyt he
1. Enf orcement of al l f or
feit
ures, tax assessorhi mselfwhereby t he
penalti
es, and f ines connect ed correct amount of t he t ax i s
ther
ewi th deter minedaf teranexami nationor
2. Execut ionofj udgmentsi nallcases investigati
on i s conducted. The
decidedi nitsfavorbyt heCour tof li
abilit
yi sdet erminedandassessed
TaxAppeal s( CTA)andt heor dinar
y forthef oll
owingr eason:
courts a.amountascer t
ainedexceedst hat
3. Gi ve effectto and admi nisterthe whichi sshownast hetaxbyt he
supervi
sor y and pol i
ce power s taxpayerinhisr et
urn
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 18
MEMORYAI
DIN TAXATI
ON LAW
b.noamountoft axi
sshowninthe anydefici
encytaxdueint hesame
retur
n mannert hatthe said acts could
c.taxpayerdi
dnotfi
l
eanyret
urnat have been per f
ormed by t he
all RevenueRegionalDir
ector.
3. I
LLEGALANDVOIDASSESSMENT- GeneralRule:income t ax retur
ns ar e
assessmentwher ei
ntaxassessor confi
denti
al.
hasnopowert oassessatal l Excepti
on:i
nquiryi
ntoincomet axreturns
4. ERRONEOUSASSESSMENT-assessorhas maybeaut hori
zed-
power to assess buter r
si nt he
exerci
sether
eof 1. i
nspect ionisauthori
zeduponwr i
tt
en
order of t he Pr esi
dent of t he
BURDEN OF PROOF I N PRE- ASSESSMENT Phili
ppines;
PROCEEDI NGS 2. i
nspect ion i s aut horized under
Ther e i s a pr esumpt i
on of Fi
nance Regul ati
ons No.33 oft he
correctnessandgoodf aithont hepartof SecretaryofFinance;
the CI R;t hus,the bur den lies on the 3. product i
on of t he tax r eturn is
taxpay er. Otherwise,thef indingoft he mat eri
alevidenceinacr i
mi nalcase
CIRwi l
lbeconcl usiveandhewi l
lassess wher ei
nt hegovernmenti si nterest
ed
thet axpayer.Thesamei st r
ueev enifthe i
nt heresult;or
CIRi swr ong,ift hetaxpay erdoesnot 4. product i
on orinspection ther eofis
contr over. (
t Cagayan Robi na Sugar authorizedbythetaxpay erhimsel f.
Mil
li
ngCo.vs.Cour tofAppeal
s,GR.No.
122451,October12,2000) Networ
th Met
hod-invent
orymet
hod of
Reasons:a.li
febl
oodtheor
y i
ncometax v er
if
icat
ion.
b.presumpt ion ofr egul
ari
tyin
perfor
mance of publ ic  Appl i
est heaccount ingpri
nciple:
functi
ons asset s–l i
abili
ti
es= net wor t
h
NOTE:Assessment s by the BIR must Condit
ionf oritsuse:
hav
eoni tsfacet hel aw andfact
supon 1. taxpay er’
s books do not cl earl
y
whi
chthepresumpt ionismade. refl
ecthi sincomeort hetaxpay erhas
no books,ori fhe has books,he
PRI
NCIPLESGOVERNINGTAXASSESSMENTS refusest opr oducet hem;
1. Assessment s ar e pr i
ma f aci
e 2. therei sev i
denceofpossi bl
esour ce
presumedcor rectandmadei ngood orsour cesofi ncomet oaccountf or
fait
h. i
ncr easesi nnetwor th;
2. Itshouldbebasedonactual f
acts. 3. therei saf i
xed st ar
ti
ng poi ntor
3. Itisdiscret
ionaryonthepartoft he openi ngnet worth;and
Commi ssioner. 4. theremustbepr operadjustment sto
conf orm withthei ncomet axlaws.
POWERSANDDUTIESOFTHECOMMISSI
ONER
4. Theauthori
tyoftheCommi ssi
onerto I.SECTI
ON 4(powertointer
prettaxlaw
assess taxes may be del egat
ed, anddecidet
axcases)
except t
he power t o make f i
nal
assessments. 1.I
nterpretpr ovi
sions oft hi
s Code and
5. Itmustbedirect
edtother
ightpart
y. othertaxl awssubj ecttorevi
ew ofthe
SecretaryofFinance
Authori
tyofaRev enueOf fi
cer-pursuant (Quasi-l
egisl
ati
ve)
to a Lett
erofAut horityissued byt he 2.Decide:(Quasi-j
udici
al)
RegionalDir
ector a)disputedassessment
a.To exami ne taxpayers wit
hint he b)refunds ofinter
nalrev enue taxes,
j
uri
sdicti
onoft hedi str
icti
nor der feesandchar ges
t
ocollectthecorrectamountoft ax; c)penalti
esimposedi nr
elati
onther eto
b.Tor ecommendt heassessmentof d)othermat t
ersari
singfr
om t hi
sCode
orot herlaws orpor ti
ons ther eof
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 19
MEMORYAI
DIN TAXATI
ON LAW
administ
eredbyt heBIRsubjectto constr
uedasgranti
ngtheCommi ssi
oner
the excl
usiv
e appell
atej
uri
sdict
ion theauthor
it
ytoi
nquir
eintobankdeposits
oftheCTA( Sec.4) othert
hanasprovi
dedforundersec.6(F)
oftheCode.
I
I. SECTI
ON 5 ( power to obtai
n
i
nformati
on,summon,examineandt
ake I
II
.SECTION 6 ( power t o make
t
esti
monyofper sons) assessment
s, prescr
ibe addi
tional
requi
rement
sfort axadminist
rati
on
3. Fort
heCommi
ssi
onert
oascer
tai
n: andenfor
cement)
(
a)cor r
ectness ofanyretur
n orin
maki ngar et
urnwherenonehas 4. Examinat
ion of r et
urns and
beenmade deter
minati
onoftaxdue
(
b)liabil
ity ofany per
son forany A.Af terar et urnhasbeenf i
ledt he
i
nternal r ev
enue tax or i n Commi ssioner or hi
s
correcti
ngsuchli
abi
li
ty repr esent ativemayaut hor ize
(
c) taxcompl i
ance i
. t heExami nati
onofany
taxpay erand
TheCommi ssioneri saut hor ized: i
i. t heAssessmentoft he
1.toExami neanyr elevantBook,paper , cor r
ectamountoft ax;
recor dorot herdat a B.Fai l
ur et of i
lear eturnshal lnot
2.to Obt ain any i nformat ion ( costs, pr eventt he commi ssionerf r
om
volumeofpr oduct ion,r ecei pts,sales, aut hor izing t he exami nat i
on of
grossi ncome,et c),onar egularbasis anyt axpay er ;
from: * Anyt axordef i
ciencyt axso
i.anyper sonot hert hant heper son assessedshal lbepai dupon
underi nvest igat i
onor not iceanddemandf rom t he
ii
.any of fice or of ficer of t he Commi ssioner or hi
s
national /local gov ernment , gov ’t repr esent ative
agenci es and i nstr ument ali
ti
es * Any r eturn, st at ement or
(Bangko Sent ral,gov ’towned and decl ar ation f i
led i n any
cont rolledcor por ati
ons)( e.g.LTO, aut hor izedof fi
ceshal lnotbe
Regi sterofDeeds) wi thdr awn;but wi thint hree
3.toSummon year sf rom dat eoff ili
ng,t he
i.theper sonl i
abl ef ort axorr equi
red same may be modi fied,
tof ilear eturnor changedoramended; provided
ii
. anyof ficerorempl oy eeofsuch thatno not i
ce f oraudi tor
per sonor inv estigat ion ofsuch r eturn,
ii
i.any per son hav ing i n hi s has i nt he meant ime,been
possessi on/ cust ody /car e act ual l
y ser ved upon t he
--thebooksofaccount s, taxpay er .
--account ing r ecor ds ofent ri
es
relat i
ng t ot he busi ness oft he 5.Fai
lur
etosubmitrequi
redr
etur
nsand
per sonl iabl ef ort axoranyot her ot
herdocument
s
per son I
faper son
--t opr oducesuchbooks, papers, i
.failst of i
lear equi
redr etur
nor
recor ds,andot herdat aandt ogive repor tatt hetimepr escribedor
test imony i
i
.wi l
l
f ul
lyorot her wi
sef i
lesaf alse
4.tot aket heTest i
monyoft heper son orf raudulentr etur
n,
concer ned,underoat h as may be TheCommi ssionershal lMakeor
relevantt othei nqui ry Amendt her eturnfrom
5.to cause r evenue of ficers and i
.hi sownknowl edgeor
empl oy eest omakeaCanv assofany i
i
.f rom suchi nformationashecan
revenuedi strictorr egion obtai n t hrough t estimony or
other wisewhi chshal lbepr i
ma
Not
hing i
n Sect
ion 5 shal
l be faciecor rectandsuf ficientfor
alllegal purposes
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 20
MEMORYAI
DIN TAXATI
ON LAW
col
l
ect
ionoft
ax
6.I
nventor
y-t
aking, Sur
vei
ll
ance,
Pr
esumpt i
veGrossSal
es 8. Pr
escr
ibeRealPr
oper
tyVal
ues
A.Commi ssionermay ,
atanyt i
me TheCommi ssionerisauthori
zedt o:
duri
ngt het axabley ear a.Divide t
he Phi l
s. i nto di
fferent
(a)ordert hei nventoryt aki
ng of zonesorar easand
goodsofanyt axpayeror b.Determi
net hefairmar ketval
ueof
(b)may pl ace t he busi ness realproper t
ies located in each
oper ati
ons of any per son zoneorar ea
(natural/j
ur i
dical) under
obser vati
onorSur veil
lance, Fortaxpurposes,thevalueoft he
iftherei sr easontobel i
eve pr
oper t
yshallbewhi cheverishigher
thatsuchi snotdecl aringhi s of
:
correct i ncome, sal es or a) Fairmarketvalueasdet er
mi ned
receiptsf ortaxpur poses. bytheCommi ssioner;or
Thef indingsmaybeused b) Fairmar
ketvalueasshowni nt he
as basi sf or assessi ng t he schedul
e of val ues of t he
taxes and shal lbe deemed provi
nci
alandcityassessors.
primaf aci ecor r
ect.
9. Aut
hor
it
ytoI
nqui
rei
ntoBankDeposi
t
B.Commi ssionermay pr escribe a NotwithstandingR. A.1405( Bank
Mini
mum amount of gr oss SecrecyLaw)t he Commi ssioneri s
r
eceipts,sal esand t axablebase authorized toi nquireintot he Bank
(
taki
ngi nt oaccountt hesal esand depositsof :
i
ncomeofot herper sonsengaged (a)adecedentt odet er
mi nehisgr oss
i
nsimilarbusi ness): estate
i
. Whenaper sonhasf ail
edt o (b)ataxpay erwhohasf il
edan
i
ssuer ecei ptsasr equiredby applicati
ont ocompr omise
sec.113( I
nvoicer equir
ement s paymentoft axliabi
li
tybyr eason
for VAT- r
egistered per sons) of f i
nancialincapacit
y
and Sec.237 ( Issuance of
Recei pts or Commer cial The t axpayer
’s appli
cation for
Inv
oi ces)or compr omiseshallnotbeconsi dered
i
i. Whent hebooksofaccount s unless he wai ves in wr it
ing his
orr ecor ds do notcor rectly pri
vilege underRA 1405 and ot her
ref
lectt hedecl arationsmade gener alorspeciallaws.Suchwai ver
orr equi red to bemadei na shallaut hor
izetheCommi ssionerto
ret
ur n, i
nqui reintohisbankdeposi
t s.
Such mi nimum amountshal l 10.Aut
hor
it
ytoRegi
stert
axagent
s
beconsi deredcor rect. (
a)TheCommi ssionershal laccr edit
7. Ter
minat
etaxabl
eper
iod and Regi ster ,i ndividuals and
Commi ssi onershal ldecl ar
et het ax generalprofessi onalpar tner
shi ps
peri
odofat ax pay erTermi natedandsend andtheirrep.whopr epareandf il
e
noti
cet ot he taxpay erofsuch taxr et
urns and ot herpaper s or
deci
si on wi thar equestf ori mmedi ate whoappearbef or etheBI R
paymentoft het axwheni thascomet o (
b)The Commi ssioner shal lcr eate
theknowl edgeoft heCommi ssioner: nati
onalandr egionalaccr edi
tat i
on
a) t hatat axpayeri sr eti
ring fr
om boards.
busi nesssubj ecttotaxor
b) isi ntendi ngtoleav ethePhi l
s.or Those who ar e deni ed
c) t or emov ehispr opertytherefr
om accredit
ati
onmayappealt hesamet o
or theSec.OfFinancewhoshal lrul
eon
d) t ohi deorconcealhi sproper t
y the appeal withi
n 60 days f rom
or recei
ptofsuchappeal .Failuretodo
e) isper forminganyactt endi ngto sowi thi
ntheprescri
bedper i
odshall
obst ructt hepr oceedingsf orthe be deemed as appr oval f or
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 21
MEMORYAI
DIN TAXATI
ON LAW
accr
edi
tat
ion. andColl
ecti
onDiv.
i
v.Revenue Dist
ri
ctOffi
cerhavi
ng
11.Author
ity t
o Pr
escr
ibe Addi
ti
onal j
uri
sdict
ionovert
hetaxpay
er
Requir
ement
s
TheCommi ssi
onermaypr escri
be d) powert oAssignorreassi
gn
themannerofcompl i
ancewi t
hany i
nternalrevenue of
fi
cersto
document ar
y or procedural establi
shments where
Requirementfort he submi ssi
on or art
iclessubj
ecttoexci
setax
preparat
ion offinanci
alst atements arekept.
accompany i
ngtaxreturns.
V.SECTIONS 8 ,14,15,16,17 ( Ot
her
I ON 7 (
V.SECTI Aut
hor
it
y t
o Del
egat
e Powers)
Power) 13.Dutyt o ensurethe prov
isi
on and
12.TheCommissi
onermaydel
egat
ethe distr
ibution of f orms, recei
pts,
power
svest
edinhimt
o certi
ficates,andappl
i
ances,andthe
-subor dinateof fici
alswithr ank acknowl edgment of pay ment of
equiv alenttoDi vi
sionChi eforhi gher, taxes( Sec.8)
subject t o l i
mitations/rest
ri
ct i
ons
imposed under t he r ul
es and 14.Authori
tytoadmini
steroat
hsandt
o
regulat i
ons taketest
imony(
Sec.14)
EXCEPT,( the following power s
shallNOTbedel egated) 15.Aut
hori
ty to make ar
rest
s and
a) power t o Recommend t he sei es(
zur Sec.15)
pr omul gati
on of r ules and
regul ati
ons by t he Sec. of 16.Author i
ty to empl oy, assi
gn or
Fi nance reassign int
ernalr ev
enue of f
icers
b) powert oI ssue r uli
ngs off irst i
nv ol
ved in exci
set axfuncti
onst o
impr essionort oRev erse,revoke establi
shments wher e ar t
icles
modi fyanyexi sting rul
eoft he subjecttoexcisetaxareproducedor
BI R kept(Sec.16)
c) powert oCompr omi seorAbat e
anyt axli
abili
ty 17.Authority t
o assi gn or r eassi
gn
i
nternal r evenue of fi
cers and
empl oyees ofthe BIRt o otheror
specialduties connect
ed wi ththe
enforcementoradmi ni
str
ati
onoft he
revenuelaws(Sec.17)
pr
ovi
ded however t
hat t
he ARELEGALOFFI CERSOFTHEBI RAUTHORI ZED
regi
onalev aluation board may TO I NSTITUTE APPEAL PROCEEDI NGS
compr omi se: WITHOUT THE PARTI CI ON OF THE
PATI
1.assessment s i ssued by SOLI TORGENERAL?
CI
regi onal of fi
ces i nvol
v i
ng NO. The insti
tuti
on or
def ici
encyt axesofP500, 000 commencementbef oreapr opercour tof
orl essand civi
l and cr iminal act ions and
2.mi norcr i
minalv iolati
ons as proceedings ar i
sing under t he Tax
may be det ermi
ned by t he Reform Actwhi chshal lbeconduct edby
rulesandr egulati
ons l
egalof f
icersoft heBIRi snoti ndisput e.
3.di scov ered by r egionaland Anappealf rom suchcour t,howev er,i s
distr i
ctoffi
cials nota mat t
erofr i
ght. I ti s sti
llt he
Soli
cit
orGener alwho has t he pr i
mar y
Regi
onal Eval
uat
ion Boar
d i
s responsi
bilit
y t o appear f or t he
composedof
: government i n appel l
ate pr oceedings.
i
. Regi
onal Direct
orasChairman (Commissi
onervs.LaSuert
eCi garand
i
i
.Asst .RegionalDir
ector Cigar
ett
eFactor
y,GRNo.144942,Jul
y4,
i
i
i.Headsoft heLegal,Assessment
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 22
MEMORYAI
DIN TAXATI
ON LAW
2002) TESTSONTAXABI TYOFI

LI NCOME
1. Flow of Weal t
h Test – The
SOURCESOFREVENUE determining f actor f or t he
The f ollowing t axes, f ees and i
mposi t
ion of i ncome t ax i s
charges ar e deemed t o be nat i
onal whet her any gai n was der ived
i
nternal revenuet axes.( Sec.21,NIRC) fr
om t het r
ansaction.
1. Incomet ax 1. RealizationTest-unl esst heincome
2. Est ateanddonor '
st axes i
sdeemed" r
eali
zed, "therei sno
3. Val ue-addedt ax t
axabl eincome.
4. Ot herper cent agetaxes 1. Economi c-
Benef i
tPr i
nci pl
eTest
5. Exci set axes -flowofweal threalizedist axable
6. Document ar
yst ampt axes onl y to t he ext ent t hat t he
7. Suchot hert axesasar eorher eaf
ter taxpay er i
s economi call
y
maybei mposedandcol lectedbythe benef it
ed.
BureauofI nternalRev enue.
CRITERIAI NIMPOSI NGI NCOMETAX
1.Citizenshi pPr inciple–Aci t
izenoft he
Phili
ppines i s subj ect t o Phi li
ppine
I
I. NATI
ONALTAXATI
ON i
ncomet ax( a.)onhi swor l
dwi dei ncome,
i
fher esidesi nthePhi li
ppines, or(b. )only
A.I
NCOMETAXATI
ON onhi si ncomef rom sour ceswi thint he
Phili
ppines,i fhequal i
fiesasnonr esident
DEFI
NITI
ONS citi
zen.
I
NCOME TAX – t axon al lyearlyprofi
ts 2.Resi dencePr i
nci ple–r esidental ienis
ari
singfrom proper
ty,possessi
ons, l
iablet opayi ncomet axonhi sincome
tr
adeorbusi ness,orasat axona from sour ceswi thi
nt hePhi l
ippinesbut
person’
s i ncome, emol uments, exemptf rom t ax on hi si ncome f r
om
profi
tsandthelike(61CJS1559) sourcesout sidet hePhi l
ippines.
–taxonincome, whether 3.Sour cePr inciple–Anal ieni ssubj ect
grossornet.(27Am.Jur .308) to Phi l
ippi ne i ncome t ax because he
derivesi ncomef rom sour ceswi thint he
I
NCOME–a l
lwealt
h,whichfl
owsintothe Phili
ppines.Thus,anonr esidental i
eni s
t
axpayer ot
her than as a mere l
iablet opayPhi lippinei ncomet axonhi s
r
etur
nofcapital
. i
ncome f rom sour ces wi thi
n t he
Phili
ppines such as di vidend,i nt erest
,
CAPI
TAL–r esour
ceofperson,whichcan rent,orr oyal ty
,despi tet hef actt hathe
be used in pr
oduci
ng goods and hasnotsetf ootint hePhi l
ippines.
serv
ices. CLASSI
FICATI
ONOFTAXPAYERS
I
ncome Capit
al
I
ndi
vi
duals
All wealth, which Fund or proper
ty a. cit
izens
fl
ows i nto t he whichcanbeused
(1)r esi
dentcit
izens( RC)
taxpayerotherthan i
npr oduci
nggoods
asamer er et
urnof orservi
ces
(2)non- r
esidentcit
izens( NRC)
capit
al. b. ali
ens
(1)r esi
dentaliens(RA)
Fl
owofWeal
th Fundorpr
oper
ty (2)non- r
esidentali
ens( NRA)
(a)engaged i n t rade or
Sour
ceofweal
th Weal
th businesswi thi
nthePhils.
(NRAETB)
REQUI
SITESFORINCOMETOBETAXABLE (b)notengagedi nt r
adeor
1. Theremustbeagai norprofi
t. business wi t
hin t he
2. Thegainmustber eali
zedorrecei
ved. Phil
ippines(NRANETB)
3. Thegainmustnotbeexcl udedbylaw
ortreat
yfrom taxati
on. Cor
porati
ons
a. Domest
ic(
DC)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 23
MEMORYAI
DIN TAXATI
ON LAW
b. Foreign i
nint
ernat
ional
trade.
(1)r esi
dentforei
gncorpor
ati
on
(RFC) Based on t he abov e pr ov i
si ons,
(2)non- resi
dentfor
eign therear et hr ee( 3)t ypesofnonr esi dent
corporat
ion(NRFC) cit
izens,namel y :( 1)i mmi gr
ant s;( 2)
Estates empl oyees ofa f or eign ent ity on a
Trusts permanentbasi s; and
Partner
ships (3) ov erseas cont ract wor ker s.
Immi grant sandempl oy eesofaf or eign
A.I
NDI
VIDUALS entit
yonaper manentbasi sar et reat ed
asnonr esi dentci tizensf r
om t het ime
WHOARETAXABLE? they depar tf rom t he Phi lippi nes.
1. Resi
dentCi tizen Howev er,ov erseas cont ractwor kers
2. Non-residentCi tizen must be phy sical ly pr esent abr oad
A non- r
esi dentci ti
zenmeans,a mostoft het imedur ingt hecal endar
Fi
li
pinoci ti
zen: yeartoqual i
fyasnonr esi dentci ti
zens.
a. who est abl i
shes t o t he 3. Residental ien-meansani ndiv idual
sat i
sf act i
onoft heCommi ssioner whose r esi dence i s wi thin t he
thef actofhi sphy sicalpr esence Phili
ppinesandwhoi snotaci tizen
abr oadwi thadef init
ei ntent i
ont o thereof.[ Sec. 22( F,NI RC) ]
residet her ein; 4. Non- residental ienengagedi nt rade
b. whol eav est hePhi l
ippi nesdur i
ng orbusi ness wi thi nt he Phi li
ppi nes.
thet axabl ey eartor esi deabr oad, (NRAETB)
eitheras an i mmi gr antorf or A non- resi dental i
en means an
empl oy ment on a per manent i
ndiv i
dualwhose r esidence i s not
basi s; withint hePhi lippi nesandwhoi snot
c. who wor ksand der ivesi ncome acitizent her eof .[ Sec. 22( G)]
from abr oad and whose The t erm t rade or busi ness
empl oy mentt hereatr equir eshim i
ncludes t he per formance of t he
to bephy si call
ypr esentabr oad functionsofapubl icof fice.[Sec.22
most of t he t i
me dur ing t he (
S)]
taxabl ey ear ; The t m t
er rade, busi
ness or
d. whoi spr ev i
ousl yconsi deredasa pr
ofessi
on shall not i ncl
ude
non- resi dentandwhoar rivesi n performance of servi
ces by t he
thePhi l
ippi nesatany timedur i
ng taxpayeras an employee.[Sec.22
thet axabl ey eartor esi det hereat (
CC)
]
per manent lyshal lbeconsi dered A non-resident al
ien i
ndivi
dual
non- resi dentf ort het axabl ey ear who shal
lcome t ot he Phi
li
ppines
in whi ch he ar ri
v es i n t he and st
ay thereinforan aggr egate
Phi l
ippi nes wi t
hr espectt o his per
iodofmor et han180day sduring
income der ived f r
om sour ces anycal
endary earshallbedeemeda
abr oadunt ilthedat eofhi sar rival non-r
esidental
iendoingbusinessin
[
Sec.
22(
E),
NIRC] the Phi li
ppi
nes Sect ion 22( G)
notwi
thstandi
ng[Sec.25(
A)(
1)]
NOTE:Anover
seascont
ractwor
ker 5. Non-residentali
en notengaged i
n
(OCW)i staxable only on i
ncome tr
ade or busi ness wit
hin the
der i
ved f r
om sour ces wi t
hin the Phil
ippines.(NRANETB)
Phili
ppines.[Sec.23(B)(
C)]
A seaman i sconsidered asan ONLY RESI DENT CI TIZENS aretaxable
OCW pr
ovided t he f oll
owing forincomeder iv
edf rom sourceswithin
requirementsar emet: and wi thoutt he Phili
ppines.Allother
1. r
ecei v
escompensat ionforservi
ces i
ndividuali ncomet axpayersaretaxable
renderedabr oadasamemberof onlyf ori ncome der i
ved from sources
thecompl ementofav essel
;and wit
hint hePhi li
ppines.
2. suchv esselisengagedexclusivel
y
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 24
MEMORYAI
DIN TAXATI
ON LAW
 TaxRat
es:Pl
easer
efert
oAnnexA. 3. RegionalorAr
eaHeadquart
ersunder
Sec.22( DD)–notsubj
ectt
oincome
B.CORPORATI
ONS tax
WHOARETAXABLE? onaloper
Regi ati
ng headquar
ter
s
1. Domest icCor por at
ion– cr eatedor underSec.22(EE)shal
lpayat axof
organizedint hePhi ls.orunderi ts 10%oftheirt
axabl
eincome.
aw[
l Sec.22(C),NI RC]
2. Resident For eign Cor por ati
on – ONLY DOMESTI C CORPORATI ONS ar e
engagedi nt r
adeorbusi nesswi t
hin taxabl
eforincomeder iv
edf rom sour ces
thePhi l
i
ppines[Sec.22( H), NIRC] withi
n and withoutthe Phi l
ippines.All
3. Non-residentFor eignCor porati
on– othercorporat
ei ncome t axpay ers are
notengaged i nt r
ade orbusi ness taxabl
e onlyf orincome der i
ved from
withi
nt he Philippines [Sec.22( I)
, sourceswit
hinthePhil
ippines.
NI
RC]
ACorporationIncl
udes:  TaxRat
es:
Pleaser
efert
oAnnexB.
1. Part
nerships,nomat t
erhow creat
ed
ororganized; C.ESTATESANDTRUSTS
2. Joi
nt-stockcompanies;
3. Joi
nt account s ( cuentas en ESTATE–ref
erstothemassofpr
oper
ti
es
part
ici
pacion) l
eftbyadeceasedperson.
4. Associati
ons;or
5. I
nsurance compani es [Sec. 22(
B), RULESONTAXABI TYOFE
LI STATE
NI
RC]
. Whenaper sonwho ownspr operty
di
es,t he foll
owing taxes are pay able
Excl
udes: underthepr ovisi
onsoft he i
ncomet ax
1. General pr
ofessionalpar
tnerships; l
aw:
2. Jointv ent
ureorconsor t
ium f ormed 1. Incomet axf orindi
vidualunderSec.
for the pur pose of under taking 24 and 25 ( t
o cov er t
he per i
od
constructi
onpr oject
sorengagi ngi n beginni
ng Januar yt ot he time of
petrol
eum, coal , geot
hermal and death);
otherener gyoper at
ionspur suantt o 2. Estateincomet axunderSec.60i f
an oper ati
ng or consor t
ium theestateisunderadmi ni
strat
ionor
agreementunderaser vicecont ract judi
cialset
tlement.
withtheGov ernment.
CORPORATIONS E XEMPT F ROM I NCOME

TAXATI
ON (FOR INCOME REALI ZED AS SUCH) ESTATESUNDERJUDI CI ALSETTLEMENT
UNDERNI RC A. During t he Pendency of t he
1. Thoseenumer atedunderSec.30. Settlement
Exemptcor porationsar esubj ect Gener alRule:Anest ateunderj udicial
toi ncomet axont heiri ncomef r
om settl
ementi ssubj ecttoi ncomet axin
anyoft heirproper t
ies,real orper sonal, thesamemannerasi ndivi
duals.It s
orf r
om anyot heract i
viti
esconduct ed statusi sthesameast hest atusof
forpr of
itr
,egardlessoft hedi sposi t
ion thedecedentpr iort ohisdeat h.
madeofsuchi ncome. Except i
ons:
2. Wi threspectt oGOCCs,t hegener al 1. The ent i
tlement t o per sonal
rulei sthatt hese cor por at
ions ar e exempt i
on i s l imi t
ed onl y t o
taxable as any ot her cor por at
ion P20,000.
except: 2. No addi ti
onal exempt i
on i s
a. GSI S all
owed.
b. SSS 3. The di stri
but ion t o the hei r s
c. PHI C duringthet axabl ey earofest ate
d. PCSO income i s deduct iblef r
om t he
e. PAGCOR[ Sec.27( C)
] taxabl
ei ncome of t he est ate.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 25
MEMORYAI
DIN TAXATI
ON LAW
Such di stri
buted i ncome shal l 2. Ift he hei r
s, without cont r
ibuting
form par tofther especti
veheirs’ money ,propert
yori ndustr
yt ot he
taxableincome. estate,si
mpl ydiv
idethef r
uit
st hereof
Wher e no such between/ among t hemselves,a co-
distri
butiontot hehei rsismade owner shi
pi screatedandi ncomet ax
duringt het axabley earthatthe i
simposedont heincomer eceivedby
i
ncome i s ear ned, and such each oft he hei
rs,pay abl
ei nt heir
i
ncome i s subjected toincome separateandi ndi
vidualcapacit
y .
taxpay mentbyt he est
ate,the
subsequentdi stri
bution ther
eof TRUST –Ar ighttothepr
oper
ty,whet
her
i
snol ongertaxableont hepartof realorpersonal,hel
dbyonepersonfor
ther eci
pient. thebenef
itofanother.
B. TERMINATION OF THE JUDI CI

AL WHENTRUSTSARETAXABLEENTI TI
ES
SETTLEMENT (WHERE THE HEI RS STI
LL 1.Atrust
,thei ncomeofwhi chi stobe
DONOTDI DETHEPROPERTY)
VI accumulated
1. I ft he heir
s cont ri
but et ot he 2.At r
ustinwhi chthef i
duci
arymay ,at
estate money , pr opert
y , or hi
s discreti
on, either di
str
ibut
e or
i
ndust r
ywi thintentiont odi vi
de accumulatetheincome.
the pr of
its bet ween/ among
themselves, an unr egist
ered RULES ON TAXABI
LITY OFTHEI NCOMEOFA
partner
shipi s created and t he TRUST
estate becomes l iablef ort he 1. The i ncome of t he t
rust for t
he
paymentofcor poratei ncomet ax. taxableyearwhi chistobedistri
but
ed
(Evangel
istavs.Col
lect
or,GRNo. to the benef iciar
ies – f i
li
ng and
L-9996,October15,
1957; Oñavs. payment of tax l
i
e on t
he
Commi ssioner,GR No.L-19342, benef
ici
ari
es.
May25, 1972) 2. Theincomeoft hetrustwhichi
st obe
2. Iftheheir s,withoutcont ri
buting accumulated or hel d for f utur
e
money ,pr operty ori ndustryt o dist
ri
bution whether consist
ing of
i
mpr ovet heest ate,si
mpl ydivide ordi
naryincomeorgai nfr
om thesale
the fruit
s thereof ofassetsincl
udedi nthe"corpus"of
between/among t hemsel v
es,a the estate– f i
li
ng ofr eturn and
co-ownershi p is cr eated, and paymentoftaxbecomet hebur
denof
i
ndividualincomet axisi mposed thetr
usteeorf
iduci
ary.
ont heincomer eceiv
edbyeach Excepti
ons:
of the hei rs,pay ablei nt heir a. Int hecaseofar evocabl et rust
,
separateandi ndivi
dualcapaci ty
. thei ncomeoft het rustwi l
lbe
(Pascualvs.Commi ssi
oner,GR returnedbyt hegrantor.
No.L- 78133,October18,1988; b. In at r
ustwher et hei ncomei s
Obill
osvs.Commi ssi
oner,GRNo. heldf orthebenef i
toft hegr antor
,
L-68118,October29,1985) thei ncomeoft het rustbecomes
i
ncomet othegrantor.
ESTATESNOTUNDERJUDI ALSETTLEMENT
CI
c. Int hecaseoft rustadmi nistered
Pendingtheext r
ajudici
alset tl
ement, i
naf orei
gncount ry,thei ncome
ei
theroft he foll
owing situations may oft het r
ust;undiminishedbyany
ari
se: amount di str
ibuted t o t he
1. If the hei r
s cont ri
bute money , benef i
ciari
esshallbet axedt othe
property,ori ndustryt ot he estate trustee.
witht he intenti
on of di viding the
profi
ts between/among t hemsel v
es, I
RREVOCABLE TRUSTS (
ir
rev
ocabl
ebot
has
an unr egist
ered par tnership i s t
ocor pusandast oincome)–
created and t he est ate becomes
li
ablef orthepay mentofcor por
ate Tr
ustit
sel
f,t
hrough t
he tr
ust
ee or
incomet ax;or f
iduci
ary
,isli
abl
ef orthe pay
mentof
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 26
MEMORYAI
DIN TAXATI
ON LAW
i
ncomet ax.Taxedexact l
yi nt hesame b. nopartofthei
ncomeofwhichis
wayasest atesunderj udi
cialsettlement deri
ved f
rom engagi
ng in any
andi tsstat usasani ndi
vidualist hatof tr
ade orbusiness.[
Sec.22(B)
,
thetrustor.I tisent i
tl
edtot hemi nimum NI
RC]
.
personal exempt ion ( P20,000) and 2. Taxabl eorBusi nessPar tnership–
distr
ibuti
on oft rustincome dur i
ng t he All ot her par tnerships except
taxable y ear t o t he benefici
aries is generalpr ofessi onalpar tnershipsno
deductibl
e f rom t he trust’
s t axable mat t
er,how cr eat edoror ganized.I t
i
ncome. i
ncludes unr egister ed jointv entures
andbusi nesspar tner ships.
REVOCABLE TRUSTS – t
het rust
or,notthe Howev er,joi ntv enturesar enot
tr
ustitself
,issubjecttot hepay mentof taxablesascor por at i
onswheni ti
s;(a)
i
ncomet axonthetrustincome. undertakingconst ruct i
onpr ojects(b)
engagedi npet roleum,coalandot her
EXEMPTION OFE MPLOYEES’ TRUST energy oper ation under a ser v
ice
Provi
ded: contractwi ththegov ernment
1. theempl oyee’strustmustbepar tof Gener
alco-
par
tner
shi
ps (
GCP)
a pensi on,st ock bonus or pr ofi
t are partnerships,whi ch ar e byl aw
sharingpl anoft heempl oyerf ort he assimilatedt obewi t
hi nthecont ext
benef it of some or al l of hi s of,andso l egal
lycont empl atedas,
empl oyees; corporations.Thepar tnershipi t
selfi s
2. cont r
ibuti
onsar emadet othet r
ustby subjectt o corpor atet axat i
on.The
suchempl oyer,orsuchempl oy ees,or i
ndiv i
dualpar tners ar e consi der ed
both; stockholder s and,t her ef
or e,pr of i
ts
3. suchcont ri
butionsar emadef ort he dist
ributedt othem byt hepar tnershi p
purpose of di stri
buting t o such aretaxabl easdi vidends.
empl oyees bot ht he ear nings and Thet axabl eincomef orat axabl e
pri
ncipaloft hef undaccumul atedby year,af t
erdeduct i
ng t he cor porat e
thet r
ust,and i
ncomet axi mposedt herein,shal lbe
4. thatt he t r
usti nstrumentmakes i t deemed t o hav e been act ually or
impossi bleforanypar toft het rust constructively r eceived by t he
corpusori ncomet obeusedf or,or partnersint hesamet axabl ey earand
divertedt o,purposesot hert hant he shallbe t axed t o t hem i n t heir
exclusivebenef itofsuchempl oyees. i
ndiv i
dualcapaci ty whet heract ual l
y
(
Sec.60B,
NIRC) dist
ributedornot .[ Sec.73(D) ,NIRC]
Tax exempt ion islikewi se to be LI

ABI
LITYOFAPARTNERSHI P
enjoyed byt hei ncomeoft hepensi on 1. Gener alPr ofessionalPar t
ner ship .-
trust; otherwise, taxat
ion of t hose Theyar enotsubj ectt oi ncomet ax,
earningswoul dr esul
tinadi mi nuti
onof butar er equiredt of i
l
er eturnsoft heir
accumul ated i ncome and r educe i
ncomef ort hepur poseoff urnishing
what evert he tr
ustbenef i
ciaries would i
nf ormat ionast ot heshar eofeach
receive out of t he t rust f und. par t
neri nthenetgai norpr ofit
, which
(Commi ssi
oner vs.Court of Appeal
s, each par t
ner shal li ncl ude i n hi s
CourtofTaxAppealsandGCLRet i
rement i
ndi vi
dualr eturn. The par tnershi p
Plans,
GRNo.95022, March23,1992) shallactast hewi thhol dingagent .
The net i ncome ( i
ncome f or
D.PARTNERSHI
PS distri
but i
on)shal lbecomput edint he
samemannerasacor por ation.Dat e
KI
NDS OF PARTNERSHI
PF OR TAX PURPOSES off il
ingoft her eturni sApr i
l15of
UNDERTHENI RC eachy ear.
1. General Professional Partnerships 2. Taxabl e orBusi ness Par tnership-
(GPP)-formedbyper sonsfor: The i ncome t ax of t hist ype of
a. thesolepur poseofexer ci
singa Par t
ner shipi s comput ed and t axed
commonpr ofessionand l
iket hatofacor poration.Thi skindof
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 27
MEMORYAI
DIN TAXATI
ON LAW
partnership,l
ikear egularcorpor ati
on,  Non-
resi
dentAl
i
en engaged
i
s al so required tof il
e a quar t
erly i
ntr
adeorbusi
ness– 20%
corporatei ncome t ax r eturn.Fili
ng (
Sec.25A2)
and pay mentofquar terl
yr eturni s  Non- resident al i
en not
within60day saf t
ert heendofeach engagedi nt radeorbusi ness
quarterwhi l
et heannualr eturni son –25%( Sec.25B)
orbef oreApr il15 oft hef ol
lowing b. Shareofapar tneri nthelossofa
year. taxable orbusi ness partner
ship
may be taken by t he indivi
dual
LI
ABI TYOFAPARTNER
LI partneri
nhi sr eturnofincome.
Rules: c. Pay mentsmadet oapar tnerofa
1. Shar e of a par tner in gener al business ort axable partner
ship
pr
ofessionalPar tnership forser vi
ces r endered shallbe
a. Each par tner shal lr eport as considered as compensat ion
grossi ncome( businessi ncome) i
ncomesubj ectt osec.24A.
hisdi str
ibutedshar eact ual
lyor
constructivelyreceivedint henet
i
ncomeoft hepar tnership.(Sec.
KI
NDSOFINCOMETAXES
26,NI RC)[Thesameshar e shall UNDERTHENI
RC
be subj ect t o cr editabl
e
withholdingt axof10%. ]Theyar e 1.NetIncomeTax
l
iable i n t heir separ ate and 2.Opti
onal CorporateIncometax
i
ndividualcapaci ty. 3.Minimum Cor porateIncomeTax
4.I
mpr oper l
y Accumul ated Earni
ngs
b. Shareofapartnerinthelossofa Tax
generalpr
ofessionalpartner
shi
p 5.PreferentialRatesorSpecialRat
esof
maybe t aken byt he i
ndivi
dual I
ncomeTax
part
nerinhisr
eturnofincome. 6.GrossI ncomeTax
7.Fi
nal IncomeTax
8.Fri
ngeBenef it
sTax
c. Each par tner i
n a gener al 9.CapitalGai nsTax
professional par
tnershi
p shal l
, (
1)NETI
NCOMETAX
report as gr oss income hi s
dist
ributed share in t he net DEFI
NITION:Me ans gr
oss i ncome less
i
ncomeoft heGPP,basedonhi s deducti
ons and/ or per sonal and
agreedr ati
o,whet
herhe,av ai
l
sof addi
tionalexemptons(
i Sec.31,NIRC)
i
temi zed or optional standar
d
deduct i
on. NETINCOMETAXF ORMULA
Entir
eIncome
d. Paymentsmadet oapar tnerofa Less: Exclusions and I
ncome
GPP forservicesrenderedshal l subj
ect t o Final Tax (e.
g.
be consi dered as or dinar
y Passi
veI ncome)
busi
nessincomesubj ecttoSec. GrossIncome
24A(Eff
ectiv
eJanuar y1,1982) Less: Deductions(and/oraddi
ti
onal
exemptions,i
fappli
cabl
e)
2. Share ofa par tneri n Taxabl
e or NetTaxableIncome
Busi
nesspar t
nership Mul t
ipl
yby:TaxRat e(%)
a. Share ofa par t
neri nt he net NetIncomeTaxDue
i
ncomeofat axableorbusi ness Less:TaxCredi
t,i
fany
partnershi
p( di
v i
dend) shallbe
TaxStil
ldue,i
fany
subjecttoaf i
nal t
axasf ol
lows.
 Resi dent Ci t
izen, Non-
resi
dentCi t
izenandResi dent GROSSI
NCOME
Ali
en (2000 and onwar d)–
10%( Sec.24B2) DEFI
NI ON:Me
TI ans al
li ncome deri
ved
fr
om whatev
ersour
ce,includi
ngbutnot
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 28
MEMORYAI
DIN TAXATI
ON LAW
l
imit
edt othef ol
lowing(Sec.32) Except
ions:
a. Compensat i
on; a. Sec.73B, 1997NI RC
b. Grossi ncomef rom profession,trade (1)t here i s r edempt i
on or
orbusiness; cancel l
ation
c. Gainsfor m deal
ingsinproper t
y; (2)t he t ransact i
on i nvolves
d. I
nterests; stockdi vidends, and
e. Rents; (3)t he“ ti
meandmanner ”oft he
f. Royalti
es; transaction makes i
t
g. Divi
dends; “essentially equival
entt oa
h. Annuiti
es; distri
bution of t axable
i
. Pr i
zesandwi nnings; dividends” . (see
j
. Pensi ons; Commi ssi
onervs.Courtof
k. Partner’
sshar ei ntheneti ncomeof Appeals, Court of Tax
thegener alprof
essionalpartnership Appeals& ANSCOR,GR No.
108576,Jan.30,
1999)
 SeeAnnexDf
ordet
ail
eddi
scussi
on b. the r
eci
pientis otherthan the
ofi
tems. shar der(
ehol Bachrachvs.Sei
fert
,
GRNo.L-
2659,
Oct
ober12,
1950)
KI
NDSOFDI VIDENDS c. change in the st ockhol
der’
s
1. CashandPr opertyDividends equit
yresul
ts by v
irtue ofthe
Indi
vi
dual Taxpay er stockdi
vi
dendi
ssuance.
a. From Domest i
cCor porat
ions
 RC, NRC, RA–10%( Sec.24A) 3. Li
quidating Di vidends – When a
 NRAETB–20%( Sec.25A2) corpor at
iondi stri
butesallofi ts
 NRANETB – 25% on gr oss asset sincompl eteli
quidati
onor
ncome(
i Sec.25B) dissoluti
on,t hegai nr eal
ized or
b. From For eignCor porati
ons l
osssust ainedbyt hestockholder
,
 RC,NRC,RA,NRAETB – 5- whet herindividualorcorporati
on,
32%( Sec.24,25A1) i
st axablei ncomeordeduct i
ble
 NRANETB – 25% on gr oss l
oss,ast hecasemaybe.( Sec.
ncome(
i Sec.25B) 73A)
Ali
quidat
ingdi
vi
dendisnota
Cor
porat
eTaxpay
er di
vi
dendincome.Thetransact
ion
a. For
eignt
oDomest
icCor
p.–32% i
sconsi
deredasal
eorexchange
(
Sec.32A) of propert
y bet ween t he
b. Domest
ictoDomesti
cCorp.– cor
por
ati
onandthest
ockhol
der.
Exempt
;int
ercor
por
atedi
vi
dends
(
Sec.27D) EXCLUSI
ONSF ROM GROSSI NCOME
c. DomestictoForeignCorp.- NOTE:Un derthe1997TaxCode, theterm
 Resi dent Foreign Cor p. – “excl
usi
ons”r ef
er stoi temst hatar enot
Exempt( Sec.28[A]7d) i
ncluded int he det ermi nat
ion ofgr oss
i
ncomeei t
herbecause:
 Nonr esidentForeignCor p.–
(
a)theyr epresentr eturnofcapi talor
15% subjecttot heconditi
on
arenotincome, gai norpr ofi
t;or
stat
ed i n Sec. 28 [ B] 5.
(
b)theyar esubj ecttoanot herkindof
Otherwise,i
tshallbetaxedat
i
nternalrevenuet ax;or
32%.( SeeCommi ssi
onervs.
(
c)theyar eincome, gainorpr of
itthat
Proct
erandGambl e,GRNo.
areexpr essl
yexemptf orm i ncomet ax
66838,December2,1991)
undert he const it
ution,t ax treaty
,Tax
Code,oragener al orspeci all
aw.
2. StockDiv
idends
Generalrule: Not subject to t ax
because it does not const i
tute 1. Pr
oceedsofl
if
einsur
ancepai
d by
i
ncome;i tr epresentst ransfer of reasonofthedeat
hofthei nsur
edt o
surpl
ustocapitalaccount.(Sec.73B, his estat
e or to any benefici
ary
1997NI
RC) (i
ndivi
dual
, part
ner
ship, or
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 29
MEMORYAI
DIN TAXATI
ON LAW
corporati
on,butnotat r
ansfer
eefora foraloss,
whi
chi
mpai
redpet
it
ioner
’s
valuableconsiderati
on),dir
ectl
yori n capi
tal.
trust.
NOTE: i f t he pr oceeds ar e 5. I
ncomeexemptunderTr
eat
y;
retai
nedbyt hei nsurer,t
hei nt
erest
thereonistaxable; 6. Ret
ir
ement benef it
s, pensi on,
gr
atuiti
es, et c.
2. Ret
urnofi
nsur
ancepr
emium; a. those der ived underR. A.7641
NOTE:ifsuchamount
s(whenadded (pertainst opr i
vat efir
mswi thout
to amount s alreadyr eceived bef or e reti
rementt rustfund) ;
thetaxabl ey earundersuchcont r
act s) b. those r eceived byof f
icials and
exceed t he aggr egat e pr emi ums or empl oy eesofpr i
vateempl oy er
s
consi der ati
ons pai d( whetherornot i
naccor dancewi thar easonabl e
paiddur ingt het axabl ey ear),t hent he privatebenef itplan;
excessshal lbei ncludedi nt hegr oss Requi sites:
i
ncome. Howev er ,int hecaseofa (1)i nt he ser vice oft he same
transf erf orav aluabl econsi der ation, empl oy er for at l east 10
byassi gnmentorot herwise,ofal ife year s;
i
nsur ance, endowment or annui ty (2)atl east50y ear sold;
contract ,oranyi nter estt herei n,onl y (3)mustbeav ailedofonl yonce
theact ualv alueofsuchconsi der at
ion (4)pl an appr oved by t he BI R
andt heamountoft hepr emi umsand (R.R. 2-98) ;
othersumssubsequent lypai dbyt he c. separ ationpaybecauseofdeat h,
transf ereear eexemptf rom t axat i
on. sickness, or ot her phy sical
Nol ossi srealizedonsur renderofa disabili
t yorf oranycausebey ond
l
ifei nsur ancepol icyf ori tssur render the cont r
olof t he of fici
alor
value. empl oy ee ( e.
g. r et
renchment ,
redundancy or cessat ion of
3. Gi
ft
,bequestordev
ise business) ;
Gi
fts, bequest s, and dev ises “
for any cause beyond the
(whichar esubj ectt oest at
eorgi f
t contr
ol of sai d offici
al or
taxes) ar e excluded,but not t he employee” – connot
es
i
ncomef rom suchpr operty
.I ft he i
nv oluntar inessont hepar toft he
amountr eceived is on accountof offi
cialorempl oy ee;separ ation
servi
ces rendered, whether mustnotbeaskedori ni
tiatedby
consti
tuting a demandabl e debtor theof fi
ci al orempl oy ee.
not,ort heuseoft heoppor t
unit
yt o d. social secur i
ty benef i
ts,
useofcapi t
al,ther eceiptisincome reti
rement gr atuities, pensi ons
(Pi
rovano vs. Commi
ssi
oner
, 14 and ot her si mi lar benef i
ts
SCRA832) received byci t
izens and al iens
whocomet oresideper manent l
y
4. Compensat
ion f
orper
sonali
njur
ies heref rom f orei
gnsour cespr i
vate
or si ckness,whet her by sui t or orpubl ic;
agreement e. benef i
tsduet or esi dentsunder
NOTE:Thephr ase“ personalinjur
ies” thelawsoft heU. S.admi nistered
shouldbegi v
enar estr
icti
vemeani ng by the U.S. Vet erans
tor ef
eronl ytophy sicalinj
uries.The Admi nist ration
theoryf orthi
si sthatrecoupmenton f. SSSbenef its;and
accountofsuchl ossesi snotincome, g. GSISbenef its.
sincei tisnotder ivedf r
om capi tal
,
from l abororf rom bot hcombi ned. 7. Mi
scel
laneousi
tems
And t he factt hatt he pay mentof a. Passivei ncome derived int
he
compensat i
on f or such l oss was Phil
i
ppinesby :
voluntarydoesnotchangei t
sexempt (1)Foreigngov er
nment s;
status.I twasi nf actcompensat ion (2)Financinginsti
tut
ionsowned,
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 30
MEMORYAI
DIN TAXATI
ON LAW
cont r olled or enj oy i

ng
ref inanci ng f rom f oreign Something earned or Somethi
ng spentor
gov er nment s recei
ved by t he pai d i
n earni
ng of
(3)I nt er nat ional or r egional taxpayerwhichdonot gr ossi
ncome
form part of gross
financi al i
nst itutions
i
ncome
est abl ished by f oreign
gov er nment s
b. Incomeder ivedf rom anypubl i
c
util
ityorf rom t heexer ciseofany DEDUCTI
ONS
gov er nment al funct i
on;
c. Prizes and awar ds made DEFI
NI ON:I
TI t
emsoramount swhichthe
primar ily i n r ecogni ti
on of l
aw al l
owsto bededucted f
rom gr
oss
reli
gi ous, char i
tabl e, sci entif
ic, i
ncomei nor
dertoarr
iveatthetaxabl
e
educat ional ,ar tistic,l i
t erary,or i
ncome.
civicachi ev ement
Requi si tes: BASI
CPRINCIPLESGOVERNINGDEDUCTIONS
(1)r eci pi ent was sel ected a. The taxpay erseeking a deduct ion
wi thoutanyact iononhi s must poi nt t o some speci fi
c
par t;and provi
sionsoft hestatuteauthorizing
(2)r eci pi enti snotr equi redt o thededuction;and
render subst ant ial f uture b. Hemustbeabl etopr ovethathei s
ser v ices. enti
tl
edt ot hedeductionauthor ized
d. Prizes and awar ds gr ant ed t o or alowed. (
l Atl
as Consolidat ed
athlet es i n spor ts compet i
tions Mini
ng & Dev. Cor p. vs.
andsanct ionedbyt hei rnat i
onal Commissi
oner, GR No. L-
26911,
spor tsassoci ation; Januar
y21,1981)
e. 13thmont hpayandot herbenef it
s c. Anyamountpaidorpay ablewhi chis
upt oP30, 000. 00; other
wisedeductibl
ef rom,ort aken
f. GSI S,SSS,Medi car e and uni on i
nto account in comput i
ng gr oss
duesofi ndi viduals; i
ncomeorf orwhichdepr eciat
ionor
g. Gai ns der ived f rom debt amorti
zati
onmaybeal l
owed, shallbe
secur itieswi thamat urityofmor e al
lowed as deduction onlyi fi tis
than5y ear s; shown thatthe tax required t
o be
h. Gai nsf r om r edempt ionofshar es deductedandwithheldtherefr
om has
i
nMut ual Fund. been paidtot he BIR.[ Sec.34( K)
,
NI
RC]
EXCLUSI
ONSVS.DEDUCTI
ONS
NOTE: Deduct
ions f or income t ax
purposes par t
ake oft he nature oftax
Excl
usions Deduct
ions exemptions;hence,iftaxexempt ionsare
[
Sec.32(B)
] [
Sec.34] tobest r
ictl
yconst r
ued,theni tf ol
lows
thatdeduct ions mustal so be st ri
ctl
y
Ref er to f l
ow of Refert
ot heamounts
weal thwhicharenot whichthelaw all
ows
constr
ued.
treated as par t of to be subt ract
ed
gross i
ncome fr
om grossincomein TAXPAYERS WHO CANNOT AVAI L OF
because: ordert
oar ri
veatnet DEDUCTIONSFROM GROSSINCOME
(1)exempt ed byt he i
ncome 1. Citi
zens and resi
dental iens whose
fundamentallaw;( 2) income i s pur ely compensat ion
exempt ed bystatute; income ( except f or pr emium
(3) do not come pay ments on heal th and/ or
wi t
hinthedef
ini
ti
onof
hospital
i
zati
oninsurance);
i
ncome
2. Non- r
esi
dental i
ens notengaged i n
Per
tai
n to t
he Pert
ain t
o t
he tradeorbusinessi nthePhi li
ppines;
computat
ionofgr
oss computat
ion of t
he and
i
ncome neti
ncome 3. Non- r
esi
dentforei
gncor porat
ion
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 31
MEMORYAI
DIN TAXATI
ON LAW
t
he amountprov
ided i
nthe NI
RC,
CLASSESOFDEDUCTI ONS whi
chev
erisl
ower.
1. Indivi
dual s
a. wi t
hgr osscompensat ionincome Indi
vi
dual s not ent itl
ed to t hese
from empl oy er
-employ ee exemptions:
relat
ionshi ponly a. Non- r
esidentAl i
en notengaged
(1)pr emi um payment sonheal th intradeorbusi ness
and/ orhospital
ization b. Ali
en i ndivi
dual empl oyed by
insur ance RegionalorAr eaHeadquar tersof
(2)per sonal additi
onal Mul ti
nationalCompani es
exempt i
ons c. Ali
en i ndivi
dual empl oyed by
b. gr ossi ncomef r
om busi nessor OffshoreBanki ngUni t
s
practiceofpr ofessi
on d. Ali
en i ndivi
dual empl oyed by
(1)Opt i
onalSt andardDeduct ion Petroleum Ser vice Cont ract
or
(OSD) andSubcont ractor
(2)I temi zeddeduct ions
(3)pr emi um payment sonheal th c. It
emizeddeduct ions
and/ orhospital
ization a. ordinar y and necessary
insur ance expenses
(4)per sonal additi
onal b. i
nt erests
exempt i
ons c. taxes
2. Cor porations d. l
osses
 I t
emi zedDeduct i
ons e. baddebt s
f. depr eciati
onofpr oper
ty;
g. deplet i
onofoi l
andgaswel l
sand
KI
NDSOFDEDUCTI ONS mi nes;
a. Optionalst andar ddeduct i
ons( OSD) h. char i
tableandot her
–10%oft hegrossincome. cont ri
butions;
TheOSD maybeav ai
ledof i
. r esear chanddev elopment;
only by i ndi
vidual
s ( except j
. pensi ont r
ustcont ri
buti
onsof
nonresidental ien)whoar enotpur el
y empl oy ees;and
compensat ionincomeear ners. k. premi um pay ment sonheal t
h
b. Personalandaddi t
ionalexempt ions and/ orhospi t
alizati
oninsurance.
Available onl y t o i ndivi
duals (Thisi stheonl ydeductionwhich
(businessi ncomeandcompensat ion acompensat ionincomeear ner
i
ncomeear ners). maycl aim asadeduct i
on.)
NRAETB may be ent it

led t o d. Specialdeduct i
ons
personal exempt ions(only)subjectto a. private pr opri
etar
y educat i
onal
reci
pr oci ty,i
.e., insti
tutionsandhospi tal
sthatare
a. t he count ry ofwhi ch he isa non- proft(
i Sec.34A, 2)
subj ectorci tizenhasani ncome b. insurancecompani es( Sec.37)
taxl aw; and c. estat esandt r
usts(Sec.61)
b. t hei ncomet axl awofhi scount r
y
allows per sonal exempt ion t o PERSONALEXEMPTI
ONS
citizens oft he Phil
ippi
nes not
resi ding t herein, but der i
ving A. Amount
s of Per
sonalExempt
ions
i
ncome t herefrom and not t o [
Sec.35,
NIRC]
exceed t he amountal l
owed i n 1. P 20,
000 – Singleindi
vi
dualor
NIRC. married i
ndiv
idualjudi
ciall
y
decreed legall
y separated
Theper sonalexempti
onshallbe wit
houtqual i
fi
ed dependent
equaltothatallowedbyt heincome chi
ldren.
taxlaw ofhiscountrytoaciti
zenof 2. P25,000–Headoft hefamil
yor
thePhil
i
ppinesnotresidi
ngtherei
n,or married i
ndiv
idualjudi
ciall
y
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 32
MEMORYAI
DIN TAXATI
ON LAW
decreed legall
y separated
wit
h qual if
ied dependent ASeni orCi t izenis:
chi
ldren. 1. any r esi dent ci tizen of t he
3. P 32,000 – For each l egall
y Philippines
marriedi
ndiv
idual. 2. at l east si xty 60 y ears ol d,
i
ncl udingt hosewhohav er eti
red
Headoft heFami ly fr
om bot h gov er
nment of f
ices
1. Unmar r
ied orl egal ly separ ated andpr ivat eenterpr
ises,and
personwi thoneorbot hpar ent s, 3. hasani ncomeofnotmor et han
oroneormor ebr ot hersorsi sters, Sixtyt housand pesos ( 60,000)
or one or mor e l egiti
mat e, perannum subj ectt other eview
recognized nat ur al or l egal l
y of t he Nat i
onal Economi c
adopt edchi ldrenl ivingwi thand Dev elopment Aut hor i
ty( NEDA)
dependentupont het axpayerf or ever ythr eey ears.
theirchiefsuppor t; and
“Chiefsuppor t
”meansmor et han Par ent
sanddependent squali
fy
one-halfoft her equi rement sf or the t axpayer
, to t he personal
suppor t
. exempt i
onofP25,000asheadoft he
2. Wher e such br other/si steror famiy but not t
l o the addi
ti
onal
chil
dren ar e notmor et han 21 exempt i
onofP8,000.
yearsofage,unmar ri
edandnot
gainfull
y empl oy ed, or wher e NOTE:NRAETBmaydeductper
sonal
such dependent sr egardless of exempt i
on( notaddit
ionalexemption)
,
age,ar ei ncapabl e of sel f– butonlyt ot heextentall
owedbyhi s
suppor tbecause ofment alor country to Fi l
ipi
nos not r esi
ding
physical defect. ther
ein,and shal lnotexceed t he
afor
ement ionedamount s.NRANETB
Parents,brother
s,si
ster
sandseni or cannot cl aim any per sonal or
ci
tizenwi t
ht hetaxpayer
,whetherrel
ative addit
ionalexempt i
ons.
ornot ,mayqual if
ythetaxpayer,tothe
personalexempt i
onofP25,000ashead C.ChangeofSt atus[ Sec.35, NIRC]
oft hef amily butnottot headdi t
ional 1. Ifthet axpay ershoul dmar ryor
exempt ionofP8,000. should hav e addit
ional
dependent s dur i
ng t he t axable
B. Addi ti
onal Exempt ion for year, he may cl aim t he
Dependent s[Sec.35, NIRC] correspondi ngexempt ionsi nf ull
P8, 000– Foreachoft hequal i
fi
ed forsuchy ear.
dependent chi l
dr en not 2. Ifthet axpay ershoul ddi edur ing
exceeding f our ( 4) i n thet axabl ey ear,hisest atemay
number . clai
m the correspondi ng
Theaddi t
ionalexempt i
onr efer sonl y exempt ionsasi fhedi edatt he
toqualifi
eddependentchi ldrensuchas closeofsuchy ear.
l
egiti
mat e, recognized nat ural, 3. Ifthespouseoranydependent
i
ll
egiti
mat eandl egall
yadopt ed. should di e or any dependent
Thepr opercl ai
mantoft headdi t
ional shouldmar ryorbecomet went y
-
exemptioni sthehusbandbei ngthehead oney ear sol ddur i
ngt hey ear,or
ofthef ami l
yexceptundert hef ollowing should become gainfull
y
cases: empl oy ed, t he t axpay er may
1. Husbandi sunempl oy ed clai
m t heexempt ionsasi ft he
2. Husbandi swor ki
ngabr oadl ike spouseordependentdi edorasi f
anOFW oraseaman suchdependentmar ri
ed,became
3. Husband expl i
citl
y wai v ed hi s twent yoney ear soldorbecame
rightoft heexempt ioninf avorof gainfullyempl oyedatt hecl oseof
his wi fe i n t he wi thhol di
ng suchy ear .
exempt ioncerti
f i
cate. 4. Foranyot herev entandf orwhi ch
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 33
MEMORYAI
DIN TAXATI
ON LAW
there are no specifi

c rules deductibl
ebutdepr eci
able,except,i
ft he
appli
cable from the abov e- taxpayer is a non- profit propri
etary
ment i
oned,the st
atus of the educationalinst
it
uti
on whi ch mayel ect
taxpayerattheendoft heyear eit
hert odeductt hecapi t
alexpenseor
shalldeter
minehisexempti
ons. depreciatei
t.
(
str
ict
ly const
rued agai
nst t
he
t
axpayer
)  SeeAnnexE– Busi
nessExpenses
Examples:
 becamel egall
ysepar at
ed –  SeeAnnexF–Cei li
ngon
canonlycl aim P20,
000 “Ent
ertai
nment,
Amusementand
 25 y ears ol d chi
ld became Recreati
onal
Expenses”
i
ncapacitat ed–cannotcl ai
m
addit
ional exempti
on B.I
NTEREST
I
TEMI
ZEDDEDUCTI
ONS INTEREST –s hallr
efertothepay mentfor
theuseorf orbearanceordet enti
onof
A.ORDI
NARYANDNECESSARY money , regardlessofthenamei tiscal
l
ed
EXPENSES ordenomi nated.Itincl
udest heamount
paidf ort he borrower'
s use of,money
duringt het erm oftheloan,aswellasfor
NECESSARY EXPENSE – appr opri
ate and
hisdet entionofmoneyaf tert
heduedat e
helpfuli
nt hedev el
opmentoft axpayer'
s
foritsrepay ment .
businessandar eintendedt o mini
mize
l
ossesort oincreasepr of
it
s.Thesear e
REQUISITES F OR DEDUCTI BILITY ( REV.REG.
theday -
to-
dayexpenses.
NO.13- 2000)
ORDINARY EXPENSE – normalorusuali n
1. Ther emustbeani ndebt edness;
rel
ationt othet axpayer
’sbusinessand
2. Ther eshoul dbeani nter estexpense
thesurroundi
ngci r
cumstance.
pai d or i ncur red upon such
indebt edness;
REQUISITES OF BUSI NESS E XPENSE TO BE
3. The i ndebt ednessmustbe t hatof
DEDUCTI BLE
thet axpay er;
1. or dinar yandnecessar y ;
4. Thei ndebt ednessmustbeconnect ed
2. pai dori ncurr
edw/ i
nt het axabley ear;
wi tht het axpay er '
st rade,busi nessor
3. pai dori ncurr
edi ncarryingonat rade
exer ciseofpr ofessi on;
orbusi ness;
5. Thei nt erestex pensemusthav ebeen
4. subst ant i
atedwithof f
icialreceiptsor
pai d ori ncur red dur ing t he t axabl
e
ot heradequat erecords.
year ;
5. ifsubj ectt owithholdingt axespr oof
6. The i nt erest must hav e been
ofpay mentt ot heBur eauofI nternal
stipulat edi nwr iting;
Rev enuemustbeshown.
7. Thei nt erestmustbel egallydue;
6. must be r easonable ( when t he
8. Thei nt erestar rangementmustnot
expensei snotlavi
sh,ext ravagantor
bebet weenr elat edt axpay ers;
excessi v eunderthecircumst ances)
9. Thei nt er estmustnotbei ncurredto
7. mustnotbecont raryt ol aw,publ i
c
financepet roleum oper at i
ons; and
pol i
cyormor al
s.
10.Incaseofi nter esti ncur redt oacqui r
e
pr oper tyusedi nt rade,busi nessor
NOTE:Whi
l
eil
l
egali
ncome wi
l
lfor
m
exer ciseofpr of ession, thesame, was
partofincomeofthet axpayer
,expenses
nott r
eat edasacapi tal expendi tur
e.
which consti
tut
e br i
be,kickback and
11.The i nt erest i s not expr essly
othersimil
arpayment,beingagainstlaw
disallowed by l aw t o be deduct ed
andpubl i
cpol
icyarenotdeduct i
blefr
om
from gr ossi ncomeoft het axpay er.
grossincome.(Subsec.A,1,c)
RULES ON DEDUCTI
BI TY OF I
LI NTEREST
CAPITAL E TURE – An e
XPENDI xpendi
ture
EXPENSE
thatbenefit
snotonl ythecurr
entperiod
GeneralRul
e-I
ngener al,t
heamountof
but also f utur
e periods. I
ti s not
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 34
MEMORYAI
DIN TAXATI
ON LAW
i
nt er
estexpensepaidorincurredwi t
hina The deduct
ibl
e expense shal
l be
taxable y ear of i ndebtedness i n comput
edasf ol
l
ows:
connection with the taxpayer'
s t r
ade
businessorexerciseofprofession,shal
l Year2000
be allowed as a deduct i
on f rom the
taxpayer'
sgrossincome. NetIncomebef ore
i
nterestexpense P500,
000
Limitati
on - The amount of i nt
erest Less:InterestExpense P120,000
expensepai dincurredbyat axpayeri n Less:38%ofi nt
erest
connection with hist r
ade,business or incomef r
om deposit
exerciseofapr ofessionfrom anexisting (38%xP200, 000) 76,000
i
ndebt edness shal lbe reduced by an DeductibleInterest
amountequalt hef oll
owingpercentages Expense 44,
000
ofi nterestincome ear ned whi ch had TaxableIncome P456,
000
been subj ected t o f i
nal withholding
dependingont hey earwhent hei nt
erest
i
ncomeear ned,viz: DeductibleInterestExpense
38%-begi nningJanuar y1,2000and 1. Interestont axes,suchast hosepai d
t
hereafter fordef iciencyordel i
nquency ,since
taxes ar e consi dered i
ndebt edness
Aim ofLi mi t
ation: To discourage so- (prov i
dedt hatt hetaxisadeduct ibl
e
called “ back-to-back” loans wher e a tax,excepti nt hecaseofi ncomet ax).
taxpay ersecur es a loan fr
om a bank, Howev er, f ines, penal t
ies, and
turns ar ound and i nv
ests the l oan surchar gesonaccountoft axesar e
proceedsi nmoneymar ketplacement s. not deduct ible. The i nt
er est on
Byi mposi ngal i
mitast otheamountof unpai
d business t
ax shallnotbe
i
nt erestexpense t hatcan be deduct ed subj
ected to t he li
mitati
on on
from gr ossi ncome,t heprevi
ouspr acti
ce deduct
ion.
oft axar bitr
agewasabsol ut
elynull
i
fied. 2. Int
erestpaidbyacor por ationonscr i
p
divi
dends
TaxAr bit
rage–i samet hodofbor rowing 3. Int
erest -
on deposi ts pai d by
withoutent eri
ng i nto a debtor
/credit
or authorized banks of t he Bangko
rel
ationshi
p,of ten t oresolvefinancing SentralngPi li
pinast odeposi t
ors,if
andexchangecont r
olproblems. Int ax i
ti s shown t hatt he t ax on such
cases,back-to-backl oanisusedt ot ake i
nterestwaswi thhel d.
advantageoft hel oweroft axoni nter
est 4. Int
erestpai dbyacor por atetaxpayer
i
ncome and a hi gherr ate oft ax on whoi sliabl
eonamor tgageuponr eal
i
nterestexpensededuct i
on. propertyofwhichthesai dcor porati
on
i
st hel egalorequitabl eowner ,even
Il
lustr
ation: thoughi tisnotdirectlyl iableforthe
OnJune1, 2000CompanyXhas: i
ndebt edness.
1. Obt ainedal oanf r
om ABCFi nancing
Corporation in connecti
on witht he NON-
DEDUCTI
BLEI
NTERESTEXPENSE
operati
on of i t
s business and its 1. An i ndividual taxpayer r eporti
ng
i
nterest expense on t he loan i
ncomeont hecashbasi si ncursan
amount edt oP120, 000. i
ndebt ednessonwhi chani nterestis
2. Deposi taccounti n DEF Bank and pai
di nadv ancethroughdi scountor
deri
ved i nterest income t hereof otherwi se:
amount ingtoP200, 000onwhi cht he  al l
owed as a deduct i
on int he
fi
nalt ax of P40, 000 has been yearthei nde
btednessispaid
wit
hhel d. i ft he indebtedness is pay able
Assume t hatCompany X’ s net periodi
c amor ti
zati
on on, t he
i
ncome bef ore the deduction of amount of i nt
erest whi ch
i
nterestexpensei sP500,000. correspondst otheamountoft he
pri
ncipalamor ti
zedorpai dduri
ng
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 35
MEMORYAI
DIN TAXATI
ON LAW
the y ear shal lbe al l

owed as i
ncl
udedaspar tofgrossincomeint he
deduct i
oni nsucht ax abl
ey ear . y
earof r ecei
pttot he extentof the
2. Interest pai d on i ndebtedness i
ncome tax benef
itofsaid deduct
ion.
bet weenr elatedt axpayer TaxBenef
( itRul
e)
3. Ift he indebt edness i si ncurred to
financepet r
oleum expl orati
on ForNRAETBandRFC,t axespaidor
4. Interestonpr eferredst ock,whi chin i
ncurr
edar eal
lowedasdeduct i
onsonlyif
realityisdividend andtot heext
entthattheyareconnect
ed
5. Interest on unpai d sal ari
es and fr
om incomewi t
hinthePhil
i
ppines.
bonuses
6. Interestcal culatedf orcostkeepi ng EXCEPTI ONS t or equirementt hatonly
on accountofcapi t
alorsur pl
us such per sons on whom t he tax is
i
nv est edinbusi nesswhi chdoesnot i
mposed by l aw can cl aim deduct i
on
repr esent char ges ar isi
ng under ther
eof :
i
nt erest-bearingobl i
gation. 1. Taxes of shar eholder upon hi s
7. Interest pai d when t here i s no interestas such and pai d by the
stipulati
onf ort hepay mentt hereof . cor porat
ion withoutr eimbursement
from hi m,can be cl aimed by the
OPTI
ONALTREATMENTOFI
NTERESTEXPENSE cor porat
ionasdeduct ion.
Attheopti
onofthet
axpay er
,int
erest 2. Acor porat
ionpay ingt het axforthe
i
ncurredtoacquir
epropert
yusedintr
ade holderi tsbondsorot herobl i
gati
on
or business may be al lowed as a cont ai
ningat ax-
freecov enantcl
ause
deducti
on or t r ed as capi
eat tal cannot cl aim deduct ion for such
expendi
ture.[
Sec34(B)(
3),NIRC] taxes pai d by itpur suantt o such
cov enant.
C.TAXES
TAXCREDI
T
Taxes mean TAXES PROPER, and
ther
efor enodeducti
onsareall
owedf or
: DEFI
NI ON:
TI ri
ghtofani ncomet axpayerto
1. interest deductf rom i ncome t ax payablet he
2. sur charges for
eign incomet axhehaspai dt o his
3. penal ti
es or f i
nes incident to for
eigncount r
ysubjecttoli
mi t
ation.
delinquency(Sec.80,
Rev.Reg.2)
WHOCANCLAI M TAXCREDIT
REQUI TESF
SI ORDEDUCTIBILITY 1. resi
dentciti
zensofthePhili
ppines
1. mustbei nconnectionwi t
htaxpay er
’s 2. resi
dentaliensunderthepr i
ncipl
eof
busi ness; reci
procit
y
2. taxmustbei mposedbyl aw on,and 3. domest i
ccor por
ati
onswhi chincl
ude
pay ablebytaxpayer( dir
ecttax);and part
nerships except general
3. paid ori ncurr
ed dur ing the taxable prof
essionalpart
nership
year . 4. benefi
ciari
esofestatesandtrusts
5. member s ofbenef ici
ari
es ofl ocal
TAXESNOTDEDUCTI BLE part
nerships
1. incomet ax;
2. estateanddonor ’
stax; WHOARENOTENTI TLEDTOTAXCREDI T
3. specialassessments; 1. non- r
esidentciti
zens
4. excessel ect
ri
cconsumpt iontax; 2. residentali
ens, i
fwithoutreciproci
ty
5. forei
gni ncomet ax,warpr of
itsand 3. resident aliens whose i ncome i s
excess pr of
it
st ax,ift he taxpayer derived solelyf r
om sour ces wi t
hin
makesuseoft axcredi
t;and thePhi l
ippi
nes
6. finaltaxes,being inthe nat ure of 4. foreign corporations (r
esi dentand
incomet ax. non- r
esident)
NOTE: Taxes al
l
owed as deduct
ions, FORMULAFORCOMPUTINGLI
MITATI
ON
when r
efunded or cr
edi
ted,shal
lbe 1. Percount
ryl
imitati
on
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 36
MEMORYAI
DIN TAXATI
ON LAW
Taxabl
e 1. Act uallysust ai
neddur ingthet axable
i
ncomefrom year
f
orei
gncountr
y X Phi
l
. = TaxCr
edi
t 2. Connect edwiththet r
ade,businessor
Taxabl
eincome incomet
ax Li
mit prof essi on
fr
om al
lsources 3. Ev i
dencedbyacl oseandcompl eted
transact i
on
2. Ov
er-
alll
imi
tat
ion 4. Notcompensat edforbyi nsuranceor
Taxable otherf orm ofindemni t
y
incomef rom
outsidesources X Phil
. = TaxCredi
t
5. Notcl aimedasadeduct i
onf orestate
Taxableincome i ncometax Limit taxpur poses
from all
sources 6. Not iceofl ossmustbef il
edwi t
ht he
Bur eauofI nternalRevenuewi t
hin45
Theall
owabl
et axcr
edi
tisthe“
lower daysf rom thedat eofdi scoveryof
amount”bet
weenthetaxcr
edi
tcomputed the casual t
y or r obbery,t heft or
underNo.1andNo.2. embezzl ement.
WHENCREDI TFORTAXESMAYBETAKEN NOTE:Thet

axpay
er’
sfai
l
uret
orecor
din
The cr editf ort axes provi
ded by hi
sbookst heal
legedl
osspr ov
esthatthe
Section30( C) (
3)t o(9)mayor di
naril
ybe l
osshadnotbeensuf fered,hence,not
takenei therint her eturnforthey earin deduct
i e.(
bl Ci
tyLumbervs.Domingoand
whicht het axesaccr uedoronwhi cht he CourtofTaxAppeal
s,GR No.L-
18611,
taxeswer epaid,dependentuponwhet her Januar
y30,1964)
theaccount soft het axpayerarekeptand CATEGORYANDTYPESOFLOSSES
hisreturnsf i
ledupont heaccrualbasisor 1. ORDINARYL OSSES
upon cash r eceipts and disbur
sement s a. Incur redi nt radeorbusi ness,or
basis. practiceofpr ofession
 Net oper ating l oss car r
y-over
LI
MITATIONSONCREDI TFORFOREI GNTAXES (NOLCO)
1) Theamountofcr editinrespectt othe  Ref er stot heexcessofal l
owabl e
taxespai doraccr uedt oanycount r
y deduct ionsov ergr ossi ncomeof
shal lnotexceedt hesamepr opor t
ion thebusi nessf oranyt axabley ear
,
oft het axagai nstwhi chsuchcr edi
tis whi ch had notbeen pr eviously
taken, whi ch t he t axpay er’s net offsetasdeduct ionf rom gr oss
income f rom sour ces wi t
hin such income.
count rytaxabl eunderTi tl
eI I( income  Can be car ri
ed ov er as a
Tax)bear st ohi sent i
reneti ncome deduct ionf rom gr ossi ncomef or
fort hesamet axabl ey ear;and the next 3 consecut i
vey ears
2) Thet otalamountoft hecr edi tshal l immedi atelyfollowi ngt heyearof
notexceed t hesamepr opor t
ion of suchl oss.
thet axagai nstwhi chsuchcr editis  Formi nes,ot hert hatoi landgas
taken, whi ch t he t axpay er’s net well,netoper ati
ngl ossi ncurred
income f rom sour ces wi t
hout t he inanyoft hef i
rstt eny earsof
Philippi nes t axabl e under Ti tl
e I I oper ati
onmaybecar riedov erfor
(IncomeTax)bear stohi sent irenet thenext5y ears.
incomef orthesamet axabley ear.
D.LOSSES  Requirements:
(1)Thet axpayerwasnotexempt
LOSSES – r
efertosuchl osseswhi chdo from incomet axi nthey ear
notcome undert he categor
y ofbad ofsuchnetoper ati
ngl oss;
debts,i
nventorylosses,depreci
ati
on,etc.
, (2)Thel osswasnoti ncurredin
andwhi char i
seint axpayer'
sprofessi
on, at axabl
ey ear duri
ng t he
tr
adeorbusi ness. taxpayerwas exemptf r
om
i
ncomet ax;and
REQUI
SITESFORDEDUCTI
BILI
TY (3)Ther e has been no
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 37
MEMORYAI
DIN TAXATI
ON LAW
substant i
al change i n the becoming wor thless and whi
ch
owner shipofthebusi nessor arecapitalassets.
enterpri
se. c. Losses f rom shor t sal
es of
There i s no subst ant
ial propert
y.
changei ntheowner shipof d. Lossesduet of ailur
etoexerci
se
thebusinesswhen: pri
vil
egeoropt i
ont obuyorsel l
(a)not l ess than 75% i n propert
y.
nomi nal value of t he
outstandi
ng i
ssued 3. SPECIALKINDSOFL OSSES
shares is held byoron a. Wager inglosses-deductibleonl
yt o
behal f of t he same theext entofgainorwi nnings.[
Sec.
persons;or 34( D)(6)]
;deemedt oapplyonlyt o
(b)notl essthan75% oft he i
ndividuals
paidupcapi t
alishel dby b. Lossesonwashsal esofst ocks-not
oronbehal foft hesame deductible because t hese ar e
person. consideredtobearti
fici
all
oss.
NOTE: The 3 yearper

iod shal
l Wash sal
es – a sal
e or ot
her
conti
nue to run not
withstanding dispositi
on of st ock or secur i
ti
es
thatthecorpor
ati
onpaiditst axes wher e subst
ant i
all
y identical
underMCI T,orthatt
hei ndivi
dual securit
iesar eacqui r
edorpur chased
avail
edthe10%OSD. withi
n 61- day period,begi
nni ng 30
daysbef or
et hesal eandendi ng30
 SeeAnnexSf
ori
l
lust
rat
ion. daysaf tert
hesale.[Sec.38]
b. Ofpr oper tyconnect ed,wi tht he Gener alr ul e:Lossesf r

om washsal es
trade,busi nessorpr ofession,i f arenotdeduct i
ble.
thelossar i
sesf rom f i
res, storms, Except ion:Whent hesal ei smadebya
shipwr eckorot hercasual ties,or dealeri nst ockorsecur i
tiesandwi t
h
from robber y, t hef t
, or respectt oat r
ansact i
onmadei nt he
embezzl ement . ordinar y cour se oft he busi ness of
(1)Tot aldest ruction suchdeal er ,l
ossesf rom suchsal eis
Ther epl acementcostt o deduct ible.
restor et he pr oper tyt oi t
s Element sofWashSal es:
nor maloper ating condi tion, (1)Thesal eorot herdi sposi
tion of
but i n no case shal lt he stockr esul
tedt oal oss;
deduct i
blelossbemor et han (2)Ther e was an acqui sit
ion or
the netbook v al ue oft he contractoropt i
onf oracqui siti
on
proper t
y as a whol e, ofst ock orsecur iti
es wi thin 30
immedi atelybef or ecasual ty. day sbef orethesal eor30day s
(2)Par tialDest ruction aftert hesale;and
Theexcessov ert henet (3)Thest ockorsecur i
tiessol dwer e
book v alue i mmedi ately subst ant i
all
yt he same as t hose
bef oret he casual ty shoul d acqui redwi thi
nt he61- dayper iod.
be capi t
alized, subj ect t o
depr eciati
on ov er t he c.Abandonment l osses in pet r
oleum
remai ni
ng usef ull ife oft he oper
ati
onandpr oducingwel l
.
proper t
y. (1)In case a cont r
actar ea wher e
petr
oleum operati
ons are
2. CAPI
TAL LOSSES ( LOSSES ARE undertaken i
s parti
all
yorwhol l
y
DEDUCTI
BLE ONLY TO THE EXTENT OF abandoned, al l accumul ated
CAPI
TALGAINS) explorat
ion and dev el
opment
a. Lossesfrom saleorexchangeof expenditur
es per t
aining thereto
capit
alassets shallbeall
owedasadeduct i
on.
b. Lossesr esul
ti
ngf r
om securit
ies (2)In case a pr oducing wel li s
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 38
MEMORYAI
DIN TAXATI
ON LAW
abandoned,theunamor t
izedcost taxpay erwhi ch mustbe v al
id and
ther
eof, as wel l as t he l
egal lydemandabl e;
undepreci
atedcostofequi pment 2. Connect edwitht hetaxpay er'
strade,
dir
ectl
y used t her
ein,shall be busi nessorpr acticeofpr of
ession;
all
owedasdeduct i
onint heyear 3. Must not be sust ained i n a
thewel l
,equipmentorf aci
li
tyis transact i
on ent ered into bet ween
abandoned. relatedpar t
ies;
4. Act uall
yascer tainedtobewor thl
ess
d.Lossesduet o vol
unt
aryremovalof anduncol l
ectibleasoft heendoft he
buil
ding incident to renewal or taxabl eyear.;
and
repl
acements - deducti
ble expense 5. Act uall
ychar gedof fint hebooksof
from gr
ossincome. account soft het axpayerasoft he
endoft hetaxabl eyear.
e.Lossofusef ulvalueofcapi t
alassets
duetochargesinbusi nessconditions- EQUITABLEDOCTRINEOFTAXBENEFI T
deducti
bleexpenseonl yt ot heextent Ar ecoveryofbad debt spr evi
ousl
y
of act ual loss sust ained ( aft
er deductedf rom grossincomeconst i
tut
es
adj
ustment for improvement , taxableincomei fintheyeartheaccount
depreci
ati
onandsal vagev alue) waswr i
ttenoff,t
hededuct i
onresult
edin
at axbenefit.(
TaxBenef i
tRule)
I
ll
ust
rat
ion:
.Lossesf
f r
om sal esorexchangesof CaseA CaseB CaseC
proper
tybetweenrelatedtaxpayer
s- Net
l
ossesofthisnatur
ei snotdeducti
ble i
ncome
(l
oss)
butgai
nsaretaxabl
e. before
wr i
teoff
g.Lossesoff ar
mers-i
fincurredi
nt he forbad P10,000 (
P9,
000) P5,
000
operat
ion of far
m business, i
ti s debts
Less:
deducti
ble. Account s
wr i
tt
enof f
h.Lossi
nshr
inkagei
nval
ueofst
ock–i
f asbad
the st ock oft he cor
por ati
on becomes debts 3,000 2,
000 6,
000
FinalNet
wor t
hless,thecostorot herbasi smaybe I
ncome
deduct edbytheowneri nthet axableyear (Loss) P7,000 (
P11,
000) (
P1,
000)
i
nwhi chthest ockofitswor thlessnessis Baddebt s
made.Anyamountcl aimedasal osson recovery
i
nasubse-
accountofshr inkageinv alueoft hestock quenty ear 3,000 2,
000 6,
000
through f l
uctuati
on int he mar ket or TAXABLE
otherwi se cannot be deduct ed f r
om INCOME
grossi ncome. upont he
baddebt
recovery P3,000 P -0- P5,
000
E.BADDEBTS
ASCERTAINMENTOFWORTHLESSNESS
BAD DEBTS – shallrefert ot hosedebts  ProofofTwoFact s:
result
ing fr
om t he wor thlessness or 1. t axpayerdi
dinf actascer
tai
nt he
uncoll
ecti
bil
it
y,in whol e ori n par
t,of debtt obewor t
hless,i
nt heyear
amount s due the taxpay erby ot hers, forwhichdeduct
ionissought,
ari
sing from money l ent or f r
om 2. t hatinsodoing,heactedingood
uncoll
ecti
ble amount s ofi ncome f r
om faih. (
t Coll
ect
or vs. Goodrich
goodssoldorser v
icesr endered. I
nternat
ionalRubber
,GR No.L-
22265,Dec.22,
1967)
REQUI
SITESFORDEDUCTIBI
LITY  Dependsupont
hepar
ti
cul
arf
act
sand
1. Exi st
ing i
ndebtedness due t
othe t
heci
rcumst
ancesoft
hecase.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 39
MEMORYAI
DIN TAXATI
ON LAW
 Goodf
ait
hdoesnotr
equi
ret
hatt
he Fi
nanceuponrecommendati
onofthe
taxpayerbean“ i
ncorri
gibl
eopt
imi
st” Commissi
onerofInt
ernal
Revenue.
butont heotherhand,hemaynotbe
undulypessi
misti
c. METHODSOFDEPRECI
ATI
ON
Ki
nd Formula
F.DEPRECI
ATI
ON 1)
Str
aight
-l
ine cost-salv
agev al
ue
esti
mat edli
fe
2)Decli
ning cost–depr eci
ati
onxRat e
DEPRECI ON –t
ATI hegradualdiminut
ionin balance esti
mat edli
fe
the servi
ce orusefulv al
ue oftangibl
e 3)Sum oftheyear
s nthperiodxcost -sal
vage
propertyduef r
om exhausti
on,wearand digi
ts(SYD) SYD
tearandnor malobsol
escence.
Theterm al
soappli
estoamor ti
zati
on I
ll
ust
rat
ion:A machi
ne i
s used i
nthe
ofi nt
angibl
eassets,t
heuseofwhi chin manufact
uring depar t
ment of
tradeorbusinessisofli
miteddurat
ion. Corpor
ati
onA,computet hedepr eci
ati
on
perannum wit
hthef
oll
owi ngfact
s:
REQUI
SITESF ORDEDUCTI BILITY Cost=P15,000 Salvage
1. Theal l
owancef ordepr eci
ati
onmust Value=P5,000
ber easonable.
2. I t must be f or pr opert
y use or
empl oymenti nt radeorbusi nessor
outofi tsnotbei ngusedt empor ar
il
y 1. Str
aightLineMet
hodwit
hest
imat
ed
duringthey ear. l
if
e=5y ears
3. Theal lowancemustbechar gedoff 15,
000–5, 000 =P2,
000
withinthetaxable, year. 5years
4. Schedul eont heal l
owancemustbe
attachedtot heret urn. 2. Decl
ini
ngbalancewit
hrat
eof200%
Year1:15,
000–0x200%=P6, 000
PROPERTY HELD BY ONE PERSON FOR LI
FE 5
WITH THEREMAINDERTOANOTHERPERSON Year2:
15,000–6,
000x200%=P3,600
Thededuct i
onshal lbecomput edas 5
i
fthel i
fetenantwast heabsoluteowner
ofthepropertyand,assucht heexpense 3. Sum oft
heyear
sdi
git
s
shal
laccruetohim. SYDfor5year
s=5+4+3+2+1or15
Year1:
5/15x(15,
000–5,
000)
PROPERTYHELDI N TRUST =P3,333.
33
Al
lowable deduct i
on shal l be Year2:
4/15x(15,
000–5,
000)
apporti
oned bet ween t he i ncome =P2,666.
67
benefi
ciari
es, and t he t rust
ees i n
accordancewi t
ht heper ti
nentprovisi
ons AGREEMENT AS TO USEFUL LI FE ON WHICH
of the instr
ument cr eati
ng or int he DEPRECI ATION RATEI SBASED
absenceofsuchpr ov
isions,onthebasis TheBur eauofI nternalRev enueand
ofthetrusti
ncomeal l
owabl etoeach. thet axpay ermayagr eei nwr it
ingont he
usef ul l if
e of t he pr oper t
y t o be
METHODSOFDEPRECI ATION depr eciated.The agr eed r ate may be
The t erm " r
easonabl e all
owance" modi fi
ed i f j ustified by f acts or
shalli nclude ( but not l imited to) an cir
cumst ances.Thechangeshal lnotbe
all
owancecomput edi naccor dance,with effect i
vebef oret het axabley earonwhi ch
the r egulations pr escribed by t he notice i n wr i
ting by cer ti
fied mai lor
DepartmentofFi nance,underanyoft he registered mai li s ser ved byt he part
y
fol
lowingmet hods. i
nitiating.
1. St raight-l
inemet hod SPECI ALTYPESOFDEPRECI ATION
2. Decl ining-balancemet hod 1. Pet roleum Oper ations
3. Sum oft heyears-digitmet hod  Depr eciation of al l pr oper
ti
es
4. Any ot hermet hod whi ch may be directl
yr elatedt opr oductionof
prescribed by t he Depar tment of pet r
oleum shal lbeal l
owedunder
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 40
MEMORYAI
DIN TAXATI
ON LAW
st r
aight -l
ine ( SL) or decl ining economi
cint
erest
.
bal ance( DB)met hod
 Mayshi ftfrom DBt oSLmet hod FEATURES
 Usef ulli
fe: 10y earsorshor t
erl i
fe 1. I ntangi bl
eExpl orati
onand
asal lowedbyt heCommi ssi
oner dev elopment dri
ll
ingcosti n
 Usef ulli
feofpr opertynotdir ectl
y pet r
ol eum explorati
onshal l
be
related t o pr oduction:5 y ears treatedei theras:
underst raightl i
nemet hod a. r ev enueexpendi tures;or
2. Mi
ningOper at i
ons b. capi talexpendi t
ures
 Depr eciationonal lpr opert
iesi n 2. The t ot
al amount deduct i
ble for
mi ning oper ations ot her t han explor ati
on and devel
opment
pet roleum oper ati
ons at t he expendi t
uresshal lnotexceed50%of
nor mal rateifexpect edlif
eisl ess neti ncome f r
om mi ning operati
on.
than10y ears. Theexcessshal lbecar ri
edf orward
 Ifexpect edl i
fei smor ethan10 tot he succeedi ng y earunt i
lf ul
ly
y ears,depr eciationshal lbeany deduct ed.
numberofy earsbet ween5y ears
andt heexpect edl i
fe. H.CHARI
TABLEANDOTHER
CONTRI
BUTI
ONS
3. Depr eciat
ion deducti
ble by non-
resident al i
ens engaged i n TAXTREATMENT
trade/business or non- r
esident
corporation A.Deduct
ibl
e B.Deducti
ble
a. Onl y when such pr opert
y i s I
nFull Subj
ectTo
locatedinthePhi
l
ippi
nes. Limi
tat
ion
G.DEPLETI
ONOFOI
LANDGAS 1) Reci
pienti s: 1) Reci
pientis:
WELLSANDMI
NES (a)Gov ernmentof (
a) Gover nment
the ofthe
Phili
ppi nes; Phil
ippi nes;
DEPLETI ON - e xhausti
on of nat ural (b)Anyofi ts (
b)Anyofi ts
resour cesasi nmi nes,oil
,andgaswel ls. agenci esor agenci esor
Thenat uralresourcesarecalled“wasti
ng poli
tical poli
tical
assets” . As t he phy sical units subdiv i
sions; subdiv i
sions
represent i
ng such r esources ar e or
extracted and sol d,such assets move (c)Anyf ully- Foranon-pr i
ori
ty
towar dsexhaust ion. owned acti
vit
yinanyoft he
gover nment areasmentionedinA,
Knownascostofdepl eti
onal l
owance
corpor ati
on andexclusi
velyfora
formi nes,oi lgaswel l
sandot hernat
ural publi
cpurpose.
deposi tsstarti
ngcal endaryear1976and Forpriori
ty
fi
scal y earbeginningJuly1,1975 acti
vi
tyin:
1.Science;
2.Educat ion
TOWHOM ALLOWED 3.Cul tur
e
Only mi ning ent i
ti
es owni ng 4.Heal th
economi cint
erestinmi neraldeposits. 5.Economi c
Development
Economi ci nter
estmeansi nter
esti n
6.Human
miner alsinpl acei nvest mentt hereinor Settl
ement
secured by oper ati
ng or cont ract 7.Yout hand
agreementf orwhi chi ncomei sder i
ved, Spor t
s
andr et ur
nofcapi t
alexpect ed,from t he Dev el
opment
extr
act ionofmi neral.
Mer e economi c or pecuni ary 2)Recipi
enti sa 2)Non-
gover
nment
advant aget o beder ivedbypr oduction forei
gnor or
gani
zati
ons
byonewhohasnocapi talinvestmenti n i
nternational
themi neraldepositdoesnotamountt o organizati
onwit
h
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 41
MEMORYAI
DIN TAXATI
ON LAW
anagr eementwi t
h
thePhi l
ippi
ne
Governmenton
deduct i
bil
it
y,ori
n
accordancewi th
speci
al law.
3) Reci pienti
san 3) Recipientisan
accreditednon- accredited
government domest ic
organizati
on, corporationor
organized/operat
ed association
for(purposes): organized/oper
a
tedfor
(purposes):
(
a) Sci
ent ifi
c; (
a)Sci
ent ifi
c
(
b) Educat i
onal ; (
b)Educat i
onal;
(
c) Cult
ur al; (
c)Cult
ur al;
(
d) Charact er (
d)Youthandspor t
s
bui
lding/ yout development
handspor t
s (
e)Charitable
development (
f)Social welf
are
(
e) Charitable g)Rel
( igious
(
f) Social h)Rehabi
( l
itat
ionof
welfare Vet
erans
(
g) Health
(
h) Resear ch Ift
hecondi
ti
ons
i
nTableAisnot
Andsat i
sf ying compl
iedwit
h:
thef ollowi ng
condi ti
ons: Subj
ecttol i
mitati
on:
1. Thedonat i
on (a) Indivi
dual -
mustbe 10% t axabl
e
util
izednot i
ncome f rom
l
at ert hant he trade
15thdayoft he business or
rd
3 mont h p r
ofession
before REQUI
SITESFORDEDUCTI BI
LITY
followi ngt he
contri
but i
on 1. The cont r
ibution or gi f
t must be
closeofi ts
taxabl ey ear. (b) C orpor
a t
ion- actuallypaid.
2. The 5% t axabl
e 2. Itmustbegi vent otheor ganizati
ons
admi nist r
at i
ve i
ncome f rom specifi
edint hecode.
expensemust trade 3. The neti ncome oft he insti
tuti
on
notexceed business or mustnoti nur et othebenef i
tofany
30%oft otal profession pri
v at
estockhol derorindi
v i
dual.
expenses. before
3. Upon contri
but i
on
VALUATION
dissol ut i
on,
Charit
abl
e contri
but
ion of pr
opert
y
asset smust
bedi stributed otherthanmoneyshal lbebasedont he
toanot her acquisi
tioncostofsai
dpropert
y.
non- pr ofit
domest ic I
. RESEARCHANDDEVELOPMENT
cor por ationor (R&D)
tot hest ate.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 42
MEMORYAI
DIN TAXATI
ON LAW
TAXTREATMENT 1. Theempl oyermusthav eestabl ished

Ei
theras: a pensi on or r eti
rement pl an t o
1. RevenueExpendi tures provide f or t he pay ment of
Requisit
es: reasonable pensi ons t o hi s
a. Pai d or i ncurred dur ing the empl oyees;
taxabl ey ear 2. Thepensi onpl anisr easonableand
b. Or dinaryandnecessar yexpenses actuari
allysound;
inconnect ionwi thtradebusiness 3. Itmustbef undedbyt heempl oy er;
orpr ofessi on 4. Theamountcont ri
butedmustbeno
c. Not char geable t o capi tal l
ongersubj ectt ot he cont roland
account disposi
t i
onoft heempl oyer;
2. DeferredExpenses 5. The pay ment has not y et been
Requisit
es: all
owedasadeduct i
on; and
a. Pai d ori ncurredinconnect i
on 6. Thededuct i
oni sappor ti
onedinequal
wi th t rade, busi ness, or partsov eraper iodof10consecut i
ve
prof ession years begi nning wi tht he y ear i n
b. Nott r
eat edasexpense which t he t r
ansferorpay menti s
c. Char geabl et ocapitalaccountbut made.
not char geable t o pr operty
subj ect t o depr eciat
ion or SUMMARY OF RULES ON RETI REMENT
depl eti
on. BENEFITSPLAN /PENSI ON TRUST
1. Exempt f rom I ncome Tax –
Amountdeduct
ibl
e: empl oyees’ t
rustunderSec.60( B)
Amountratabl
ydistr
ibutedovera 2. Excl usion f rom Gr oss I ncome –
peri
odof60mont hsbegi nni
ngwith amountr eceived by t he empl oy ee
themont htaxpayerreal
izedbenefi
ts from t he fund upon compl i
ance of
from suchexpendi
tur
es. cer t
ai nconditionsunderSec.32( B)(6)
3. Deduct ionfrom Gr ossIncome–
EXCLUSI
ON FROM RESEARCH AND a. Amount s cont ri
but ed by t he
DEVELOPMENTEXPENDI TURES empl oyerduringt het axabley ear
1. Anyexpendi turefort heacquisi t
ionor int othepensi onplant ocovert he
impr ovement of l and or f or the pensi on liabi
lit
yaccr uing during
impr ovementofpr opertyt obeused they ear–consi deredasor dinary
in connect i
on wi th resear ch and and necessar y expenses under
dev elopmentsubj ectt odepr eciati
on Sec.34(
A)(
1)
anddepl etion. b. 1/10 ofther easonableamount
2. Anyexpendi turepai dori ncur redfor paid byt he employerto cover
the pur pose of ascer tai
ning t he pensionli
abili
tyappli
cabl
et othe
existence,locat i
on,ext entorqual ity yearspri
ort othetaxabl
ey ear
,or
ofanydeposi toforeorot hermi neral so paidto placet hetrustina
includingoilorgas. sound f i
nanci
al basi s –
deducti
bleunderSec.34(J)
J.PENSI
ONTRUST
CONTRI
BUTI
ONS K.PREMI UM PAYMENTS
ONHEALTHAND/ OR
PENSI
ON TRUST CONTRI ONS – a
BUTI HOSPITALI
ZATIONINSURANCE
deducti
onappli
cableonlytotheempl
oyer
onaccountofit
scont ri
buti
ontoapri
vate DEFI
NI ON: I
TI tisanamountofpr emium
pensi
on plan f or the benefi
t of i
ts onhealthand/ orhospital
izat
ionpaidby
employee. Thi
s deduct ion is pur
ely anindivi
dualtaxpayer(headoff amil
yor
busi
nessincharacter
. marri
ed),forhimselfandmember sofhi
s
famil
yduringthetaxableyear.
REQUI TESF
SI ORDEDUCTI
BILI
TY
REQUI
SITESFORDEDUCTI
BILI
TY 1. Insurance musthav e act
ual
l
ybeen
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 43
MEMORYAI
DIN TAXATI
ON LAW
taken businesscarr
iedonbyt het axpayer
,
2. Theamountofpr emium deduct i
ble i
ndividualor corpor
ate,when t he
doesnotexceedP2, 400perfami l
yor taxpayeris dir
ect
ly orindirect
lya
P200permont hduri
ngt het axable benefici
aryundersuchpolicy .[
Sec.
ear. 36]
3. Thatsaidf amil
yhasagr ossincome 5. Lossesfr
om sal
esorexchangesof
ofnotmor ethanP250,000f orthe proper
tybet
weenrel
atedtaxpayer
s.
taxabl
ey ear. [
Sec.36]
4. Incaseofmar r
iedi
ndi
vidual
,onlythe
spouse cl
aimi
ng addit
ional TRANSACTIONSBETWEEN RELATEDPARTI ES
exemption shallbe enti
tl
ed tot his 1. Betweenmember soft hef ami l
y;
¬deducti
on. “Fami ly” incl udes onl yt he
brot her s,sisters( whet herbyt he
WHOMAYAVAI LOFTHEDEDUCTI ON whol e or hal f bl ood) ,spouse,
1. Indiv i
dualtaxpayer s earning pur el
y ancest ors, and li
neal
compensat i
on ¬i ncome dur ing the descendant soft het axpay er.
year . 2. Excepti nt hecaseofdi str i
but ionsi n
2. Indiv i
dualtaxpayerear ningbusi ness li
quidation:
i
ncome or i n pr acti
ce of hi s a. bet ween an i ndi v i
dual and a
pr ofession whet her av ail
i
ng of corpor ati
on mor et han 50% i n
i
t emi zed or opt i
onal st andard valueoft heout standi ngst ockof
deduct i
onsduri
ngt heyear. whi ch i s owned, di r ectly or
3. Indiv i
dual taxpay er ear ning bot h i
ndi rect ly
, by or f or such
compensat i
on, and busi ness or i
ndi vidual ;
pr actice of profession dur ing the b. bet weent wocor por ationsmor e
year . than 50% i n v alue of t he
outst andi ng st ock of each of
NON-
DEDUCTI
BLEEXPENSES whi ch i s owned, di r ectly or
i
ndi rect ly
,by orf ort he same
REASONSFORNON- DEDUCTI
BILITY i
ndi vidual ,i feitheroneofsuch
1. Personal expenses corpor ati
ons,wi thr espectt ot he
2. Capitalexpenditur
es taxabl ey earoft he cor porati
on
3. Itemsnotnor mall
ysubj ecttoi
ncome precedi ngt hedat eoft hesal eof
taxandt herefor
ear enotdeductibl
e. exchangewasaper sonalhol di
ng
4. Items taken adv antage of by t he companyora f or eign per sonal
taxpayert oavoidpaymentofi ncome holdi ngcompany ; or
tax. 3. Betweent hegr antorandaf iduciary
ofanyt r ust ;
SPECI
FICITEMS( SECTION 3 6) 4. Betweent hef iduciaryofat rustand
1. Personal ,
livi
ngorf amilyexpenses; thef iduci aryofanot hert rusti ft he
2. Amountpai doutf ornewbui l
dingsor same per son i s a gr ant or wi th
for per manent i mpr ovement s, or respectt oeacht r
ust ;
betterment made t oi ncrease t he 5. Betweenaf i
duci aryofat r ustanda
valueofanypr oper tyorestate, benef i
ciar yofsucht rust .
Exceptt hatintangi bl
edr i
ll
ingand
dev el
opment cost i ncurred i n TAXCONSEQUENCES
petroleum oper ati
onsar ededuct i
ble; Thefoll
owi ngarenotdeducti
ble:
3. Amount expended i n r est ori
ng 1. Int
erestexpense[ Sec.34(B)
(2)]
proper t
y or i n maki ng good t he 2. Baddebt s[Sec.34( E)
(1)]
exhaust i
on t hereof f or whi ch an 3. Lossesf rom salesorexchangesof
all
owancehasbeenmade; propery[
t Sec36( B) ]
4. Premi umspai donanyl if
einsur ance
policycov eri
ngt hel ifeofanyof fi
cer (
2)OPTIONALCORPORATE
or empl oyee, or of any per son I
NCOMETAX
fi
nanci al
lyinterestedi nanyt radeor SECTI
ON27(A)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 44
MEMORYAI
DIN TAXATI
ON LAW
due f rom such cor porat

ion
APPLI
ESTO: det
ermi
nedunderSect
ion27[
A].
1. Domesti
ccorpor
ati
ons(DC)
2. Resi
dentf
orei
gncorpor
ati
ons(
RFC) LI
MITATI
ONS
RATEOFTAXANDDATEOFEFFECTI
VITY 1. The MCI T shall apply onl y to
15% oftheGrossI
ncomeef fect
ive domest i
c and r esi
dent f orei
gn
Januar
y1,2000 corporat
ions subj
ectt ot he normal
corporat
ei ncome t ax (
income t ax
CONDI ONSORREQUI
TI REMENTS rat
esunderSec27[ A]oftheCTRP) .
1. At axeffortr
atioof20%ofGr oss 2. Inthecaseofadomest i
ccor porati
on
Nat i
onalProduct whose oper at
ions oract iv
iti
es are
2. Ar ati
oof40%i ncomet axcol
lect
ion partl
ycov er
edbyt heregularincome
tototaltaxrevenues taxsystem andpar t
lycoveredunder
3. AVATt axeffortof4%ofGNP a specialincome t ax system,t he
4. A0. 9%ratioofConsol i
datedPubli
c MCI T shall apply on oper ati
ons
SectorFinancialPositi
on(CPSFP)to cover
ed by the r
egul
ar cor
por
ate
GNP i
ncometaxsystem.
3. I
ncomput ingfortheMCI Tduefrom a
OTHERFEATURES resi
dentforei
gncor por
ati
on,onlythe
1. Av ai
labl
eonl
ytof
ir
mswhoser
ati
o gross i
ncome f rom sources wit
hin
of: the Phi
li
ppines shallbe consi
dered
forsuchpurpose.
Costofsal
es
<=55% WHENDOESACORPORATIONBECOME
Gr
osssal
esorrecei
ptsf
rom al
l LI
ABLEUNDERTHEMCI
T?
sour
ces
MCITisimposed beginning on
2.Theel
ecti
onshallbeir
revocabl
e the four t
h taxabl
e year immedi ately
fort
hree(3)consecut
iveyears
fol
lowing t he year in which such
corporati
on commenced its busi ness.
MEANI
NGOFGROSSI NCOME
Thet axableyearinwhichthebusi ness
Gener
alconcept–
operati
onscommencedshal lbet hey ear
Gr
osssales
whent hecorpor
ati
onregi
sterswi tht he
Less: BIR.
(
1)SalesReturn;
(
2)Discountandal l
owances
CARRY FORWARD OF THE EXCESS
(
3)Costofgoodssol d-means
MINI
MUM TAX
all busi ness expenses
dir
ectl
yi ncurred to produce
 AnyexcessofMCI Tov ert henormal
the mer chandise t o bring
i
ncomet axcanbecar r
iedf or
war don
them totheirpresentlocat
ion
anannual basi
s.
anduse.
 Theexcesscanbecr edi tedagai nst
thenormal i
ncomet axduei nthenext
(
3)MINIMUM CORPORATE 3i mmedi atel
y succeedi ng t axable
I
NCOMETAX( MCI T) years.
SECTI
ON27( E)  Any amountof t he excess MCI T
whichcannotbecr editedagai nstt he
WHOARECOVERED? normalincomet axduei nt henext3-
MCI Tisi mposed on domesticand yearperi
odshallbef or
feited.
resi
dentfor
eigncorporati
ons
1. Whenev ersuchcor por
ati
onhaszero
ornegativet
axableincome;or RELI
EFFROM MCI
T
2. Whenev erthe amountofMCI Tis
great
ert hanthenor malincometax The Secr
etar
y of Fi
nance i
s
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 45
MEMORYAI
DIN TAXATI
ON LAW
authori
zedt osuspendt heimposi t
ionof wher et he goods
the MCI T on any cor por
ation which areact ual l
ysol d;
suffer
slossesbecauseof : 4.i
nsur ance whi l
e
a. prolongedlabordispute; the goods ar ei n
b. forcemajeure;or transi t.
c. l
egi t
imatebusinessrev er
ses. B.Manuf acturi
ng CostofSal es = Al l
GrossI ncome costofpr oduct i
onof
Subst
“ anti
all
ossesf r
om aprol
onged (Same) fi
nished goods,such
l
abordi
sput
e"meanslossesar
isi
ngf
rom a as
str
ike st aged by t he empl oyees whi ch 1.rawmat erials
l
astedf ormor et hansi x(6)mont hswi t
hin used;
ataxabl eper i
odandwhi chhascausedt he 2.directl abor ;
tempor ary shut down of busi ness 3.manuf actur ing
operat i
ons. ov erhead;
For
“ cemaj eure"meansacauseduet o 4.freightcost ;
anirresistiblef orceasby" ActofGod"l i
ke 5.i
nsur ance
l
ightning, ear t
hquake, st
orm, f
loodandt he premi ums;
l
ike.Thi st erm shal lal soincludear med 6.other costs
conflictsl i
kewarandi nsurgency. i
ncur red t o br ing
Legi
“ timat ebusi nessr everses"shal l the r aw mat erial
s
i
ncludesubst antiallossessust aineddue tot he f act ory or
tof i
re,r obber y,theft,orembezzl ement , war ehouse.
or f or ot her economi c r eason as C.Services CostofSer vices=Al l
determi nedbyt heSecr et
aryofFi nance. GrossI ncome= dir
ectcost sand
Grossr eceiptsless expensesnecessar il
y
TAX RATE: 2% ofgr oss income or salesreturns, i
ncur r
edt opr ov i
de
taxabl
e base per ti
nent t o a all
owances, theser vicesr equi red
tradi
ng/mer
chandi
sing concern or a discountsand byt hecust omer sand
servi
ceenti
ty costsofser vices cli
ent sincl udi ng:
a.Sal ariesand
TAXBASE:Gr
ossI
ncome empl oy eebenef its
MEANINGOFGROSSINOME ofper sonnel ,
consul tantsand
Gener
alconcept-gr
ossi
ncomemeans: speci al i
stsdi r
ect l
y
Gr
osssales render i
ngt he
Less: ser vi
ce;
(
1)SalesReturn; b.Costoff aci li
ti
es
(
2)Discountandal l
owances direct lyutilizedin
(
3)Costofgoodssol d-means prov i
di ngt he
all busi ness expenses ser vi
ce.
dir
ectl
yi ncurred to produce Itshal lnot
the mer chandise t o bring i
ncludeint
erest
them totheirpresentlocat
ion expenseexceptfor
anduse. banksandot
her
fi
nanci
ali
nst
it
uti
ons.
KI
NDSOFBUSI
NESS
 Gross income excl udes passi v
e
A.TradingorMer chandi
singConcer n i
ncomesubj ectt
ofinalt
ax .
Gross I ncome = CostofSal es=  Other income and Ext r
aor
dinary
gross sal
es/ 1. I
nvoicecostoft he Incomear eincl
uded sinceRR 9-98
recei
ptsl esssal es goodssold; provi
des that gr
oss sal es i
ncl
ude
retur
ns, di scounts 2. i
mpor tduti
es; salescontri
but
orytoincomet axabl
e
andallowancesand 3. fr
eight i
n undertheregul
arcorpor
atetax.
costofgoodssol d tr
ansporti
ng t he
goodst otheplace  SeeAnnexTf
ori
nter
playofnor
mal
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 46
MEMORYAI
DIN TAXATI
ON LAW
tax,opt
ionalcor
por
atei
ncome t
ax paid/issuedfrom theappl
icabl
ey ear
’s
andMCIT. taxableincome
Amountr eser
v edforther
easonable
needsoft hebusinessasdefi
nedi nt
he
(
4)I
MPROPERLYACCUMULATED Regulat i
ons
EARNI
NGS( I
AE)TAX Taxbaseofi mpr operl
yaccumulated
earningst ax
SECTI
ON29
EXCLUSI
ONS
(
REVENUEREGULATI
ONSNO.2–2001)
 Forcor
por
ati
onsusi
ngt
hecal
endar
DEFINITION: “ Improperl
y accumul at
ed basi
stheaccumul
atedear
ningst
ax
earni
ngs ( IAE)” aret he profits of a shal
lnotappl
yonI
AEasofDec.31,
corporati
on t hat ar e per mitted t o 1997.
accumul ateinsteadofbei ngdi stri
but
ed  Forfiscalyearbasi
s,t
het
axshal
lnot
byacor porati
ont oitssharehol dersfor applytothe12-monthper
iodoff
iscal
thepur poseofav oi
dingthei ncomet ax year1997-1998.
withrespectt oi tsshareholdersort he
shareholdersofanothercorporation. IAEasoftheendofacal
endaror
fi
scalyearper
iodonorafterDec.31,
TAX RATE: 10% of t he I mpr operl
y 1998shall
besubj
ecttot
he10%tax.
Accumul at edTaxabl eIncome( i
naddi ti
on
toot hert axes) . WHOARECOVERED?
Rat i
onal ebehi ndI AET
Ift he ear nings and pr ofit
s wer e GeneralRule:TheI AEt axshal lappl yt o
distri
but ed,t heshar eholder swoul dt hen everycor por ationf ormedorav ai l
ed
bel i
abl et oi ncomet axther eon,wher eas for the pur pose of av oiding t he
i
ft hedi stributionwer enotmadet othem, i
ncome t ax wi th r espect t o i t
s
theywoul dincurnot axinr espectt othe shareholder sort heshar ehol der sof
undistribut edear ningsandpr ofi
tsoft he anyot hercor por at ion,byper mi t
t i
ng
corpor ation.Thus, at axisbei ngimposed; earningsand pr ofitst o accumul ate
a. i nt henat ureofapenal tyt othe i
nsteadofbei ngdi videdordi stri
but ed.
cor porat i
on f or t he i mproper Thesear e:
accumul ationofi tsear nings,and 1. Domest i
c cor porations as
b.as a f or m ofdet errentt ot he defi
nedundert heTaxCode;
av oidance of t ax upon 2. Cor porat i
onswhi char ecl assif i
ed
shar ehol der swho ar esupposed asclosel y-hel dcor porat ions.
to pay di v i
dends t ax on t he • t hose cor porat i
ons atl east
ear ningsdi stri
buted t ot hem by fif
t yper cent( 50%)i nv alueof
thecor por ation. theout standi ngcapi talst ock
oratl eastf i
ftyper cent( 50%)
“I
MPROPERLY ACCUMULATED oft het otalcombi nedv ot i
ng
TAXABLEI
NCOME” powerofal lclassesofst ock
ent i
t l
ed t ov otei s owned
Taxabl
eincomef ort heyear direct lyori ndirectlybyorf or
Add: notmor et han t went y( 20)
Incomeexemptf rom tax; indiv i
dual s.
Incomeexcludedf r
om gr ossi ncome;  Domest ic cor porations not
Incomesubjecttofinaltax; falli
ng under t he af oresai d
Netoperat
inglosscar ry
-ov er(NOLCO) def initi
on ar e, t heref ore,
Total publ icly-hel dcor por ati
ons.
Less:
Incometaxpaid/payablef orthet axabl
e Except
ion:Thesaidtaxshallnotapplyto:
year 1. Publi
clyhel
dcorporat
ions( Sec.29)
Divi
dendsactual
lyorconst ructi
vely 2. Banksandot hernon-banksFi nanci
al
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 47
MEMORYAI
DIN TAXATI
ON LAW
i
ntermedi
ares(
i Sec.29) the t
ax upon i t
s sharehol
ders or
3. I
nsurancecompanies(Sec.29) member sunlessthecorporat
ion,by
4. Taxabl
e partner
ships (deemed t
o thecl
earpreponderanceofevi
dence,
have actual
ly or constr
ucti
vely shal
lprovet
hecont r
ary.
recei
ved t
he t
axabl
eincome under
Sec.73D) “Reasonabl eneedsoft hebusi ness”
5. Gener
al pr
ofessi
onal par
tner
shi
ps i
ncludes t he r easonabl yant icipat ed
(
exempt
;taxabl
eagai
nstt
hepar
tner
s) needsoft hebusi nesssuchas:
6. Non-t axablejointv ent uresand a. Allowancef ort hei ncreasei nt he
7. Enterprisesdul yr egi steredwi tht he accumul ationofear ningsupt o
Phili
ppineEconomi cZoneAut horit
y 100%oft hepai d-upcapi taloft he
(PEZA) under R. A. 7916, and cor porat i
onasofBal anceSheet
enterprisesregisteredpur suanttot he dat e,incl usi veofaccumul at i
ons
BasesConv ersionandDev elopment takenf rom ot hery ears;
Actof1992underR. A.7227,aswel l b. Ear nings r eser ved f or def i
nite
asot herent erpri
sesdul yregistered cor porat eexpansi onpr oj ectsor
under speci al economi c zones progr ams as appr oved by t he
declaredbyl awwhi chenj oypay ment Boar dofDi rector sorequi v alent
ofspeci altaxr ateont heirr
egistered body ;
operationsoract i
viti
esi nli
euofot her c. Reser ved f orbui lding,pl ant sor
taxes,nat i
onal orlocal . equi pment acqui si
tion as
8. Foreigncor porations[ RRNo.02- 2001] appr ov ed by t he Boar d of
Direct orsorequi valentbody ;
EVI
DENCE OF PURPOSE TO AVOI
D d. Reser ved f or compl i
ance wi th
I
NCOMETAX anyl oancov enantorpr e-exi sting
obligat i
on est ablished under a
1. The factthatanycor por
at i
on isa legitimat ebusi nessagr eement ;
mereholdingcompanyori nvest
ment e. Ear nings r equired by l aw or
company shal l be pr i
ma f acie appl icable r egulat i
ons t o be
evi
denceofapur posetoav oi
dt he retainedbyt hecor por ationori n
tax upon i t
s shar eholders or respectofwhi ch t herei sl egal
member s. prohi biti
onagai nsti t
sdi stribut i
on;
f. Int he case ofsubsi diar i
es of
Inst
ances i ndi cati
ve ofpur pose t o foreign cor por ations i n t he
avoidi
ncomet axuponshar ehol ders: Phi l
ippines, al l undi stribut ed
a. Investment of subst antial earni ngsi nt endedorr eser vedf or
earnings and pr of
it
s of t he invest ment s wi t
hin the
corpor ation i
n unr elated Phi l
ippinesascanbepr ov enby
business or i n st ock or cor porat er ecor dsand/ orr elev ant
secur i
ties of unr elated document aryev idence.
business;
a. Investmenti nbondsandot her The control
l
ing int
ent
ion of the
l
ong- term secur i
ti
es; t
axpayeristhatwhichismanif ed at
est
a. Accumul ati
on of ear nings i n t
he t i
me of accumul at
ion, not
excess of 100% of pai d-up subsequentl
ydeclaredintenti
ons,which
capital,notot herwisei ntended aremerelytheproductofaftert
hought
.A
forther easonableneedsoft he specul
ative and i
ndefi
nit
e purpose wil
l
business as def i
ned i nt hese notsuff
ice.
Regul ations. Defini
tenessofplan/scoupl edwith
acti
on/stakentowardsit
sconsummat i
on
2. Thefactt hattheearningsorpr ofi
ts i
sessent i
al.
ofa cor porat
ion are permitted to
accumulate beyond the reasonable PERIOD FOR PAYMENT OF DIVIDEND/
needs of t he business shal l be PAYMENTOFI AET
deter
minativeofthepurposet oavoid Div
idendsmustbedecl
aredandpaid
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 48
MEMORYAI
DIN TAXATI
ON LAW
or issued not l at
er than one y ear saidincome.
fol
lowingt hecl oseofthet axabl
ey ear
, 2. Thei ncomesubj ectedt ofinalincome
other
wi se,theIAET,i
fany,shouldbepaid taxisno l ongersubj ectt ot henet
withi
nf i
fteen(15)dayst
hereafter
. i
ncomet ax; otherwise, t
herewoul dbe
a v iolation of pr ohibit
ed doubl e
taxation.
(
5)I
NCOMESUBJECTTO 3. Thel iabilit
yf orthepay mentoft he
taxr estspr imaril
yont hepay oras
PREFERENTI
ALORSPECI
AL
withholdingagent .
RATES 4. Thepay eei snotr equiredt of i
lean
i
ncomet axr eturnf ort hepar t
icular
Pert
ainstoi ncomederi
vedbya i
ncomesubj ectedt oFWT. I tist he
parti
cul
ar i ndi
vidual or cor por
ation withholdingagentwhof il
est heret urn.
belongi
ngt oaclassofi ncometaxpayer 5. Ther ateoft hefinalt axismul t
iplied
thatissubjecttoeitherapref
erent
ialor to t he gr oss i ncome. Thus,
special
rate. deduct i
ons and/ or per sonal and
additional exempt i
ons ar e not
 TaxRat
es:
Pleaser
efert
oAnnexC. all
owed.
(
6)GROSSI
NCOMETAX(
GIT) (
8)FRI
NGEBENEFI
TTAX(
FBT)
GROSSI
NCOMETAX(
GIT)FORMULA FRINGEBENEFI TTAXisaf i
nalincome
tax on the empl
oyee whi
ch shallbe
Enti
reIncome wit
hheldandpaidbytheemployerona
Less:ExclusionsandIncomesubject quart
erl
ybasi
s.
toFinalTax(e.
g.Passive
Income) FRINGE BENEFI T means any good,
GrossIncome service,orot herbenef i
tf ur ni
shed or
Multi
plyby:TaxRates(%) grantedbyanempl oyer,i
ncashori nki nd,
i
n addi ti
on t o basi c sal aries,t o an
NetI
ncomeTaxDue i
ndiv i
dualempl oy ee( exceptr ankandf i
le
empl oy ees)suchas,butnotl i
mi t
edt o
GI
TAPPLI
ESTO thefollowi ng:
1. Housi ng
1. Non-
resi
dentali
en notengaged in 2. ExpenseAccount
t
radeorbusi
ness(25%)
;and 3. Vehi cleofanyki nd
2. Non-
resi
dent forei
gn corpor
ati
on. 4. Househol dper sonnel ,suchasmai d,
(
32%) driverandot hers
5. I nterestonl oanatl esst hanmar ket
 TaxRates:Pl
easer
efert
oAnnexA ratet ot heext entoft hedi ff
er ence
andB. bet weent hemar ketr ateandact ual
rategr ant ed.
(
7)FI
NALI
NCOMETAX 6. Member shipf ees,dues and ot her
expensesbor nebyt heempl oyerf or
GENERALPRI
NCI
PLES theempl oy eei nsoci alandat hletic
clubsandsi mi l
aror ganizations
1. I
ti sconst i
tuted asaf ulland fi
nal 7. Expensesf orf oreigntravel
paymentoft heincomet axduef r
om 8. Hol idayandv acationexpenses
the payee on a par ti
culartype of 9. Educat ional assi st
ance t o t he
i
ncomesubj ectt of i
nalwithhol
ding empl oy eeorhi sdependent s; and
tax(FWT) . 10.Li fe orheal thi nsurance and ot her
Thefinal
ityofthewithhol
dingtax non- lir
e i nsur ance pr emi ums or
i
sl i
mi t
edonl ytot hepayee’
sincome simi laramount sonexcessofwhat
taxl i
abi
li
tyanddoesnotext endt o thel awal lows.
othertaxest hatmaybei mposedon
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 49
MEMORYAI
DIN TAXATI
ON LAW
PERSONSLI
ABLE a. ifi ti sr equiredornecessar yt o
thebusi nessofempl oy er
TheEMPLOYER ( asawi thholding b. ifi tisf ort he conv enience or
agent)
,whet herindivi
dual,professional adv antageofempl oyer
part
nershiporacor poration,regardless 2. Fri
nge Benef itt hati s nott axabl e
ofwhet hert
hecor porat
ioni staxableor underSec.32( B)–Excl usionsf rom
not, or t he gov er
nment and i ts GrossI ncome
i
nstrumental
iti
es 3. Fri
ngebenef i
tsnott axabl eunderSec.
33FringeBenef i
tTax:
TAX RATE:32% ( fr
om Januar y1,2000 a. Fr i
nge Benef its whi ch ar e
onwards)oft he Grossed up Monet ar
y aut hor ized and exempt ed under
Value(GMV)off ri
ngebenefits. speci all aws,such as t he 13t h
I
nthecaseofal i
ens,t
het axr at
esto mont h Pay and Ot herBenef its
beappl i
edonf r
ingebenefitshal lbeas wi tht hecei l
ingofP30, 000.
fol
l
ows: b. Cont ri
but i
onsoft heempl oy erf or
1. NRANEBT25% the benef i
toft he empl oy ee t o
2. Ali
ensempl oyedbyr egionalHO ret i
rement , i nsurance and
15% hospi talizati
onbenef itplans;
3. Ali
ensempl oyedbyOBU15% c. Benef itsgi vent ot heRankand
4. Ali
ensempl oyedbyPet roleum FileEmpl oyees,whet hergr anted
Servi
ceCont r
actor
sand under a col lective bar gaining
Subcontr
actors15% agr eementornot ;and
d. The De mi ni mis benef its –
“GMV” OF THE FRI
NGE BENEFI
T benef its whi ch ar e r elatively
REPRESENTS smal li nv alue of f
er ed by t he
empl oy er as a means of
1. Thewhol eamountofi ncomer eal
ized pr omot inggoodwi ll,
cont ent ment ,
byt heempl oy
eewhi chi ncl
udest he ef fi
ciencyofEmpl oy ees
net amount of money or net The t erm “ Rank and Fi le
monet aryvalueofpropertywhichhas Empl oy ees” shal l mean al l
beenr eceiv
ed;plus empl oy ees who ar e hol ding
2. The amountoff r
inge benef i
tt ax nei ther manager ial nor
ther
eon ot herwi
se due f rom t he super visor yposi t
ionasdef i
nedi n
empl oyeebutpai dbyt heempl oyer theLaborCode
forandi nbehalfoftheempl oyee. Int hecaseofr ankandf ile
empl oy ees,f ri
ngebenef i
tsot her
“GMV”oft hef r
ingebenef
itshall thant hoseexcl udedf rom gr oss
bedet er
mi nedbydi vidingthemonet ar
y incomeundert heTaxCodeand
val
ueoft hef r
ingebenef i
tbytheGrossed ot herspeci all aws,ar et axabl e
updivisor.TheGr ossedupdi vi
soristhe undert he indi vidualnor malt ax
dif
fer
ence bet ween 100% and t he rat e.
appli
cablerates. DEDUCTI BILITY TO THE TAXABLE
INCOMEOFTHEEMPLOYER
GROSSEDUP
YEAR RATE Gener alRule:The amountoft axable
DI
VISOR
1998 66% 34%FWT fr
ingebenef i
tandt hef r
ingebenef it
st ax
1999 67% 33%FWT shall consti
tut
e al l
owabl e deduct i
ons
2000 fr
om gr ossi
ncomeoft heempl oyer.
68% 32%FWT
onwar
ds Except i
on:
I
ft hebasisforcomput ationoft he
FRI TS NOT SUBJECT TO
NGE BENEFI fr
inge benefit
st ax ist he depreciati
on
FBT value,thezonalvalueort hefairmar ket
value,onlytheactualf r
ingebenef it
st ax
1. Fr
inge benef
is not consi
t der
ed as paid shal l constit
ute a deduct i
ble
gr
ossincome– expensef ortheempl oy er.Thev alueof
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 50
MEMORYAI
DIN TAXATI
ON LAW
thefringebenef itshal lnotbededuct i

ble worknotexceedi
ng25%oft
hebasi
c
and shal lbe pr esumed t o hav e been mini
mum wage.
tacked on or act ually cl aimed as
depreciation expense byt he empl oyer. Time f orf i
li
ng ofquar t
erl
yr emitt
ance
Provided,howev er,thati ftheaf oresaid ret
ur noffinalincomet axeswi thheld
zonalv alueorf airmar ketv alueoft he Thetaxi mposedunderSec.33shal l
said pr opert
yi s gr eatert han i t
s cost bet reatedasaf i
nalincomet axont he
subject t o depr eci
at i
on, t he excess empl oyeethatshal lbewithheldandpai d
amountshal lbeal l
owedasadeduct i
on bytheempl oyer,whetheralarget axpayer
from t he empl oy er
's gr oss income as ornon- lar
get axpay ,onorbef
er orethe
fri
ngebenef itexpense.( Sec.2. 33[
D],Rev. th
10 day oft he mont hf ollowing the
Reg.No.3- 98) cal
endar quar ter in which t he fri
nge
benef i
tsweregr anted(RR04-2002) .
EXAMPLE OF DE MI
NIMI
S BENEFITS
NOTSUBJECTTOFBT (RRNO.8-2000  For Addi
tional Rul
es on Fr
inge
AND10-2000) Benef
it
s,r
efertoAnnexH.
1. Monet i
zed unused v acat i
on l eav e (
9)CAPI
TALGAI
NSTAX
credi ts ofPRI VATE empl oy ees not
exceedi ng( 10)day sdur ingt hey ear SUMMARYOFTAXRATES
and t he monet ized v al ue ofl eav e
credi tspai dt ogov ernmentof fi
ci als 1. Indi
vi
duals
andempl oy ees a. Onsal eofshar esofst ockofa
2. Medi cal cash al lowance t o domest i
c corporati
on notl i
sted
dependent s of empl oy ees not and traded thrual ocalst ock
exceedi ngP750. 00perempl oy eeper exchange,hel
dascapi talasset
semest erorP125permont h; OntheNetCapit
alGai
n
3. Ricesubsi dyofP1, 000. 00orone( 1) NotoverP100,
000 – FT
sack of 50kg. r ice per mont h of5%
amount ing t o not mor e t han AmountinexcessofP100,
000– FT
P1, 000: 00, of10%
4. Uni form and cl ot hi
ng al l
owancenot b. On saleofr ealpr opertyi nt he
exceedi ngP3, 000perannum; Phil
ippi
neshel dascapi tal asset
5. Act ualy ear ly medi calbenef it
s not Ont hegrosssel l
i
ngpr ice,orthe
exceedi ngP10, 000perannum; cur
rentfai
rmar ketvalueatt hetime
ofsal
e,whi
chev
eri
shi
gher – FT
6. Laundr y al lowance not exceedi ng
of6%
P300permont h; 2. Cor
por at
ions
7. Empl oy eesachi ev ementawar dse.g. a. Onsal eofshar esofst ockofa
for l engt h of ser vice or saf ety domest i
c corporati
on notl i
sted
achi ev ement ,whi chmustbei nt he and traded thrual ocalst ock
form ofat angi bl eper sonalpr oper ty exchange,hel
dascapi talasset
othert han cash orgi ftcer ti
fi
cat e, OntheNetCapit
alGai
n–
withanannualmonet aryv alueofnot NotoverP100,
000 – FTof5%
exceedi ng P10, 000 r ecei ved byt he Amountinexcess
empl oy ee under an est abli
shed ofP100,
000 –FTof10%
wr i
tt en pl an whi ch does not b. Onsal eofl and/buildi
nghel das
discr imi nat einf av orpai dempl oyees; capit
alasset
8. Gifts gi v en dur ing Chr istmas and Onthegrosssel l
i
ngpr i
ce,orthe
maj oranni v ersar y cel ebr ati
ons not cur
rentfai
rmar ketvalueattheti
me
exceedi ngP3,000perempl oy eeper ofsal
e,whi
chev
eri
shi
gher – FT
annum; of6%
9. Flower s, fruits, booksorsi milaritems (Reyes,Vi
rgi
l
io. I
ncome TaxLaw and
given t o empl oy ees underspeci al Accounti
ng–ANewApproach,2002)
circumst ances
10.Dai ly mealal l
owance f orov erti
me CAPI
TALGAI
NSANDLOSSES–
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 51
MEMORYAI
DIN TAXATI
ON LAW
I
NGENERAL parti
es;
b. Wash sal es by non-deal
ers of
CONCEPTOFCAPI
TALASSETS securit
iesandwhennotsubj ect
tothest ocktransf
ertax;
Undert het axcode,therei
snodef i
nit
ion c. Exchangesnotsol elyinkindi n
forthet erm" capi
talasset
s".Whati
t mer gerandconsol i
dati
on;and
givesist hemeani ngofordinar
yassets: d. Salesorexchangest hatarenot
atarmsl ength.
a. Ordi
naryasset s(Sec.39,NIRC)
a. Stocki ntradeoft hetaxpay
eror REQUISI
TES FOR RECOGNI
TION OF
otherpr opert
iesofaki ndwhich CAPITALGAI
N/LOSS
woul dproperlybeincl
udedinthe
i
nv entor
yoft hetaxpayer
; 1. The t r
ansacti
on must i
nvol
ve
proper
ty classi
fi
ed as capi
tal
b. Propert
y held by the taxpayer asset;
and
pri
mar i
l
yforsaletocustomer sin
theordi
narycourseofbusiness; 2. Thetransacti
onmustbeasaleor
exchangeoroneconsi der
ed as
c. Property used in t
rade or equival
enttoasal
eorexchange.
business and subject t o
depreciat
ion;
and RULES ON THE RECOGNITI
ON OF
CAPITALGAI
NSORLOSSES
d. Realproper
ty used i
ntr
ade or
busi
ness.
I
NDI
VIDUAL CORPORATI
ON
b. Capit
alAsset sinclude allpropert
y

hel
dbyt het axpayerwhet herornot  Holdi
ngPer iod Capi t
algains and
connect
edi nt r
adeorbusi nessbut The per centages l
osses are
not incl
uding t hose enumer at
ed ofgai norl osst obe recognized tothe
above(#1)asordinaryassets. taken i nto account extentof100%.
shallbethef oll
owing: (Thereisno
a.100% - i f the holdingper
iod)
CAPI
TALGAI
N CAPI
TALLOSS capit
alasset shas
been heldf or12
The gai n der
ived The l oss incur
red mos.orl ess;and
fr
om t he sal
e or fr
om t he sale or b.50%-i ft
hecapi tal
exchangeofcapital exchangeofcapi tal asset has been
assets. assets. held f or mor e
than12mos.
 Non-  Capi tal l osses

NETCAPITAL NETCAPITAL deduct i
bil
ity of areal l
owedonl y
GAI
N LOSS Net Capital toext entoft he
l
osses capi
tal gai ns;
The excess oft he The excess oft he  Capital l osses hence, t he net
gains from sal es/ l
ossesf r
om salesor areal l
owedonl y capi
tal l oss i s
exchangesofcapi tal exchangesofcapital to extentoft he notdeduct ible.
assets ov er t he assets ov er t he capit
al gai ns; Exception: I f any
gains f rom such gains f r
om such hence, t he net domest ic bank or
sales/exchanges. salesorexchanges. capit
al l oss i s trust company ,a
notdeduct ible. substantialpar tof
whose busi ness is
the r ecei pt of
 TRANSACTI
ON RESULTI
NG IN TAXABLE deposits,sel l
s any
GAINSBUTNON-RECOGNI
TIONOFLOSSES bond, debent ure,
a. Saleorexchangebetweenr
elated note orcer t
ifi
cate
orotherev idenceof
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 52
MEMORYAI
DIN TAXATI
ON LAW
i
ndebt edness i ssued 2. Transfertoacont roll
edcor poration
by any cor porati
on – exchange ofpr opertyforst ocks
(i
ncluding one issued resul
tinginacquisit
ionofcor porate
by a gov er
nmentor controlbyaperson,aloneort ogether
poli
ticalsubdi
visi
on)
withothersnotexceedingfour.
“
Cont rol
” means owner shi p of
 NetCapi talLoss  Notal
l
owed
Carry–Ov er stocksinacor por
ationamount i
ngt o
 Al l
owed atleast51%oft hetotalvoti
ngpower
Thenetcapi t
alloss( i
n ofal lclassesofst ocksent it
led to
an amount not i n vote.
excess oft he t axable
i
ncomebef oreper sonal SALEOREXCHANGEOFORDI
NARYASSETS
exempt i
on f or such
year)shallbetreatedi n Gener
alr ul
es of i
ncome t
axat
ion
the succeedi ng y ear
appl
ytobothgainandl
oss.
(but not bey ond 12
mont hs)asadeduct ion
as shor t-
term capi tal  SeeAnnexD(GrossIncome–Gai
ns
l
oss( at100%)f rom t he fr
om deal
i
ngsi
nproperty
)
netcapitalgai
ns.
SUMMARY OF TAX TREATMENT OF
GAINS/
LOSSES I
N THE EXCHANGE OF
 SeeAnnexUf
ori
l
lust
rat
ion. PROPERTI
ES
SALEOREXCHANGEOFCAPI
TALASSETS GeneralRule:Uponthesaleorexchange
ofproper
ty,theent
ir
egainorl oss,asthe
Thef ollowingar econsi der edassal e casemaybe,shal lber ecognized.[
Sec.
orexchangeofcapi tal asset s: 40(C,1)]
1. Ret irementofbonds
2. Shor tsal esofpr oper ty Excepti
ons:
3. Fai l
ur et oexer cisepr i
v i
legeoropt ion 1. Transact i
onswher egai nsandl osses
tobuyorsel lproper ty arenotr ecogni zed–
4. Secur iti
esbecomi ngwor thl
ess a. Exchange sol elyi n kind i n
5. Di stribution i n l iqui dation of l
egi ti
mat e mer gers and
corpor ations consol idati
on
6. Readj ust mentofi nter esti nagener al b. Tr ansf er t o a cont roll
ed
professi onal partner shi p. cor porati
on[ Sec.40( C,2)]
TAXFREEEXCHANGES 1. Transact i
ons wher e gai n i s
Salesorexchangesr esul ti
ngi nnon- recognizedbutnott heloss–
recognitionofgai nsorl osses: a. Tr ansact i
ons bet ween related
1. Exchangesol elyi nki ndi nl egi t
imate taxpay er s[Sec.36]
mer ger sandconsol idat ion; includes: b. Ill
egalt r
ansact i
ons [ Sec.96,
a. Bet weent hecor por ati
onswhi ch Rev .Reg.2]
ar e par ti
es t ot he mer ger or c. Exchanges of pr operty, not
consol i
dation ( pr oper ty f or sol elyinki nd,i npur suanceof
st ocks); cor porat e mergers and
b. Bet ween a st ockhol der of a consol idations[ Sec.40,(C, 3)
]
cor porationpar tyt oamer geror
consol i
dationandt heot herpar ty IMPORTANTDI STINCTI
ON
cor poration( stockf orst ock) ; I
fitisanordinar
yasset,t
heordinar
y
c. Bet ween a secur ityhol derofa gai
ns and l osses are consider
ed in
cor porationpar tyt oamer geror determini
ngincomeorl ossf r
om trade,
consol i
dationandt heot herpar ty businessorprof on.(
essi SeeSecs.32A,
cor poration ( secur i
ties f or 34D)
secur i
ti
es) Ifitis a capi
talasset
,determine
f
urt
herwhet
herornotiti
sarealpropert
y
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 53
MEMORYAI
DIN TAXATI
ON LAW
l
ocatedi nt hePhi l
ippines.Ifitis,theni
t  Forshar
esnotli
stedi
ntheexchange,
i
ssubj ecttocapi talgainstax.(SeeSecs. the FMV shal
lbe the book val
ue
24D,27D5)( SeealsoSecs.24C, 27D2)If near
esttheval
uat
iondat
e
not,the capi talgai ns and losses are
consi
der ed i n determining t
he t axabl
e Theabover ul
esshallbeusedin
ncome.(
i Sec.39) computingforthenetcapit
algai
n/l
oss
fordi
sposit
ionofshares.
CAPI
TALGAI
NSANDLOSSES–
SHARESOFSTOCK I
MPORTANTFEATURES
The taxat
ion of shares of stock 1. Saleofshar esofst ockofadomest i
c
whet
herornotl ist
edandt r
adedi nthe corpor ati
on l isted and t raded ina
st
ockexchangeissubj
ecttofinalt
ax. l
ocalst ock exchange and t hatof
i
niti
alpubl icof feringshal lbesubj ect
WHOARELI ABLETOTHETAX toPer centaget ax( Busi nessTax)
1. I
ndi vidualtaxpayer
, ci
ti
zenorali
en 2. Capitall ossessust ained during the
2. Cor porate t axpayer, domestic or year( notl i
stedandt radedi nal ocal
foreign stockexchange)shal lbeal l
owedas
3. Ot hertaxpay er
ssuchasest ate,tr
ust
, acapi t
allossdeduct ibleont hesame
trust f unds and pensi on among taxabl eyearonl y( nocar ry-
over)
other s. 3. Theent i
reamountofcapi talgainand
capitalloss( notl istedandt radedina
RATESOFTAX l
ocal st ock exchange) shal l be
consi dered wi thout t aki
ng i nto
1. Shar esofst ocknott r
adedt hrougha accounthol dingper iodi r
respectiv
eof
localst ockexchange– Netcapi t
al whoi st hetaxpay er( all100%)
gainsder i
veddur ingthet axabl eyear 4. Non- deduct i
bilit
yofl ossesonwash
from sal e,exchange,ort ransf ershal
l sales.
be t axed as f oll
ows ( on a per
transact i
onbasi s): FI
LINGANDPAYMENTOFTAX
Notov erP100, 000 -5%
Over P100, 000 -10% 1. Li
sted and Tr aded i n the Stock
2. Shar es ofst ock li
sted t hrough a Exchange-Thes t
ockbrokershallt
urn
localst ockexchange– ½ of1% of overthet axcollected t
ot heB.I.
R.
thegr osssel li
ngpr i
ceoft hest ock. wit nf
hi ive(5)bankingday sfr
om the
EXCEPTIONSTOTHETAX dateofcoll
ecti
on.
1. Gainsder i
vedbydeal ersinsecur i
ti
es.
2. Allot hergai nswhi charespeci fi
call
y 2. Nott r
adedt hroughthestockexchange-
exempt f rom i ncome t ax under I
tshal lbepai dbyt hesell
eronaper
existing inv estmenti ncent i
ves and transaction basis upon fil
i
ng oft he
otherspeci al l
aws. requiredr et
urnwit n30day
hi sfoll
owing
eachsal eorot herdi
sposit
ionofshares
BASI
SFORCOMPUTI NORLOSS(
NGGAI BIR ofstock .
RULI
NG146-98)
CAPI
TALGAI
NSANDLOSSES
 Thef airmar ketvalue(FMV)oft he
saleofshar esnottradedbutli
stedin
(
REALPROPERTY)
the st ock exchange isthe highest
closingpr iceont hedayt heshar es PERSONS LI
ABLE AND TRANSACTI
ONS
wer esol d,
transf
erredorexchanged. AFFECTED
 Whennosal eismadei nthest ock
1. Indivi
dual taxpay
ers, est
ates and
exchange,t he FMV shallbe t he
trusts
highest sel li
ng price on the day
Sale or exchange or ot her
nearestt ot hedayofsale,tr
ansferor
disposit
ion of r eal pr opert
y
exchange.
consideredascapit
alasset
s.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 54
MEMORYAI
DIN TAXATI
ON LAW
Thesai
dsaleshal
li ude"
ncl pact
o
der
etr
osale"andothercondi
ti
onal GROSSINCOMEFROM DIFFERENTSOURCES
sal
e. (SEC.42)
2. Domest i
cCorporati
on  Pleaseref
ertoAnnexI .
Saleorexchangeordi sposi
tion
oflands and/orbuildi
ng which are ACCOUNTNG PERI
ODSANDMETHODSOF
notactual
lyusedinbusinessandar e ACCOUNTI
NG
tr
eatedascapital
asset.
I
. ACCOUNTINGPERI ODS
 EXCEPTI
ONSTOTHETAX A. Gener alrule( Sec.43)
1.Gai
nsderi
vedbydeal
ersi
nreal
est
ate Taxabl ei ncome i s comput ed
upont hebasi soft axpay er ’
sannual
RATEANDBASI SOFTAX account ing per iod ( fiscal or
Afinaltaxof6% i sbased on the calendary ear)i naccor dancewi th
grossselli
ngpriceorfairmarketval
ueor the met hod of account i
ng
zonalvaluewhicheverishi
gher. empl oyed.
Note: Gain orl oss i
si mmat er
ial
, I f no met hod of account i
ng
therebeingaconcl usi
v epr
esumpt i
onof empl oy ed ormet hod does not
gain. clearly r ef lect t he i ncome,
comput ati
on shal lbe made i n
 See Annex G – Gui del
i
nes i n accor dancew/suchmet hodas
Det
ermi
ningWhetheraRealPr oper
ty theopi nionoft heCommi ssioner
i
saCapit
aloranOrdinar
yAsset. clearlyrefl
ect st hei ncome.
Taxabl e i ncome i s comput ed
EXEMPTI
ON OF CERTAI
N INDI
VIDUALS FROM basedoncal endaryeari f:
THE CAPITAL GAI
NS TAX ON THE SALE OR 1. account ing per i
od i s ot her
DI
SPOSI ONOFAPRI
TI NCIPALRESI
DENCE thanaf i
scal year
2. t axpay erhasno account i
ng
Conditi
ons: per i
od
a. Saleordi sposi tionoft heol dprincipal 3. t axpay er does not keep
residence; books
b. Bynat uralper sons-c i
ti
zensoral iens 4. t axpay eri sani ndi vidual
provided t hat t hey ar e r esident s Fi scaly ear:account ingper iodof
taxableunderSec.24 oft heCode 12mont hsendi ngont hel astday
(doesnoti ncl udeanest ateorat r
ust )
; of any mont h ot her t han
c. Thepr oceedsofwhi chi sf ull
yut i
li
zed December
i
n( a)acqui ri
ngor( b)const r
uct i
nga Cal endary ear :account ingper iod
new pr i
nci pal r esidence wi thin from Januar y1t oDecember31
eighteen( 18)cal endarmont hsf r
om
dateofsal eordi sposi ti
on; B. Peri
ods in whi ch i
tems ofgr oss
d. Not if
yt heCommi ssi onerwi thinthirty i
ncomei ncluded( Sec.44)
(30)day sf rom t hedat eofsal eor Amountofal litems ofgr oss
disposi ti
on t hr ough a pr escribed incomeshal lbei ncludedi nt he
returnofhi si ntent iont oav ailt
het ax grossincomef orthet axabley ear
exempt ion; inwhichr eceivedbyt het axpay er,
e. Canonl ybeav ailedofonl yonceev ery unless,anysuchamount sar et o
ten( 10)y ear s; be proper l
yaccount ed f orina
f. Thehi storicalcostoradj ustedbasi s diff
erentper iod undermet hods
ofhi sol dpr incipalr esidencesol d, ofaccount i
ngper mi t
ted
exchanged or di sposed shal l be In case ofdeat h oft axpay er:
carriedov ert ot hecostbasi sofhi s incl
ude f ort he taxabley eari n
newpr incipal resi dence whichf al
lsthedat eofhi sdeat h,
g. Ift her ei s no f ullut i
l
ization,t he allamount swhi chaccr uedupt o
port i
on oft he gai ns pr esumed t o the dat e of his deat h;i f not
hav ebeenr ealizedshal lbesubj ectt o otherwise properlyi ncludiblei n
capi t
al gainst ax .
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 55
MEMORYAI
DIN TAXATI
ON LAW
respectofsuchper
iodorapr
ior December31
period Ifchangei sfrom cal endary earto
fiscal year :
C. Peri
od f orwhi ch deduct i
on and - separ atef inaloradj ust ment
cr
editstaken( Sec.45) retur nbemadef ort heper iod
Deduct ionspr ov i
dedi nthisTi tl
e betweent hecl oseoft helast
shallbet akenf orthetaxabl eyear calendarf orwhi chr et urnwas
in whi ch ‘ paid or i ncur red, made and t he dat e
dependentupon t hemet hod of desi gnated as t he cl ose of
account ing upon t he basi s of thef iscaly ear
which t he net i ncome i s Ifchangei sfrom onef iscaly ear
comput ed,unl ess,i n or der to toanot her :
refl
ectt he income,deduct i
ons - separ atef inaloradj ust ment
shouldbet akenasofadi ffer
ent retur nbemadef ort heper iod
period. between t he cl ose of t he
In case ofdeat h oft ax payer: former f i
scaly earandt he
deductions al lowed f or t he datedesi gnat edast hecl ose
taxableper iodi nwhi chf allsthe oft henewf iscaly ear
date of hi s deat h, amount s (
2)Income comput ed on basi s of
accrued up t ot he date ofhi s shor tper i
od
deat hifnotot herwise pr operly Inwhatcases?
all
owabl e in r espect of such a. Wher easepar atef inalor
periodorapr i
orper i
od. adj ustmentr etur ni smade
onaccountofachangei n
D. Change of account i
ng per iod account ingper iod
(Sec.46) b. I nal lothercaseswher ea
Ki ndsofchanges: separ atef inalor
-f r
om f i
scaly eart ocal endar adj ustmentr eturni s
year requi r
eorper mittedbyR&R
-f r
om cal endary eartof i
scal pr escri
bedbySec.of
year Finance.upon
-f r
om one f iscal y ear t o recommendat ionof
another Commi ssioner
Ef fectofchange: Neti ncome, Bot h shal l be made f or a
shall,witht he appr ovaloft he fract i
onal partofay ear .
Commi ssi
oner,becomput edon Theni ncomei scomput edont he
thebasi soft henew account ing basi s of t he shor t per iod for
period,subj
ecttoSec.47. whi ch separ ate f inal or
adj ustmentr etur nismade.
E. Finaloradj ust
mentr eturnsf ora
per i
odofl esst han12mont hs I
I.METHODSOFACCOUNTI
NG
(1) Ret ur ns f or shor t per iod
result
ing f rom change of A. Cashmet hod
account ingperiod Recogni
ti
on of i ncome
t axpayer i s ot her t han an andexpensedependentoninfl
ow
indivi
dual orout
fl
owofcash.
wi th t he appr oval of t he
Commi ssioner A. Accrualmethod
I fchangei sfrom f iscaly eart o Method under whi ch
calendary ear: i
ncome,gai ns and pr ofi
ts are
- separ atefinaloradj ust ment i
ncluded i
n gr ossi ncomewhen
ret
ur nbemadef ortheper iod earnedwhet herr eceiv
edornot ,
betweent hecl oseoft hel ast and expenses ar e all
owed as
fi
scaly earf orwhi ch r eturn deducti
ons when i ncur
red:
wasmadeandt hef ollowi ng al
though noty etpaid.Itist he
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 56
MEMORYAI
DIN TAXATI
ON LAW
r
ighttoreceiveandnottheact ual Under r
ules and
r
eceipt t hat determines t he regulati
onspr escribedbyt he
i
nclusi
onoft heamountingr oss Sec.of Fi nance,a per son
i
ncome who r egularly sel ls or
 Exampl es: otherwise di sposes of
1. interestorr entincome personal pr operty on t he
ear ned but not y et i
nst all
mentpl an mayr et
urn
received asi ncomet her efrom inany
2. rent expense accr ued taxabley eart hatpr oporti
on
butnoty etpaid oft hei nstal
lmentpay ments
3. wages due t o worker s actuallyreceivedi nt hatyear,
butr emaini
ngunpaid which t he gr oss pr ofit
reali
zed or t o be r eali
zed
A. Account i
ng for l ong-term whenpay menti scompl eted,
contracts bear stothecont r
actpr i
ce.
 Long- term contracts:buil
ding,
installat
ion or const ructi
on Exampl
e:Sal
ein2000
cont ractscov er
ingaper i
odin Contractpri
ce( CP)
excessof1y r (i
nstall
ment s
 Per sonswhosegr ossincome recei
vable) P200,000
isder ivedinwhol eori npar t Cost 150,
000
from such cont racts shall Grosspr of
it(GP) 50, 000
repor tsuchi ncomeupont he
basi s of per cent age of Instal
lment s pay able i
n 2
compl
eti
on equal annual i
nstall
ments
 Ther et urnisaccompani edby GP/ CPr at
io
a r et urn cer ti
ficate of =50, 000/200,000=25%
architects or engi neers Collecti
ons in
showi ng t he per centage of 2000=P100, 000
compl et i
on dur ing the Incomef or2000
taxabley ear of t he ent i
re =P100, 000x25%=P25, 000
wor k per formed under t he
contract (
2)Sal
es ofreal
ty and casual
 Deduct i
ons f r
om gr oss sal
esofPer
sonal
ty
i
ncome: al l expendi tures  I
ncasesof
:
madedur ingt het axabley ear a. casualsal eorot her
onaccountoft hecont ract
: casualdi sposi
tionof
accountbei ng taken oft he personal pr oper ty
mat erial and suppl i
es on (otherthani nvent or y
hand att he begi nning and on hand of t he
endoft het axableper i
odf or taxpayeratt hecl ose
use i n connect i
on wi t
ht he oft he taxabley ear )
wor kundert hecont ractbut forapr ice>P1, 000,
noty etsoappl ied. or
 Amended r eturn may be b. sale or ot her
permi tted / required by t he disposit
ion of r eal
Commi ssioner: i f upon property,ifin ei ther
compl et i
on of cont ract
, case t he i nitial
taxablei ncomehasnotbeen pay ments do not
clearl
y r eflected f or any exceed 25% oft he
year(s). selli
ngprice
 How may i ncome be
A. I
nst
all
mentbasi
s ret
urned: same as i n
(
1)Salesofdeal
ersi
nper
sonal sal
es of deal er in
proper
ty personal
propert
yabove
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 57
MEMORYAI
DIN TAXATI
ON LAW
 Init
ial payment s: deduct i
ons bet ween or
pay ments r eceiv
ed i n among such or ganizat
ion,
cash or pr oper ty ot
her trade or busi ness, i f he
than evidences of determines that such
i
ndebt edness of t he distr
ibuti
on, appor t
ionment
purchaser dur ing t he oral l
ocati
oni snecessar yi n
taxable period in which ordert o prev
entev asion of
the sal e or ot her taxesort oclearl
yr efl
ectthe
disposit
ionismade. i
ncome of any such
organizati
on, t rade or
(
3)Sales of r eal pr operty business.
consi der
ed as capi talasset
byindi vi
dual
s FI
LINGOFTAXRETURNANDPAYMENTOFTAX
 I ndivi
dualwho sel l
s of
disposesofr ealpr operty, TAX RETURN – Thisisar epor tmadeby
considered as capi tal the taxpayert ot he BIR ofal lgr oss
assetand i s ot herwise i
ncomer ecei
veddur i
ngt het axabley ear
,
qualif
ied to r epor tt he the al l
owable deduct i
ons i ncluding
gainunder( 2)abov emay exempt i
ons,thenett axablei ncome,t he
payt hecapi t
algai nst ax i
ncomet axrate,theincomet axdue,t he
i
n i nst
allments under i
ncome t ax withhel
d,i f any ,and t he
rulesand r egulationst o i
ncomet axst
illt
obepai dorr efundable.
be pr omulgated by t he
Sec.ofFi nance.
(
4)Change from accr
ual t
o PERSONS REQUI
RED TO FI
LE I
NCOME TAX
i
nstal
lmentbasi
s RETURN
 taxpay ermustbeent itl

ed a. Indi
vidual
to benef i
ts under ( 1) 1. Resi dentci t i
zen;
hereofsal esofdeal ersin 2. Non- residentci ti
zen on i ncome
per sonal proper t
y from wi thint hePhi l
.;
 i
ncomput ingi ncomef or 3. Resi dental i
en on i ncome f r
om
they earofchangeorany wi thint hePhi l
.;
subsequent year: 4. NRAETB oni ncomef r
om wi thin
amount s actuall
y thePhi l.
recei veddur i
nganysuch 5. An i ndividual( citi
zens /al i
ens)
yearonaccountofsal es engagedi nbusi nessorpr actice
orot herdi sposit
ions of ofapr ofessi onwi thinthePhi l
.
proper t y made i n any regar dless of t he amount of
priory earshal lnotbe gr ossi ncome;
excl uded. 6. Indi vidualder i
v i
ngcompensat i
on
incomeconcur rent l
yfrom twoor
A. Al
locati
on of i ncome and mor e empl oy ers at any t i
me
deducti
ons dur ingt het axabl ey ear;
 Appl icablet o:casesof2or 7. Indi vidual whose pur e
mor eor ganizati
ons, t
radesor compensat ion i ncome der i
ved
businesses (
incorporated from sour ces wi thint he Phi l
.
and or ganized wi t
hin t he exceedsP60, 000.
Phil
ippines) owned or b. Taxabl eEst ateandTr ust
controll
eddi r
ectly/ i
ndir
ect l
y c. GeneralPr ofessi onalPar t
nership
bythesamei nter
est d. Corpor ation
 Commi ssioneri s authorized 1. Notexemptf rom i ncomet ax;
to di st
ribute,appor t
ion or 2. Exemptf rom i ncomet axunder
all
ocat e gr oss i ncome or Sec.30 ofNI RC buthas not
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 58
MEMORYAI
DIN TAXATI
ON LAW
shownpr
oofofexempt
ion. and whose tax withhel
d i
s
equi
val
entt
ohi
staxdue.
I
NDI DUALS E
VI XEMPT FROM FI
LING I
NCOME
TAXRETURN SUBSTI
TUTEDFI
LINGOFINCOMETAXRETURNS
BY EMPLOYEES RECEI
VING PURELY
1. Indi
vidualwhosegr ossi ncomedoes COMPENSATI
ON INCOME.[SECTI
ON 4,RR3-
not exceed t otal per sonal and 2002;RMC01- 03]
addit
ionalexemptions;
2. Indi
vidual wi t
h r espect t o pur e Requisit
es:
compensat i
on income der ived f
rom 1. The empl oy ee r ecei
v es pur ely
sources withinthe Philippi
nes,t he compensat ioni ncome( regardlessof
i
ncome t ax on whi ch has been amount )duringt het axabl eyear.
corr
ectlywithhel
d; 2. The empl oy ee r eceives the income
3. Indi
vidualwhose sol ei ncome has onlyf rom oneempl oyerdur i
ng t he
been subjected t
of i
nalwi thhol
ding taxabley ear.
i
ncomet ax; 3. The amountoft ax due f rom t he
4. Indi
vidual who i s exempt f rom empl oyee att he end oft he y ear
i
ncomet ax. equalst heamountoft axwi thheldby
theempl oyer.
SUBSTI
TUTED FI
LING – i s when t he 4. The empl oyee' s spouse al so
employer ’
s annual r eturn may be compl ieswi thal lthree( 3)condi ti
ons
consi
der ed as t he “substit
ute”Income statedabov e.
TaxRet urn( I
TR)ofempl oyeeinasmuch 5. The empl oy er f il
es t he annual
astheinf or
mat i
onpr ovidedinhisincome informat i
on r et urn( BIR For m No.
tax r
eturn woul d exact l
ybe t he same 1604- CF)
i
nformationcont ai
nedi nt heempl oyer’
s 6. Theempl oyeri ssuesBI RFor m 2316
annualreturn. (Oct2002 ENCS)v er
sion t o each
empl oyee
HOW IS “SUBSTI
TUTED FI
LING”DI
FFERENT
FROM “
NON-FI
LING”? I
NDIVIDUALS NOT QUALI
FIED FOR
SUBSTITUTEDFI
LING(
STI
LLREQUIREDTOFLE)
I
 Substi
tuted Fil
ing – an i ndivi
dual
taxpayeralthoughrequiredunder 1. Individuals der iving compensat i
on
the law tof i
le hi
si ncome t ax from t wo or mor e empl oyer s
retur
n,wi llno l ongerhav et o concur r
ent l
yorsuccessi velydur i
ng
personallyf i
l
e his own i ncome thet axabley ear .
taxreturn. 2. Empl oyees der iving compensat i
on
– but i nstead t he i
ncome,r egar dless oft he amount ,
employer
’s annual i
nfor
mati
on whet herf rom a si ngl e orsev er al
ret
urnf i
led i
st he consi
der
ed empl oyersdur i
ngt hecal endary ear ,
“substi
tut
e”incomet axretur
nof thei ncomet axofwhi chhasnotbeen
the employee inasmuch as the wi t
hhel dcor r ectly( i.
e.t axduei snot
i
nformat i
on in t he employer’
s equalt othet axwi thheld)r esultingt o
retur
n i s exact l
y the same collectibleorr efundabl eretur n.
i
nformat i
on cont ai
ned in t he 3. Empl oyees whose mont hly gr oss
employee’sret
urn. compensat i
on i ncome does not
exceed P5, 000 or t he st atut or y
 Non-f
il
ing – appl i
cablet o cer
tain mi nimum wage,whi chev eri shi gher ,
ty
pesofi ndiv
idualtaxpayerswho andopt edf ornon- withholdi ngoft ax
arenotrequiredundert helawt o onsai dincome.
fi
leanincomet axreturn. 4. Individuals der iving ot her non-
Example:empl oy eewhose busi ness, non- professi on-relat ed
purecompensat ionincomedoes i
ncomei naddi tiont ocompensat i
on
notexceedP60, 000andhasonl y i
ncomenotot herwi sesubj ectt of inal
oneempl oyerforthetaxableyear tax.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 59
MEMORYAI
DIN TAXATI
ON LAW
5. Indi
vidual s r
eceivi
ng pur ely
compensat ioni ncomef r
om asi ngle I
NDI DUALS REQUI
VI RED TO FI
LE AN
empl oy eralthought heincomet axof I
NFORMATION RETURN
which has been cor rectly wi
thhel d,
butwhosespousef all
sunder1t o4 Indivi
duals notr equired tof i
le an
abov e. i
ncomet axr eturnmaynev er
thelessbe
6. Non-r esidentaliensengagedi nt rade requir
ed t of i
l
e an i nformati
on r et
urn
orbusi nessi nthePhi l
ippinesderiv i
ng pursuant t o r ul
es and, r egulati
ons
purely compensat ion i ncome, or prescri
bed byt heSecretaryofFi nance
compensat ionincomeandot hernon- upon recommendat i
on of t he
business, non-profession-
related Commi ssioner.
i
ncome.
PLACEOFFI
LING
NOTE: Non-
fi
li
ngofI
TR,f
orempl
oyees
whoarequal i
fi
edf ort
hesubsti
tutedfi
l
ing 1. Legalr esi
dence -authori
zed agent
lbeOPTI
shal ONALf orthetaxableyear bank; Rev enue Di str
ict Of fi
cer
;
2001,t
her eturnsforwhichshallbefi
led Coll
ecti
on agentordul yaut hori
zed
onorbef oreApr i
l15,2002. Thereaf
ter
, tr
easurer
subst
it
utedf il
i
ngwher eapplicableshal
l 2. Pri
nci
pal pl
aceofbusi
ness
beMANDATORY.[ Sec5RR3- 2002) 3. WiththeOffi
ceoftheCommi ssi
oner
REQUI
REMENTOFBANKSFORSUBMI ON OF
SSI
AN ITR F OR LOAN OR CREDI
T CARD TI
MEFORFI
LING(
PAYASYOUFI
LESYSTEM)
APPLI
CATI
ONS
Apri
l15 – f orthose earning sol
e
Banksmayr equir
et hesubmissionof compensationi
ncomeorsol elybusiness,
BIR Form No.1700( forempl oyeesnot practi
ceofprofessi
onorcombi nat
ionof
enti
tl
ed to subst i
tuted fil
ing of ITR). businessandcompensation.
Howev er
,f or empl oy ees enti
t l
ed to
substi
tut
edf i
li
ngofI TR,t hesubmi ssi
on RETURN AND PAYMENT OF ESTI MATED
oftheJointCert
ifi
cati
onwi ll
suffi
ce. INCOMETAXBYI
NDI DUAL (
VI SELF-
EMPLOYED
ORPRACTI
CEOFPROFESSI
ON)
JOINT CERTI FICATI ON - Iti s a swor n
statementmade by t he empl oyerand 1.Fir
stquart
er-April15ofcurrentyear
empl oyee,whi ch ser ve the f oll
owi ng 2.Secondquart
er-August15ofcurrent
purposes: year
1. I tcont ains t he empl oyee's consent 3.Thir
dquart
er–Nov ember15ofcur rent
thatBI RFor m No.1604¬CFmaybe year
consider edhi ssubst it
utedr eturn,in 4.Fi
nalquar
ter-Apri
l15ofthefoll
owing
li
euofBI RFor m No.1700,whi cht he year
.
empl oyeenol ongerf i
l
ed.
2. I t cont ains the empl oyer'
s Not
e:Whent
het
axduei
sinex
cessofP2,
certi
ficationt hathehasr eportedt he 000- thetaxpayermayel
ectt
opayintwo
empl oyee' si ncome t ot he BI R and (2)equalinstal
l
ments:
thathehasr emi t
tedthet axesont he 1sti
nstal
lment-Apr
il
15
empl oyee' si ncome,as i ndicated in 2ndi
nstal
lment-onorbef
oreJul
y15
BIRFor m No.1604- CF.
3. I t ser ves as pr oof of f i
nanci al EXTENSI
ONOFTI
METOFLERETURN
I
capaci t
y i n case t he empl oyee
decidest oappl yforabankl oanora The Commi ssi
oner may on
credit-
car d,orf oranyot herpur pose, merit
ori
ous cases granta r easonable
asi fhehadi nf actfil
edaBI RFor m ext
ensionoftimef orf i
li
ngincomet ax
No.1700. ret
urnandmaysubj ecttheimpositi
onof
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 60
MEMORYAI
DIN TAXATI
ON LAW
t
wenty(20)percentint
erestperannum i
ncomeexempt )
f
rom t
heori
ginalduedat
e.  Shal
lsetfor
th:
a. i
tems of gr oss income and
RETURNOFHUSBANDANDWI
FE deducti
onsal
lowed
b. namesofpartner
s
 Fil
e one ( 1)r eturnf ort hetaxpay er c. TIN
yeariffoll
owi ngr equisit
escompl i
ed; d. address and share of each
a. Mar r
ied i ndividuals ( citi
zens, part
ner
r
esidentornonr esidentaliens)
b. Do notder i
ved income pur ely TAXRETURNOFACORPORATI ON
f
rom compensat ion. Thoser equiredtof i
le:
 Ifi
mpr acticabletof i
l
eoner et
urn:each 1. Cor poration subjectt ot ax having
spouse f il
e a separ ater eturn of existed dur i
ng t he t axable y ear
,
i
ncomebutt her eturnsof il
edshallbe whet herwi t
hi ncomeornot .
consolidated byt heBur eau forthe 2. Cor porati
on i n t he pr ocess of
purposesofv erifi
cationforthey ear. li
quidationorr ecei
vership.
3. Insurancecompanydoi ngbusi nessin
UNMARRI
EDMI
NOR the Phi li
ppines order iv
ing income
therein
 I
ncomeofunmarri
edminor
sderi
ved 4. Foreign cor porati
on hav ing income
f
rom pr
oper
tyr
ecei
vedbyt
heli
vi
ng from wi t
hinthePhi l
ippi
nes
par
entshal
lbei ncl
udedint
her et
urn FI
LINGOFRETURN (PAYASYOUFI LESYSTEM)
oft
heparent,except: Quart
erlyr
eturnsf ort
hefirstthree(3)
a. whendonor ’staxhasbeenpai d quartersonast ri
ctlysixt
y(60)daybasi s
onsuchpr opert
y,or andt hefi
naloradjustedret
urnont he15t h
b. whentransferofsuchpropert
yis dayoft hefour
th(4th)mont hfoll
owi ngthe
-
exemptfrom donor’
stax cl
oseofei t
herafiscaloncalendary ear.
PERSONSUNDERDI
SABI
LITY  SeeAnnexVf
orI
l
lust
rat
ion.
I
fat axpay erisunablet omakehi s WHOSHALLFI LE?
ownr etur
n, itmaybemadebyhi s The r et
ur n shallbe fi
led by t he
1. dulyaut hor i
zedagents; president
,v i
ce-pr
esident
,orot
herprinci
pal
2. represent ativ
e; offi
cer,and shal lbe swornt o bysuch
3. byguar dian; offi
cerandbyt het r
easur
erorassi st
ant
4. otherper sonchargedwi t
hthecar eof tr
easur er
.
hisper sonorpr operty
;
 whowi llassumet heresponsibi
li
tyof WI
THHOLDI
NGTAXES
maki ng t he return and i ncurr
ing
penalt i
es pr ov
ided for erroneous, WI NGTAXES
THHOLDI
falseorf r
audulentret
urn. Ki
nds:
1. Wit
hholdingTaxatSour ce:
RETURNOFESTATE,
TRUSTANDPARTNESHI
P a. FinalWi t
hhol
dingTax
b. Creditabl
e Wi thholding Tax
EstateandTrustwithgrossi ncome (Expandedwithholdi
ngt ax)
of P20,000 or more and par t
nershi
p 2. Wit
hholding Tax on Compensat i
on
(whetherprof
essi
onalorbusiness)shall (Wages)
fi
letheiri
ncomet axret
urnonorbef or
e 3. Wit
hholdingTaxonCr editabl
eVal
ue-
Apri
l15. AddedTax
4. Wit
hholdingofPercentageTax
TAX RETURNS OF GENERAL PROFESSI
ONAL
PARTNERSHI
PS(GPP) FI
NAL CREDI
TABLE
 Each GPP shal lfil
ei n dupli
cate,a WI
THHOLDING WITHHOLDI
NG
retur
n ofitsincome (exceptt hose TAXSYSTEM TAXSYSTEM
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 61
MEMORYAI
DIN TAXATI
ON LAW
computed in accor
dance wi
th t
he
Theamountof Taxeswi thheldon regul
ati
ons.
i
ncomet axwi thheld certaini
ncome
bythewithholding payment sare Excepti
on:
agenti
sconst ituted i
ntendedt oequal or
Wher e such compensat i
on
asafullandf i
nal atleastappr oxi
mat e
paymentoft he thet axduef rom t
he
i
ncomeofani ndivi
dual
:
i
ncomeduef rom t he payeeont hesaid 1. Does not exceed t he stat
utor
y
payeeont hesai d i
ncome. minimum wages; or
i
ncome.[ Sec.2.57 2. Five t housand (P5,000) monthl
y
(a)
,Rev.Reg.2- 98] (P60,000ay ear)
 whi cheverishi
gher.
Thel i
abili
tyfor Thei ncomer eci
pient
paymentoft hetax i
sst i
llrequir
edtof i
le ELEMENTS OF WITHHOLDI
NG ON
restsprimar i
lyonthe anincomet axret
urn
COMPENSATION
payorort he and/orpayt he
withholdingagent. diff
erencebet ween
1. Theremustbeanempl oyer-
employee
Thepay eei snot thetaxwi thhel
dand rel
ati
onship
requir
edt of i
lean thetaxdueont he 2. There must be pay ment of
i
ncomet axr etur
nfor i
ncome.[ Sec. compensat i
onorwagesf orser
v i
ces
theparticular 2.57(B),Rev.Regs.2- rendered
i
ncome. 98] 3. Th eremustbeapay r
ollperi
od.
COMPENSATION EXEMPTED
TI
METOWI
THHOLDTAXATSOURCE
1. Remuner ations r ecei
v ed as an
-ari
sesatthetimeanincomei spai
d i
nci dentofempl oyment
orpay abl
e,whichevercomesf i
rst
. The 2. Remuner ations pai df oragr i
cult
ure
ter
m “ payabl
e”r ef
erst othe datethe l
abor
obli
gati
onbecomesdue,demandabl eor 3. Remuner ations pai d f or domest i
c
l
egall
yenfor e.(
ceabl Sec.2.
54.
4Rev.Regs. ser vi
ces
2.
98) 4. Remuner ationsf orcasualnoti nthe
cour se ofan empl oyer'
st rade or
NATUREOFWITHHOLDINGAGENT’
SL I
ABILI
TY busi ness.
Thewi t
hholdingagentisdirectl
y 5. Compensat i
on f or ser v
ices of a
andindependent
lyliableforthecor r
ect citi
zen, residentoft hePhi li
ppines,for
amountofthetaxthatshouldbewi t
hheld a f oreign gov ernment or an
fr
om the di
vidend remitt
ance. i
nt ernat i
onal organizati
on
(Commi
ssionervs.Proct
erandGambl
e, 6. Damages
GRNo.66838,December2,1991) 7. Lifei nsurance
8. Amountr eceivedbyt hei nsuredas
CONSEQUENCESFORFAI LURETOWI THHOLD: returnofpr emi um
1. liableforsur char gesandpenal t
ies; 9. Compensat i
on f or i nj
ur i
es and
2. liableuponconv ict
iontoapenal ty sickness
equalt othet otalamountoft hetax 10.Incomeexemptundert reaty
notwi thheld,ornotaccount edf or 11.Thi r
teent h ( 13th) mont h pay and
andr emi t
ted.(Sec.251, 1997NI RC) otherbenef i
ts
3. any i ncome pay ment whi ch i s 12.GSI S; SSS; Phi lhealt
h and ot her
otherwise deduct ibl
e f rom t he cont ributions,
payor’sgr ossi ncomewi llnotbe
all
owed as a deduct i
on ifi ti s FREECOVENANTBOND[
TAX- SEC.57(
C)]
shownt hatthei ncomet axrequired
tobewi t
hheldisnotpai dtot heBI R. COVENANT BONDS – bonds,mor tgages,
(
Sec.2.
58.
5,Rev.Reg.2-
98) deeds of t rust and ot her simi l
ar
obli
gationsofdomest i
c/r
esidentforeign
WI NGTAXON COMPENSATI
THHOLDI ON corporati
on, whi ch contai
n a
Ev
ery empl
oyer must withhol
d contract/
prov
ision bywhi ch theobligor
f
rom compensat i
on paid,an amount agrees;
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 62
MEMORYAI
DIN TAXATI
ON LAW
1. topayanypor tionofthet aximposed 30% -donor

’s
upont heobl i
gee; tax
2. toreimbur setheobligeef orany
portionoft hetax;or Lesserexempt
ions Mor
eexempt
ions
3.t opayt hei nt
erestwithoutdeducti
on
foranyt axwhi chtheobligormaybe
required/ permittedt
opayort oret
ain (
1)ESTATETAXES
therefrom.
DEFI
NI ON:a
TI nexci
set axont her i
ghtof
 Obligorshal ldeductandwi t
hhol da tr
ansmitti
ngpropert
yatthetimeofdeat h
tax=30% oft hei nterestandot her andont hepri
vil
egethatapersoni sgi
ven
payment swhet heri nterestorot her i
n controll
ing t
o a certai
n ext entthe
payment sarepay ableannual l
yorata di
spositi
onofhi sproper
tytot akeeff
ect
shor t
er per iod; whet her bonds, upondeath.
secur i
ties,obligationshadbeen/ wil
l
bei ssued/mar ket edandt heinterest ESTATETAXFORMULA
andot herpay ment spai dwi t
hinand
withoutt hePhi li
ppi nesi ftheinterest GrossEstate(Sec.85)
orot herpay menti spay abletoanon- Less: (1)Deduct ons(
i Sec.86)
residental i
enoraci tizenorr esident (2)
Netshar eoftheSSintheCPP
ofthePhi l
ippi
nes
NetTaxableEst ate
I
NCOMEOFRECI PIENT[ SEC.58( D)
]
Multi
plyby:Taxr ate(
Sec.84)
 Incomewhi chanycr edi
tablet axis Estat
eTaxdue
requi red to be wi thheld atsour ce Less: TaxCr edit[i
fany](Sec.86[
E]or
shal lbei ncl udedi nther eturnofi ts 110[
B]
recipient . Est
ateTaxDue,
ifany
 The excess oft he amountoft ax
withhel d ov ert he tax due on hi s
return shal lbe r efunded t o him, GROSSESTATE
subj ectt o Sect i
on 204 (abat ement,
refund/ cr
edi ttaxes). ADECEDENT’ NCLUDES(
SGROSSESTATEI SEC.
 Ifamountwi thhel
datsour cei sless 85)
than t het axdueonhi sr eturn,the
differencei spai dinaccordancewi th RESIDENT&NON-
Sect ion56( pay mentandassessment RESIDENT
NON-
RESI
DENT
ofincomet ax )
. CITI
ZEN,
ALI
ENDECEDENT
 Alltaxeswi thheldshallbeconsi dered RESIDENTALIEN
ast rustf undsandmai ntainedi na DECEDENT
separ at e account and not
commi ngledwi thanyot herf undsof 1.Real
proper
ty 1.Realproper
ty
thewi thholdi ngagent. wher
ever si
tuatedinthe
si
tuat
ed Phi
l
ippi
nes.
B.TRANSFERTAXES 2.Personal 2.Per

sonalproper
ty
pr
operty a)Tangibl
e
wher
ever propert
y
si
tuated si
tuatedinthe
TRANSFERTAX I
NCOMETAX
a) Tangibl
e, Phi
l
ippi
nes
and b) I
ntangible
Tax on t r
ansf
er of Taxoni
ncome
b) I nt
angi
ble per sonal
proper
ty.
proper t
ywit
ha
situsinthe
Rat
esar elower Rat
esarehi
gher
Phi
l
ippi
nes
--
5% t o 20% - --5%to32%
unless
estatetax
exemptedon
--2% t o15% or
thebasisof
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 63
MEMORYAI
DIN TAXATI
ON LAW
r
eci
proci
ty. propert
yownedbyciti
zensoft he
Phili
ppi
nes notresi
ding i
nt hat
THELAW THAT GOVERNSTHEI
MPOSI
TION OF forei
gncounty(
r Reci
proci
ty)
.
ESTATETAX
VALUATI
ONOFTHEGROSSESTATE
Thestat
uteinf ce att
or hetimeof
deathofthedecedentshal
lgover
nestat
e Thepropert
iescompri
singt
hegross
taxati
on. est
ateshallbeval
uedbasedonthei
rfai
r
marketv
alueasoftheti
meofdeath.
I
NTANGI
BLEPERSONAL PROPERTI
ES WI
TH A
SI NTHEPHI
TUSI L.(SEC.104,1997NIRC) PROPERTY VALUATI
ON
1. Franchisewhi chmustbeexer cisedin 1)Real

Proper
ty -f
airmarketv alue
thePhi l
ippines; a)asdet ermi nedbyt he
2. Shares,obl igat i
onsorbondsi ssued Commi ssioneror
by any cor por ation or soci edad b)as shown i n t he
anonimaor gani zedorconst i
t utedin schedule of v alues
thePhi l
ippinesi naccor dancewi thit
s fixedbyt heprovincial
andcityassessor s
l
aws; WHI
CHEVERI
SHI
GHER
onsorbondsi ssued
byanyf oreigncor porationeight y-
fi
ve 2)Shar esofSt
ock
percent um ( 85%)oft hebusi nessof Unli
sted
whichi slocat edi nt hePhi li
ppines; Common -bookv alue
onsorbondsi ssued Shares -parv al
ue
byanyf oreign cor porati
on,i fsuch Preferr
ed -arit
hmet i
cmean
shares,obl igations orbonds hav e Shar es bet weent hehighestand
l
owestquot ati
onata
acquired a busi ness si tus i nt he
Li
sted dat enearestthedateof
Phil
ippines; deat h,i
fnonei savail
abl
e
5. Sharesorr ightsi nanypar tnership, ont hedat eofdeath
business ori ndust ryest abli
shed i n i
t self
.
thePhi l
ippines.
3)Ri
ghtto -shall bet akeni nto
usufr
uct,useor accountt hepr obableli
fe
I
NTANGI
BLE PERSONAL PROPERTY,WITH A habi
tati
on,aswell ofthebenef i
ciaryin
SI N THE PHI
TUS I LI NES,OF A DECEDENT
PPI asthatofannui
ty accordancewi ththe
l
atestbasi cst andard
WHO I S A NON-RESI
DENT ALI
EN SHALL NOT
FORM PART OF THE GROSS ESTATE I F mor t
alitytabl e,tobe
approvedbyt he
(RECI
PROCITYCLAUSE)(SEC.104)
SecretaryofFi nance,
uponr ecommendat i
on
1. thedecedentatt hetimeofhi sdeat h oftheI nsur ance
was a ci t
izen and r esident of a Commi ssioner .
foreigncount rywhichatt het imeof
hisdeat h 4)Personal -whet hertangi
bleor
a. di dnoti mposeat ransfertaxor proper
ty i
nt angibl
e,apprai
sedat
deat htaxofanyc haracter FMV.“ Senti
mental
a. i nr espectofi ntangi bl
eper sonal value”ispracti
call
y
proper t
y of ci tizens of t he disregarded.
Phi l
ippines notr esiding int hat
foreigncount ry
;or
2. the l aws oft he f
oreign count ryof I
NCLUSI NTHEGROSSE
ONSI STATE(
SEC.85)
whi cht hedecedentwasaci ti
zenand
residentatt het i
meofhi sdeat h 1.DECEDENT’SINTEREST
a. al low a si mil
arexempt on f
i rom To the ext
ent of the i
nter
est i
n
transfert axesordeat ht axesof proper
tyofthedecedentatthetimeof
ev erycharacter hi
sdeath.
b. i nr espectofi ntangi bl
eper sonal
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 64
MEMORYAI
DIN TAXATI
ON LAW
2.TRANSFER IN CONTEMPLATI ON OF a. thepossessi onorenj oy

mentof ,
DEATH orther ighttot heincomef r
om
1. Atransf
ermotivat
edbyt hethought theproperty
; or
ofimpendi
ng death al
though death b. the right, eit
her alone or i n
maynotbeimminent;or conj
unct i
onwi thanyper son,to
desi
gnat etheper sonswhoshal l
2. A transferby whi ch the decedent possessorenj oyt hepropertyor
ret
ainedf orhisl i
feorf oranyper iod thei
ncomet herefr
om.
whichdoesnoti nf actendbef orehis
death: Except
ion:bonafi
desalef
oranadequat
e
a. t hepossessi onorenj oy
mentof , and full consi
der
ati
on in money or
orther ightt othei ncomef r
om money’
swor th.
theproperty
, or
b. t he right, eit
her al one or i n 5.PROCEEDSOFLI FEI NSURANCE
conj
unct i
onwi thanyper son,to Proceedsofl i
feinsur ancet akenby
desi
gnat etheper sonwho shal l the decedenton hi s own l i
fe shallbe
possessorenj oythepr opertyor i
ncluded i n t he gr
oss est ate i ft he
thei
ncomet herefr
om. benefi
ciaryis:
a. the est ate of the decedent , his
Except
ion:bonafi
desalef
oranadequat
e execut ororadministr
at or(regardless
and full consi
der
ati
on in money or whet herthedesignationi sr evocable
money’
swor th. orirrevocable)
;or
b. at hirdpersonothert hant heest ate,
3.REVOCABLETRANSFER execut ororadmi nist
rat orwher et he
A transfer whereby the t erms of designat i
on of t he benef i
ciaryi s
enjoymentoft hepropertymaybeal t
ered, r
evocabl
e.
amended,r evokedort erminated byt he
decedental oneorinconjunctionwi thany 6.TRANSFERSFORI NSUFFI CIENT
otherperson,orwher eanysuchpoweri s CONSI DERATION
rel
inquished i n contemplati
on of t he Thev aluet obeincl udedinthegr oss
decedent ’
sdeat h.Itisenought hatthe estatei st he excessoft hef ai
rmar ket
decedenthadt hepowert oal ter,amend valueoft hepr opert
yatt hetimeoft he
orrevoket houghhedidnotexer ci
sesuch decedent ’
sdeat hovert heconsiderati
on
power . received.Thisi sappl icableincasesof
transfer i n cont empl ati
on of deat h,
Except
ion:bonafi
desalef
oranadequat
e revocablet r
ansfer and t r
ansfer under
and full consi
der
ati
on in money or generalpowerofappoi ntmentmadef ora
money’
swor th. considerationbuti snotabonaf idesal e
foranadequat eandf ullconsi
derationi n
4.TRANSFERUNDERGENERALPOWER moneyormoney ’
swor th.
OFAPPOI NTMENT
Apowerofappoi nt menti sther i
ghtto 7.PRIORI NTERESTS
designatetheper sonorper sonswhowi l
l Alltransfers,
trusts,estates,i
nterest
s,
succeed t ot he proper t
y oft he pr i
or ri
ghts,power s and r el
inquishment of
decedent. powersmade,cr eated,ar i
sing,existi
ng,
The gener alpowerofappoi ntment exer
cisedorr eli
nquishedbef or
eoraf t
er
maybeexer ci
sedbyt hedecedent : theeffecti
vit
yoft heNI RC.
1. bywi ll
;or
2. bydeedexecut edi ncont emplationof PROPERTY RELATIONS BETWEEN HUSBAND
hi sdeath;or ANDWI FE
3. bydeedunderwhi chhehasr etained The pr oper
tyr el
ations between the
f orhisl if
e orf orany per i
od not spousesshal lbegov erned bycontract
ascer t
ainablewithoutr efer
encet ohis (marr
iage set t
lement)execut ed before
deat horf oranyper iodwhi chdoes themar r
iage.
noti nfactendbef orehi sdeath:
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 65
MEMORYAI
DIN TAXATI
ON LAW
Intheabsenceofsuchcont r act,orif 2. 5%ofthegrossest

ate
t
hecontractisvoi
d: 3. P200,
000.
Onmarri
agescont ractedbeforeAugust3,
1988, t he sy stem of conj ugal Iti
ncl udest hef oll
owi ng:
partnershipofgainsshal l
gov ern; 1. Mour ning appar eloft he sur vivi
ng
On marriages contracted on or af ter spouseandunmar ri
edmi norchi l
dr en
August3,1988 ( eff
ecti
vit
y oft he oft hedeceased,boughtandusedi n
Fami lyCodeoft hePhi li
ppines) ,t
he theoccasi onoft hebur ial.
system ofabsol ut e communi t
y of 2. Expensesoft hewakepr ecedi ngt he
proper t
yshallgovern. bur i
al includi ngf oodanddr inks.
3. Publ icationchar gesf ordeat hnot ices.
EXEMPTTRANSMI ONS(
SSI SEC.87) 4. Tel ecommuni cation expenses i n
1. Themer gerofusuf ructi nt heowner i
nf ormi ngr elativesoft hedeceased.
oft henakedt i
tl
e; 5. Cost of bur ialpl ot . Tombst one
2. Fi deicommi sar ysubst itution; monumentormausol eum butnot
3. Thet r
ansmi ssionf rom t hef irstheir
, theirupkeep.I ncasedeceasedowns
legateeordoneei nf av orofanot her af ami l
yest ateorsev eralbur i
all ot s,
benef i
ciary ,in accor dance wi tht he onlyt hev al uecor respondi ngt ot he
wi l
lofthepr edecessor ;and plotwher ehei sbur i
edi sdeduct ible.
All bequest s, dev ices, l egacies or 6. I ntermentf eesandchar ges.
transferst osoci alwel fare,cul turaland 7. Al lot herexpensesi ncur red f ort he
charitableinst it
ut i
onsnopar toft henet per formance of t he r itual and
i
ncomeofwhi chi nurest ot hebenef i
tof ceremoni esi ncidentt ot hei nterment .
anyi ndivi
dual ;Pr ovided,t hatnotmor e Expensesi ncur edaf
r t
ert hei nter ment ,
than30% oft hesai dbequest s,legacies such as f or pr ay ers, masses,
or t ransfers shal lbe used by such entertainment , or t he l i
ke ar e not
i
nst i
tutionsforadmi nistrati
onpur poses. deduct ible.
Anypor ti
onoft hef uner alandbur ial
DEDUCTI
ONSON GROSSE STATE expensesbor neordef r ayedbyr el ati
ves
APPLI
CABLETO and f riends oft he deceased ar e not
RESI
DENTALIENSANDCITIZENS deduct ible.
(
REVENUEREGULATI
ONS2-
2003)
JUDICIAL EXPENSES OF THE
Thef oll
owingar ededuct i
blefr om the TESTAMENTARY OR I
NTESTATE
gr
oss est ate ofci tizens and r esident PROCEEDI NGS
al
i
ens: Expensesal lowedasdeduct i
onunder
1. Expenses, l osses, i ndebt edness, thi
scat egor yar ethose:
taxes,etc.(ordinar ydeducti
ons) 1. i ncurredi ntheinv entor
y -
takingof
2. Transferforpubl icuse asset s compr isi
ng t he gr oss
3. Vanishingdeduct ion estate,
4. Fami l
yhome 2. admi nistrati
on,
5. Standarddeduct ionequiv al
entt oone 3. pay mentofdebt soft heest ate,
mi l
l
ionpesos( P1, 000,
000) as wellas t he di
str i
buti
on oft he
6. Medi calexpenses estat eamongt hehei rs.
7. Amount sr eceivedbyhei rsunderRA Inshort,t hesededuct ibl
ei t
emsar e
4917( Retir
ementBenef i
ts) expensesi ncur r
eddur i
ngt heset tlement
8. Netshar eoft hesur v
ivi
ngspousei n oft heest atebutnotbey ondt hel astday
theconjugal orcommuni t
ypr operty prescr i
bed by l aw,or t he ext ension
thereof,f ort hef i
li
ng oft heest atet ax
return.
1.ORDI
NARYDEDUCTI
ONS
CLAIMSAGAI
NSTTHEE STATE
A. FUNERALEXPENSES
The wor d " cl
aims" is gener
all
y
Theamountdeduct i
bleisthel
owest
const
ruedtomeandebt sordemandsof
amongthef ol
l
owing:
apecuniar
ynaturewhichcouldhav
ebeen
1. actualf
uneralexpenses
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 66
MEMORYAI
DIN TAXATI
ON LAW
enfor
ced agai
nstthe deceased in hi
s accommodat i
onl oanwher etheloan
l
ifet
imeandcouldhavebeenr educedto proceedswentt oanot herperson,the
si
mpl emoneyj
udgments. value oft he unpai dl oan mustbe
i
ncl udedasar eceivableoft heestate.
Cl
aims agai nst t he estat
e or  Ift hereisal egali mpedi mentt o
i
ndebtednessi nrespectofpr
opert
ymay recognizethesameasr ecei
vableof
ar
iseoutof: the estate,said unpai d obl i
gati
on/
1.Cont ract
; mor tgage pay able shal l not be
2.Tort;or all
owed as a deduct ion f r
om t he
3.Oper ati
onofLaw. grossestate.
 In al linstances, t he mor t
gaged
property,t o t he ext ent of t he
Requi
sit
es: decedent
'si
nter
estt
her
ein,shoul
d
1. Thel i
abi li
tyrepresentsaper sonal always form par
t of t
he gr
oss
obl igation of t he deceased taxabl
eestate.
exi sti
ngatt het i
meofhi sdeat h
except unpai d obli
gations TAXES
incur red i ncidentt o his deat h Taxeswhichhav eaccruedasofthe
suchasunpai dfuneralexpenses deat
hoft hedecedentwhichwereunpai
d
(i.e.,ex pensesi ncurredupt ot he asofthetimeofdeath.
time ofi nterment)and unpai d
medi cal expenses whi ch ar e Thefollowingarenotdeduct
ibl
e:
cl assified under a di f
ferent 1. i
ncomet axoni ncomer ecei
ved
cat egor yofdeduct i
ons; afterdeath
2. The l i
abi l
ity was cont ract
ed i n 2. property taxes not accr ued
goodf ait
handf oradequateand beforedeath
fullconsi der at
ion in money or 3. estatetax
money '
swor th;
3. Thecl aim mustbeadebtorcl ai
m LOSSES
whi ch i s v ali
d i n law and Requi
sites:
enf orceabl eincour t
; 1. Itshoul dar i
sef rom f ir
e,st or
m,
4. Thei ndebt ednessmustnothav e shipwr eck, or ot her casual ty
,
beencondonedbyt hecreditoror robber y,t
heftorembezzl ement;
the act i
on t o coll
ectf rom t he 2. Notcompensat ed byi nsurance
decedent must not hav e orot herwise;
prescr ibed. 3. Notcl aimedasdeduct i
oni nan
incomet axreturnoft het axable
CLAI
MSAGAI
NSTI
NSOLVENTPERSONS est at
e;
4. Occur ri
ng during theset tl
ement
Requisi
tes: oft heestate;and
1. Theamountt hereofhasbeenini
tial
l
y 5. Occur ri
ngbef oret helastdayf or
incl
udedaspar tofhisgrossest at
e the pay mentoft he est atet ax
(forotherwisetheywouldconst i
tut
e (lastdayt opay :sixmont hsafter
doublededuct i
onsi ft
heyweret obe thedecedent ’sdeat h).
deducted)
2. Thei ncapacit
yoft hedebtor
st opay 2.TRANSFERFORPUBLI
CUSE
thei
robligat
ionisproven.
Requisi
tes:
UNPAIDMORTGAGE 1. Thedi sposi
ti
onisi nal astwil
land
 Incaseunpai dmor t
gagepayableis test
ament
being cl ai
med by t he est ate, 2. Totakeef f
ectaft
erdeat h
veri
fi
cationmustbemadeast owho 3. Infav oroft he governmentoft he
was t he benefi
ciar
y of t
he l oan Phil
., or any pol i
ti
cal subdiv
isi
on
proceeds. ther
eof
 I
fthel oanisfoundt obemer el
yan 4. Forexclusi
vepublicpurposes.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 67
MEMORYAI
DIN TAXATI
ON LAW
mustbei ncludedaspar tofthegr oss

Not
e:Thi
sshoul
dal
soi
ncl
udebequest
s, est
ateoft hedecedent ;and
devi
ces,ortransfer
st o soci
alwelf
are, 3. All
owabl ededuct i
onmustbei nan
cul
tur
alandchari
tabl
einst
ituti
ons. amountequi valentto
 t hecur r
entf ai
rmar ketvalueof
3.VANI
SHI
NGDEDUCTI
ON thef ami l
yhomeasdecl aredor
includedi nt hegrossest at
e,or
DEFI NI
TION:Th ededuct
ional l
owed fr
om  t heext entofthedecedent '
s
thegr ossestatef
orproperti
esthatwere interest( whether
subj ectt odonor’
sorest atetaxes.I
tis conj ugal/communi t
yorexclusi v
e
calledv ani
shi
ngdeductionbecauset he proper ty),whicheverislower,but
deduct i
on all
owed diminishes over a notexceedi ngP1,000, 000
periodoff i
veyear
s.Therateofdeducti
on 5.STANDARDDEDUCTI
ON
dependsont heperi
odf rom thedateof
transfert othedeathofthedecedent,as Adeducti
onint he amountof One
foll
ows: Mill
ion Pesos ( P1,000,
000) shall be
all
owed as an addi ti
onal deduct
ion
PERI
OD DEDUCTI
ON withoutneedofsubstanti
ati
on.
 1y
earorl
ess 100% ThefullamountofP1, 000,
000shall
 1y
ear–2y ear
s 80% beal l
owedasdeduct i
onforthebenefi
tof
 2y
ear
s–3y
ear
s 60% thedecedent.
 3y
ear
s–4y
ear
s 40%
20%
6.MEDI
CALEXPENSES
 4y
ear
s–5y
ear
s
Requisi
t es:  Any amountofmedi calexpenses
1. thepr esentdecedentdi ed within5 i
ncur redwithinoney earf rom deat h
yearsf rom t r
ansferoft hepr oper t
y i
nexcessofFi veHundr edThousand
from apr iordecedentordonor . Pesos( P500, 000)shallnol ongerbe
2. Thepr oper tymustbel ocat edint he allowed as a deduct ion undert his
Phils. subsection.
3. The pr oper tyf ormed par t of t he  Nei t
her can any unpai d amount
taxableest at eoft hepriordecedent , thereofi n excess oft he P500,000
oroft het axablegiftofthedonor . thresholdnoranyunpai damountf or
4. Theest atet axordonor ’st axont he medi calexpenses i ncur r
ed priort o
gift must hav e been f inall
y the one- y
earper i
od f rom dat e of
deter minedandpai d. death be al lowed t o be deduct ed
5. The pr oper tymustbe i denti
fi
ed as from t he gr oss est ate as cl aim
the one r eceived from t he pr i
or againsttheest ate.
decedent ,orsomet hi
ng acqui red in
exchanget herefor. 7.AMOUNTRECEI
VEDBY
6. No v anishi ng deduct ion on t he HEI
RSUNDERREPUBLI
CACT
proper tywasal l
owablet ot heest ate NO.4917
ofthepr iordecedent .
Any amountrecei
ved by the hei
rs
4.FAMI
LYHOME f
rom t
he decedent'
s employer as a
consequence of the death of the
Conditi
ons: decedent-
empl
oyee i
n accor
dance wi
th
1. Thef amilyhomemustbet heactual Republ
icActNo.4917i sal l
owedasa
resi
dentialhomeoft hedecedentand deduct
ion prov
ided t
hattheamountof
hisfamilyatt heti
meofhi sdeat h,as theseparat
ionbenefi
tisi
ncludedaspar
t
certi
fi
edbyt heBar angayCapt ai
nof ofthegrossestat
eofthedecedent
.
thelocali
tywher ethef amil
yhomei s
sit
uated; 8. NETSHAREOFTHE
2. Thet otalv al
ueoft hefami l
yhome SURVI
VINGSPOUSEI
NTHE
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 68
MEMORYAI
DIN TAXATI
ON LAW
CONJUGALPARTNERSHI
POR theloweramountbet
ween Li
mitA
COMMUNITYPROPERTY andLimitB.
Aft
er deduct i
ng t he al l
owable Li
mi tA.Whi cheveri
slowerbetween:
deductions( onl
ytheor dinarydeducti
ons)  Est atet ax paid to af orei
gn
appertaini
ng t o t he conj ugal or country
communi t
y pr opert
ies included int he  TaxCr editLi
mit=
grossest ate,theshar eoft hesurvi
ving NTE, forei
gncount ry X Phi
l
.estate
spousemustber emov edtoensur ethat NTE,wor ld Tax
onlythedecedent '
sinterestintheestate
i
st axed. Li
mitB.Whi cheverislowerbetween:
 Totalofest atetaxespaidt oal
l
DEDUCTI
ONSON GROSS f
oreigncount r
ies
 TaxCr editLi
mit=
ESTATEAPPLI
CABLETO
NTEoutsidePhi l
.X Phi l.est
ate
NON-
RESI
DENTALI
ENS NTE, wor l
d Tax
Thefol
lowi
ngarededuct
ibl
efr
om t
hegr
oss
est
ateofnon-
resi
dental
i
ens:
SETTLEMENTOFTHE
1. Expenses,losses,indebt
ednessand
ESTATETAX
taxes( T)(
ELI ordinar
ydeducti
ons)
For
mul
a: A.FI
LING
Tax = Phil
.Gross
Cr
edi
t Estate X Worl
d NOTI
CEOFDEATH TOBEF I
LED
Li
mit Wor l
dGross ELI
T I
nal
l casesoft
ransf
erssubjecttot
ax,
Est
ate orwhere,thoughexemptf rom tax,t
he
gross value of t he estat
e exceeds
2. Tr
ansf
erf
orpubl
i
cuse P20,000,the executor
,administ
rat
oror
anyoft helegalhei
rs,wit
hint
womont hs
3. Vani
shi
ng deduct
ion on pr
oper
tyi
n aft
erthedecedent
’sdeath,
orwithi
nalike
thePhi
l
ippi
nes. peri
odafterquali
fyi
ngassuchexecut or
or admini
strat
or,shallgive a wri
tten
4. Conjugal shar
e of t
he sur
viv
ing noti
cethereoft
otheCommi ssi
oner.(
Sec.
spouse 89)
ESTATETAXCREDI
T AN ESTATETAX RETURN I S REQUIRED TO BE
FI
LED
1. whent heest ateissubj ectt oest ate
At axcredi
tisgrant
edf orest
ate
tax;or
taxespai dto af or
eigncount r
yont he
2. when t he est ateis notsubj ectt o
estate ofciti
zens and residentali
ens
estate t ax but t he gr oss est ate
subjecttothefol
lowi
nglimit
ations
exceedsP200, 000;or
3. regardless of t he amount of t he
1. Oneforeigncountryonly
grossest at e,wher ethegr ossest ate
The t ax cr
editis whicheveris
consistsofr egist
eredorr egi
strable
l
owerbet ween:
proper t
y such as mot orv ehicle or
4.Est
atetaxpai dtothefor
eigncountry
shares of st ock or ot her si mi l
ar
5.TaxCreditLimit=
proper t
yf orwhi chclearancef r
om t he
NTE,foreigncount
ry X Phil.est
ate
BIR i s r equired as a condi tion
NTE, wor
ld Tax
precedent f or t he t ransfer of
owner shipt hereofint henameoft he
(
NTE-NetTaxabl
eEst
ate)
transferee.
2. Mor
ethanonefor
eigncountr
y
TI
MEFORFI
LINGOFTHEESTATETAXRETURN
Thecredi
tshallbethatwhi
chi
s
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 69
MEMORYAI
DIN TAXATI
ON LAW
Theestat
etaxret
urn shal
lbe f
il
ed PAYMENTOFTHEESTATETAXDUE
wi
thinsi
x(6)monthsaft
erthedeat
hof Theest atet axdueshal lpaidatt he
t
hedecedent. ti
mewhent heest atetaxr eturnisf i
led.
When t he Commi ssionerf inds that
Extension:TheBI R may ,inmeri
tori
ous thepay mentoft heest atet axont hedue
cases, gr ant an ext on of not
ensi datewoul dimposeunduehar dshipsupon
exceedingt hi
rt
y(30)daysforthef
il
ingof theestateoranyhei r
:
theestatetaxretur
n. a. t he paymentoft he est atet ax
maybeext endedf oraper i
odnot
WHEN THE GROSS ESTATE EXCEEDS toexceedf i
ve( 5)year sifthereis
P2,000, 000, THE ESTATE TAX RETURN ajudici
al settl
ementoft heest ate;
SHALL BE ACCOMPANI ED BY A STATEMENT or
WHICH I S CERTI ED BY AN I
FI NDEPENDENT b. t he paymentoft he est atet ax
CERTIFIEDPUBLI CACCOUNTANTSTATI NG maybeext endedf oraper i
odnot
1. t hei temi zedasset soft hedecedent toexceedt wo( 2)year sifthereis
withi tscor respondinggr ossv alueat anext r
a-judici
alset t
lementoft he
thet imeofhi sdeath,orint hecaseof estate.
a non- resident,notci tizen of t he NOTE:I ncaset heav ail
ablecashi snot
Philippines,t hatpar tofhi s gross suff
ici
ent t o pay i tst otalest atet ax
estat esituatedinthePhi li
ppines; l
iabi
lit
y,theestatemaybeal l
owedt opay
2. t he i temi zed deductions f rom t he taxbyinst
all
ment
.(Sec.9F,Rev.Reg.2-
grossest ate; 2003)
3. t heamountoft axdue,whet herpaid
orst il
ldueandout standing. LIABI
LITYFORPAYMENT
Theest at
et axshal lbepai dbyt he
PLACE WHERE TO FI
LE THE ESTATE TAX execut ororadmi nist
ratorbeforedeli
ver
y
RETURN toanybenef i
ciar yofhi sdist
ri
butiv
eshare
oftheest ate.
1. ResidentCiti
zen Suchbenef iciaryt ot heextentofhis
-withtheAccr edi
tedAgentBank distr
ibutiv
eshar eoft heestateshallbe
(AAB), Rev enue Di str
ict Officer, subsidiari
lyli
abl ef orthepaymentofsuch
Coll
ecti
on Officerordulyauthorized porti
on of t he est ate tax as hi s
Treasur
eroft heci tyormuni ci
palit
y distr
ibutiv
eshar ebear stothev alueof
wherethedecedentwasdomi cil
edat thetotalnetest ate.(Sec.9G,Rev.Reg.2-
theti
meofhi sdeath. 2003)
No j udge shal l aut hor i
ze t he
2. Non- resident(citizenoral i
en) distr
ibut ion of t he est ate unl ess a
a. has r egister
ed execut or or certi
ficat i
onf rom t heCommi ssionert hat
administr
at or taxhasbeenpai disshown.( Sec.94)
-wi t
ht he Rev enue Di st
ri
ct Noshar esorot herf ormsofsecur ities
Office wher e such execut oror shallbet ransf err
edi nt hebooksofany
admi nistratori
sr egister
ed corpor ation, par tnership, busi ness or
b. execut ororadmi nist
ratorisnot i
ndust ry or gani zed i nt he Phi l
ippines,
registered unless a si mi l
ar cer ti
ficati
on by t he
-wi t
ht he Rev enue Di st
ri
ct Commi ssioneri sshown.( Sec.97)
Officehav i
ngjurisdict
ionov erthe Whenabankhasknowl edgeoft he
execut or’ or admi nistr
ator’
s deathofaper sonwhomai ntai
nedaj oint
residence account ,itshal lnotal l
owanywi t
hdrawal
c. noexecut ororadmi ni
strator by the sur vivi
ng deposi torwi thoutt he
- wi th t he Of fi
ce of t he abov ecer ti
fication.(Sec.97)
Commi oner(
ssi Sec.9C,Rev.Reg. Provi ded: t hatt he admi nistrat
orof
2-
2003) theest ateoranyone( 1)oft hehei r
sof
thedecedentmay ,uponaut horizati
onby
B.PAYMENT theCommi ssioner,wi thdraw anamount
notexceedi ng t went yt housand pesos
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 70
MEMORYAI
DIN TAXATI
ON LAW
(
P20,
000)wi
thoutt
hesai
dcer
ti
fi
cat
ion.
(
2)DONOR’
STAXES
Therei snot hingi nt heTaxCodeand DEFI
NI ON:A t
TI ax on t
he pri
vi
lege of
i
nt heper t
inentr emedi allawt hatimplies tr
ansmitti
ng one’
s pr
opert
yorpr opert
y
the necessi ty oft he pr obate courtor ri
ghts to another or ot
hers wit
hout
estateset tlementofcour t
’sapprov alof adequateandfull
val
uabl
econsi
derat
ion.
theSt ate’scl aimf orest atetaxesbef ore
thesamecanbeenf or
cedandcol lected COVERAGEOFTHETAX(
SEC.104)
by t he BI R. On t he contrary,under
Sect i
on94, itisthepr obateorset tl
ement
RESI
DENT&NON-
cour twhichi sbi ddennott oauthori
zet he
RESIDENT
deliveryoft hedi stri
butiveshar etoany NON-RESI
DENT
CI
TIZEN,
i
nt erest
ed par ty wi t
houta cer ti
fi
cation ALIENDONOR
RESIDENTALIEN
from theCI Rshowi ngt hepay mentoft he
DONOR
estatet ax. ( Mar cos I Ivs.Cour tof
Appeal
s,GRNo.120880,
June5,
1997) 1.Real
propert
y 1.Realproper
ty
whereversi
tuat
ed sit
uatedinthe
COLLECTION OFTAXFROM THEHEIRS Phi
l
ippi
nes.
Anest at
eorinheri
tancetax,whether
assessedbef oreoraft
erthedeathoft he 2.Personalpropert
y 2.Personal propert
y
deceased, canbecoll
ectedfr
om theheirs whereversi
tuated a.Tangibl
epr opert
y
even af t
er the distri
buti
on of t he a. Tangibl
e, and sit
uatedi nthe
propert
iesoft hedecedent.(Palancavs. I
ntangibl
e Phil
ippines
b.I
ntangiblepersonal
Commi ssi
onerofI nt
ernalRevenue,GR propert
ywi tha
No.16661,Januar
y31,1962) sit
usint he
Phil
ippinesunless
The Gov ernmenthas t wo way s of exempt edont he
col
l
ecti
ngt axesduef rom theestate. basisof
a. Bygoi ngaf t
eral ltheheirsand reci
procity.
collecti
ngf r
om eachoneoft hem
the amount of t he t ax REQUI
SITES
propor ti
onat et ot heinheri
tance
received, or 1. Capacityoft hedonor
b. Pursuantt othel iencreatedby 2. Donati
veI ntent
Sect i
on 219 oft he Tax Code 3. Deli
very, whet her act ual or
upon al lpr opertyand r i
ghtst o constr
uctive, ofthesubj
ectgift
propert y bel onging t o t he 4. Acceptancebyt hedonee
taxpay erforunpai dincomet ax, is
bysubj ect i
ngsai dpropert
yoft he LAW THAT GOVERNS THE I
MPOSI
TION OF
estatewhi chisint hehandsofan DONOR’
STAX
heirort ransfereet othepay ment
of t he t ax due t he est ate. Thedonor ’
staxshal lnotappl yunl
ess
(Commissioner of I nter
nal andunt ilt
her eisacompl etedgi ft
.The
Revenue vs.Pineda,GR No.L transferis perf
ected from t hemoment
–22734,September15,
1967) thedonorknowsoft heaccept anceby
thedonee;i tiscompl etedbyt hedeli
ver
,
eitheractuallyorconst r
uctively
,oft he
donatedpr opert
ytot hedonee.Thus,t he
l
aw i n for ce at t he t ime of t he
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 71
MEMORYAI
DIN TAXATI
ON LAW
per
fect
ion/
compl
eti
on of t
he donat
ion
shal
lgov
ernt
hei
mposi
ti
onoft
hedonor
’s
tax.
I
NTANGI
BLE PERSONAL PROPERTIES WITH A
Agi ftthati si ncompl etebecauseof SI
TUSI N THE PHIL.(
SAMEASI N ESTATETAX
r
eserved power s, becomes compl ete SUBJECT TO THE RECIPROCITY RULE)( SEC.
wheneither: 104)
1.thedonorr enouncest hepower ;or
2.hisr ightt o exer ci se t he reser v ed For
mula:(Onacumul ati
vebasi
sovera
power ceases because of t he per
iodofonecal
endaryear)
happeni ng of some ev ent or
contingency or t he f ulfi
l
lment of he1stdonat
1. Ont ionofay
ear
somecondi tion,ot hert hanbecause
ofthedonor 'sdeat h. Grossgift
s xxx
 Renunci at i
on by t he sur vi
v ing Less:Deducti
onsfrom gross xxx
spouse ofhi s/ hershar ei nt he gi
fts
conjugalpar tner shi porabsol ut e Netgif
ts xxx
communi tyaf tert hedi ssolut ion Multi
plyby:TaxRat
e xxx
oft hemar r
iage i nf avoroft he Donor’
staxonthenetgi
fts xxx
heirsoft hedeceasedspouseor
anyot herper son/ si ssubj ectt o
2. On donati
on ofa subsequent
donor '
st ax.
dat
eduringthey
ear
 Wher easgener alr enunciationby
an hei r,i ncludi ng t he sur vi
v ing Grossgiftsmadeonthi
sdat e XX
spouse,ofhi s/ hershar ei nt he Less:Deducti
onsfr
om grossgif
ts XX
hereditary est at e l eft by t he
Netgift
s XX
decedent i s not subj ect t o
Add:Al lpri
ornetgif
tswi t
hinthe XX
donor '
st ax,unl ess speci fical ly
year
andcat egor ical lydonei nfav orof
Aggregatenetgi
ft
s XX
identif
iedhei r/st ot heexcl usi on
Multi
plyby:TaxRat
e XX
ordi sadv ant ageoft heot herco-
heirsi nt he her editary est at e. Donor’
st axonaggr
egatenetgif
ts XX
(
Sec.11,
Rev.Reg.2-
2003) Less:Donor’staxonal lpri
ornet XX
gif
ts
STRANGER-aper sonwhoisnotabr ot
her, Donor’
st axonthenetgift
sont hi
s XX
sister
, spouse, ancestor and l i
neal date
descendant , or of a r el
ati
ve by
consangui ni
tyi
nt hecol
later
alwit
hint he EXEMPTI
ONOFCERTAI
NGI
FTS
4thciv
ildegree.
 Al egall
yadoptedchil
disentit
ledt o 1. Gift
smadebyar esident
al
ltheri
ghtsandobl
i
gationsprovi
ded a.Dowr ies or gi fts made on
by law t
ol egi
ti
mate chil
dren,and accountofmar riageandbef ore
therefor
e,donationtohi m shallnot it
scel ebrat i
onorwi thi
noney ear
beconsi deredasdonat i
onmadet o thereafterbypar ent st oeachof
stranger. thei
rl egiti
mat e,i llegi
t i
mate or
adopt edchi ldrent ot heextentof
 Donat i
on made bet ween busi ness
thefirstP10, 000.
organizat
ions and t hose made
b.Gift
smadet oorf ort heuseof
betweenani ndi
vi
dualandabusi ness
theNat i
onalGov ernmentorany
organizat
ionshal lbeconsideredas
enti
ty cr eated by any of i t
s
donationmadet oast r
anger.
agenci eswhi chisnotconduct ed
for pr ofi
t ,or t o any pol i
tical
VALUATI
ONOFGIFTSOFPROPERTY
subdiv i
sion of t he sai d
Thef ai
rmarketval
ueoft hepr
opert
y
government .
giv
enatt heti
meoft hegi f
tshal
lbethe
c.Gift
si nf av or of educat i
onal,
val
ueoft hegi
ft
.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 72
MEMORYAI
DIN TAXATI
ON LAW
char i
table,r eligious,cul t
ur alor gift
;and
social wel fare cor poration, 2. Thet ot
alamountoft hecr edi
tshall
i
nst it
ut i
ons,f oundat ions,t rustor notexceed thesamepr oport
ion of
philanthropic or ganization, thet axagai
nstwhi chsuchcr edi
ti s
resear ch insti
tution or taken,whicht hedecedent’
snetgi ft
organi zati
on, accr edited non- sit
uat ed outside the Phi li
ppi
nes
gov ernmentor ganization( NGO) . taxableundert heNIRC bearstohi s
Prov i
ded,t hatnomor et han30% entir
enetgif
t.
ofsai d gift
s shal lbe used by
such donee f oradmi nistrati
on FORMULAOFTAXCREDI
TLI
MIT
purposes.
2. Gi ft
smadebyanon- residentnot 1. Fordonor
’st
axespai
dtoonef
orei
gn
aci tizenoft hePhi l. count
ry
a.sameas( b)
b.sameas( c)exceptaccr editednon NGsit
uat
ed Tax
-gov ernmentor gani zation( NGO) i
naforei
gncount
ry XPDT=Credi
t
Ent
ir
enetgi
ft Limi
t
A NON-PROFI
T ONAL AND/
EDUCATI OR
CHARITABLE CORPORATI ON, INSTI
TUTION, (
NG-NetGi
ft
s;PDT-Phi
l.Donor
'sTax)
ACCREDITEDNON- GOVERNMENTORGANI ON,
ZATI
TRUST OR PHI LANTROPHIC ORGANI
ZATION, 2. Fordonor
’staxes pai
dtot
wo or
RESEARCHI NSTI
TUTIONORORGANIZATI
ONI S moref
orei
gncountr
y
1. one i ncorporated as a non- stock NGoutsi

dethePhi
l
. XPDT=Tax
entit
y Ent
ir
enetgi
ft
s Credi
t
2. payingnodi vidends Li
mit
3. governedbyt rusteeswhor eceiveno
compensat ion, and The al
l
owabl
etaxcr
edi
tist
he
4. devoting al li ts income whet her l
oweramountbet
weent
het
axcr
edi
tli
mit
students’f ees orgi f
ts,donat ions, under(
a)and(
b).
subsidies or ot her for ms of
phil
ant r
ophyt ot heaccompl i
shment
and pr omotion of t he pur poses SETTLEMENTOFTHEDONOR’
STAX
enumer ated i n i ts Articles of
Incorporati
on. TIMEFORF I NGOFRETURNANDPAYMENTOF
LI
THEDONOR’ STAX
TAX CREDI
T FOR DONOR’
S TAXES PAI
D TO A Thedonor ’st
axr eturnisfiledandt he
FOREI
GNCOUNTRY
donor’
st axduei spai dwi thi
nt hir
ty(30)
daysafterthedat et hegi f
tismade.
1. Donor was a Fi l
ipi
no citi
zen or
The r eturn shal lbe underoat hi n
resi
dentali
en
dupli
cateset t
ingfor th:
2. Attimeofforei
gndonation
1. Eachgi ftmadedur ingt hecal endar
3. Donor’
st axesofanychar acterand
year whi ch i st o be i ncluded in
descri
pti
on
comput i
ngnetgi ft
s;
4. Are imposed and pai d by t he
2. The deduct i
ons cl aimed and
author
it
yofaf or
eigncountry
.
all
owabl e;
3. Anypr eviousnetgi f
tsmadedur i
ng
LI
MITATI
ONSONTAXCREDI
T
thesamecal endary ear;
4. Thenameoft hedonee;
1. Theamountoft hecrediti
nr espectto
5. Relati
onshi p of t he donor t ot he
thetaxpai dtoanycount r
yshal lnot
donee; and
exceed thesamepr oport
ion oft he
6. Suchf urt
heri nformat i
onasmaybe
taxagainstwhichsuchcr editi
staken,
required by r ules and r egulat
ions
which t he decedent ’s net gi fts
madepur suantt ol aw.
sit
uatedwi t
hinsuchcount rytaxable
undertheNI RCbearst ohisent i
renet
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 73
MEMORYAI
DIN TAXATI
ON LAW
NOTE:Thef i
li
ngofanot
iceofdonat
ion theCTAinaidofit
sappel
lat
ejur
isdi
cti
on
snotr
i equi
red,unl
i
kei
nestat
etaxwhere underRA1125(asamendedbyRA9282) .
not
iceofdeat
hisr
equi
red.
Condi ti
ons f or the I ssuance of an
PLACEFOR FI
LING OF RETURN AND PAYMENT Injuncti
onbyt heCour tofTaxAppeal s
OFTHEDONOR’STAX The CTA may enj oin collect
ion of
taxes:
1. Resident a. I fi n its opi nion t he same may
Wi thanaut horizedagentbank,t he j
eopar dizethei nterestoft hegov er
nment
Rev enue Di strictOf f
icer,Revenue and/ orthetaxpay er.
Col l
ecti
onOf f
icerordul yauthorized b. I nthisinstance, thecour tmayr equi
re
Tr easureroft heci tyormuni ci
palit
y thet axpayerei t
hert odeposi ttheamount
wher et hedonorwasdomi cil
edat claimedorf i
leasur et ybondf ornotmor e
thet imeoft het r
ansf er,orifthere thandoubl et heamountwi ththecourt.
be no l egal r esidence i n t he
Phi l
ippi
nes,wi tht he Of fi
ceoft he * Bef ore enf orcement of r emedies,
Commi ssioner . assessmenti snecessar ytot r
iggerthe
2. Non- r
esident process. If no r et
urn is filed, t
he
Filedwi ththePhi lippineEmbassyor Commi ssioneri s empowered to obtai
n
Consul atei nt hecount rywher ehe i
nformat i
on,and t o summon/ examine,
is domi ci
l
ed att he time oft he and t ake t esti
mony of per sons to
transfer,ordi rectlywi tht heOf fi
ce determinetheamountoft axdue.(Sec.5,
oft heCommi ssi oner . 1997NI
RC)
TAXRATE TAXREMEDI
ESUNDERTHE1997TAXCODE:
Ifthedoneeisastr ,t
anger herateof 1. Summar y – r emedi es at t he
taxshall
be30%ofthenetgif
ts. admi nistrati
v elev elorr egulati
ont hatare
I
fthedoneei
snotast r ,t
anger he execut ed wi thout cer emony or del ay
;
rat
eshal lbefr
om 2% t
o15% oft henet shortorconci se
gif
ts. 2.Subst ant i
v e–r emedi espr ov
idedf orby
l
aw orr egul ati
on;an essent ialpar tor
 SeeAnnexW -Donor
’sTax const i
tuent or r elating t o what i s
essent i
al
3.Pr ocedur al–r emedi esi nvol
v i
nglawof
C.TAXREMEDI
ES pleading, evidence, jurisdi cti
on,etc.
UNDERTHENI
RC 4.Admi nistrative–r emedi esav ail
ableat
theadmi nistrati
on( BI R)l evel
5. Judi cial–r emedi est hatareenf orced
I
. TAXREMEDIESOFTHE throughj udicialact ion,whichmaybe
GOVERNMENT civilorcr i
mi nal
TAX REMEDIES OF THE GOVERNMENT TO

I
MPORTANCE EFFECTCOLLECTI
ONOFTAXES
1. They enhance and suppor t the 1. Compr se(

omi Sec.204)
government’
st axcoll
ect
ion. 2. Di
str
aint(
Act
ualand Const
ruct
ive)
2. They are safeguards oftaxpayer’
s (
Secs.205-
208)
ri
ghtsagai
nstar bi
tr
aryacti
on. 3. Levy(Sec.207B)
4. TaxLien(Sec.219)
TAX COLLECTI
ON CANNOT BE RESTRAI
NED BY 5. Civ
ilActon(
i Sec.221)
COURTI ON (
NJUNCTI SEC.218,
1997NI
RC) 6. Cri
minalAction(Secs.221,and222)
7. For fei
tur
eofPr opery(
t Sec.224
Just
if
icat
ion:Li
febl
oodTheor
y -
225)
8. Suspension of business
Except
ion:I
njunct
ionmaybei
ssuedby operat
ionsinv
iol
ati
onofVAT
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 74
MEMORYAI
DIN TAXATI
ON LAW
(
Sec.115)
9. Enf
orcementofAdmi
nist
rat
ive CASESWHI
CHMAYBECOMPROMI
SED
Fi
ne
1. Deli
nquentaccount s
Ther emediesofdi st
rai
ntandlevyas 2. Casesunderadmi nistr
ativepr otests
wellascol lect
ion byciviland cri
minal 3. Civi
ltaxcasesbei ngdisput edbef ore
acti
ons may ,inthe discret
ion ofthe thecour ts
Commi ssioner, be pursued singl
y or 4. Coll
ect i
oncasesf il
edincour t
s
i
ndependent l
y ofeach ot her
,oral lof 5. Cri
minalv i
olations,othert hant hose
them si
mul t
aneously. alr
eady f i
led i n cour t or t hose
i
nvolvingcr i
mi naltaxfraud;and,
6. Cases cov ered by pr e-assessment
(
1)COMPROMI
SE noti
cesbutt axpay erisnotagr eeable
tothef indingsoft heaudi tof f
iceas
DEFI
NITION:Acontractwherebyt
hepart
ies, confi
rmedbyt herev i
ewof fce.(
i Sec.2,
byreciprocalconcessi
ons,avoi
dli
ti
gat
ion Rev.Reg.7-
2001)
orputanendt ooneal r
eadycommenced
(
Art
.2028,
NewCi
vi
lCode)
. EXCEPTI
ONS
REQUISI
TES 1. Wi thhol dingt axcases;
1. Thet axpayermusthav eataxliabi
li
ty. 2. Crimi nal taxf raudcases;
2. Ther e must be an of fer (by the 3. Crimi nalv iolations al ready fil
ed in
taxpay erofanamountt obepai dby cour t;
thet axpayer) 4. Del i
nquent account s wi th dul y
3. Ther emustbeanaccept ance( bythe appr ov ed schedul e of i nstall
ment
Commi ssi
oner or t
axpay er as the pay ment s;
case may be)oft he offeri nthe 5. Cases wher e f inal r eports of
settlementoft heor
iginalclai
m. reinv estigat ion or r econsiderati
on
hav e been i ssued r esult
ing t o
OFFI
CERSAUTHORI
ZEDTOCOMPROMI
SE reduct ioni nt heor iginalassessment
andt het axpay erisagr eeablet osuch
1. TheCommi ssi
onerofInter
nalRevenue deci sion.
(CIR)wit
hrespecttocr i
minalandcivi
l 6. Caseswhi chbecomef i
naland
casesar i
singfrom violat
ionsoft he execut or yaf t erf i
nal j
udgmentofa
TaxCode[ Secs.7(C)and204,1997 cour t,wher ecompr omi seis
NIRC]. Thi s poweroft he CIRi s request edont hegr oundofdoubt f
ul
discr
eti
onar yandonceexer ci
sedby validityoft heassessment( RR.
him cannotber evi
ewedori nt
erf
ered 30–2002) ;
with by t he Cour ts. ( Koppel
, 7.Est at et axcaseswher ecompr omi se
Phi
li
ppi
nesvs.Commissi
oner
,GRNo. i
sr equest edont hegr oundof
L-
1977,
September21,
1950) fi
nanci alincapaci t
yoft hetaxpay er.
2. By t he Regi onalEv aluati
on Boar d (
RR.30–2002)
composedof :
a.t heRegi onalDi rect orasChai r
man, COMMI
SSI
ONER MAY COMPROMI SE THE
b.Assi stantRegional Di rector, PAYMENT OF ANY I
NTERNAL REVENUE TAX
WHEN
theheadsoft heLegal ,
AssessmentandCol l
ection
1. Areasonabl edoubtast othev al
idit
y
Divisi
ons, and
oft he cl
aim agai nstthe taxpayer
c.theRev enueDi strictOf fi
cerhav i
ng
exi
sts;or
j
ur i
sdicti
onov ert het axpay er,
as
a.Thedelinquentaccountordisputed
member s;
assessment i s one r esulti
ng
 on assessment si ssued by t he fr
om aj eopar
dyassessment .
regionalof f
ices i nv olvi
ng basic b. The assessmentseems t o be
taxes ofP500, 000 orl ess,and arbi
tr
ar yinnature,appeari
ngt o
mi norcriminal violations. bebasedonpr esumpti
ons,and
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 75
MEMORYAI
DIN TAXATI
ON LAW
ther ei sr easont obel i

ev ethati ts Bureau,
butforwhichthe
i
sl acki ngi nl egaland/ orf act ual SupremeCourthasnotdecided
basi s; or uponwithf
inali
ty.(RR.08-
c. The t axpay erf ailed t of ile an 2004)
.
admi nist rative pr ot est on
accountoft heal legedf ailur et o 2. Thef
inanci
alposi
ti
onoft
het
axpay
er
recei venot i
ceofassessmentor demonst rat esacl earinabi l
ityt opay
prelimi nar y assessment and theassessedt ax[ Sec.204( A) ,1997
ther ei sr easont obel i
ev ethati ts NIRC) .I n such case,t he t axpay er
i
sl acki ngi nl egaland/ orf act ual shoul d wai v
e t he conf ident i
alit
y
basi s; or pri
vilegeonbankdeposi tsunderRA
d. Thet axpay erf ail
edt of ilea No.1405[ Sec.6( F) (
2),NI RC] .
requestf or Financi al Incapaci ty.—Theof fer
reinv est igation/ reconsi der at ion tocompr omi sebasedonf inanci al
wi t
hin30day sf rom r ecei ptof i
ncapaci tymaybeaccept edupon
fi
nal assessmentnot iceand showi ngt hat :
ther ei sr easont obel iev et hati ts a.Thecor por at ionceasedoper ation
i
sl acki ngi nl egal and/ orf act ual ori sal readydi ssolved.Pr ovided,
basi s; or thatt axl iabi liti
escor respondi ngt o
e. Thet axpay erf ailedt oel ev at et o the Subscr ipt ion Recei vabl e or
theCTAanadv ersedeci si onof Asset sdi stribut ed/distr i
but ablet o
the Commi ssioner , or hi s the st ockhol der s r epresent ing
aut hor ized r epresent at i
ve, i n return ofcapi talatt he t ime of
some cases,wi thin 30 day s cessat ion of oper ati
on or
from r ecei ptt her eofandt her ei s dissolut i
onofbusi nessshal lnotbe
reason t o bel i
ev et hat i tsi s consi der edf orcompr omi se; or
l
acki ng i nl egaland/ orf act ual
basi s; or b.The t axpayer ,asr efl
ected i ni ts
f
. Theassessmentwer ei ssuedon l
atestBal anceSheetsupposedt o
oraf terJan.1,1998,wher et he bef i
ledwi t
ht heBur eauofI nternal
demand not ice al legedl yf ail
ed Revenue,i ssuf feringfrom sur plus
to compl ywi tht he f or mal i
ties or ear ni
ngs def i
citr esulti
ng t o
prescr ibedunderSec.228oft he i
mpai rmenti nt heor iginalcapi tal
1997NI RC; or by at l east 50%,pr ov i
ded t hat
g. Assessment s made based on amount s pay able or due t o
the “ BestEv idence Obt ai nabl e stockholdersot herthanbusi ness-
Rul e”and t her ei sr eason t o rel
ated t ransact ions whi ch ar e
believ et hatt he same can be properlyincl udiblei nt he r egular
disput ed by suf f
icient and "accountspay able"arebyf ictionof
compet entev idence. l
aw consi der edaspar tofcapi tal
h. The assessment was i ssued and not l iabili
ty, and pr ov i
ded
wi t
hint hepr escr i
pt iv
eper iodf or furt
hert hatt he taxpay erhas no
assessmentasext endedbyt he suffi
cientli
qui dassett osat isfyt he
taxpay er '
s execut ion ofWai ver taxli
abili
ty;or
oft heSt atut eofLi mi tationst he
validityoraut hent ici
tyofwhi ch
i
sbei ngquest i
onedorati ssue
and t her ei s st rong r eason t o
believ e and ev idence t o pr ov e
thati ti snotaut hent c.(
i RR.30– c.Thetaxpay
eri ssufferi
ngf rom a
2002) networt
h def ici
t( total liabil
i
ties
i
. Theassessmentisbasedonan exceedtot
alasset s)comput edby
i
ssuewher eacourtof deducti
ng totall i
abil
i
t i
es ( netof
competentjuri
sdi
cti
onmadean defer
red cr edit
s and amount s
adver
sedeci si
onagainstt
he payabl
e to st ockhol
der s/owner s
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 76
MEMORYAI
DIN TAXATI
ON LAW
refl
ect ed as l i
abili
ti
es, except
business- r
elated transacti
ons) APPROVAL OF THE COMPROMI SE BY THE
from t ot alasset s( netofpr epaid EVALUATI
ON BOARDISREQUIREDWHEN
expenses,def err
ed char ges,pr e- a. the basi c tax invol v
ed exceeds
operat ing expenses,as wel las P1,000,
000.00,or
appraisal i
ncreasesi nfixedassets), b. the set
tlementof f
ered isl essthan
taken f r
om t he latest audited theMCR.
fi
nanci alst atement s,providedthat
i
n t he case of an i ndivi
dual NOTE: TheMCRmaybel
esst
hant
he
taxpay er ,hehasnoot herlevi
abl e prescr
ibedratesof10% or40%,ast he
proper tiesundert helawot herthan casemaybe,pr ovidediti
sapprovedby
his f ami y home; (
l Sec. 3,RR. theEvaluat
ionBoar d(composedoft he
30–2002) . BIR Commi ssioner and the four BIR
DeputyCommi ssioners)
.
c.The t axpayeris a compensat i
on
earnerwi t
h no othersour ce of COMPROMISEOFCRI
MINALVIOLATI
ONS
i
ncome and t he family’
s gr oss GeneralRule: Al lcri
mi nalv i
olat
ions
mont hly compensation does not undertheCTRPmaybecompr omised.
exceed ( P10,
500/mont hi fsingle;
P21,000/ monthif mar r
ied)
,and Except
ions:
thatitappear sthatt het axpayer 1. Thosealr
eadyfi
ledincour
t
possesses no ot her l eviabl
e/ 2. Those i
nvol
ving f
raud [
Sec.204(
B),
dist
rainableassets,otherthanhi s 1997NI
RC]
.
familyhome; or
EXTENTOFTHECOMMISSIONER’
SDI SCRETI
ON
d.
Thet axpay
erhasbeengr ant
edby TOCOMPROMISECRI
MINALVIOLATI
ONS
the SEC or by any compet ent
tri
bunal a mor atori
um or 1. Beforet hecomplainti
sfi
ledwit
ht he
suspension of pay ment s t o Prosecut or
’sOffi
ce:TheCIRhasf ul
l
credi
tors,or other
wise declared discr
etion t o compromise except
bankruptorinsol
vent.(Sec.3,RR. thoseinv ol
vi
ngfraud.
07-
2001)
2. Afterthecomplainti
sf i
ledwi
ththe
The Congressional Ov ersi
ght Prosecutor
’s Of
fi
ce butbefor
et he
Commi t
tee,underSect ion 290 oft he i
nformation i
sfil
ed withthecour:
t
1997NI RCi sempower edt orequir
et he The CI R can st i
l
l compromise
BIR: provi
ded the pr
osecutormustgive
1.
The submi ssion ofal lperti
nent consent.
i
nf ormation,i ncl udi
ng but not
l
imi ted t o i ndustry audi ts, 3. Aft
eri nfor
mation i
sf il
ed withthe
collecti
on per f ormance dat a, court:TheCIRisnolongerpermitt
ed
status r eports on cr i
minal to compromisewi t
horwi thoutthe
actionsiniti
atedagai nstpersons; consentoft heProsecut
or.( Peopl
e
and vs.Magdaluyo,GRNo.L-
16235,Apr
il
2. The submi ssion of t axpayer 20,1961)
returns. Thisismor eso,whent hecourt
hasr ender edaf inaljudgment .Asa
mer eagentoft heGov ernment,t
he
Commi ssioneri s notaut hori
zed t
o
MI
NIMUM COMPROMI
SERATES(
MCR)OFANY acceptany t
hing less than whati s
TAXLI
ABI
LITY adjudicated i n f avor of t he
a. I
ncaseoff i
nanciali
ncapaci
ty: Gov ernment .Byv i
rtueofsuchf i
nal
MCR=10%oft hebasicassessedtax j
udgment , t he Gov ernment has
b. Othercases: al
readyacqui redav estedright
.
MCR= 40% oft hebasicassessed
tax[Sec.204(A),
1997NIRC]
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 77
MEMORYAI
DIN TAXATI
ON LAW
NATUREOFA COMPROMI NE
SEI XTRAJUDI
CIAL assessed; [
Sec.204( B), 1997NI RC] .
SETTLEMENT OF THE TAXPAYER’
S CRIMINAL a.When t he f il
ing of t he
LI
ABILI
TYFORHISVI OLATI
ON retur n/payment i s made at t he
wrongv enue;
Itisconsensualincharacter,hence, b.When t he taxpay er ’
s mi stake i n
may notbe i mposed on t
he t axpayer pay ment of hi st ax i s due t o
wit
houthi sconsent.TheBI R mayonl y erroneouswr ittenof ficialadv iceof
suggestset t
lementofhi st ax liabi
lity ar ev enueof ficer ;
thr
oughacompr omise.Theextra-j
udicial c.Whent het axpay erf ail
st of i
let he
sett
lement and t he amount of t he retur nandpayt het axont i
medue
suggested compromise penalt
y shoul d to subst ant ial l osses f rom
confor
m with t he schedul e of prol onged l abor di spute, f or ce
compromisepenalti
esprovi
dedundert he maj eur e, l egi timat e busi ness
rel
evantBIRregul
ati
onsororders. rever ses,pr ov ided,howev er ,t he
abat ement shal lonl y cov er t he
REMEDY I
N CASETHETAXPAYER REFUSES OR sur char ge and t he compr omi se
FAI
LSTOABI
DETHETAXCOMPROMI
SE penal t
y and not t he i nter est
i
mposed underSec.249 oft he
1. Enforcet hecompr omi
se Code;
a.Ifitisaj udici
alcompr omise,itcan d.Whent heassessmenti sbr ought
beenf orcedbymer eexecut ion.A aboutort her esul toft axpay er ’
s
judicial compromi seisonewher ea non- compl i
ancewi tht hel aw due
deci sionbasedont hecompr omi se toadi ffi
cultint erpr etat i
onofsai d
agreementi srenderedbyt hecour t l
aw.
onr equestoft hepar t
ies. e.Whent het axpay erf ail
st of i
let he
b.Any ot her compr omise i s retur nandpayt hecor rectt axon
extrajudi cialand l i
ke any ot her ti
meduet oci rcumst ancesbey ond
cont ractcanonl ybeenf orcedby hiscont r
ol,pr ov i
ded,howev er ,t he
cour tact ion. abat ement shal lonl y cov er t he
2. Regardi tas r esci
nded and i nsist sur char ge and t he compr omi se
upon or iginaldemand ( Art
.2041, penal t
y and not t he i nter est
Ci
vi
lCode)
. i
mposed underSec.249 oft he
Code;
COMPROMI
SEPENALTY f.Late pay mentoft he t ax under
mer i
torious ci rcumst ances ( ex.
I
ti san amountofmoneyt hatthe Failur et obeatbankcut -offt ime,
taxpay er payst o compromise a t ax sur char ge er roneousl y i mposed,
viol
ation.Thisispai dinli
euofcr i
minal etc.)( Sec.2, Rev.Reg.13- 2001)
prosecut i
on. A t axpayer cannot be
compel l
edtopayacompr omisepenal
t y
. 2. The administr
ati
on and col
lecti
on
Ifhedoesnotwantt opay,theCIRmust costsinvolved do notj
usti
fyt he
i
nstituteacr i
minalact
ion. col
lect
ion oftheamountdue [ Sec.
204(
B),
1997NI
RC]
.
COMPROMI
SEVS.ABATEMENT a.Abat ement of penal t
ies on
assessment conf ir
med by t he
Compr omiseinvolv
esar educt
ionof l
owercour tbutappeal ed byt
he
t
het axpayer’
sliabi
li
ty e abat
,whi
l ement taxpay ertoahighercourt
meanst hattheentiretaxl
iabi
li
tyofthe b.Abat ement of penal t
ies on
t
axpayeriscancell
ed. withhol di
ngtaxassessmentunder
ABATEMENT mer itori
ousci
rcumst ances
c.Abat ementofpenal t
iesondelay
ed
THECOMMI
SSI
ONERMAYABATEORCANCELA i
nst allment pay ment under
TAXLI
ABI
LITYWHEN mer itori
ousci
rcumst ances
d.Abat ement of penal t
ies on
1. The tax or any port
ion thereof assessment r
educed af
ter
appear
stobeunjust
lyorexcessi
vely
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 78
MEMORYAI
DIN TAXATI
ON LAW
rei
nvesti
gationbutt axpayeri
sst i
l
l
contesti
ng r educed assessment ; 1. Actual : t here i s t aking of
and possessi on of t he per sonal
e.Such otherci r
cumst ances which proper t
yf r
om t het axpay erbythe
the Commi ssioner may deem government .Phy sicaltransferof
analogous t o t he enumer at
ion possessi on i s not al ways
above.(Sec.3, Rev.Reg.13-2001) required.Thi si strueint hecase
ofi ntangible pr operty such as
3. The Commi ssi
onermay al so,ev en stocksandcr edit
s.
withouta clai
m theref
or,refund or 2. Const ructive:theowneri smer ely
credi
tanyt axwhereont hef aceof prohibitedf rom disposi ngofhi s
theretur
nuponwhi chpaymentwas proper t
y .
madesuchpay mentappearscl earl
y
tohav ebeenerroneousl
ypai d(Sec. ACTUALVS.CONSTRUCTI
VEDI
STRAI
NT
229,
1997NI
RC)
).
ACTUAL CONSTRUCTI
VE
DI
STRAINT DI
STRAI
NT
(
2)DI
STRAI
NT
Made onl y on the Madeont hepr opert
y
DEFINI
TION: I
ti s t he seizur
e by t he proper
ty of a of any t axpayer,
deli
nquentt
axpayer whetherdel
i
nquentor
governmentofper sonalpr
operty,t
angibl
e
not
orintangibl
e,toenf or
cethepay mentof
taxes.Thepr oper
tymaybeof f
eredi na There is t
aki
ng of The t axpayer i s
publicsale,iftaxesar e notv ol
untari
l
y possessi
on mer el
y prohi
bit
ed
paid.I
tisasummar yremedy . fr
om disposingofhis
propert
y
NATUREOFTHE WARRANT OF DI
STRAI
NT OR
LEVY Effectedbyleavi
nga Effectedbyr equi
ring
l
ist of di str
ained thetaxpayertosigna
Thewar rantisasummar ypr ocedure propertyorbyservi
ce receipt of the
of a war r
ant of property or by t he
“f
orcing”thetaxpayertopay.Ther ecei
pt
distr
aint or revenue offi
cer
ofawar r
antmayormaynotpar t
aket he garnishment preparingandleaving
characterofaf i
naldecisi
on.I fitisan alistofsuchproperty
i
ndicationofaf i
naldeci
sion,thetaxpayer
mayappealt ot heCTA wi thin30day s An i mmediat
e step Notnecessar
il
yso
fr
om ser vi
ceofthewar r
ant. forcoll
ect
ionoft
axes
Duti
esoft heof f
icerser vingt hewar r
ant
ofdi
str
aint:
1. Makeanaccountoft hepersonal
properti
esdi st r
ained;
2. Sign t he l ist of per sonal Both
properti
es di str
ained t o which Aresummar yremediesforthecoll
ecti
onof
shallbeadded,a st atementof taxes;
thesum demandedandnot eof NOTE:Referonl
ytopersonal
proper
ty;
and
thetimeandpl aceofsal e; cannotbeavail
edofwheretheamountofthe
3. Leave ei t
herwi tht he owneror taxinv
olv
edisnotmor et
hanP100
person f r
om whose possessi on
such per sonalpr operties were
taken,oratt hedwel l
ingorpl ace REQUI
SITESFORTHEEXERCI
SEOFTHEREMEDY
OFDI
STRAI
NT
ofbusinessofsuchper sonwith
someone of sui t
able age and
discret
ion( Sec.208, CTRP) 1. The t axpayer must be delinquent
(excepti n constr
uct
ive di
str
aint
)i n
TWOTYPESOFDI
STRAI
NT
thepay mentoft ax
;
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 79
MEMORYAI
DIN TAXATI
ON LAW
2. Theremustbeasubsequentdemand II
forit
spay ment( assessment); Ser
viceofWarrantofDi
str
aint
3. Thet axpayermustf ai
ltopaythet ax (
Sec.208)
atthetimer equired;
and
4. Theper i
odwi t
hinwhi chtoassessor
coll
ectthetaxhasnoty etpr
escrbed.
i Wi t
hr espectt o:
1.Per sonal pr oper ty–
PERSONS WHO SHALL SEI
ZE AND DI
STRAI
NT (a)upont heowneroft hegoods,
PERSONALPROPERTY(ACTUALDI NT)
STRAI chattels, orot herper sonal
proper t
y ;or
1. Amountofdel i
nquentt ax i
s mor e (b)upont heper sonf rom whose
thanP1,000,
000– Commi ssioneror possessi onsuchpr oper t
iesare
hisdulyaut
hori
zedrepresent
at i
ves. taken.
2. Amount of del inquent t ax i s 2.St ocksandot hersecur ities
P1,000,
000orless–Rev enueDi str
ict (a)upont het axpay er;and
Offi
cer.(
Sec.207(
A),1997NI RC) (b)upont hepr esident ,manager ,
tr
easur erorot herr esponsi bl
e
AUTHORI
TY OF THE COMMISSIONER TO offi
ceroft hecor porat ion,
I
NQUIREI
NTOBANKDEPOSI
TACCOUNTS companyorassoci at i
onwhi ch
i
ssuedt hesai dst ockand
Dist r
aint includes gar ni
shment of securiti
es.
moneyev eni nbankdeposi t
sbecauseRA 3.Bankaccount sshal lbegar nishedby
1405 ( Bank Secr ecy Law)cov er s only servingawar rantof di st raint–
divulgingofi nformat i
onofdeposi ts.No (a)upont het axpay er;and
i
nqui ryi smadeongar nishmentfori tonly (b)upont hepr esident ,manager ,
earmar ksapor t
ionoft hedeposits. tr
easur er ,orot herresponsi ble
Not withstanding any cont r
ary offi
ceroft hebank.
provisionofRA1405,t heCommi ssioner Note:Upon r eceiptoft he war rantof
i
s aut hor ized t oi nquir
ei ntothe bank distr
ai nt,thebankshal ltur nov ertot he
deposi tsof : Commi ssioner so much of t he bank
1.a decedentt o determine his gr oss account sasmaybesuf fi
ci entt osat i
sfy
estate thecl aim oft hegov ernment .
2.a t axpay erwho wai v
es hisr i
ghtby 4.Debt sandcr edi ts–
reasonoff inancialincapacitytopayhi s (a)per sons owi ng orhav ing in his
taxliabi l
it
y( Sec.5,NIRC) possessi ont hedebt s;
(b)orunderhi scont rolsuchcr edits;
or
PROCEDURESFORTHE ACTUALDI
STRAI
NTOR (c)uponhi sagent .
GARNISHMENT
Not
e:Thewar
rantofdi
str
aintshal
lbe
I suff
ici
entauthori
tytothepersonowi ng
Commencementofdist
rai
nt thedebtsorhav i
nginhispossessionor
proceedi
ngs underhiscontr
olanycr
edit
sbelongingt o
thetaxpayert
opayt ot
heCommi ssioner
theamountofsuchdebtsorcredi
ts.
Eit
herbytheCI Rorhisdul
yauthori
zed
repr
esent
ati
ve;orbyt
heRevenueDist
ri
ct
Offi
cer
Taxpay
ermustsi
gn
recei
pt
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 80
MEMORYAI
DIN TAXATI
ON LAW
Commissi
onerof
II
I I
nter
nal Rev
enue.
Posti
ngofNotice
(Sec.209,NI
RC)
Not i
ce specify
ing theti
me andpl aceof
Remedywhentaxpayerdi
dn’
tsi
gn
sale and the ar ti
clesdist
rained. The
receipt
post i
ngshallbemade i n notl ess t
han
two( 2)publicplacesinthecityormuni-
cipali
tywher ethedi st
rai
ntismade.One Ifthetaxpay erorper soni npossessi onof
placef orposti
ngofsuchnot iceisatthe thepr opertyr ef
usesorf ail
st osignt he
Of f
ice oft he May orofsuch ci t
y or receiptr ef
erred t o,the r evenue of f
icer
muni cipal
i
ty. effecti
ngt heconst r
ucti
vedi strai
ntshal l
(a)pr oceed t o pr epareal istofsuch
propertyand
(b)int hepr esenceoft wo( 2)wi tnesses
l
eav e a copy t hereofi nt he premi ses
IV wher et hepr opertydi st
rainedi slocat ed,
Sal
eofPr
opert
yDi
str
ained afterwhi ch t he said pr oper tyshal lbe
deemed t o hav e been pl aced under
const r
uctiv
edi straint.
THE TAXPAYER’
S PROPERTY MAY BE PLACED (
3)LEVY
UNDERCONSTRUCTI
VEDI
STRAI
NTWHENHE
DEFI
NITION:Itrefer
st ot heactofseizure
1. i
sr etir
ingfrom anybusi nesssubj ect
ofrealpr operyi
t nor derto enfor
cet he
totax;
paymentoft axes.Thepr oper
tymaybe
2. i
sint endingto–
off
eredi napubl i
csal e,ifaft
erseizure,
a.leavethePhili
ppines,
thetaxesar enotvoluntari
lypai
d.
b.remov ehispropertytherefrom,
c.hideorc oncealhisproper t
y,
REQUI
SITES FOR THE EXERCI
SE OF THE
3. i
s per f
orming any act t endi
ng t o
REMEDYOFLEVY
obstructtheproceedingf orcollect
ing
thetaxdueorwhi chmaybeduef r
om
Sameasi
nther
emedyofdi
str
aint
.
him( Sec.223,1997NI RC) .
PROCEDURE FOR THE CONSTRUCTI

VE
WHENMAYLEVYBEEFFECTED?
DI NTOFPERSONALPROPERTY
STRAI
Realpr oper t
y may be l ev
ied upon
Taxpay
er’
sobl
igat
iont
opr
eser
ve bef
or e, simultaneously, or af ter t he
di
straintofper sonalpr opert
ybel onging
tothedel i
nquent[ Sec.207(B)
,1997NI ;
RC]
CIR shal lr equiret he t
axpay erorany andt heremedybydi str
aintandl ev ymay
personhav ingpossessi onorcont rolof be repeated ifnecessar yunt i
lt he f ul
l
suchpr opert yto amount ,i ncluding al l expenses, i s
(a)si gnar eceiptcov er
ingt hepropert
y col
lected(Sec.217,1997NIRC).
dist
r ainedand
(b)obl igatehi mselfto PROCEDUREOFLEVYONREALPROPERTY
1.pr eser vethesamei ntactand
unalteredand I
2.nott odi sposeofthesamei nany Pr
epar
eCer
ti
fi
cat
eofLev
y
mannerwhat soeverwithoutthe
I
expressaut hori
tyofthe
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 81
MEMORYAI
DIN TAXATI
ON LAW
Preparat
ion of a dul y aut hen-t
icated 213,
CTRP)
.
cert
ifi
cat
econt aini
ng:
(
a)descr ipti
onofthepr oper t
yl ev
ied;
(
b)nameoft hetaxpayer,and
(
c)t heamount soft axandpenal tydue
from hi m. This cer ti
fi
cate shal l
operate witht he f orce ofa l egal I
V
execut i
onthroughoutt hePhi l
ippines Sal
e
(
Sec.207B,
1997NI
RC)
.
DI NTVS.
STRAI LEVY
DI
STRAI
NT LEVY
II
Ser
viceofNot
ice Referstoper
sonal Referstor
eal
propert
y propert
y
Serviceofwr i
ttennoticet o: Forf
eitur
ebythe For
fei
tur
eis
governmenti
snot aut
hori
zed
(a)thedel i
nquenttaxpay er;or
provi
ded
(b)ifheisabsentf rom t hePhi l
ippines,t
o
hisagentormanageroft hebusi nessin Thet axpayeri
snot Ther i
ghtof
respecttowhi chtheliabilit
yarose; or giventherightof redempt i
onis
c. t otheoccupantoft hepr operty. redempt i
onwi t
h grantedincaseof
d. thepr operRegisterofDeedsshal l respecttodistr
ained realpropert
ylevi
ed
alsobenot if
iedofthel evy( Sec.207B, personalproperty. uponandsol d,or
1997NI
RC)
. forf
eitedtothe
government .
Both
Aresummar yremediesforthecol
lect
ionof
t
axes;
and
I
II Cannotbeav ai
ledofwher etheamountof
Adv
ert
isementoftheTimeand t
hetaxinv
olv
edi snotmorethanP100
Pl
aceofSale
REDEMPTI
ONOFPROPERTYSOLD
Theadv er
ti
sementshallcont
ain:
1. theamountoft axandpenalti
esdue;
Wi
thi
n1yearf
rom t
hedat
eofsal
e,
the propertymaybe r edeemed byt he
2. nameoft het axpayeragainstwhom
del
inquentt axpayerorany onef r
om him,
taxesarel
evied;
uponpay mentoft hetaxes,penalt
iesand
3. shortdescr
ipti
ont hepropertytobe
i
nterest t hereon f r
om t he dat e of
sold.
del
inquencyt ot hedat eofsale,toget
her
wit
hi nterestonpur chasepr i
ceat15%
The adv erti
sement shal lbe made
perannum f r
om t hedat eofsalet othe
wit
hin 20 day s aftert he levy,and t he
dateofredempt on.(
i Sec.214,NIRC).
sameshal lbef oraper i
odofatl east30
days.Itshal lbeeffectuat edby:
FORFEI
TURETOTHEGOVERNMENT
a.postinganot i
ceatt hemai nent r
ance
oft hemuni ci
palbui ldingorci tyhal l
Iftherei
snobi dderi
nt hepubli
csale
andi napubl icandconspi cuouspl ace
orift heamountoft hehi ghestbidis
int hebar ri
oordi stri
cti nwhi cht he
i
nsuffi
cientto payt he t
axes,penalti
es
real propertyli
es; and
and costs,the realproper t
y shal
lbe
b.by publ i
cation once a week f or3
for
feit
edt ot
heGov ernment.
weeks i n a newspaper of gener al
circulati
oni nt hemuni ci
pali
tyorci ty
FURTHERDI NTANDL
STRAI EVY
wher et he proper t
yi sl ocated (Sec.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 82
MEMORYAI
DIN TAXATI
ON LAW
owneroft
he mustbeownedby
Ther emedyofdi str
aintandl evymay pr
opert
y t
hetaxpay
er
be r epeated i
fnecessar yunt ilthe ful
l
amount of t he t ax deli
nquency due
i
ncludi ngallexpensesi scollectedfrom (
5)CI
VILACTI
ONS
thet axpayer
.Ot herwi
se,aclevertaxpayer
who i s abl
et o concealmostoft he DEFINI
TION: F ort ax remedy pur poses,
val
uabl e part of hi s property woul d these ar e actions inst i
tut
ed by t he
escape pay mentofhi st ax liabi
li
tyby governmentt o coll
ecti nter
nalrevenue
sacrifi
cingani nsigni
fi
cantpor t
ionofhi s taxes.Iti
ncludesfil
ingbyt hegovernment
holdings. withthepr obatecourtclaimsagainstthe
deceasedt axpayer.
(
4)TAXLI
EN
WHENRESORTEDTO?
DEFINITION:Iti
sal egalclai
m orchargeon
proper ty, eit
her r eal or per sonal, 1. When a t ax is assessed butt he
establishedbyl awasasecur i
tyi
ndefaul
t assessment becomes f inal and
ofthepay mentoft axes( 51AmJur881) . unappealable because the taxpay er
Gener ally
,i tat t
aches t othe propert
y fail
st ofil
eanadmi nist
rati
vepr otest
i
rrespect iv
e of owner ship or t
ransf
er witht he CIR wi thi
n 30 day sf rom
thereof. receipt;
or
2. Whenapr otestagainstassessment
EXTENTANDNATURE i
sf i
ledandadeci sionoftheCI Rwas
rendered but t he sai d deci sion
The tax, together wit
h int
erest
s, becomes f inal, executory, and
penal
ti
es,andcost st hatmayaccruein demandabl e f or fail
ure of t he
addi
ti
ontheret
oi salienuponal
lproper
ty taxpayert o appealt hedecision t o
andr ight
stopr
oper
tybel
ongi
ngt
othe theCTAwi t
hin30day sfr
om r eceipt
taxpayer. ofthedeci si
on.
Thel i
enshallnotbev ali
dagainstany NOTE:Judici
alacti
onmayber esort
edto
mor tgagee, pur chaser, or j udgment even before assessment al t
hough
creditorunti
lnoticeofsuchl ienshal lbe i
mpract
ical
,asst at
edinSec.203,1997
fi
l
ed by t he Commi ssi
onerofI nternal NI
RC,“… and no pr oceedi
ng in cour
t
Revenuei ntheOf ficeoftheRegi sterof withoutassessmentf orthecol l
ecti
onof
Deedsoft hepr ov i
nceorcitywher et he such t axes shallbe begun af ter the
proper t
yoft he taxpayerissituated or expirat
ionofsuch( 3year)period.
”
l
ocat ed(Sec.219, 1997NIRC). I
tshouldbenot edt hatnociv i
lor
cri
mi nalacti
onf orther ecoveryoft axes
shallbef i
l
edincour twithouttheapprov al
WHENDOESI
TATTACH? oftheCommi ssi
oner .
Notonlyf r
om t he ser
vice oft
he WHERETOFI
LE
warrantofdi
str
aintbutfr
om thetimet
ax
becamedueandpay able. 1. CourtofTaxAppeal s– wher et he
pri
ncipalamountoft axesandf ees,
LI
ENVS.DI
STRAI
NT excl
usive ofcharges and penalti
es
cl
aimed is One mi l
li
on pesos and
LI
EN DI
STRAI
NT above.
2. RegionalTri
alCourt,Munici
palTr ial
Dir
ect
edagainst Neednotbe Court,Met r
opoli
tan TrialCour t–
thepr
opert
y dir
ectedagai
nstt
he wheret hepri
nci
palamountoft axes
subj
ectt
othetax propert
ysubj
ectt
o and fees,excl
usi
v eofchargesand
tax penalti
esclai
med isl essthan One
mill
i
onpesos.(Sec.7,RANo.9282)
Regar
dlessoft
he Pr
oper
tysei
zed
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 83
MEMORYAI
DIN TAXATI
ON LAW
TAXPAYERI
NACRI
MINALACTI
ON
THE APPROVALOFTHE CIRI SE SSENTIALI
N
CI
VILCASES.Ho wever,underSec.7,1997 Itdoesnotnecessar il
yr esultinthe
NIRC,t he Commissionermaydel egat
e exonerat
ionofsai dt
axpay erfrom hi
scivil
suchpowert oaRegionalDirector. l
iabi
lit
ytopayt axes.
Rati
onale:Thedut ytopayt axi simposed
DEFENSES WHI
CH ARE PRECLUDED BY FI
NAL bystatut
epr i
ortoandi ndependentofany
ANDEXECUTORYASSESSMENTS att
emptont hepar toft het axpayerto
evade pay ment .Iti s not a mer e
1. Inv al
idi
ty or il
legal
i
ty of the consequence of t he f elonious acts
assessment ;and charged,nori si ta mer e ci vi
lli
abil
it
y
2. Pr escri
pti
onofthegov er
nment’
s deri
ved f r
om a cr ime. ( Republi
c vs.
righttoassess. Pat
anao,
GRNo.L-
14142,
May30,
1961)
(
6)CRI
MINALACTI
ONS EFFECT OF SUBSEQUENT
SATISFACTI
ONOFCI
VILLI
ABI
LITY
The j
udgmenti nt he cri
minalcase
shal
lnotonl yimpose the penalty but Thesubsequentsati
sfact
ionofci vi
l
shal
lalso orderthe paymentoft axes l
iabi
li
tybypay mentorprescr
ipt
iondoes
subj
ectoft he cr
iminalcase as finall
y notextingui
sh the t
axpayer
’s cr
iminal
deci
dedbyt heCommi ssioner(Sec.205, l
iabi
li
ty.
NI
RC)
.
NOSUBSI
DIARYI
MPRI
SONMENT
WHERETOFI
LE
Incaseofinsolvencyont hepartof
1. Cour tofTaxAppeal s– oncr i
mi nal the taxpay
er,subsidi
aryi mpri
sonment
of f
enses ar i
si ng fr
om v iolations of cannotbei mposed asr egar
dst he t
ax
the NI RC orTCC and ot herl aws whi
chhei
ssent
encedt
opay.
admi nister
edbyt heBIRandt heBOC, However,i
tmaybeimposedi
ncases
wher et hepr inci
palamountoft axes off
ail
uret
opayt hef
i mposed.(
nei Sec.
and f ees,excl usiv
eofchar gesand 280,
1997NI
RC)
penal ties cl aimed i s One mi l
lion
pesosandabove.
2. Regi onalTr ialCour t,Muni cipalTr ial
Cour t,Met ropol i
tanTr ialCour t–on
criminal of fenses ar ising f rom
violations oft he NIRC orTCC and CRI
MINAL ACTION MAY BE FILED
otherl awsadmi ni
steredbyt heBI R DURI
NG THE PENDENCY OF AN
and t he BOC,wher et he pr i
ncipal ADMINI
STRATI
VEPROTESTI
NTHEBIR
amountoft axesandf ees,excl usive
ofchar gesandpenal tiescl aimedi s I
ti s nota r equir
ementf ort he
l
essthanOnemi l
li
onpesosorwhere fi
ling thereoft hatt here be a precise
t
hereisnospeci
fi
edamountclai
med. comput ati
onandassessmentoft hetax,
(
Sec.7,RANo.9282) since whati si nv
olved int he cri
minal
act i
onisnott hecol l
ecti
onoft axbuta
I
MPORTANTCONSI
DERATI
ONS criminalpr osecut i
onf orthev i
olati
onof
theNI RC.Pr ovided,however ,t
hatthereis
10.No criminalact ion shallbe begun a pr ima f acie showi ng of a wi l
lf
ul
wit
hout t he appr ov al of t he attemptt oev adet axes.(SeeUngabvs.
Commi ssioner.(Sec.220,1997NIRC) Cusi,GRNos.L-41919-24,May30,1980
10.I
tshallbebr oughti nthenameoft he i
nr elat
iontoCommi ssi
onervs.Courtof
Governmentandshal lbeconducted Appeals,GRNo.119322,June4,1996)
bythelegalofficersoftheBIR.
(
7)FORFEI
TURE
EFFECT OF ACQUI
TTAL OF THE
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 84
MEMORYAI
DIN TAXATI
ON LAW
DEFINITION: divest
it
ure of pr oper
ty enfor
cementofa t axl
ien,t
her esi
due,
wit
houtcompensat i
on,i
nconsequenceof aft
er deducti
ng the t
ax li
abi
l
ity and
adefaultorof
fense. expenseswil
lgotothet er(
axpay Bankof
t
hePhil
.Isl
andvs.Tr
ini
dad,
GRNo.16014,
ENFORCEMENT OF THE REMEDY OF Oct
ober4,1941)
.
FORFEI
TURE
I
NFORMER’ SREWARD( Sec282)
a. Incaseofper sonalpr oper ty– The A.Forviolationsoft heNI RC,ar ewardof
forfei
tureofchat telsandr emov able 10% oft her evenues,sur charges,or
fi
xtures ofanysor tis enf or ced by feesr ecov eredand/ orf i
neorpenal t
y
seizureandsal eordest r
uct ionoft he imposedandcol lect edorP1M per
specificfor
feitedpr operty. case,whi chev erisl owershal lbegiven
b. In case of r ealpr oper t
y – The to:
forfei
tureofr ealpr opertyi senf orced 1.anyper son who v oluntaril
ygives
byaj udgmentofcondemnat ionand definiteandswor ni nf ormationnot
salei nal egalact i
onorpr oceedi ng, yeti nt hepossessi onoft heBI R
civi
lorcr iminal,as t he case may l
eadi ngt ot hedi scov eryoff raud
require. upon t he InternalRev enue Laws
c. In case ofdi stil
led spirits,l iquor s, and/ oranyv i
olationst hereof
cigars, ci garettes manuf act ured, 2.ani nformerwher etheof fenderhas
product soft obaccoandappar at us offered t o compr omi se t he
used f ort heirpr oduction – Upon vi
ol ati
on ofl aw comi i
ted byhim
forfei
ture,maybedest r
oy edbyor der and hi sof f
erhasbeenaccept ed
oft heCommi ssionerwher et hesal e andcol l
ected byt heCI R . This
maybei nj
urioust opubl icheal t hor excludes an I nternal Rev enue
prejudici
altolawenf orcement . Officer/empl oy ee orot herpubl i
c
offi
cial/empl oy ee,orhi sr el
ati
ve
withint hesixthdegr ee
*Thisshal
lnotref
ertoacaseal
ready
pendi
ngorexami
nedbyt
heCI
R
B.For t he discov
ery and seizure of
smuggledgoods
- ar ewardof10%oft heFMVoft he
d. Otherar ticlessubjectt oexci set ax smuggled and conf
iscated goods
whi ch hav e been manuf actur ed or orP 1M percase,whi cheveris
remov ed i nv iol
ation oft he Code, l
ower ,shallbe gi
ven to persons
dies f or pr i
nti
ng or maki ng f ake i
nstrumentalinthediscoveryand
revenuest ampsandl abels– Upon sei
zureofsuchsmuggl edgoods.
forfei
turemaybesol dordestr oy edat
thedi screti
onoft heCommi ssi oner
. *Thisdoesnotapplyt
oal
l publ
i
cof f
icial
s
Forfeit
ed pr opert
y shal l not be whether incumbent or reti
red, who
dest r
oyedunt i
latleast20day sf r
om acqui
redtheinfor
mati
oninthecourseof
seizure. perf
ormanceoft hei
rdut
iesdur i
ngt hei
r
i
ncumbency .
EFFECT OF THE FORFEI
TURE OF
PROPERTY
PRESCRIPTI
VEPERI
ODSFOR
Theef f
ectistot r
ansferthetit
leto
thespecif
icthi
ngfrom theownert othe
THEASSESSMENTAND
government.Allt
heproceedsi ncaseof COLLECTIONOFTAXES
a sal e go to t he coffer
s of t he
government(U.
S.vs.Surl
a,GRNo.6536,
September2,1911) .Inseizureforthe RATI
ONALEOFPRESCRI
PTI
VEPERI
ODS
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 85
MEMORYAI
DIN TAXATI
ON LAW
pr
ovedasaf
act
.Itmustbet
he
Such per i
ods ar e designat ed to productofadel iberat
ei nt
entto
secure the t
axpayers agai
nst evade t axes. I t may be
unreasonable i nvesti
gati
on aft er the establishedbyt he:
l
apseoft heper i
odpr escri
bed.Theyar e a. I ntenti
onal and subst ant
ial
al
so benef ici
al t o t he gov ernment understat ement of t ax
becauset axoffi
cerswi l
lbeobli
gedt oact l
iabili
tybyt het axpayer;
prompt l
y. b. I ntenti
onal and subst ant
ial
overstatementofdeduct i
ons
RULESONPRESCRI
PTI
ON ofexempt ions;and/or
c. Recur rence of t he abov e
1. Whent het axl aw itselfissilent cir
cumst ances
on prescri
ption, t he t ax i s  Falsity const it
utes a dev i
ati
on
i
mprescri
pti
ble; fr
om t he truth due t o mistake,
2. Whennor eturnisr equired,t
axi s carelessnessori gnorance.
i
mprescri
pti
ble;
Note:Remedyoft axpay erist ofi
lea Ther eisf r
audi nthef ollowi ngdeci ded
r
eturn. cases:
3. Defense of pr escripti
on i s 1.Fraudmustbet hepr oductofa
wai
vable; deliberateintentt oev adet axes
(Jalandonivs.Republ ic)
WHATCONSTI
TUTESASSESSMENT? 2.Simpl est atementt hatr eturnfil
edwas
notf raudulentdoesnotdi sprove
Anassessmentcontai
nsnotonly existenceoff raud( Tayengcovs.
acomputat
ionoftaxli
abil
i
tiesbutal
soa Collector)
demandforpaymentwithi
napr escr
ibed 3.Subst ant i
alunder-decl ar ati
onsof
per
iod. i
ncomef orsixconsecut ivefivey ears
demonst ratefraudul enceofr eturn
(Perezvs.CTA)
PRESCRI
PTIVE PERIOD FOR THE 4.Presenceoff i
cti
tiousexpenses, wi th
ASSESSMENTOFTAXES noev idencepr esent ed, proves
existenceoff raud( TanGuanvs.
Gener
alRul
e: Commi ssi
oner)
Thr
ee(3)year
saft
erthedat
ethe
r
etur
nisdueorfil
ed,whi
cheveri
slat
er Howev er,thecourtsdi dnotconsider
(
Sec.203,
1997NI
RC)
. t
het axr etur
nsf i
ledasf alseorfraudulent
wi
t hintenttoev adepay mentoft axint he
Except
ions: f
ollowingcases:
1. Failuretof il
ear et
ur n:ten( 10) a. Mer e under st
atementi nt he t ax
years f r
om t he dat e of t he return willnotnecessar il
yi mpl y
discoveryoft heomi ssiont ofil
e fraud(Jalandonivs.Republ i
c)
ther et
urn(Sec.222[A]); b. Sal eofar ealpropertyforapr ice
2. False orf raudulentr eturn with l
esst hani tsfairmar ketv al
uei s
intenti
on to ev ade the t ax:ten not necessar i
l
y a f alse retur n
(10)y earsf r
om t hedat eoft he (
Commi
ssi
onervs.Ayal
aSecur
it
ies)
discoveryoft hef alsityorf raud c. Fraudisaquesti
onoff actandthe
(
Sec.
222[A]
); ci
rcumstances consti
tut
ing fr
aud
Not
e:Nothi
nginSect
ion222(
A)shal
l mustbeal l
egedandpr ovedinthe
be const r
ued t o author ize the tr
i t(
alcour Commi ssi
onervs.Ayal
a
examinati
on and i nv
estigat i
on or Secur
it
ies)
i
nquiryinto any t
ax ret
urnf il
ed in d. Fraud i
s neverimputed and the
accordance withthe pr
ov isions of court
s neversustainf i
ndi
ngs of
anytaxamnest yl
awordecr ee. fr
auduponci r
cumstancesthatonl
y
creat
esuspi on(
ci Commi ssi
onervs.
aud must be al
 Fr l
eged and Javi
er)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 86
MEMORYAI
DIN TAXATI
ON LAW
e. Mi st
akes ofr ev
enue of
fi
cers on PRESCRIPTI
VE PERIOD FOR THE
three di
ff
erentoccasi
ons r
emov e COLLECTIONOFTAXES
elementoff r Aznarvs.CTA
aud (
andCol
l
ect
or) Gener
alPer
iods:
Five(5)years–f r
om assessment
3. Agr
eement i
n wr
it
ing t
o t
he orwi thin per i
od f orcol l
ection agreed
extensionoft heper
iodtoassess uponinwr i
ti
ngbef oreexpirati
onoft he5-
betweent heCI Randthetaxpayer yearper od(
i Sec.222, 1997NI RC).
befor ethe expi r
ati
on oft he 3- Ten ( 10) year s – wi t
hout
yearper i
od.NB:The ext ended assessmenti ncaseoff al
seorf raudul
ent
period agr eed upon can f ur
ther ret
urnwi t
hi nt
enttoev adeorf ail
uretofil
e
be ext ended by a subsequent ret
urn( Sec.222, 1997NI RC) .
written agr eementmadebef ore
the ex pir
at ion oft he ext
ended WHAT IS THE PRESCRI
PTIVE PERIOD
period pr ev iousl
y agreed upon WHERETHEGOVERNMENT’ SACTIONIS
(
Sec.222[
b])
. ON A BOND WHI CH THE TAXPAYER
4. Wri
tt
enwaiverofr
enunci
ati
onof EXECUTESIN ORDER TO SECURETHE
t
he ori
ginal three (3) y ear PAYMENTOFHI STAXOBLIGATION?
l
i
mit
ati
on,signedbythetaxpayer
(Sambrano vs. Court of Tax Ten(10)year
sunderAr t
.1144(1)
Appeals,GR No.L-8652,March oftheCi v
ilCodeandnott hree(3)years
30,1957). under the NIRC. I nt his case,t he
Gov er
nmentproceedsbycour tacti
ont o
Not
e: Not
ice of t
he assessment i
s for
feita bond.The act i
on isf ort he
released,mai
ledorsenttothetaxpay
er enforcementofacont r
actualobli
gati
on.
alsowi thi
nthe3y earper
iod. I
tisnot (
Republ
i
cvs.Ar anet
a,GR No.L-
14142,
r
equi
redt hatt
henoticeber ecei
vedby May30,1961)
t
hetaxpayerwi
thi
ntheprescr
ibedper
iod.
Butt
hesendi
ngofthenoti
cemustcl
ear
ly GROUNDS FOR SUSPENSI
ON OF THE
be pr en. (
ov Basi
lan Est
ate,I
nc.vs. RUNNING OF THE STATUTE OF
Commissi
oner, GR No. L-
22492, LI
MITATI
ONS
Sept
ember5,1967)
a. Whent heCI Rispr ohi bit
edf rom
AMENDMENTOFRETURN maki ng t he assessment or
begi nningt hedi str
ai ntorl ev yor
I
f t he amended ret
urn i s a pr oceedi ng i n cour t,and f or
subst
ant
ial
l
ydi f
fer
entf
rom t
he or
igi
nal sixty( 60)day st hereaf ter;
ret
urn,t he pr escr
ipti
v e peri
od shallbe b. Whent het axpay err equest sf ora
countedf rom t hef i
li
ngoft heamended reconsi der ationwhi chi sgr ant ed
ret
urn.Butt hesaidper iodshallrunfrom byt heCI R;
thefi
li
ngoft heor i
ginalreturnifthesame c. When t he t axpay er cannotbe
s suf
i f
iciently compl etet o enablet he l
ocat edi nt headdr essgi venby
Commi ssi oner t o make a pr oper him i nt he r et ur
n,unl ess he
assessment .(Commi ssionervs.Phoenix i
nf ormst heCI Rofanychangei n
Assur
anceCo.
,GRNo.L-
19727,May20, hisaddr ess.
1965) d. Whent hewar rantofdi str
ai ntor
WhenSubst
anti
ve: l
ev y i s dul y ser v ed, and no
a. subst
ant
ial under decl
arat
ion proper tyi slocat ed; and
(
exceedi
ng30%oft
hatdecl
ared) e. Whent het axpay eri soutoft he
of t axabl
e sal es, receipts or Philippines( Sec.223, 1997NI RC).
i
ncome,
b. ora subst ant
ialov erstatement A TAX RETURN I
S CONSI
DERED FI
LED
(exceeding 30% ofdeduct i
ons) FOR PURPOSES OF STARTING THE
(
Sec.248) RUNNING OF THE PERI OD OF
LI
MITATIONSIF
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 87
MEMORYAI
DIN TAXATI
ON LAW
a. Pr ot
est–f i
li
ngapet i
ti
onfor
a. Ther et
urnisv
ali
d–ithascompli
ed reconsiderati
on or
substant
ial
l
ywit
hther
equi
rement
sof reinvest
igati
on wi thin 30
thelaw;and day s f rom receipt of
assessmentWi t
hin 60 days
b.Ther et
urnisappr
opri
ate –itisa from f il
ing of pr otest
,al l
ret
urnfort
hepart
icul
artaxr
equi
red relevant supporti
ng
bylaw. document sshouldhav ebeen
submi tt
ed, ot herwise, the
Not
e: Adef
ect
ivet
axr
etur
nist
hesame assessment shal l become
asi
fnor
etur
nwasf
il
edatal
l
. fi
nal– cannotbe appeal ed
(
Sec.228,
1997NI
RC)
.
PRESCRI
PTI
VE PERI OD FOR THE Not
e:Submi
ssi
onofdocument
s
VI
OLATIONOFANYPROVI SI
ONOFTHE wit
hin the 60 day peri
od i
s
TAXCODE (
SEC.281,
1997NIRC) opt
ionaltot
hetaxpayer
.
1. Shoul
dbef il
edwit
hinfi
ve(5)years "Thatther elevantsuppor ti
ng
fr
om the(a)dayofthecommission document sment ionedi nthe
ofthevi
olat
ionoft
helaw,andifthe l
aw r
efers to such
same be notknown,fr
om the (b) document s which the
di
scover
yt hereofandtheinst
it
uti
on taxpayer f eels woul d be
ofthe judici
alproceedi
ngs f
ori t
s necessar y to suppor t his
i
nvest
igat
ionandpuni
shment
. protest and not what t he
Commi ssi
onerf eels should
2. I
ll
ustr
ati
ve case:(
Lim vs.Courtof be submi tt
ed, ot herwise,
Appeal
sGR Nos.48134- 37,Ocober taxpayerwoul dal way sbeat
18,1990) themer cyoft heBI R which
a. char gei sf ai l
ureorr efusalt opay may r equire pr oduction of
def i
ciency i ncome t ax – such document s whi ch
commi ttedonl yaf tert hef i
nality taxpayercoul dnotpr oduce."
oft heassessmentcoupl edwi th (Standar
dCharter
edBankvs.
the t axpay er ’
s wi l
l
f ulr efusalt o CIR,CTA Case No.5696,
payt het axeswi thint heal l
otted August16,2001)
per i
od.( i.
e.cannotbecommi tted A pr otest i sa v ital
uponf i
lingt her eturn) documentwhi chi saf ormal
b. char ge i s f il
ing of f alse or declarati
on ofr esistance of
fraudul entr eturn wi thi ntentt o thetaxpay er.Iti
sar eposit
or y
ev ade t he assessment – i n ofal lar gument s.I tcan be
addi ti
ont ot hef actofdi scov ery, used i n cour t i n case
there must be a j udicial admi nist
rati
v eremedi eshave
proceedi ng f orthei nvest i
gation beenexhaust ed.I tisalsothe
and puni shment of t he t ax for
malactoft he taxpayer
offense bef ore t he 5 y ear quest i
oning t he of fi
cial
prescr i
pt iveper i
odbegi nst orun. actuationoft heCI R.Thi sis
equivalenttoapl eadi ng.
b. Enteringi nt
oacompr omise
I
I.TAXREMEDIESOFTHE (
Sec.204,
1997NI
RC)
.
Af
terPay ment
TAXPAYER Fili
ngofcl ai
mf orrefundor
tax credi
twi t
hin2y earsf r
om
date ofpay mentr egar
dless of
GENERALREMEDI
ES anysuper v ngcause(
eni Sec.229,
1997NI
RC)
.
A.ADMINISTRATI
VE
Bef
orePayment
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 88
MEMORYAI
DIN TAXATI
ON LAW
B.JUDI CI
AL 1. Tax per i
od of a t axpayer is
Civi
lAct i
on terminated( Sec.6(D),NIRC)
a.Appeal t o the Cour t of Tax 2. Defici
ency t ax li
abi l
ity ari
si
ng
Appeal s – within 30 daysf rom from a t axaudi tconduct ed by
receiptofdecisionont hepr otest theBIR( Sec.56( B)
,NI RC)
orfrom thelapseof180day sdue 3. Taxl en(
i Sec.219,NI RC)
toi nacti
on oft he Commi ssioner 4. Dissolvi
ng Cor poration ( Sec.
(
Sec.228,
1997NI
RC)
. 52(
c),
NIRC)
b.Action t o cont est f orfei
ture of
chat tel,atanyt i
mebef or
et hesal e  Pr otest
ordest ructi
ont her eof ,tor ecover 1.Di
rectdeni
alofpr
otest
thesame,andupongi vi
ngpr oper Admnist
rat
ivedeci
siononadi sput
ed
bond,enj ointhesal e;oraf tert he assessment - The decisi
on of the
sale and wi thi
n 6 mont hs,an Commi ssioner or hi s duly author i
zed
actiont or ecovert henetpr oceeds representativ
eshal l( a)statethef acts,
reali
zedatt hesal e(Sec.231,1997 theappl i
cablelaw, r
ulesandr egulati
onor
NIRC) ;
and j
urisprudenceonwhi chsuchdeci si
oni s
c.Action f or damages agai nst a based ot herwise,the decision shallbe
revenueof f
icerbyr easonofany void,inwhi chcaset hesameshal lnotbe
actdone i nt he per f
ormance of considered a deci sion a di sputed
offi
ci alduty(Sec.227, 1997NI RC). assessmentand( b)thatthesamei shis
Cri
mi nalAct i
on fi
naldeci sion(Sec.3. 1.
5,Rev.Regs.No.
a.Fil
ing of cr i
mi nal compl ai
nt 12-
99)
agai nster ring BI R of fi
cials and
empl oyees. 2.I
ndir
ectdenialofpr ot
est
b.Inj
unct ion– whent heCTA i nits a.Commi ssionerdidnotrul
eont he
opinion,t hecol lectionbyt heBI R taxpayer’
s moti
on f
or
mayj eopardizetaxpay er. reconsiderat
ion of the
assessment–i twasonl ywhen
Not
e: Wi
tht
heenact
mentoft
henew respondent r
ecei
ved the
CTAlaw( RANo.9282)amendingRANo. summonson
1125,CTA now has j ur
isdi
cti
on over
cri
minalcases.(
SeeChapt
erVI-Courtof thecivi
lacti
onf orthecollect
ion
TaxAppeal
s.) ofdefi
ciencyincomet axthatthe
peri
odt oappealcommencedt o
Subst
anti
veRemedies run (Commi ssioner vs. Union
1.Quest
ioni
ng the const
itut
ionali
ty or Shi
ppi
ngCor
p.)
val
idi
tyoft
axstatut
esorregulati
ons b.Referr
albyt heCommi ssi
onerof
2.Non-r
etr
oacti
vi
tyofr ngs (
ul
i Sec.
246, requestforrei
nvest
igati
ontothe
NI
RC) Soli
cit al (
or Gener Republi
c vs
3.Fai
l
uretoinf
ormthet
axpayerinwri
ti
ng Li
m Ti
anTengSons)
oft he l
egaland f
actualbases of c. Reit
erating the demand f or
assessmentmakesitvoid(Sec.228, i
mmedi ate payment of t he
NI
RC) defi
ciencytaxduet otaxpayer’
s
4.Pr
eser
vati
onofbooksofaccount
sand conti
nued r ef
usal to execute
once a y
earexaminat
ion (
Sec.235, waiver( Commissi
onervs.Ayala
NIRC) Secur
it
iesCor
p.)
d.Prel
i
minar
ycoll
ecti
on l
ett
ermay
ASSESSMENTANDPROTEST ser
ve as assessment not
ice
 Assessment (Uni
tedInt
ernati
onalPi
ctur
esvs.
Gener
alr ul
e:Taxes are sel
fassessi ng Commi ssi
oner)
andthus,donotrequir
et hei ssuanceof
an assessment not i
ce i n or der to ACTS OF BI R COMMISSI
ONER
est
abli
shthetaxl
iabi
l
ityofat axpayer. CONSIDERED AS DENI
ALOFPROTEST
Except
ions: WHICHSERVEASABASI SFORAPPEAL
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 89
MEMORYAI
DIN TAXATI
ON LAW
TOTHECOURTOFTAXAPPEALS
Two-y ear per
iod to Two-year peri
od
1. fi
li
ng bythe BI
R ofa civ
ilsui
tfor fi
leclaim wi
ththeCIR start
sf r
om t hedate
coll
ect
ion of the def
ici
ency tax star
ts af ter t he such cr edi
t was
paymentoft hetaxor al
lowed ( in case
(Commissi
oner vs.Uni
on Shi
ppi
ng
penalty credi
t i s wr ongl
y
Corpor
ati
on,GRNo.66160,May21, made) .
1990)
2. i
ndicati
on t ot he taxpay
er by t
he REQUI
SITES OF TAX REFUND OR TAX
Commi ssioner “ i
n cl ear and CREDI
T
unequivocallanguage”ofhi sf i
nal
deni .(
al Commi ssi
oner vs. Uni
on 1. Claim mustbei nwriti
ng;
Shi
ppi
ngCor por
ati
on,GRNo.66160, 2. It must be f il
ed wi t
h t he
May21,1990) Commi ssionerwithint wo( 2)y ears
3. BIR demand l etter r
eiterati
ng his after the pay mentof t he tax or
previ
ousdemandt opay ,sentt othe penalty.
taxpayer af
ter his pr
ot est of the Not e:Nosui torproceedingshal lbe
assessment.(Sur
igaoElectricCo.,
Inc. begunaf tertheexpi r
ationoft hesaid
vs.CTA,GR No.L- 25289,June28, two ( 2) y earsr egardless of any
1974; Commi ssioner vs. Ayala supervening cause t hatmay ar i
se
Securi
ti
es Cor
por at
ion,GR No.L- afterpayment .
29485,Mar
ch31, 1976) 3. Showpr oofofpay ment .
4. Theactuali
ssuanceofawar r antof
dist
rai
ntand levyin certai
n cases COMMENCEMENT OF THE TWO (
2)
cannotbeconsider
edafinaldeci si
on YEARPERI
OD(JURI
SPRUDENCE)
on a di
sputed set
tlement .
(Commissi
oner vs.Uni
on Shi
ppi
ng 1. Taxsoughttoberefundedi
sil
legal
ly
Corpor
ati
on,GRNo.66160,May21, orer
roneousl
ycol
lected
1990) -f r
om t hedat
et het axwaspaid.
(Commi
ssi
onervs.Victor
iasMill
i
ng,
GRNo.L-
24108,
January31,1968)
2. Taxi spai donlyi ni nstal
lmentsor
FILI
NGOFCLAI
M FOR onlyinpart
TAXREFUNDORTAXCREDI
T -from t he datet he lastorf i
nal
i
nstall
mentorpay mentbecausef or
tax purposes,therei s no payment
GROUNDS FOR FI
LING A CLAI
M FOR
unti
lthewhol eorent i
retaxliabi
li
tyis
TAXREFUNDORTAXCREDIT
ful
lypaid. (Collectorvs.Pr i
eto,GR
No.L-
11976,
August29,
1961)
1. Tax is collect
ed er r
oneously or
3. Taxpayermerel
ymadeadeposit
i
ll
egall
y.
2. Penal
tyiscol
lect
edwithoutauthor
it
y. -countedfrom t
heconver
sionofthe
3. Sum coll
ect
edisexcessi
ve. deposi
tt opayment(Uni
onGar ment
vs.Coll
ect
or,CTA Case No.416,
TAXREFUNDVS.TAXCREDI
T November17,
1958)
- Mer ely maki ng a deposi tis not
TAXREFUND TAXCREDI
T equival
ent t o pay ment unt ilt he
amounti s act uall
y appl i
ed t ot he
Thetaxpay
erasksfor The t axpay
er asks specifi
c pur pose f orwhi ch itwas
rest
it
uti
on of t he that the money so deposited.
moneypaidastax paidbeappliedtohis 4. Taxhasbeenwi t
hheldf rom sour ce
exist
ingtaxl
iabi
l
ity (thr
ought hewi t
hhol di
ngt axsy st
em)
-count edfrom t hedatei tfall
sdueat
theendoft het axabley ear
-At axpayerwhocont ri
but est othe
wi t
hholding t ax sy st
em does not
reall
y deposi t an amount t ot he
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 90
MEMORYAI
DIN TAXATI
ON LAW
government,butintruth,perf
orms notnecessaryinrefundf
orl
ocalt
axes.
and exti
ngui
sheshist axobli
gati
on (SeeSec.196,LGC)
.
forthe y ned.(
earconcer Gi
bbsvs.
Commissi
oner, GR No. L-
17406, However
,paymentunderpr otestis
November29,
1965) necessaryin cl
aim forrefund forreal
5. Endoft axabley earv s.dat
eoft he propert
ytaxes (
Sec.252,LGC)andf or
fil
ingoft hef i
naladjustedret
urn customsdutes(
i Sec.2308,TCC).
-f rom t he dat e when t he f i
nal
adjust edreturnwasf i
led. SUSPENSI
ON OF THE TWO-
YEAR
-t he rationalei n computing this PRESCRI
PTIVEPERI
OD
per i
odi st hefactthati ti
sonlythen
the cor porati
on can ascer tain 1. Thereisapendingl i
ti
gati
onbet ween
whet heritmadepr ofitsorincurr
ed the Governmentand t he taxpayer
;
l
osses i ni ts business operat
ions. and
(ACCRA Invest
ment
s vs.Courtof 2. CIRint hatli
ti
gatedcaseagr eedt o
Appeal
s,GRNo.96322,
December20, abidebythedecisionoftheSCast o
1991) thecol
lecti
onoftaxesrel
ativ
et her
eto
6. Datewhenquar ter
lyi
ncomet axwas (
PanayElect
ri
cCo.vs.Col
lect
or,GR
paidv s.dat e when fi
naladj ust
ed No.L-
10574,
May28,1958)
.
ret
urnwasf iled
-from thedat ewhenf inaladjust
ed I
NTERESTONTAXREFUNDS
ret
urnwasf il
ed
-Thef i
l
ingoft hequar t
erlyincome GeneralRul e:
taxreturn(Sec.68)andpay mentof Gov ernmentcannotber equired
quart
erlyincomet axshouldonl ybe topayi nterestont axesref
undedtot he
consi
deredmer einst
all
ment softhe taxpay
eri nt heabsenceofast at
utory
annualt ax due.(Commi ssi
onervs. provi
sioncl earl
yorexpressl
ydir
ecti
ngor
TMXSales,
GRNo.83736,
Januar
y15, author
izing such payment.
1992) (Commi ssionervs.Sweeney,GR No.L-
7. Date when t
he fi
nal adj
ust
ment 12178,
August29,
1959)
ret
urnwasact
ual
lyf
ied(
l ex.Apr.2)
vs.Lastdaywhen t he adjust
ment
r
eturncoul
dst
il
lbef i
led(ex.Apr.15) Excepti
ons:
-fr
om thedat
et hef i
naladjust
ment 1. When t he CIR act ed with patent
r
eturn was actual
ly f i
l
ed. arbi
trar
iness. Arbi
tr
ari
ness
(Commi
ssi
onervs.CourtofAppeal
s, presupposes inexcusabl
e or
GRNo117254,Januar
y21,1999) obsti
nate di sr
egar d of l egal
8. Taxwasnoter r oneouslyori l
legall
y provi
sions. (
Commi ssi
oner vs.
pai
d but t he t axpay er became Vi
ctori
as Mi l
l
ing,GR No.L-
19667,
enti
tl
ed t o r ef und because of Nov.29,1966)
superveni
ngcircumst ances 2. UnderSec.79( C)(
2)wit
hrespectt
o
-fr
om thedatet het axpay erbecomes i
ncomet axeswi t
hhel
donthewages
enti
tl
edt orefundandnotf r
om t he oftheemployees.
dateofpayment .( Commi ssi
onervs.
DonPedroCentr
alAzucar
era,GRNo. TAXCREDI
TCERTI
FICATE
L-
28467,
Feb.28,1973)
PAYMENT UNDER PROTEST I
S NOT 1. Maybeappl iedagainstanyi nter
nal
NECESSARYUNDERNI
RC revenuet axexceptwithholdingtaxes,
2. Or i
ginalcopyi ssur r
ender ed tot he
A sui
torpr oceedi
ngf ortaxref
und revenueof fi
ce,
maybemai ntai
ned“ whet
herornotsuch 3. Not axr efundwillbegi venr esult
ing
tax,penalt
yorsum hasbeenpai dunder from av ailmentofincentivesgr anted
prot ess”(
estordur Sec.229,NI
RC). byl awwher enoact ualpay mentwas
made( Sec.204C, 1997NI RC) .
Not
e:Si
mil
arl
y,pay
mentunderpr
otesti
s
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 91
MEMORYAI
DIN TAXATI
ON LAW
FORFEI
TURE OF CASH REFUND/
TAX Divi
sion’
sdeci sionmayf i
l
eonemot ion
CREDIT forreconsideration/
newtrial
within15
day sfrom r
ecei ptofdeci
sion.IftheMR
1. Forf
eitur
eofr efundi nfavoroft he i
sdeni edfi
leapet i
ti
onforrevi
ewwi ththe
governmentwhenar efundcheckor CTAenbanc
warrant r emai ns uncl ai
med or 
uncashedwi t hinfive(5)y earsfrom Appealtot
heSupremeCourtwi
thi
n15
dateofmai l
ingordel i
ver
y. day
sf r
om r
ecei
ptoftheCTAenbanc
2. Forf
eitur
eofTaxCr edit–at axcr edi
t decisi
onunderRule45oft
heRul
esof
cert
ifi
cate whi ch remains unutil
ized Court
aft
erfive(5)y earsfrom dateofissue,
shallbe inv ali
d,unl ess reval
idated PRE-
ASSESSMENT NOTICE, WHEN NOT
(
Sec.230,
1997NI
RC)
. RED(
REQUI SEC.228,
NIRC)
1. When t he f i
ndi ng f or any
REGLEMENTARYPERI
ODS deficiency t ax i st he r esul tof
I
NINCOMETAXIMPOSED mat hemat i
cal er ror i n t he
BYLAW UPONTHETAXPAYER comput ati
on of t he t ax as
(
PURSUANTTOREV.REG.NO.12-
99, appear i
ng on t he f ace oft he
SEC.228OFTHE1997NI
RC,ANDRANO. return; or
1125ASAMENDEDBYRANO.9282) 2. When a di scr epancy has been
determi ned bet ween t he t ax
BI
Rmakesat
axassessment withhel dandt heamountact ual ly
remi tt
edbyt hewi t
hhol dingagent ;
 or
I
ftaxpayeri
snotsat i
sfi
edwi t
hthe 3. When at axpay erwho opt ed t o
assessmentfil
eapr otestwithi
n30days claim ar efund ort axcr edi tof
f
rom recei
ptthereof excesscr editabl ewi t hholdingt ax
 for a t axabl e per i
od was
Submitsupport
ingdocumentswithi
n60 determi nedt ohav ecar ri
edov er
daysf
rom dateofthefi
l
ingoftheprot
est and aut omat ically appl i
ed t he
 same amountcl aimed agai nst
I
fprotestisdenied,el
evat
et hemat tert
o the est i
mat ed t ax l iabil
ities f or
t
heCommi ssi
onerofInt
ernalRevenue thet axabl equar terorquar tersof
(CIR)within30day sfr
om receiptofthe thesucceedi ngt axabl ey ear ;or
deci
sionoft heCIR’
sdulyauthorized 4. When t he exci se t ax due on
represent
ati
veoffi
cer excisabl ear ticleshasnotbeen
paid;
 5. Whenanar ticlel ocal lypur chased
Appealtot heDi v
isionoft heCour tof orimpor t
edbyanexemptper son,
TaxAppeals( CTA)wi thin30day sfrom such as, but not l imited t o,
r
eceiptoff
inal decisi
onofCI Rorhi sdul y vehicles, capi tal equi pment ,
authori
zedr epresentative(thet axpay er machi neriesandspar epar t s,has
hast heoptiont oappeal straighttot he beensol d,t radedort r
ansf erred
CTAuponr eceiptoft hedeci sionoft he tonon- exemptper sons.
CIR’sdul
yaut hor
izedr epresent at
ive)
 Not
es:
I
ftheCIRorhi sdulyaut
horized  As a gener alr ul
e,pay ment
representat
ivefail
stoactont hepr otest underpr otestisnotr equi
red
within180day sfrom dateofsubmi ssion undert heNI RC,exceptwhen
byt axpayer
,thelatt
ermayappealwi thin parti
al pay
ment of
30day sfrom l
apseofthe uncontroverted t axes i s
180-dayperiodwiththeCTADi vision requir
edunderRR12- 99.The
 Commi ssioner may , ev en
ThePar
tyadv
ersel
yaf
fect
edbyt
heCTA without a wr i
tt
en cl ai
m
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 92
MEMORYAI
DIN TAXATI
ON LAW
therefor,r
efundorcr editany fi
le the r eturn wi t
hin t he
tax,wher eont hefaceoft he peri
od pr escri
bed by t he
return upon whi ch payment Code, or
was made, such pay ment  wi l
l notappl yincasea
appear sclear
lyt ohavebeen taxpay er ,wit
houtnot ice
erroneouslypaid. from t heCommi ssioner,
 In case of t he CIR’sf i
nal orhi sdul yaut hori
zed
denialofthecl ai
mf orrefund, repr esent at
ive,voluntaril
y
the30- dayper iod t
o appeal fi
lest hesai dr eturn(only
witht heCTAmustbewi thin 25%shal lbei mposed)
the2- yearperemptoryper i
od  50% sur charge shal lbe
forinsti
tuti
ngjudici
alacti
on. imposed i n case t he
taxpay erf i
l
est her eturn
 See Annex N – Assessment onl yaf terpr iornot i
cei n
ProcessandAppeal wr i
ting from the
Commi ssionerorhi sdul y
aut horized r epresenta-
ADDI
TIONSTOTHETAX ti
v e( Sec.4. 2,Rev.Reg.
(
SECS.247-
252NI
RC) 12-
99)
DEFINI
TION:incr ement st ot hebasi ct ax
i
ncident due t o t he t axpay er ’
s non-
compl i
ance wi t
h cer tai
n l
egal
b. i
n case a fal
se orfr
audul
ent
requir
ement s.
r
etur
niswi
ll
full
ymade
1. CI VILPENALTY/SURCHARGE
Pr
imaFaci
eevi
dence
1. 25%sur char ge
 subst
ant
ialunder
decl
arat
ion
a. Failuret of i
leanyr etur nand
(exceeding 30% of t hat
payt het axduet her eonas
declared) of t
axabl
e sal
es,
requi redundert hepr ov i
sions
recei
ptsori
ncome,
oft his Code orr ules and
regul ations on t he dat e  orasubstant
ial
prescr ibed; or overst
atement(
exceedi
ng
b. Unlessot herwiseaut horized 30%ofact
ualdeduct
ions)of
byt heCommi ssi oner ,f i
l
inga deduct
ions(
Sec.248)
retur n wi t
h an i nter nal
revenue of fi
cer ot her t han 2. I
NTEREST
thosewi thwhom t her etur n -20%perannum orsuchhi
gherrate
isrequi r
edt obef il
ed; or asmaybepr escri
bed byt
her ules
c. Failuret opayt hedef iciency andr
egul
ati
ons
taxwi thinthet i
mepr escr ibed
fori tspay menti nt henot ice a. Defi
ciencyi
nt est(
er Sec.249B)
ofassessment ;or b. Deli
nquencyint
erest(Sec.249C)
d. Failuret opayt hef ul lorpar t c. I
nterest on Extended Pay ment
oft heamountoft axshown (
Sec.249D)
onanyr eturnr equi redt obe
fi
ledundert hepr ov i
si onsof 3. OTHER CI VI
L PENALTI
ES OR
this Code or r ules and ADMINI
STRATIVEFI
NES
regul ations, or t he f ul
l
amountoft axduef orwhi ch a. Fai
luretofil
ecertai
ni nf
ormati
on
no r et urni sr equi red t o be ret
urns(Sec.250)
fi
led,onorbef oret hedat e b. Fai
lureofawi thhol
dingagentto
prescr ibed f ori t
s pay ment . col
lectandremittax(Sec.251)
(
Sec.248) c. Fai
lureofawi thhol
dingagentof
2. 50%sur
char
ge ref
und excess wi t
hholding t
ax
a. incaseofwi
l
lfulnegl
ectt
o (
Sec.252)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 93
MEMORYAI
DIN TAXATI
ON LAW
FUNDAMENTALPRI NCIPLESGOVERNI NG LOCAL

TAXATI
ON (SEC.130, LGC)
I
II
. LOCALTAXATI
ON a. Shal
sub-
lbeuni
uni t
form i n each l ocal
b. Shal lbeequi t
ableandbasedas
POWERSANDLI
MITATI
ONS
much as possi ble on t he
taxpay er’sabi li
tytopay
NATURE AND SOURCE OF LOCAL c. Lev iedf orpubl icpur poses
TAXI
NG POWER (SEE.SEC 5,ART.X, d. Shal lnotbe unj ust,excessi ve,
1987 CONSTI
TUTI
ON AND SEC.129, oppr essi ve, orconf i
scat ory
LGC) e. Shal lnotbe cont raryt ol aw,
publ i
cpol i
cy ,nat i
onaleconomi c
The LocalGov ernment Uni
t has the pol icy ,ori nr estraintoft rade
power
: f. Col lect ion of l ocalt axes and
a. t
o createi t
s own sources of otheri mposi ti
onsshal lnotbel et
r
evenueand toanyper son
b. t
olevytaxes,f
eesandchar
ges. g. The r ev enues col l
ect ed under
theCodeshal linuresol el
ytot he
benef i
t of , and subj ect t o
disposi t
ionby ,theLGU l evying
the t ax or ot her i mposi t
ion
unl ess ot her wise speci f
icall
y
prov idedt herein
h. Each LGU shal l, as f ar as
Congress cannot enact l aws pract icable, ev olveapr ogressive
depr
ivi
ng LGU f r
om exer ci
sing such sy stem oft axat i
on.
powertot
axbuti tmaysetguideli
nesand
l
imit
ati
onsfortheexer
cise. LOCALTAXINGAUTHORITY(SEC.132,LGC)
Such t
axes,f
ees,and char
ges Shallbeexerci
sedbyt heSanggunian
shal
laccrue excl
usi
vel
ytot he local of the LGU concer ned t hrough an
gover
nmentunit
s. appropr
iateor
dinance.
NATUREOFTHETAXI NGPOWER
POWER TO PRESCRI BE PENALTI ES FOR TAX
a. Noti nherent
; VIOLATIONSAND L I
MI ONSTHEREON (
TATI SEC.
b.Exer
cisedonl yifdelegat
edt othem 516, LGC)
bylaworConst i
tut
ion; 1. The Sangguni an i s aut horized t o
c. Not absol ute; subj ect t o pr escribefinesorot herpenal ti
esf or
li
mitationsprovidedforbylaw. v i
olat i
onsoft axor dinances.
a. i n no case shal lfines be less
Undert hepr esentconst it
ut i
onal than P1, 000 nor mor e than
rul
e,“ wheret herei snei t
heragr antnora P5,000
prohibiti
onbyst atute,thetaxpowermust b. norshal lt he impr isonmentbe
bedeemed t o exi stal t
houghCongr ess l
esst hanone( 1)mont hnormor e
may pr ovide st atutoryl i
mi t
ations and thansix(6)mont h.
guidelines.The basi cr at
ionalef ort he 2. Suchf i
neorot herpenal t
yshal lbe
currentr uleist osaf eguardt hev iabi l
ity imposed att he di scretion oft he
andsel f-
suffi
ciencyofl ocalgov ernment cour t.
unitsbydi r
ectlygr anting them gener al 3. The Sangguni ang Bar angay may
andbr oadt axpower s.”(Mani l
aEl ectri
c pr escribe a f ine ofnotl ess than
Co.vs.Provi
nce ofLaguna,G.
R.No. P100normor et hanP1, 000.
131359)
POWER TO ADJUST LOCAL TAX RATE (
SEC.
ASPECTSOFLOCALTAXINGPOWER
191, LGC)
a.l ocalt
axati
on Adjust
ment of t he tax r at
es as
b. r eal
propert
ytaxat
ion prescribedher
einshouldnotbeof t
ener
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 94
MEMORYAI
DIN TAXATI
ON LAW
thanonceeveryf
ive( 5)year
s,andinno c. Anyexempt ionorr eli
efgr ant edto
caseshallsuchadjustmentexceedten at ypeorki ndofbusi nessshal l
percent(
10%)oft
her atesfi
xedundert
he applyt o allbusi ness si mi l
arl
y
LGC. sit
uat ed.
d. Thesameshal lt akeef fectonl y
POWER TO GRANT LOCAL TAX EXEMPTI
ONS duringt henextcal endary earf ora
(SEC.192,LGC) periodnotexceedi ng12mont hs
Local gov er
nment uni t
s may , as may be pr ovided i n t he
throughor di
nancesdulyapproved,grant ordinance.
tax exempt ions,incent
ives or rel
iefs e. Int hecaseofshar edr ev enues,
undersucht ermsandcondi t
ions,ast
hey theexempt ionorr eliefshal lonly
maydeem necessar y
. extendt ot heLGUgr antingsuch
exempt ionorr eli
ef .
TAX EXEMPTI ONS E XI NG BEFORE THE
STI 2. Onthegr antoft axincent i
ves:
EFFECTIVITY OF THE L GC HAS BEEN a. Thesameshal lbegr ant edonl y
ABOLISHED( SEC.193, LGC) tonewi nvest ment sint hel ocalit
y

Unless ot herwise pr ovi
ded inthis andt heor dinanceshal lprescr i
be
Code, t ax exempt ions or i ncenti
ves the t erms and condi ti
ons
granted t o,orpr esentlyenjoyed byall theref ore.
persons,whet her nat ural or jur
idi
cal
, b. Thegr antshal lbef oradef i
nit
e
i
ncluding gov ernment -
owned or period of not exceedi ng 1
controll
ed cor porat i
ons ar e her eby calendary ear .
withdrawn upon t he effecti
vel
y oft he c. Thegr antshal lbebyor dinance
LGC passed pr iort ot he 1st day of
exceptt hef oll
owing: Januar yofanyy ear .
8. local wat erdistri
cts, d. Anygr antt oat ypeorki nd of
9. cooper ati
ves dul yregist
ered under busi ness shal l appl y t o al l
R.A.No.6938,non- st
ock and non- busi nessessi milarlysituated.
profi
thospi talsand
10.educat i
onal i
nst i
tuti
ons. LEVYINGOFLOCALTAXES( LOCALTAX
ORDINANCE)
Thepowert ograntt axexemptions, Requisi
tes:
taxi ncent i
vesand t axreli
efsshallnot 1.The pr ocedure appl i
cabletol ocal
applyt or egulat
oryfeeswhi charel
ev i
ed government ordinances in general
undert hepol i
cepoweroft heLGU. shouldbeobserved( Sec.187,
LGC)
Tax exempt i
ons shallbe conf
er r
ed 2. Pr oceduraldet
ais(
l Secs.54,55,and
through t he i ssuance of a non- 59,
LGC)
:
transferabletaxexempt i
oncerti
fi
cat
e. a. necessi
tyofaquor um
b. submissionf orappr ovalbyt he
GUIDELINES FOR THE GRANTI
NG OF TAX l
ocalchiefexecutive
EXEMPTI ONS, TAX I VES AND TAX
NCENTI c. hemat terofv etoandov err
iding
RELIEFS ( ART. 282[
B], RULES AND thesame
REGULATI
ONSI NGTHEL
MPLEMENTI GC) d. thepublicat
ionandaf fect
ivit
y
3. Publ
ichearingsar er equired before
1. Ont hegr antoftaxexempt ionsort ax anylocaltaxor di
nance is enact ed
rel
iefs: (
Sec.
187,
LGC)
a. t he same may be gr anted in 4. Withi
n10 day saftertheirapprov al
,
casesofnat uralcalamiti
es,civ i
l publi
cationi nful
lfor3consecut ive
dist
ur bance,gener al f
ailure of daysi n a newspaper of gener al
crops, or adv er
se economi c ci
rculati
on. I n absence of such
conditions such as subst antial newspaperi nthe provi
nce,ci t
y or
decreasei npricesofagr i
cultural municipalit
y,t
hentheordinancesmay
oragr i-
basedproducts. bepost edi natleast2conspi cuous
b.The gr antshal lbe through an andpubl icl
yaccessibl
epl aces( Sec.
ordinance. 189,
LGC)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 95
MEMORYAI
DIN TAXATI
ON LAW
CustomsCode;
RESI
DUAL TAXING POWERS OF THE L OCAL c. Taxes,fees,etc.
,t hei mposi
ti
on
GOVERNMENTUNI TS(SEC.186,LGC) of which cont r
av enes exi
sti
ng
Tolevytaxes,f eesorchar gesonany governmentalpolicies orwhich
baseorsubjectNOT: vi
olates t
he f
undamental
1. Specificall
yenumer atedinLGC pri
ncipl
esoftaxation;
2. Taxedundert heprov i
sionsofthe d. Taxes,fees and ot hercharges
NI
RC, asamended, and i
mposedunderspeci allaw.
3. Otherappl icabl
elaws
COMMON LI MI TATI ONS ON LOCAL
Condit
ions: TAXINGPOWER( SEC.133, LGC)
1.Thatthetaxes,fees,
orchargesshal
l Local gov ernmentuni tscannotl ev y:
notbeunjust ,
excessiv
e,oppr
essiv
e, 1. Incomet ax ,exceptonbanksand
confi
scatoryorcontraryt
odeclar
ed ot herf inanci al i
nst itutions;
nati
onalpolicy 2. Document arystampt ax;
3. Est ate t ax ,i nher itance, gi fts,
2.Theordi
nancel evyingsuchtaxes,f
ees legaci es and ot heracqui sitions
orchargesshal l
notbeenact ed mor ti
scausaexceptasot her wise
wit
houtanypr iorpubli
chearing pr ov ided
conductedforthepur pose. 4. Cust omsdut i
es,r egi strationf ees
of v essel s and whar fage on
whar ves,t onnage dues and al l
ot her ki nds of cust oms f ees,
LI
MITATI
ONSOFTHERESI DUALPOWER char ges and dues except
1. Constit
uti
onal l imitations on whar fage on whar ves
taxi
ngpower const ruct ed and mai ntained by
2. Commonl imit
ationspr escri
bed the l ocal gov er nment uni t
i
nSec.133oft heLGC concer ned;
3. Fundamental princi
ples 5. Taxes,f ees,char ges and ot her
governi
ng the exer cise oft he imposi tionsupongoodscar r i
ed
taxi
ng power of t he LGUs intooroutof ,orpassi ngt hrough,
prescri
bedunderSec.130oft he thet er ritorialj
ur i
sdi ctionsofl ocal
LGC gov er nmentuni tsi nt hegui seof
4. The or di
nance l evying such char ges f orwhar fage,t ol l
sf or
resi
dual taxes shal l not be br idgesorot herwi se.
enactedwithoutanypr iorpubl i
c 6. Taxes, f ees or char ges on
heari
ng conduct ed f or t he agr i
cul tur alandaquat i
cpr oduct s
purposeand whensol dbymar ginalf armer sor
5. Thepr i
nci
pleofpr eempt i
on. fisher men;
7. Taxes on busi ness ent er prises
PRI PLEOFPREEMPTI
NCI ON OREXCLUSI
ONARY cer t i
fied by t he Boar d of
DOCTRI
NE Inv est ment s as pi oneerornon
Where t he National Gov er
nment pioneerf oraper iodof6and4
el
ectstotaxaparti
culararea,i
timpli
edly year s,r espect ively ,f r
om t hedat e
wit
hholdsfrom t
helocalgov er
nmentthe ofr egi strat i
on;
del
egatedpowert otaxt hesamef i
eld. 8. Exci se t axes on ar ti
cles
This doct
ri
ne pri
nci
pallyr est
s on the enumer at edundert heNI RC,as
i
ntenti
onoftheCongress. amended,and t axes,f ees or
char gesonpet r
oleum pr oduct s;
Excl
uded imposit
ions (pur
suantt othe 9. Per cent age orv al ue added t ax
doct
ri
neofpr eemption)
: (VAT) on sal es, bar t
er s or
a. Taxeswhi charelevi
edunderthe exchanges or simi l
ar
NIRC,unlessotherwiseprovi
ded transact ions on goods or
byLGCof1991; ser v ices except as ot her wise
b. Taxes, fees, etc. which are pr ov idedher ein;
i
mposed undert he Tar
iff
s and
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 96
MEMORYAI
DIN TAXATI
ON LAW
10.Taxesont hegr ossr ecei ptsof 2. TaxonBusi nessofPr i

nti
ngand
transpor tat i
on cont ractors and Publicat i
on
persons engaged i n t he 3. Franchi seTax
transpor tat i
onofpassenger sor 4. TaxonSand, Gravelandot her
frei
ght by hi re and common QuarryResour cesextractedfrom
carriers by ai r,land orwat er, PublicLand
exceptaspr ov i
dedi ntheCode; 5. Professi onal Tax
11.Taxesonpr emi umspai dbyway 6. AmusementTax
ofRei nsur anceorr etr
ocessi on; 7. Annual FixedTaxf orevery
12.Taxes,f ees orchar ges fort he Deli
ver yTr uckorVanof
registration of mot or v ehicles Manuf actur ersorProducers,
andf ort hei ssuanceofal lki nds Whol esal ersof ,Deal
ers,or
ofl icenses orper mitsf ort he Retailersi n,certai
nproduct s
drivi
ngt her eof ,
exceptt r
icycle;
13.Taxes,f eesorot herchar geson  SeeAnnexJ f
ort
her
atesand
Phili
ppi ne pr oduct s act uall
y det
ail
s.
expor ted,except as ot her wise
prov i
dedi nt heCode;
14.Taxes, f ees or char ges on
Count rysi de and bar angay
business enterpri
ses and
cooper at ives dul y r egi stered
underR. A.6810andR. A.6938, (
B)MUNI
CIPALI
TIES
(Cooper atives Code of t he (
SEC.143,
LGC)
Phili
ppi nes); and
15.Taxes,f ees orchar ges ofany 1. Muni ci
pal Taxes- t axes on t he
kindont heNat ionalGov ernment , businessesoft hef oll
owi ng:
i
tsagenci esandi nstrument aliti
es, a. Onmanuf act urers, assembl ers,
andl ocal gov ernmentuni ts. repacker s, pr ocessor s,br ewer s,
disti
ll
er s, rect ifi
ers, and
CLASSIFI
CATION OF COMMON compounder sofl iquor s,dist i
lled
LI
MITATIONS spiri
ts,andwi nesor
1. Taxes whi
ch arelevi
ed underthe manuf act ur ersofanyar t
icleof
NIRC unl
ess ot
her
wise pr
ovi
ded by commer ceofwhat everki ndor
theLGC b. Onwhol esal ers,di stri
but ors, or
 Number
s1,
2,3,
8,9,
10 dealersi nanyar ticleof
2. Taxes,fees,et
c.whi
charei
mposed commer ceofwhat everki ndor
undertheTari
ff
sandCust
omsCode c. Onexpor ter s, andon
 Number4 manuf act ur ers, mi ll
ers, producer s,
3. Taxes,feesandchar geswher ethe whol esal ers, distributor s,deal ers
i
mposi ti
on of whi ch cont r
avenes orretailer sofessent i
al
existi
ng gover
nment al poli
cies or commodi ti
es
whi ch ar e v i
olativ
e of t he d. Onr etailer s
fundamentalpr
inci
plesoft axati
on e. Oncont ract or sandot her
 Number
s5,
6,7,
11,
13,
14,
15 i
ndependent
4. Taxes,fees,and char
ges i
mposed f. Onbanksandot herf i
nanci al
underspeci
all
aws. g. Onpeddl ersengagedi nt hesal e
 Number12 ofanymer chandi seorar ticleof
commer ce
h. Onanybusi ness, notot herwi se
TAXESANDOTHERIMPOSI
TIONSTHAT
specifiedi nt hepr ecedi ng
THELOCALGOVERNMENTMAYLEVY
paragraphs, whi cht he
sangguni anconcer nedmay
PROVI
NCES
deem pr opert ot ax.
(
SECS.134-
141,
LGC)
1. TaxonTr
ansf
erofReal
Proper
ty
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 97
MEMORYAI
DIN TAXATI
ON LAW
2. Muni cipal non-revenue fees and CI

TIES
charges (
SEC.151,
LGC)
Themuni cipal
it
ymayi mposeand
coll
ectsuchr easonablefeesandcharges  Theci t
ymayl evythetaxes,fees,and
on busi ness and occupat i
on except charges whi ch t he pr ov
ince or
professi
onal t
axesreservedforpr
ovi
nces. municipal
it
ymayi mpose.
(Sec.147.LGC)  Thet axratest hatt hecitymayl evy
may exceed t he maxi mum r ates
RATES OF TAX WI
THIN THE METROPOLI
TAN all
owed f or t he pr ovi
nce or
MANILAAREA(SEC.144,LGC) municipal
it
ybynotmor ethan 50%
exceptther atesofpr ofessi
onaland
-Not to exceed by 50% t
he amusementt axes.
maxi
mum r at
es pr escr
ibed in t
he
pr
ecedi
ngSecti
on. (
D)BARANGAYS
(
SEC.152,
LGC)
Barangaysmayl ev
yt hefol
lowingt
axes,
fees,and charges which shal
laccr
ue
exclusi
vel
ytothem:
a. Taxes – On st ores orr etailers

wi th f
ixed busi ness
PAYMENTOFBUSI NESSTAXES
est abl i
shment s wi t
ht he gr oss
a. I t shallbe pay abl ef or ev ery sales or r ecei pts f or t he
separat e or disti
nct precedi ng cal endar y ear of
establi
shment or pl ace wher e P50, 000orl ess( f
orbar angay si n
business subj ectt ot he t ax i s theci t
ies)and P30, 000 orl ess
conduct ed and one l ine of (forbar angay si nmuni cipal iti
es)
business does not become b. Rat e=notex ceedi ng1%ofsuch
exemptbybei ngconduct edwi th grosssal esorr ecei pts.
someot herbusi nessf orwhi ch c. Ser viceFeesorChar ges– For
sucht axhasbeenpai d.

ser vicesr ender edi nconnect ion
b. Thet axonabusi nessmustbe wi tht her egulationort heuseof
paid byt he per son conduct i
ng bar angay owned pr oper t
ies or
thesame. ser vice f acil
iti
essuch aspal ay,
c. I n cases wher e a per son copr aort obaccodr yers
conduct soroper at es2ormor e d. Bar angayCl ear ance–Noci tyor
oft hebusi nessesment i
onedi n muni cipality may i ssue any
Section143ofLGC l
icense orper mi tf ee f orany
-whichar esubj ectt othesame busi ness or act ivit
y unl ess a
rateoft ax,thet axshal lbecomput ed clear ancei sf irstobt ainedf rom
ont hecombi nedt otalgr osssal esor the bar angay wher e such
receiptsoft hesai d2ormor er elated busi nessoract ivi
tyi sl ocat edor
businesses. conduct ed.
-whi char esubj ectt odi f
ferent e. Ot herFeesandChar ges– The
rates of t ax,t he gr oss sal es or bar angay may l evyr easonabl e
receipts ofeach busi ness shal lbe feesandchar ges:
separ at
elyr epor tedf ort hepur pose 1. On Commer cialbr eedi ng of
ofcomput ingt het axduef r
om each fighting cocks, cockf i
ght s
business. andcockpi ts;
2. On pl aces of Recr eat ion
 SeeAnnexK f
ort
her
atesand whi chchar geadmi ssionf ees;
det
ail
s. and
3. On Bi ll
boar ds, si gnboar ds,
neon si gns and out door
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 98
MEMORYAI
DIN TAXATI
ON LAW
adv
ert
isement
s. office:cityormuni cipalitywher et he
principaloffi
cei slocated
SI
TUSOFLOCALTAXATI
ON 5. 70%ofr ecordedsal esi nt hepr i
ncipal
office:cityormuni cipalitywher et he
A.SitusAccordingt otheCases FPPPi slocated
Wit
hrespectt oexcisetax, t
hetax  pr or atai fFPPP ar el ocat edi n
i
s upon t he performance of an act , dif
ferentmuni ci
pal i
tiesorci t
ies
enjoymentofapr ivi
legeort heengagi ng i
npr oporti
ont ot heirr espective
i
nanoccupat i
on.Thepowert ol evysuch volumesofpr oduct i
on.
taxisnotdependentont hedomi ci
leof 6. Ifplantationislocatedi nsomeot her
thet axpayer
,butont heplacei nwhich placet hanwher ethef actor yis
theacti sperf
ormedort heoccupat i
onis l
ocat ed, t
hef oregoing70%shal lbe
engagedi n;notupont helocat i
onoft he subdi vi
dedasf oll
ows:
off
ice,butt hepl acewher et hesal eis  60% t ot he cityormuni cipalit
y
perfected.(All
i
edThr eadCo. ,Inc.v.Cit
y wher ethef actoryisl ocat ed
MayorofMani l
a,L-40296)  40% t ot he cityormuni cipalit
y
wher ethepl antati
oni slocated.
Wi t
hr espectt o sale,i tisthe
placeoft heconsummat i
onoft hesale, COMMON REVENUE RAI SING POWERS
associatedwi t
hthedel i
veryoft hethi
ngs OFLGUs( SEC.153TO155)
which ar et he subjectmat t
er of the 1. Servicef eesandchar gesforser vices
contractthatdeterminest hesitusofthe render ed
contractforpurposesoft axat
ion,andnot 2. Publ i
c Ut il
it
y Char ges f or t he
mer el
yt heplaceoftheper f
ectionofthe oper ati
on ofpubl i
c ut i
li
ti
es owned,
contract Shel
.( lCo.,I
nc.v.Muni cipal
it
yof oper ated and mai ntained by LGUs
Sipocot,Camar i
nesSur105Phi l1263) withint heirjuri
sdicti
on.
3. Tollfeesorchar gesf ortheuseofany
B.Si
tusAccor
dingt
oSec.150,
LGC publicr oad,pi erorwhar f,water way ,
bri
dge,f erry or tel ecommuni cation
Branchorsal esoff
ice–af i
xedplacein system f unded and const ructed by
thelocal
it
ywhi chconduct
stheoperat
ion thelocal gov ernmentuni tconcer ned
ofthebusi nessasanext ensi
onoft he Except i
ons:
pri
ncipal
office
a.Of ficer sandenl istedmenoft he
AFPandPNP;
Principalof fi
ce-the head ort he main b.Postof f
ice per sonneldel ivering
offi
ce oft he busi
ness;t he cit
yort he mai l;and
muni cipali
tyspecif
icall
yment ionedinthe c.Phy sicall
y handi capped and
Articles of I ncorporation or of fi
cial disabl ed citi
zens who ar e si xt
y
registrat
ionpaper sasbei ngt heoffi
cial five(65)y earsorol der.
(Sec.152,
addr essofsai dpr i
ncipalofficeshallbe LGC)
consi deredthesit
ust hereof.
Whenpubl i
csaf et
yandwel f
areso
1. Pl aceofsal e(wi t
hbr anchorsal es requires,thesanggunianconcer
nedmay
outlettherein)
: discontinuethecoll
ecti
onofthetol
ls,
and
 Muni ci
pality orci ty wheret he thereafterthesaidf aci
li
tyshal
lbef ree
branchorout l
eti slocated. andopenf orpubl
icuse.
2. Placeofsal e(nobr anchorsal es
outlet)
: COMMUNITYTAX
 Muni cipal
ityorci tyofpr i
ncipal Ci
ti
esormunici
pal
i
tiesmayl
evya
of
fice(notint hepl aceofsal e) communi
tyt
ax.
3.I
fmanuf acturer,assembl er
,contractor
,
producer ,orexpor ter( MACPE)wi th Indi
vi
dualsLiable(Sec.157)
factory, pr oj
ect of f
ice, plant or a. every i nhabi
tant of the
plantati
on( FPPP) Phili
ppines;
4.30%ofr ecordedsal esi nthepr i
ncipal b. eighteen( 18)year
sofageor
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 99
MEMORYAI
DIN TAXATI
ON LAW
over; cor
por
ati
on.
c. under any of t
he f
oll
owing
i
nstances: THE FOLLOWI NG ARE EXEMPT FROM
d. who has been r egul
arl
y THECOMMUNI TYTAX( SEC.159)
employedonawageorsalary 1. Dipl
omat i
c and consular
basi
sf oratleastt
hir
ty(30) representati
ves;and
consecut
ive wor
king days 2. Transientv i
sit
orswhent hei
rst ayi n
duri
nganycal endary ear;or thePhi l
ippi
nesdoesnotexceedt hr
ee
e. whoi sengagedi nbusi nessor (3)mont hs.
occupati
on;or
f. who ownsr ealpr opertywi t
h PLACEOFPAYMENT:pl aceofr esi
dence
anaggr egat
eassessed v al
ue oftheindi
vi
dual,
ori
nthepl
acewher ethe
ofP1,000ormor e;or pri
nci
palof f
iceoft
hejuri
dicalenti
tyis
g. whoi srequiredbyl aw t ofil
e l
ocated.
an incomet axreturn
TIMEOFPAYMENT:accr uesont he1st
Tax Rat e = P5. 00 and an annual dayofJanuaryofeachy earwhichshall
additionalt ax of P1.00 f or ev er
y be paid notl
aterthan t
he lastdayof
P1,000 of i ncome r egardless of Februar
yofeachyear.
whet herf r
om busi ness,exer ci
seof
professionorf r
om proper t
ywhi chin PENALTIES FOR DELI NQUENCY: an
nocaseshal lexceedP5, 000. i
nterestof24% perannum f
rom thedue
Incaseofhusbandandwi fe, dateunti
liti
spaidshallbeaddedtothe
the addi ti
onalt ax her eini mposed amountdue.
shallbebasedupont het ot
al propert
y
ownedbyt hem andt het otalgr oss Acommuni tyt
axcerti
fi
catemayalso
receiptsorear ni
ngsder i
v edbyt hem. beissuedt oanypersonorcorporat
ion
notsubjecttothecommuni t
ytaxupon
B. Jur i
di sons(
calPer Sec.158) paymentofP1.00(
Sec.162,LGC).
Everycorpor
ationnomat t
erhow
created or or ganized, whet her PRESENTATI
ON OF COMMUNITY TAX
domest ic or r esi
dent f orei
gn, CERTI CATEON CERTAI
FI ONS–(
N OCCASI SEC.
engagedi nordoi ngbusinessi nthe 163)
Phili
ppines shall pay an annual A.I
ndivi
dual
communi t
ytax. 1. Whenani ndivi
dualsubj ectt o
the communi ty t
ax
TaxRate=P500andanannualaddi tional acknowl edges any document
tax which i n no case shal l exceed befor eanot arypubl i
c;
P10,000inaccor dancewi ththefollowi ng 2. t akest heoat hofof f
iceupon
schedul
e: elect i
onorappoi ntmentt oany
1. Forev er yP5,000 wor th ofr eal posi ti
on i n the gov ernment
propertyownedbyi tduringt he serv i
ce;
preceding y ear based on t he 3. r ecei ves any li
cense,
valuati
onusedf orthepay mentof certificateorper mi tfrom any
thereal proper
tyt ax P2.00; and publ icaut hor i
ty;pay sanyt ax
2. For ev ery P5, 000 of gr oss orf ee;
receipt
sorear ningsderi
v edbyi t 4. r ecei vesanymoneyf rom any
from i ts busi ness i n t he publ icf und;
Phili
ppinesdur ingt hepr ecedi ng 5. t ransact s other of fi
cial
yearP2. 00. busi ness; or
6. r ecei ves anysal ar
yorwage
The di vi
dends r eceived by a from any per son or
corporati
onshall,f
orthepur poseofthe corpor ation.
additi
onaltax,beconsideredaspar tof Thepresentat ionoft hecommuni t
ytax
the gross r
eceipts orear
ni ngs ofsai
d cert
ifi
cat
e shal l not be r equired i n
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
100
MEMORYAI
DIN TAXATI
ON LAW
connect
ionwi
tht
her
egi
str
ati
onofav
oter
. be.
May,forajusti
fi
ablereasonor
B. Cor porat ion cause, be ext ended wi t
hout
1. r eceiv esanyl i
cense,cer ti
fi
cate surchar
gesorpenal
ti
es,butonlyfora
or per mitf r
om any publ i
c perodnotexceedi
i ngsix(6)months.
aut hority;
2. pay sanyt axorf ee; Surchar ges and Penal ti
es on Unpai d
3. r ecei ves money f r
om publ i
c Taxes, FeesorChar ges–( Sec.168,LGC)
funds; or Sur char
genotexceedi ng25% of
4. t ransact s ot her off
icial theamountoft axes,feesorcharges
busi ness. i
ncludi ng sur charges, until such
The ci ty of muni cipal treasurer amounti sfull
ypaid.
deputizes t he bar angay t r
easur er to Buti n no case shallthe total
coll
ect t he communi t
y t ax in t heir i
nter eston t he unpai d amountor
respectiv
ej ur i
sdi cti
ons.(Sec.164,LCG) portiont her
eofexceedt hi
rt
ysix(36)
mont hs.
Thepr oceedsoft hecommuni t
yt ax
act
uall
yanddi rect
lycoll
ect
edbyt hecity I
nter
est
s on Ot
herUnpai
d Rev
enues –
ormuni ci
paltr
easurershal
laccr
ueentir
ely (
Sec.169,
LGC)
to the gener al fund of the cit
y or An i
nterestther
eon atther ate
municipal
it
yconcer ned. notexceedi
ng2% permont hfrom t he
dateiti
sdueunt i
liti
spaid,buti nno
Pr
oceeds of t
he communi
ty t
ax
case shal
lt he tot
alint
ereston t he
col
l
ect
edt
hrought
hebar
angayt
reasur
ers
unpaid amount or por t
ion t hereof
shal
l beappor t
ionedasf ol
lows:
exceedthi
rt
ysi x(
36)months.
 50%accr uestothegener al
fundof
theci t
yormuni cipali
tyconcerned; COLLECTI ON OF L OCAL REVENUES BY THE
and TREASURER– ( SEC.170LGC)
 50% accr ues to t he bar angay Alllocalt axes,f eesand char ges
wher ethet axi
scollected. shallbecol lectedbyt hepr ov i
ncial,ci t
y,
muni cipalorbar angayt r
easurer,ort heir
COLLECTION OFL OCALTAXES
dulyaut horizeddeput i
es.
The pr ovincial
,ci ty ormuni ci pal
TaxPer
iod and MannerofPay
ment– treasurermay desi gnatet he bar angay
(
Sec.165,
LGC) treasurerorhi sdeput yt o col l
ectl ocal
Unless other
wise prov
ided,the taxes, f
eesorchar ges.
t
axperi
odshal lbethecal
endaryear. Incaseabondi sr equiredf ort he
Such taxes,fees,and charges purpose,t hepr ov i
ncial
,cityormuni ci pal
maybepaidinquar ter
lyi
nst
all
ments. gov ernment shal l pay t he pr emi ums
thereoni naddi tiont ot hepr emiumsof
AccrualofTax– ( Sec.166,LGC) thebondt hatmayber equir
edundert he
Unlessot herwiseprovided,shall Code.
accrueont hef i
rstdayofJanuar yof
eachy ear.
Howev er,new t axes,f ees or
charges,or changes i nt he r at
es LOCALTAXREMEDI
ES
thereof,shallaccrueont hef i
rstday UNDERTHELGC
of the quar ternextf ol
lowing the
effecti
vit
yoft heor di
nancei mposing
suchnewl evi
esorr ates. 1.TAXREMEDIESOFTHE
LOCALGOVERNMENTUNI
TS(LGUs)
Ti
meofPay ment–(Sec.167,LGC)
Unl
essotherwi
sepr ovi
dedshal
l CI LREMEDI
VI ESOFTHEL OCALGOVERNMENT
bepai d wi
thi
nthef i
rsttwent
y(20) UNITS (
LGU)TO EFFECT COLLECTI
ON OF
days of Januar y or of each TAXES
subsequentquar
terasthecasemay
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
101
MEMORYAI
DIN TAXATI
ON LAW
(1)LocalGov er
nment ’
sLi en–Local 1. Localt axes,f
ees,orcharges–f i
ve
taxes, fees, char ges and ot her (5)yearsf r
om thedatetheybecame
revenuesconst i
tutealien,superiorto due.(Sec.194,LGC).
alll
iens,chargesorencumbr ancesi n 2. When t her
ei sfraud ori ntentto
favorofanyper son,enforceableby evadet hepaymentoft axes,feesor
any appr opriat
e admi ni
strati
ve or charges – t en ( 10) years fr
om
j
udicialacti
on. discovery ofthe f
raud orintentto
evadet hepayment(Sec.194,LGC).
(
2)Ci
vi
lRemedi
es
PRESCRI PTIVEPERI ODOFCOLLECTI ON
(
a)byadminist
rat
iveactionthrough Localt axes, fees, orchar gesmay
di
str
aintofpersonalpropertyand becollectedwi thinf i
v e(5)y earsf rom the
byl
evyuponr ealpropert
y dat
eofassessmentbyadmi ni
strativeor
j
udici
alact ion.Nosuchact ionshal lbe
(
b)byj
udi
cial
act
ion i
nstit
uted af t
ert he expi rati
on ofsuch
per
iod( Sec.194, LGC) .
GROUNDS FOR THE SUSPENSI ON OF
Ei
theroftheseremedi
esoral
lmaybe THE RUNNI NG OF THE PRESCRI PTIVE
pur
sued concurrent
lyorsimul
taneously PERIODS
att
hediscret
ionoftheLGUconcerned. a. The t reasurer i s l egall
y
prevent edf rom t heassessment
JURI
SDICTI
ONOFCOURTSOVERLOCAL orcol l
ect ionoft het ax;
TAXATI
ONCASES b. The t axpay er r equest sf or a
rei
nv estigation and execut es a
a. Wi
tht
heamendmentbr
oughtby waiver i n wr i
ting bef or e the
RA No.9282,t heCour tofTax expirati
on oft he per iod wi thi
n
Appeal s now has appel late whicht oassessorcol lect;and
j
urisdicti
on ov er l
ocalt axation c. The t axpay er i s out of t he
cases deci ded by t he Regi onal count r
yorot herwi secannotbe
Tri
alCour tint heexer ciseofi ts l
ocat ed( Sec.194, LGC) .
appellateoror igi
naljuri
sdi cti
on.
b. Regularj udicialcour ts ar e not 2.TAX REMEDIES OF THE
prohibit
ed f rom enj oining t he TAXPAYER
coll
ect i
onofl ocaltaxes,subj ect
toRul e58( Prelimi
nar yInjunction) REMEDI
ES OF THE TAXPAYER I
N LOCAL
oftheRul esofCour t. TAXATI
ON
Not
e: Unl
i
ke t
he NI
RC,t
he LocalTax ADMI
NISTRATI
VE
Code does not cont ain any speci f
ic Bef
oreassessment
provi
sion pr ohi
biti
ng cour ts f rom a. Appeal – any quest i
on on
enjoi
ning the collecti
on ofl ocaltaxes. const it
utional
it
y or l egal
i
ty of t ax
Suchst atutorylapseori ntentmayhav e ordinance wi thi
n 30 day s f rom
all
owedpr eliminaryinj
uncti
onwher elocal effectivi
tyt hereof to Secretar
y of
taxesarei nvolved.Buti tcannotnegat e Justice( Sec.187LGC)
the procedur alrules and requir
ement s b. Decl aratory r
eli
ef whenev er
underRul e 58 oft he Rul
esofCour t
s. applicable.
(
Vall
eyTradingCo.vs.CFIofI
sabel
a,GR
No.49529,
Mar ch31,1989) Af
terassessment
a. Pr
otest–withi
n60daysfrom r
ecei
pt
of assessment (
Sec. 195 LGC).
PRESCRI VEPERI
PTI ODSFORTHE Payment under prot
est is not
ASSESSMENTANDCOLLECTI
ON necessar
y.
OFLOCALTAXES
PRESCRIPTIVE PERIODS OF b. Payment&subsequentr
efundortax
ASSESSMENT credi
t–wit
hin2y ear
sfr
om payment
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
102
MEMORYAI
DIN TAXATI
ON LAW
oft axt olocaltreasurer( Sec.196 st

ruct
uresandimprovement
son
LGC) .I tistobenot edthat ,unli
kei n i
t,i
ncl
udingmachi
neri
es.
i
nt ernal r evenue t axes, t he
super vening cause applies inl ocal REAL PROPERTY – subject to t
he
taxationbecauset heper iodf ort he defi
nit
iongi
venbyAr
t.415oft
he
fi
li
ngofcl ai
msf orrefundorcr editof Civi
lCode.
l
ocal t axes i s count ed not
necessar il
yfrom thedateofpay ment I
MPROVEMENT – v al
uabl
e additi
on
butf r
om t he datet he t axpayeri s made t o a pr opert
y or
ent i
tl
edt oar ef
undorcr edi t
. amelior
ati
on in i ts condi
ti
on
amountingtomor ethanamer e
c. Ri
ghtofr
edempt
ion– 1y
earf
rom repl
acementof par tsinvol
vi
ng
t
hedateofsaleorfrom t
hedat
eof capi
talexpendi
tur
esandlabor
.
f
orf
eit
ure(
Sec.179,
LGC).
B.JUDI CIAL
1. Courtaction NATUREANDCLASSES
 wi thin 30 days af
terreceiptof
decisionorl apseof60day sof CHARACTERI STI CSOFREALPROPERTY
Secretary of Just
ice’
si nacti
on TAX
(
Sec.187LGC) 1. Direct t axont heOwner shipof
 wi
thi
n30day
sfr
om r
ecei
ptwhen realproper t
y
pr
otestofassessmenti
sdeni
ed 2. Ad v alorem t ax. The v alue i
s
(
Sec.195LGC) basedont het axbase.
 i
f no act
ion i
staken by t
he 3. Propor ti
onate – t he t ax is
t
reasur
erinr
efundcasesandthe calculated on t he basis of a
t
woy earper
iodisaboutt
olapse certai
n per centageoft hev al
ue
(
Sec.195LGC) assessed.
 i fr emedi es av ai
labl
e does not 4. Indivi
siblesingleobli
gati
on
provide pl ain, speedy and 5. Local tax

adequater emedy .
2. Actionf ordeclar
ator yrel
ief TAXI
NGAUTHORI
TIES(
SEC.233,
LGC)
3. Inj
unct i
on – i firreparable damage
wouldbecausedt ot hetaxpayerand Rat
eofBasicReal
LGU
noadequat eremedyi savail
able. Proper
tyTax
1.Pr
ovi
nce not exceedi
ng 1% of
assessedv
alue
I
V.REALPROPERTY
TAXATI
ON 2.Ci
ty notexceedi
ng 2%
3.Munici
pal
i
ty notexceedi
ng2%.
wi
thinMetr
o
DEFI
NI ONS:
TI
Manil
a
REALPROPERTYTAXATI ON – A dir
ect
taxon owner ship oflandsand
buil
dingsorot herimprovements
FUNDAMENTAL PRI NCIPLES
thereon pay abler egar
dless of
GOVERNI NG REAL PROPERTY
whet hert hepr opertyisusedor
TAXATION( SEC.198,LGC)
not,althought hev al
uemayv ary
1. Realpropertyshallbeappr ai
sedati t
s
i
naccor dancewi t
hsuchfactor
.
currentandFairmar ketvalue;
Undert heLGC,itcovers
2. Realpr opert
yshal lbecl assif
iedfor
the admi nist
r at
ion, apprai
sal
,
assessmentpur posesont hebasisof
assessment ,lev yand coll
ect
ion
actualUse.
ofRealPr opertyTax,i.
e.taxon
3. Realpr opert
yshal lbeassessedon
l
and and bui ldi
ng and ot her
the basis ofUni form classif
icati
on
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
103
MEMORYAI
DIN TAXATI
ON LAW
withi
neachLGU 2. Landsot herthanagr
icul
tur
allocat
ed
4. Theappr ai
sal,assessment,lev
yand i
naci t
yormuni ci
pal
it
ymorethanone
coll
ecti
onofRPTaxshal lnotbelet thousandsquar
emet si
er nareaonehalf
toanyPr i
vateperson of which remai
n unuti
li
zed or
5. Theappr ai
salandassessmentofreal uni
mpr
oved by t
he owner of t
he
propert
yshallbeEquitabl
e. pr
opert
y or per son hav
ing l
egal
i
nter
estther
ein.
EXTENTOFTHEPOWERTOLEVY
 Basi crealpropertytax; I SEC.
DLELANDSEXEMPTFROM TAX(
 1% addi ti
onalr ealest atet axt o 238,
LGC)
finance t he Speci al Educat i
on
Fund; (Sec.236) Byr
easonof
:
 5% addi ti
onaladv alorem taxon 1. f
orcemaj
eur
e
Idlelands;(Sec.236, LGC)and 1. ci
v i
ldisturbance
1. naturalcalamity
 Speci al l evy or speci al
1. oranycausewhi chphysical
l
yor
assessment s( may be i mposed
l
egallypr eventstheowneroft he
ev en by muni cipaliti
es out si
de
propertyorper sonhavinglegal
Met r
o Mani la) on l ands
i
nterestt hereinfrom improvi
ng,
compr i
sed wi thi
n i tst erri
tor i
al
uti
li
zingorcul ti
vati
ngthesame.
jurisdi
cti
onspeci allybenef i
tedby
publ i
c wor ks, pr ojects or
CLASSI
FI ON OF L
CATI ANDS FORPURPOSES
impr ovement sfundedbyt hel ocal
OFASSESSMENTSEC.218( A)
gov ernmentuni tconcer ned.
Pr
ovi
ded:
a. Commer cial
 Speciallevyshal lnotexceed
b. Agri
cul
tural
60% oft he act ualcostof
c. Resi
dential
such projects and
d. Miner
al
i
mpr ovement s,i ncludi
ng the
e. I
ndustr
ial
costsofacqui r i
ngl andand
f. Ti
mberland
such ot herrealpr opertyin
g. Speci
al
connectionther ewith
 notappl ytol ands exempt
SPECI
ALCLASSESOFREALPROPERTY
fr
om basi cr ealpr oper t
ytax
(
SEC.216,
LGC)
andther emai nderoft heland
have been donat ed tot he
1. Hospitals
l
ocal gov er nment uni t
2. Cult
ural andScienti
fi
cpurposes
concerned for t
he
3. ownedandusedbyLocal water
constructi
onofsai dpr oj
ects.
dist
ri
cts
(
Sec.240,
LGC)
.
4. GOCCs r enderi
ng essent i
al publi
c
servi
cesi nthesupplyanddistri
but
ion
FOR PURPOSES OF REAL PROPERTY
of wat er and/ or generati
on or
TAXATI ONI DLELANDSSHALLI NCLUDE:
tr
ansmi ssionofelectr
icpower.
(SEC.237, LGC)
1. Agricultural lands mor e than one
PROPERTIES EXEMPT FROM REAL
hectareinar eaonehal fofwhi chremain
PROPERTYTAX( SEC.234, LGC)
uncult
ivated or uni mpr oved by t he
Exempt
ionisl i
mi t
edonl ytot hefoll
owing:
owner of t he pr oper ty or per son
1. Real pr operty owned by t he
hav i
ngl egal i
nter estt her ei
n.
government except when t he
Agricultural l ands pl anted t o
beneficialuset her eofhasbeen
permanentorper enni alcropswi that
grantedt oataxableper son;
least50t reest oahect ar
eshal lnot
2. Charitableinsti
tutions,churches,
beconsi deredi dlel ands.
personages or convents
Landsact uallyusedf orgrazing
appurtenant t hereto, mosques,
purposes shal ll ikewi se not be
non-profitorreli
giouscemet er
ies
consider edidlel ands; and
and al ll ands, bui l
dings and
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
104
MEMORYAI
DIN TAXATI
ON LAW
i
mpr ovements act
ually,directl
y WHAT:Swor nst at
ementcontai
ningt
he
andexclusi
vel
yusedf orrel
igious, fai
rmar ketv
alueanddescri
pti
onofthe
chari
tabl
e or educati
onal proper
ty.
purposes (Art. VI, Sec. 28,  Fori
mpr
ovementonpr
oper
ty
Const
it
uti
on)
; WHEN:Must f i
lewit
hin60day supon
3. Machineri
esandequi pmentthat completi
on or occupation (whichev
er
are act ually, di r
ectly and comesear l
ier
)
excl
usivel
yused byl ocalwater WHAT:Swor nst at
ementcontai
ningthe
uti
li
ti
esandGOCC’ sengagedi n fai
rmar ketvalueanddescri
pti
onoft he
the supply and distri
buti
on of proper
ty.
waterand/orelect
ricpower;
4. Real property owned by dul y DECLARATIONBYPROVI
NCIAL/CITY/
regi
ster
ed cooper ati
ves as MUNI PALASSESSOR(
CI SEC.204)
provi
dedforinRA6938; and
5. Machineryand equi pmentused WHEN:Onlywhent hepersonunderSec.
for pol lut
ion cont rol and 202ref
usesorfai
lstomakeadeclarat
ion
envi
ronmental pr
otecti
on. wit
hint
heprescri
bedti
me.
ACTUALUSEOFPROPERTY AS BASI
S Nooat
hbyt
heassessori
srequi
red.
SEC.217LGC)
FORASSESSMENT(
Notes: ProofofExempt ion ofReal
Real pr
operty shal
l be cl
assif
ied, Pr
opertyf
rom Taxat
ion-(
Sec.206)
val
ued and assessed on t
he basi
s of
ualuser
act egar
dlessofwherelocated, WHO: Byanypersonorf
orwhom r
eal
whoeverownsi
t,andwhoeverusesi
t. pr
oper
tyi
sdecl
ared.
Unpai
dr eal
tyt axes attach tot he  Clai
m f orexempti
on mustbe f
il
ed
propertyand ischargeableagai nstthe with the assessor t
oget
her wit
h
personwhohadact ualorbenef i
cialuse suff
ici
entdocumentaryevi
dence t
o
and possession of i tregardl
ess of supportcl
aim
whet herornothe i sthe owner . To
i
mpose t he r
ealpr opertyt ax on the WHEN:wi t
hin30day sfr
om t
hedat
eof
subsequentownerwhi chwasnei therthe decl
arat
ionofproper
ty.
ownernort he benefici
aluseroft he
propertyduri
ng the designated peri
ods IF PROPERTY I S DECLARED FOR THE FI
RST
woul dnotonl
ybecont rar
ytol awbutalso TIME–( SEC.222)
unjust.(
Estat
eofLim vs.Ci tyofMani la, I
fDecl ared f orthe fi
rsttime,r eal
GRNo.90639,
Febr
uar
y21,
1990) propertyshal lbeassessedf orbacktaxes:
Fornotmor ethan10yearspri
ortodate
PROCEDURE ofiniti
al assessment
Taxesshal lbecomputedont hebasis
ofappl icableschedul eofv aluesinforce
STEP 1:DECLARATI
ON OF REAL duringthecor respondingperiod.
PROPERTY
STEP2:LISTI
NGOFREAL
DECLARATION BY OWNER OR ADMI NI
STRATOR
PROPERTYI
NTHEASSESSMENT
(SEC.202-203)
ROLLS(
SECS.205,
207)
 Fi le a swor n declarati
on witht he
assessor
-onceev ery3y earsduring
 Al
ldecl ar
ati
onsshal lbekeptand
fi
ledunderauni f
orm classi
fi
cat
ion
theperiodf rom January1
system to be establi
shed bythe
toJune30.
provinci
al, ci
ty or muni ci
pal
 Fornewl yacquir
edpr operty–
assessor.
WHEN:Mustf il
ewi t
ht heassessorwi t
hin
60day sfrom dateoftransfer
STEP3:APPRAI
SALAND
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
105
MEMORYAI
DIN TAXATI
ON LAW
VALUATI
ONOFREALPROPERTY 1.basicrealpropert
ytaxin4equal
(
SECS.212-
214,
224-
225) i
nstall
ments( March31,June30,
September30, December30)
DETERMI
NATI
ON OF FAI
R MARKET VALUE 2. special levy – gov erned by
(FMV) ordinance
Forl
and
(
c)I
nter
estforLatePayment(Sec.255)
 Assessor of t he pr ovince/city or
1. twoper cent(2%)f
oreachmont h
muni ci pality may summon t he
on unpai d amount unt i
lt he
owner s of t he pr oper t
ies t o be
deli
nquentamountispaid
affect ed and mayt akedeposi t
ions
2. provi
dedinnocaseshallthetotal
concer ning t he pr operty, i ts
int
erest exceed thi
rt
y-si
x (36)
owner ship,amount ,natureandv alue
(Sec.213, LGC) mont hs.
 Assessorpr epar esaschedul eof
FMV f or different cl asses of (
d)ForAdv
anceandPr
omptPay
ment
1. Advance payment– discountnot
pr oper ti
es.
exceedi
ng 20% ofannualtax(Sec.
 Sangguni anenact sanor dinance 251,LCG)
 The schedul e of FMV i s 2. Prompt payment – discount not
publ ished i n a newspaper of exceedi
ng10%ofannualtaxdue(Art
gener al ci rculation i n t he 342IRR)
pr ovince, city or muni cipalit
y
concer ned ori nt he absence COLLECTIONOFTAX( SEC.247)
thereof ,shallbepost ed int he I
tshal lbetheresponsi bi
li
tyoft hecit
y
pr ovincial capi tol, ci ty or ormuni cipaltr
easur erconcerned.
muni cipalhallandi nt woot her Theci tyormuni cipaltreasurermay
conspi cuous publ i
c pl aces deputizethebar angayt reasurertocoll
ect
therei n(Sec.212, LGC) al
lt axesonr ealpr opertylocatedi nthe
barangay ; pr ovided, t he bar angay
Formachi
ner
y tr
easur erisproperlybonded.
1. ForBrandnewmachi ner
y:FMVi
sthe
acqui
sit
ioncost ODTOCOLLECT(
PERI SEC.270)
2. Inal
lothercases:FMV 1. withinfi
ve(
5)y earsf
rom t
hedat
e
=Remainingeco.l
ife X Replacement theybecomedue
Est
imatedEco.Li
fe Cost 2. within ten ( 10) year
s from
discover
yoff raud,i
ncasether
e
STEP4:DETERMINEASSESSEDVALUE i
sf raudori
ntenttoevade
(SEC.218)
SUSPENSI
ON OF PRESCRI OD (
VE PERI
PTI SEC.
Det
ermi
neAssessedVal
ue 270)
Pr
ocedur
e 1. l
ocal t reasur
er i s l egall
y
1. TakethescheduleofFMV preventedtocoll
ecttax.
2. Assessed Value = FMV x 2. theownerorpr oper
tyrequests
Assessmentlevel forreinvesti
gati
onandwr i
tesa
3. Tax=Assessedv al
uexTaxr
ate waiver bef ore expirat
ion of
peri
odt ocoll
ect.
3. theownerofpr opertyisoutof
STEP5:PAYMENTAND
thecountryorcannotbelocated.
COLLECTI
ONOFTAX
(
a)Accr
ualofTax:Januaryofeveryy
ear
REALPROPERTYTAX
and such wil
lconst i
tut
e as a REMEDI
ESUNDERTHELGC
super
iorl
ien.(
Sec.246)
1.TAXREMEDIESOFTHELOCAL
(
b)Ti
meandMannerofPay :(
ment Sec. GOVERNMENTTOEFFECT
250)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
106
MEMORYAI
DIN TAXATI
ON LAW
COLLECTI
ONOFTAXES (
Sec.252LGC)
A.ADMI NISTRATI VE Cl
aimforTaxRef undorCr edit(
Sec.253)
1. Real Propertytaxlen(
i Secs.257,LGC) a) the taxpayermayf il
e a wri
tt
en
– super iort o al
ll i
ens,char ges or clai
mf orrefundorcr edi
twit
hthe
encumbr ances; provi
ncialorci t
ytreasur
erwithi
n
2. Dist
raint( Sec.254[B],
LGC) ; two y earsf rom t he dat
et he
3. Levy( Sec.254[A],258LGC) ; taxpayer is ent i
tl
ed t o such
4. Purchase of pr opert
y by l ocal reducti
onoradj ust
ment .
tr
easur erforwantofbi dder(Sec.263,
LGC)
. b) i
n case ofdeni
alofref
und or
B.JUDICI
AL cr
edit
,appealto LBAA as in
Ci
vi
lAct
ion(Sec.266,
270LGC) pr
otestcase.
PRESCRI
PTIVEPERI
ODSFORTHE Redempt
ion ofr
ealpr
oper
ty(
Sec.261
COLLECTI
ONOFREAL LGC)
PROPERTYTAXES
Remedyagai nstt
heAssessment/
Appeal
1st: wit
hin 60 day s fr
om not i
ce of
1. Basi
crealpr
oper
tyt
axandanyot
her
assessment of provi
nci
al,cit
y or
tax levied underthe t
it
le on Real municipalassessorto LBAA (Sec.
Pr opert
y Taxation– f
ive(5)y ears 226LGC)
from thedatetheybecamedue.(Sec.
2nd: wit
hin 30 daysfr
om recei
pt of
270,
LGC)
.
deci
sionofLBAAtoCBAA(Sec.230
2. When t
her
eisf
raud ori
ntentt
o
LGC)
ev adethepaymentoftaxes– ten
3rd: wit
hin 30 day
sf r
om recei
pt of
(10) year
sf r
om discov
ery of t
he
deci
sion ofCBAA to CourtofTax
fraudorint
enttoev
adethepayment
Appealsenbanc
(
Sec.270,
LGC)
.
4th: wit
hin 15 daysfrom r ecei
pt of
deci
sionofCourtofTaxAppealsen
GROUNDS FOR THE SUSPENSI
ON OF
banctotheSupr
emeCour t
THE RUNNI
NG OF THE PRESCRI
PTI
VE
PERI
ODS
APPEALSINREALPROPERTY
1. The t reasurer islegal
ly prevent
ed TAXATI
ON
from t heassessmentorcol lect
ionof
thet ax;
PROVI
NCI
AL,CITYORMUNI
CIPAL
2. The t axpayer requests f or a
ASSESSOR
reinvest igati
onandexecutesawai ver
i
nwr iti
ngbef or
etheexpir
ationofthe
wi
thi
n60day
s
per i
od wi thi
n which to assess or
Owner/
Personwithl
egali
nterest
collect; and mustfi
le:
3. Thet axpay erisoutofthecount r
yor 1)Wri
tt
enPetit
ionunderOath
other wise cannotbe l ocated (Sec. 2)Wit
hSupporti
ngDocuments
270,
LGC)
.
2.TAXREMEDIESOFTHE LOCALBOARDOFASSESSMENTAPPEALS
(LBAAshoul
ddeci
dewithi
n120day
sfr
om
TAXPAYER
r
ecei
ptofpeti
ti
on)
A.ADMI
NISTRATI
VE
wi
thi
n30day
s
Protest – pay ment under protest is
requir
edwi thi
n30day st
oprovincial
,ci
ty,
CENTRALBOARDOFASSESSMENT
ormuni cipaltr
easur
er.Nopr otestshall
APPEALS
beent er
tainedunl
essthetaxi
sf i
rstpaid.
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
107
MEMORYAI
DIN TAXATI
ON LAW
wi
thi
n30day
s ref
ertothet
axesimposedonimport
edor
expor
tedwares,
art
icl
es,ormer
chandi
se.

COURTOFTAXAPPEALS(
ENBANC) OTHER TYPES OF FEES CHARGED BY THE
BUREAUOFCUSTOMS
wi
thi
n15day
s  Arrast
recharge
 Whar f
age due – count er
part of
l
icense,charged notfort
heuseof
SUPREMECOURT
any wharfbutf ora specialfund
knownast hePortWorksFund.
B.JUDI CI
AL  Berthi
ngfee
1. Cour tActi
on – appealofCBAA’ s  Harborfee
decisi
ontoCourtofTaxAppeal sen  Tonnagedue
banc.
2. Suitassai
li
ngval
idi
tyoft
ax;recover
y
MEANI NGANDSCOPEOFTHETARI FFAND
ofrefundoftaxespaid(Sec.64PD
CUSTOMSLAWS
464)
.
I
ncludenotonl yt hepr ovisi
onsoft he
3. Suittodeclareinval
idi
tyoft
axdueto
Tariff and Cust oms Code ( TCC) and
i
rregulari
ty i n assessment and
regulati
onspur suantt hereto, butallot
her
coll
ection(Sec.64PD464)
l
awsandr egulati
onst hatar esubjectto
4. Suitassaili
ngthev ali
dit
yoftaxsal
e
the Bur eau of Cust oms ( BOC) or
(
Sec.83PD464)(
Sec.267LGC)
otherwisewi thinitsjurisdiction.
Ast oi tsscope,t heref ore,tar
iffand
CONDONATI ONOFREALPROPERTYTAXES
customs l aws ext end notonl yt ot he
1. Byt heSangguni an
provisi
onsoft he TCC butt o al
lother
Real proper ty t axes may be
l
awsaswel l
,theenf orcementofwhi chis
condoned whol l
y orpar t
ial
l
yi na
entrustedtot heBOC.
gi
venl ocalgov ernmentuni twhen:
a. Ther eisgener al fail
ureofcrops;
b. Ther eissubst ant i
aldecreasein THEBUREAUOFCUSTOMS
thepr i
ceofagr icult
uraloragri
-
basedpr oducts; or FUNCTI
ONS OF THE BUREAU OF
c. Ther eiscalami ty. CUSTOMS
2. Byt hePr esi
dentoft hePhi l
ippi
nes
 whenpubl icinterestsor equir
es. 1. Assessment and col lecti
on of
revenuesf rom i mportedar ti
clesand
allot heri mposi t
ionsundert het arif
f
andcust omsl aws;
V. TARI
FFAND 2. Cont rolsmuggl i
ngandr el
atedf rauds;
CUSTOMSCODE 3. Super v i
sion and cont rol ov er t he
entrance and cl earance ofv essels
and ai rcraft engaged i n f orei
gn
DEFI
NITI
ONS commer ce;
TARIFF:Customsduti
es,tol
lortr
ibute 4. Enfor cementofTCCandr el
atedl aws;
payable upon merchandi
se to t he 5. Super v i
sion and cont rol ov er t he
Government. handl ingoff oreignmai l
sar ri
vingi n
thePhi l
ippines;
CUSTOM DUTI ES:Tax assessed upon 6. Super v i
seandcont r
olal limpor tand
merchandi
se from or expor t
ed to,a expor tcar goesf ort hepr otectionof
for
eigncount
ry.(Gar
ciav.Executi
veSec.
, gov ernmentr evenue;
GRNo.101273,
Jul
y3,
1992)
) 7. Exclusi ve or i
ginalj uri
sdicti
on ov er
seizur e and f orfei
ture cases under
Note: Customs and t ari
ffs are thet arif
fandcust omsl aws.
synonymouswi
thoneanot
her.Theybot
h
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
108
MEMORYAI
DIN TAXATI
ON LAW
JURISDICTION OF COLLECTOR OF Mayei

therbe:
CUSTOMS OVER I MPORTATI ON OF 1. Subj ectt odut y–
ARTICLES a. Live ani mal s and ani mal
1. Causeal lart
icl
esf orimportat
iont o product s;
beent eredinthecustomhouse, b. Veget abl epr oduct s;
2. Cause al l such ar ti
cles to be c. Ani malorv eget abl ef at s; oilsand
appraisedandcl assi
fi
ed, theircl eav agepr oduct s; prepared
3. Assessandcol l
ectthedut i
es,taxes edibl ef at s;ani malorv eget able
andot herchargesthereon,and waxes;
4. Hold possessi on of al li mported d. Prepar edf oodst uf fs;bev erages,
arti
cles untilthe duti
es,taxes and spiritsandv inegar ;tobaccoand
otherchar gesarepaidthereon.(Sec. manuf act ur edt obacco
1206,
TCC) subst itutes;
e. Mi ner al pr oduct s;
TERRITORIAL JURI SDICTI ON OF THE f. Product sofchemi cal oral li
ed
BOC indust ries;
1. Allseaswi thinthej ur
isdicti
onoft he g. Plast icsandar ticlest her eof ;
Phil
ippines rubberandar ticlest her eof ;
2. Allcoast s,por ts,air
por ts,har
bor s, h. Rawhi desandski ns; l
eat her ,etc.
;
bays, r i
vers and i nland wat ers i. Woodandar ticlesofwood, etc.;
whethernav igable ornotf r
om t he j. Pul pofwood, et c.;
sea.(1stpar
, Sec.603,TCC) k. Text ilesandt ext ilear ticles;
l. Articlesofst one; plast er, cement ,
CUSTOMSDUTI
ES etc.;
m.Foot wear , headgear ,etc. ;
n. Nat ur al orcul tur edpear ls
WHENTARIFFANDCUSTOMSAPPLI ED preci ous/ semi pr eci ousst ones;
Onl
yaf
terimpor
tati
onhasbegunbut o. Basemet al sandar ti
cl esofbase
bef
orei
mport
ati
onister
minat
ed. met als;
p. Machi ner yandmechani cal
I
mpor
tat
ionbegi
ns: appl iances; el ect ri
cequi pment ;
1) when t he conveyi
ng vesselor soundr ecor der s, et c;
ai
rcraft q. Vehi cl es, ai rcr aft ,vessel sand
2) entersthej
urisdi
cti
onofthePhil
. associ at edt ranspor tequi pment ;
3) wit
hi nt
enti
ont ounloadt
herei
n r. Opt ical ,phot ogr aphi c, medi cal,
sur gical inst rument s, etc. ;
I
mpor
tat
ioni
sdeemedt
ermi
nat
ed: s. Arms, ammuni ti
on, par tsand
accessor ies;
(a)uponpaymentoft
hedut
ies,t
axesand t. Mi scel laneousmanuf act ured
otherchar
gesdueupont
hearti
cl
es. articles; and
u. Wor ksofar t, col lect or'spi eces
(b)andlegalpermi
tforwi
thdr
awalshal
l aridant ques(
i Sec.104, Title1,
havebeengrant
ed. TCC)
.
 Incaset hear ti
clesar efreeof 2. Prohibit
ed f rom bei ng i mpor t
ed
duti
es,t
axesandot hercharges,unt
ilt
hey (Prohibi
tedimpor tati
on)
havelegall
yleftthe juri
sdict
ion ofthe a.Absol utely prohibited such as:
oms(
cust Sec.1202,TCC) weaponsofwar ;
gambl ingdev i
ces;
narcoti
cs or pr ohibi
ted dr ugs;
INTENTIONTOUNLOAD i
mmor al, obscene or i nsi
dious
Even ifnoty etunloaded,and t
herei s art
icl
es; and t hose pr ohibit
ed
unmani f
estedcargo,for
fei
tur
emayt ake underspeci al
laws( Sec.102,TCC) .
place because i
mportati
on has al
ready b.Qual
i
fiedl
ypr
ohi
bit
ed
begun. Wheresuchcondi
ti
onsast o
war
ranta l
awf
ulimport
ati
on do
ARTI
CLESUNDERTCC
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
109
MEMORYAI
DIN TAXATI
ON LAW
notexi st
,thel egaleff
ectsofthe of the Phi
l
. upon
i
mpor t
ati
on of quali
fi
edl
y recommendat
ionofNEDA (Sec.
prohibit
edar t
icl
esar et
hesameas 105,
TCC)
.
those of absol ut
ely prohi
bit
ed LI
ABI
LITYOFI MPORTERFORCUSTOM DUTIES
arti
cles.(AuyongHi anvs.CTA,GR  A per sonaldebtwhi ch can be
No.L-
28782,
Sept
ember12,
1974) discharged onlybypay menti n
fullther
eof;
3. Conditi
onally-f
ree f rom t ariff and  Al i
enupont heimportedar t
icl
es
cust
oms dut ies ( condit
ionally-f
ree whilet hey ar ei n custody or
i
mpor t
ation) subject tot he controlof t he
 Thosepr ovidedinSec.105, TCC; gov er .(
nment Sec.1204,TCC) .
 Those gr anted t o gov ernment
agencies, GOCCs with EXTENTOFI MPORTER’
SL I
ABILI
TY
agreement s wi
th foreign The li
abili
ty ofan i mport
eris
count r
ies; l
imited tot he v al
ue of t he import
ed
 Those gi v en t o internat i
onal merchandise.Incaseoff orfei
tur
eofthe
i
nstituti
onsent i
tl
edt oexempt ion sei
zed mat eri
al,t he maxi mum civil
by agr eementorspeci all aws; penalt
yist heforfei
tur
ei t
self.(Mendoza
and vs.Davi
d,GRNo.L-
9452,
Mar
ch27,
1961)
 Thoset hatmaybegr antedbyt he
President upon NEDA’ s DRAWBACK
recommendat i
on. A dev
iceresort
edtoforenabli
nga
commodi ty af
fect
ed by taxes t
o be
4. Freefrom TCduties(duty
-fr
ee) export
ed and soldi nfor
eign markets
I
mpor t
ed goods must be uponthesamet ermsasi
fithadnotbeen
enter
ed in a customhouse attheir taxedatal.(
l UyChacoSonsvs.Col
lector
portofentryotherwisetheyshal
lbe ofCustoms,GR No.7618,Mar
ch 27,
consi
dered as contraband and t
he 1913)

i
mpor t
erisliabl
ef orsmuggling(
See
Sec.101,
TCC)
. IMPORTE NTRY
Al lart
icl
eswheni mportedf rom I
tisadecl arationtotheBOCshowi ng
anycountr
yintothePhi l
i
ppinesshal l parti
cularsofthei mpor t
edar t
icl
ethatwil
l
be subject to dut y upon each enable t he cust oms aut hori
ti
es t o
i
mpor t
ati
on,even t
hough pr eviously determinethecor r
ectdut i
es.Ani mport
er
export
edfrom t
hePhi l
i
ppines,except i
sr equiredtof i
leani mpor tentr
y.Itmust
asotherwi
sespecif
ical
lyprov i
dedf or beaccompl ishedf r
om disembar kingof
i
nt heTCCorotherl
aws. l
astcargof rom v essel.
LI
ABI TYFORCUSTOMSDUTI
LI ES TRANSACTIONVALUEUNDERRANO. 8181
General Rule: Al l importat
ions / Itist he i nvoi
ce value ofthe
export
ati
ons ofgoods ar e subjectt
o goods pl us freight,insurance,costs,
customsdutes(
i Sec.105,TCC). expensesandot hernecessaryexpenses.
Thisr epl
aces t he Home Consumpt i
on
Except
ions: Valueasbasisofv aluat
ionofgoods.
(1)Exempt ionsundertheTCC;
(2)Exempt ions granted t
o CLASSIFICATIONOFCUSTOM DUTI ES
gov ernment agencies, RegularDut ies – t hose whi
ch are
instrument al
it
iesorGOCCswi t
h i
mposedandcol lectedmer el
yasa
existingcont r
acts,commi t
ment s, sourceofr evenue.
agreement s,orobl igationswi t
h 1. Adv alor
em dut y:Thisisadut y
foreigncount r
ies; based on t he v al
ue of the
(3)Exempt ions of i nternational i
mpor tedar ti
cle.
organi zati
ons pur suant t o 2. Speci f
ic dut y:Thi sis a duty
agreement sorspecial laws; and basedont hedut iabl
eweightof
(4)Exempt ionsgrantedbyt hePr es. goods( eithert hegr ossweight,
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
110
MEMORYAI
DIN TAXATI
ON LAW
l
egalweight,ornetweight). 3. Marki
ngduty
3. Alt
ernat
ingdut i
es:Thisisadut y 4. Di
scri
minat
orydut
y
whichalt
ernatesadv alorem and
speci
fi
c. NATUREOFSPECI ALCUSTOMSDUTI ES
4. CompoundDut y:Thisi sadut y Special cust oms duties are
consi
sti
ng ofad v alorem and addit
ional impor t duti
es i
mposed on
speci
fi
cduties. speci
fickindsofi mpor t
edart
icl
esunder
cert
ainconditions.

B.Specialduties – those whi
ch are
i
mposedandcol lect
edinaddit
ionto PURPOSE OF SPECI AL CUSTOMS
theor di
narycustomsdut i
esusual
ly DUTIES
to protectlocalindust
ri
es agai
nst Thespeci alcustomsdutiesar
e
for
eigncompet i
ti
on. i
mposedf ortheprotect
ionofconsumer
s
and manuf act
urers,as well as Phi
l.
1. Dumpingduty product
sf rom unduecompet i
ti
onposed
2. Count
ervai
li
ngdut
y byforei
gn-madepr oducts.
SPECI
ALDUTI
ESCOMPARED
DI
SCRI
MINATOR
DUMPI
NGDUTY COUNTERVAI
LINGDUTY MARKI
NGDUTY
YDUTY
1. Nat ure Imposed upon f or

eign Imposed upon Imposed upon
I
mposed upon goodsenj oyi
ng subsidy those not goods comi ng
foreign pr oducts thus all
owing t
hem t o proper
lymarked from count r
ies
with v alue l ower sellatl owerprices to as to pl
ace of that discri
mi nate
than t heir f air the detri
ment of local ori
gin of t he againstPhi l
ippine
mar ketvaluetot he products similarl
y goods. product
s.
detri
ment of l ocal sit
uated.
products.
2.Amount
/Rat
e Equiv
alentt
ot hebount
y, 5% ad v al
orem Any amount not
Dif
fer
ence between subsi
dy,orsubvent
ion. ofar
ti
cles exceeding 100%
theactualpr
iceand adv alorem oft
he
thenormalvalueof subjectart
icl
es
thear
ti
cle.
3. Imposi ngAut hor ity Secr

etar
yofFi
nance Commissi
oner President of t
he
Special commi tt ee ofCust
oms Phil
ippines
on Anti-
Dumpi ng
(composed of t he
SecretaryofFi nance
as Chai rman;
Member s: t he
SecretaryofDTI , and
eit
hert heSecr et ary
of Agr icul
t ure i f
arti
cleinquest ioni s
agri
culturalpr oduct
ort he Secr etaryof
l
abor i
f non-
agri
culturalpr oduct
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw 111
MEMORYAI
DIN TAXATI
ON LAW
FLEXI
BLETARIFFCLAUSE adv alorem orspeci
fi
cequival
entsof
The Pr
esi
dentmay fi
xt ar
if
fr at
es, thedut ywi t
hrespecttotheimpor ts
i
mportandexpor
tquot
as,et
c.underTCC from thepr i
nci
palcompetingforeign
(SeeSec.28,
Art
.VI
,Const
it
uti
onandSec. country f or t he most r ecent
401,TCC) representat
iveperi
odshal
lbeusedas
1. to i ncrease, r educe or r emove bases( Sec.401,TCC).
existi
ng pr otectiver ates ofi mport
duty( i
ncludinganynecessar ychange
i
ncl assif
ication).
The exi sting r ates may be
THETARI
FFCOMMI
SSI
ON(
TC)
increasedordecr easedt oanyl ev
el,
ononeorsev eralst agesbuti nno FUNCTIONS OF THE TARI FF
case shal lt he i ncreased r at
e of COMMI SSI ON
impor t dut y be hi gher t han a 1. Inv
est igat i
v ePower s( Sec.505, TCC)
maxi mum ofonehundr ed( 100%)per a. the admi ni strat ion of and t he
centadv alorem fiscalandi ndust rialef fect soft he
2. toest ablishi mpor tquot aort oban tar i
f fand cust omsl awsoft his
i
mpor t
sofanycommodi ty
,asmaybe count r
ynow i nf or ce orwhi ch
necessar y;and mayher eaf terbeenact ed;
3. toi mposeanaddi t
ionaldut yonal l b. ther elationsbet weent her atesof
i
mpor t
snotexceedi ngt en( 10%)per dut yon r aw mat erials and t he
centadv alor
em whenev ernecessar y: finished or par tly f inished
pr oduct s;
LI
MITATI
ONS I MPOSED REGARDI
NG c. the ef fect s ofad v alor em and
THEFLEXI
BLETARIFFCLAUSE speci fi
c dut ies and of
com¬pound speci fic and ad
a.Conductbyt heTar iffCommi ssionof val orem dut ies;
ani nv esti
gat ioninapubl ichear i
ng. d. all quest ions r elat i
v e t o t he
TheCommi ssionshal lal sohear ar rangementofschedul es and
thev iewsand r ecommendat ionsof classi f
icat ion ofar ti
cles i nt he
any gov ernmentof fi
ce,agency or sev eral schedul esoft het arif
fl aw;
instrument alit
yconcer ned. e. the t ariffr elations bet ween t he
The Commi ssion shal lsubmi t Phi lippinesandf or eigncount ri
es,
theirf indingsandr ecommendat i
ons commer cialt reat i
es,pr eferent ial
tot heNEDA wi t
hint hir
ty( 30)day s pr ov isi
ons,economi c al l
iances,
aftert he t ermination oft he publ i
c theef f
ectofexpor tbount i
esand
hear i
ngs. pr ef¬er ent ial transpor tat i
onr at es;
TheNEDAt hereaf tersubmi t
si t
s f. the v olume of i mpor tations,
recommendat iontot hePresident . compar ed wi th domest i
c
a. The power of t he Pr esident t o pr o¬duct i
onandconsumpt ion;
i
ncr ease ordecr ease t he r ates of g. condi ti
ons,causes,and ef f ects
i
mpor t duty within the relat ingt ocompet it
ionoff or ei
gn
abov ement ioned l i
mi tsf ixed i nt he indust ri
es wi th t hose of t he
Codeshal lincludet hemodi ficationin Phi lippines,i ncl ud¬i ng dumpi ng
thef orm ofdut y. andcostofpr oduct i
on; and
Insuchacaset hecor respondi ng h. in gener al,t o i nv est i
gat e t he
oper ationofcust omsand t ariff
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
neTorr
es ASST.CHAIRPERSON:Rhohai
lCastro EDP:Rachel
l
eSay a SUBJECTHEADS:
Jemi
naSy
,Casi
anoI
lagan,
Jr.
,
RyanCo,EdwinTor
res :
MEMBERS:
Mar
it
aLour desAzur ,
EdizerEnr
iquez,
Chri
sti
anCabrera,
Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
112
MEMORYAI
DIN TAXATI
ON LAW
l
aws,i ncluding thei
rr el
ati
on to useoft heCessnapl anef
or
the national r ev¬enues, their smuggli
ng oper at
ion i s
eff
ectupon t he industr
ies and suf
fi
cientfori
ttobedeemed
l
abor of t he country and t o to hav e been used i n
submitrepor t
sofi t
sinvesti
gati
on smugglng. (
i Ll
amado vs.
aspro¬vided. Commissi
oner of Cust
oms,
GR No.L- 28809,May 16,
2. Administ
rat
ive Assi
stance t
o the 1983)
Presi
dentandCongress (Sec.506, 3. Reduction ofcust oms dut
ies /
TCC) compr omise
 subj ecttoapprovalofSec.of
Finance (Sec.709,
2316TCC)
4. Sei
zure,Search,Ar
rest (
Sec.
2205,
2210,2211TCC)
TAXREMEDIESUNDERTHE
TARIFFANDCUSTOMSCODE B.JUDI
CI AL
(
TCC) 1. this r emedy i s nor mall
y
av ail
edofwhent hetaxli
en
TAX REMEDI
ES OF THE i
sl ostbyt hereleaseofthe
GOVERNMENT goods
 Ci vilActi
on ( Sec.1204,
A.ADMINISTRATI VE TCC)
1. TaxLi en( Sec.1204TCC)  Cr i
minalAct
ion
at taches on t he goods,
regar dlessofowner ship,whi l
e TAXREMEDI
ESOFTHETAXPAYER
stillint hecust odyorcont r
olof
theGov ernment A.ADMINISTRATI VE
av ailed of when the 1. Pr
otest
i
mpor t
at ion is neit
her a. Any i mpor t
er or i nterested
prohi bi tednori mpr oper lymade party i f di ssati
sfi
ed wi t
h
2. Admi nist rative Fines and publi
shed v alue wi thin 15
Forfeitur es daysf rom dat eofpubl i
cation,
 appl i
edwhent hei mpor tati
on orwi t
hin 5 day sf rom t he
i
sunl awf ul, datet hei mpor terisent itl
ed
 andi tmaybeex ercisedev en to r efund i f payment i s
wher et hear ti
clesar enotor rendereder roneousori l
l
egal
no l onger i n Cust om’s byev entsoccur ri
ngaf terthe
cust ody payment .
-unl ess t he impor tati
on is b. Taxpay er– wi thin 15 day s
mer ely at t
empt ed i n whi ch from assessment . Pay ment
casei tmaybeef f
ect edonly underpr ot
esti s necessar y.
whi le t he goods ar e sti
ll (
Sec.2308,
2210TCC)
wi thin the Customs 2. Ref
und
j
ur isdi ctionori nt hehandsof a. A wr it
ten cl ai
m f orr efund
a per son who i s awar e may be submi tted by t he
ther eof( Sec.2531 & 2530, i
mpor terinabat ementcases
TCC) on mi ssing packages,
 under Sec.2530(a)ofthe defi
ciencies int he content s
TCC, in order t
o warr
ant of packages or shor tages
forf
eitur
e,itisnotnecessar y beforearrivalofthegoodsi n
that the vesselor aircraft the Phili
ppines,ar t
icl
es lost
must i tsel
f car ry t he or dest roy ed af ter such
contraband. The arr
ival, dead or i njur ed
compl ementaryif col
lateral ani
mal s,and f or mani fest
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
113
MEMORYAI
DIN TAXATI
ON LAW
cleri
cal error
s;and THEBUREAUOFCUSTOMS(
BOC)
b. Drawback cases wher et he
goodsar ere-expored (
t Sec. A.CUSTOMSPROTESTCASES
1701- 1708TCC) .
3. Set
tlement of any sei zure by DEFINI
TION:Thesear ecaseswhichdeal
pay
mentoff ineorredempt ion solelywithliabi
li
tyf orcust
oms dut
ies,
 Butt hisshal lnotbeal lowed fees,andothercharges.
i
n any case wher e
i
mpor tation i s absol utel
y Not
e: Bef
oref
il
ingapr
otest
,ther
emust
prohibited, or t he r elease f
ir
stbeapay
mentunderpr
otest
.
woul dbecont rarytol aw,or
whent hereisanact ualand WHENCUSTOMSPROTESTAPPLI
CABLE
i
nt enti
onalf raud (Sec.2307
TCC) . Thecustomspr otesti
sr equir
edt obe
fi
led onlyi n case the li
abi l
i
ty oft he
4. Appeal taxpayerforduti
es,taxes,feesandot her
 Wi t
hin 15 day s t o the chargesisdet ermi
nedandt het axpayer
Commi ssioner af
ter disputessai
dliabi
li
ty.
not
if
icati
on by Col lect
orof
hi
sdecision (Sec.2313TCC). WHENCUSTOMSPROTESTNOTREQUI
RED
B.JUDI
CIAL Wher etherei s no dispute,butt he
1. Appeal cl
aimf orrefundarisesbyr easonoft he
 Wi thi
n30day sf r
om receipt happeningofsuperveningev entssuchas
of deci sion of t he whent herawmat eri
alimpor tedisut
il
ized
Commi ssi
oner or Secretary i
nt he producti
on off i
nished products
ofFinancet othediv
isi
onof subsequentl
y expor ted and a dut y
theCTA( Sec.2403TCC,Sec. drawbackisclai
med.
7RA 1125,asamendedby
Sec.9RA9282) REQUI
REMENTSFORMAKI
NGAPROTEST
 Si
nceSec.
11ofRA 1125as
amended by RA 9282 1. Mustbei nwr i
ti
ng
empower st heTaxCour tto 2. Mustpoi ntouttheparticulardecisi
on
issue i njunct i
ons,i t would orruli
ngoft heCol l
ectorofCust oms
appeart hatani mportermay to whi ch except i
on i s t aken or
appealwi thoutf ir
stpay ing objecti
onmade;
thedut ies, suchasi nseizure, 3. Mustst atethegr oundsr eli
edupon
butnoti npr ot estcases. forrel
ief;
2. Acti
ont oquest iont helegali
tyof 4. Mustbel i
mit
edt othesubj ectmat ter
sei
zure ofasi ngleadjustment;
3. Abandonment( Sec.1801TCC) 5. Must be f i
l
ed when t he amount
a. expressl y( Sec.1801TCC) clai
medi spaidorwi t
hin15day safter
b. impliedly– thepay ment ;
c. f ai
lur et of i
le an impor t 6. Protestantmustf urni
shsampl esof
entrywi thin30day sf r
om goodsunderpr otestwhenr equi
red.
thedi schar geofgoodsor
d. hav i
ngf iledanent ryfail
s PROCEDURE I
N CUSTOMS PROTEST
to cl aim wi thin 15 days CASES
buti tshal lnotbe so
effect i
v e unti
l so TheColl
ectoracti
ngwithinhi
sjuri
sdi
cti
on
decl aredbyt hecol l
ector. shal
lcausetheimportedgoodstobe
(Sec.1801,asamended enteredatthecustomhouse
byRA7651) 
TheColl
ectorshal
lassess,
li
qui
date,
and
TWOKI
NDSOFPROCEEDI
NGSI
N col
l
ecttheduti
esthereon,
ordet
ainthe
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
114
MEMORYAI
DIN TAXATI
ON LAW
sai
dgoodsi
fthepart
yli
abl
edoesnotpay DEFINITION: Th ese r efer t o mat ter s
thesame i
nv ol
v ng smuggl
i ing.Itisadmi ni
strative
 andci v i
linnat ur eandi sdi rectedagai nst
Thepart yadverselyaff
ect
ed( t
he ther esori mpor t
edar ti
clesandent ail
sa
protest
ant)mayf i
l
eawr i
tt
enproteston determi nat i
on of t he legal i
ty of t hei r
hi
sf or
egoingliabi
li
tywiththeColl
ector i
mpor tation.Thesear eact i
onsi nrem.
wit
hin15day saft
erpay i
ngtheli
quidated Thus,I tisofnodef ensethatt he
amount( t
hepay mentunderprotestrule owneroft hev esselsoughtt obef orf
eit ed
applies) hadnoact ualknowl edget hathisproper ty
wasusedi ll
egal ly
.Theabsenceorl ackof
 actualknowl edge of such use i sa
Heari
ngwi t
hin15daysfrom r
ecei
ptofthe defenseper sonalt ot heownerhi msel f,
dulypresent
edprot
est.Uponterminat
ion which cannoti n any way absol vet he
oft
hehear i
ng,t
heColl
ectorshal
ldeci
de vesself r
om t he l i
abil
ity of f orf
eitur e.
onthesamewi t
hin30days (Commi ssionerofCustoms vs.Manila
Star Ferry, Inc.
, GR Nos. 31776-
78,
  October21, 1993)
I
fdeci
sionisadver
set
o I
fdeci
si
onisadv
erset
o
theprotest
ant t
hegov
ernment SMUGGLING
1. Anactofanyper sonwhoshal l
:
  a. Fraudulent
lyimpor tany arti
cle
Appeal
withthe Aut
omat
icRevi
ewby contrarytolaw, or
Commissi
onerwithi
n t
heCommissi
oner b. Assistinsodoing,or
15daysfrom not
ice  c. Receive, conceal , buy, sell
,
 Automati
crevi
ewby facil
it
ate,tr
ansport,conceal or
t
heSecretar
yof sell such ar t
icle knowingits
Appealwit
htheCourt
Fi
nance i
llegali mport
ation (Sec.3601,
ofTaxAppealsDi
visi
on
 TCC)
wi
thi
n30day sf
rom
noti
ce d.Expor
t cont
rar
yt aw. (
o l Sec.
3514,
TCC)
 I
fdeci si
onof
Appealwi t
hthe Commi ssioneror 2. ThePhili
ppi
nesisdi
videdint
ov ar
ious
CTAenbanc Secr
etary ofF i
nanceis port
sofentry–entryotherthanport
adverset ot he
 protestant,hemay
ofentr
y,wil
lbeSMUGGLI NG.
Appeal bycerti
orar
i appealtot heCTAand
wi
tht heSupremeCour t PORTOFENTRY
SCundert hesame A domestic portopen t o both
within15day sfr
om procedureont helef
t.
noti
ce for
eign and coast wise t r
ade i ncl
uding
“ai
rportofentry
”.(Sec.3514, TCC)
ALL art
icl
es impor ted intot he
Phil
ippineswhethersubjectt odut yornot
shallbeenteredthroughacust omshouse
REASONS FOR THE AUTOMATI
C REVI
EW OF
atapor tofentr
y.
DECI
SIONSADVERSETOTHEGOVERNMENT
ENTRY:i
nCust omsl awmeans-
1. the document sf il
ed att he
1. To pr otectthe i
nt erestoft he Customshouse
Government 2. the submi ssion and
2. A favorabledeci
sionwi l
lnotbe acceptance of the
appealed by the t axpayer and document s
cert
ainly a Collect or wil
l not 3. the procedur e of passi ng
appeal hisowndecision. goodst hrought hecust oms
3. Li
febloodTheory house (Rodriguezvs.Cour t
ofAppeal
s,GRNo.115218,
B.SEI
ZUREANDFORFEI
TURECASES Sept
ember18,
1995)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
115
MEMORYAI
DIN TAXATI
ON LAW
CONTRABAND: Art
icl
es of prohi
bit
ed PROPERTI ES NOT SUBJECT TO
i
mport
ati
onsorexport
atons.(
i Sec.3514, FORFEI TURE IN THE ABSENCE OF
TCC) PRIMAFACI EEVI DENCE
Theforf
eit
ureofthevehicl
e,vesselor
ai
rcraftshallnotbe ef fected ifiti s
establi
shedthattheownerthereoforhi s
EVIDENCE FOR CONVI CTION I N agent i n charge of the means of
SMUGGLI NGCASES conv ey
ance used as af
oresaid has no
Mer e possession oft he ar t
iclei n knowledge of or partici
pat
ion i
nt he
queston-unl
i essdefendantcoul dexplain unlawfulact:
that his possession isl awf ultot he Pr
ovided,however
,thatapri
maf aci
e
sati
sfacti
onoft hecourt(Sec.3601, TCC). presumpt i
onshallexi
stagainstthev essel,
Payment of t he t ax due af t
er vehicl
e or ai r
craft under any of t he
apprehension is not a v ali
d def ense fol
lowingcircumstances:
(Rodr
iguezvs.Cour
tofAppeal
s,GRNo. 1. I
ft heconveyancehasbeenused
115218,Sept
ember18,
1995) for smuggl i
ng at l east t wice
before;
THINGSSUBJECTTOCONFI SCATI ONIN 2. I
ft heownerisnotinthebusi ness
SMUGGLI NGCASES for which t he conv eyance i s
Any
thi
ng t hat was used f or generall
yused;and
smuggli
ngissubjecttoconfiscat
ion,l
i
ke 3. I
ft heownerisf i
nanciall
ynoti na
the vessel
,plane,et c. (
Llamado vs. positi
ontoownsuchconv eyance.
Commissi
onerofCustoms,GR No.L-
28809,
May16,1983)
. DOCTRINEOFHOTPURSUI T
Requi
sit
es:
Excepti
on:Commoncar r
ier
sthatarenot 1. OverVessels
pri
vatel
ychar
ter
edcannotbeconfi
scat
ed. a. An acti s done in Phil
.Wat ers
whichconst i
tut
esav i
olati
onof
RIGHT OF CUSTOMS OFFI CERS TO thetari
ffandcustomsl aws
EFFECTSEI ZURE&ARREST( SEC.2205) b. apur suitofsuch v esselbegan
1. Maysei zeanyv essel
,air
craft,cargo, withi
nt he juri
sdicti
onalwat ers
arti
cle, animal or ot her mov abl
e which
propertywhent hesamei ssubjectto (i
) may cont i
nue bey ond t he
forf
eiture orliablef oranyt i
me as marit
imezone, and
imposed undert ari
ffand cust oms (i
i)thev esselmaybesei zedon
laws, r
ules&regul ati
ons t
hehighseas.
2. May exer cise such power s onlyin
conformi t
y wi th t he l aws and 2. OverI
mpor tedArticles
provi
sionsoft heTCC a. Thereisav iolati
onoft het ar
if
f
andcust omslaws
COMMONCARRI ERS; FORFEITURE b. Asaconsequencet heymaybe
1. Common car riers ar
e gener all
ynot pursuedinthePhi l.
subjectt of orfeit
urealthoughi ft he c. Withjuri
sdict
ionov erthem atany
ownerhasknowl edgeofi tsusei n pl
acet herei
nf ortheenforcement
smuggl ing and was a consent ing ofthelaw.(2ndpar.Sec.603,TCC)
party,i
tmayal sobef orf
eited.
2. Ifamot orv ehicl
ei shiredt o car r
y
smuggl ed goods but i t has no REGI
ONALTRI
ALCOURTS(RTC)
Certi
ficate of Publ i
c Conv enience VS.
(CPC), i
tisnotacommoncar ri
er.I
tis BUREAUOFCUSTOMS(
BOC)
thussubj ectt oforfei
tur
e,andl ackof
personalknowl edgeoft heowneror  The RTCs do nothav ejuri
sdict
ion
the car ri
er i s not a def ense t o over sei zur
e and for
feit
ure
forf
eiture. proceedi
ngsconducted bytheBOC
and t o inter
fer
e wi t
h t hese
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
116
MEMORYAI
DIN TAXATI
ON LAW
proceedings. The Col l

ector of 
Cust oms has excl usivejurisdi
ction Di
str
ictcol
lectorrender
shi
s
overal lquest i
ons touching on t he decisions
seizure and f orfei
ture of dut i
able
goods.
 Nopet iti
onsf orcerti
orari
,prohibi
tion
 
ormandamusf i
ledwiththeRTCwi ll Ifdeci
sionisnot I
fdecisi
onisnot
l
ie because t hese ar e in r ealit
y favorabletot
he favor
ablet
othe
attempt s t
o revi
ew the aggri
evedowneror gov
ernment
Commi ssioner'
s actuati
ons.Nei ther i
mpor t
er
replevi
nf i
ledwi t
ht heRTCwi lli
ssue.  
Rat
ional
e: Doct
ri
ne of Pr
imar
y Appealbythe Aut
omati
cReview
Jur
isdi
cti
on. aggr
ievedowneror bythe
 Eveni
faCust
omssei
zur
eisi
l
legal
, import
er Commissi
oner
exclusi
ve juri
sdi
cti
on ( to t he
exclusi
on of r
egul
ar cour
ts) sti
l
l
belongstotheBureau ofCust
oms PERSONS HAVI
NG POLICEAUTHORI
TY
(Jao v.CourtofAppeal
s,GR No. TO ENFORCETHETARIFF&CUSTOMS
104604,Oct
ober6,
1995)
. LAWS AND EFFECT SEARCHES,
ZURES AND ARRESTS (
SEI SEC.2203,
GOODS I N CUSTOM’ S CUSTODY TCC)
BEYONDREACHOFATTACHMENT 1) of fi
cial
soft heBOC, dist
ri
ctcol lectors,
Goodsi nthe cust
om’scust ody police officer s,agent s,inspector s,and
pendingpay mentofcust omsdutiesar e guest softheBOC;
beyondther eachofat t
achment.Asl ong 2) of fi
cersoft hePhi l
.Nav yandot her
as t he impor t
ati
on has not been member soft he AFP and nat ionall aw
ter
minated,the imported goodsr emain enforcementagenci es when aut hor i
zed
underthej urisdi
cti
on oftheBur eau of byt heCommi ssi onerofCustoms
Customs.( Viduyavs.Berdi
ago,GRNo.L- 3) of fi
cial
soft heBI Ronallcasesf al
li
ng
29218,
Oct
ober29,
1976) withint her egul arper f
ormancesoft heir
duties,when t he pay mentof i nt ernal
ADMINI
STRATIVE AND JUDI
CIAL taxesar einv olved;
PROCEDURES RELATI
VE TO CUSTOMS 4) of fi
cersgener all
yempower edbyl aw
SEI
ZURESANDFORFEITURES toef fectar rest sandexecut epr ocesses
ofcour ts,whenact i
ngundert hedi r ecti
on
Det
ermi
nati
onofprobabl
ecauseand oftheCol l
ect or.
i
ssuanceofwarr
ant
REQUIREMENTS FOR CUSTOMS
 FORFEITURE
Act
ual
sei
zur
eoft
hear
ti
cl
es 1. Thewr ongf ulmaki ngbyt heowner ,
 i
mpor ter,expor terorconsi gnee of
Li
stingofdescr
ipt
ion,appr
aisal
and any decl ar ation oraf f
idav i
t,ort he
classi
fi
cati
onofseizedpropert
y wrongf ulmaki ng ordel i
verybyt he
 sameper sonsofanyi nvoice,letteror
Repor
tofsei
zur
etotheComm.of paper - al l t ouching on t he
CustomsandtheChai
rman,
Comm. i
mpor tati
on or expor tati
on of
onAudit mer chandi se. ;and
2. That such decl arat
ion, af f
idav i
t,
 i
nvoi ce,l etter or paper i s false.
I
ssuancebyt
heColl
ectorofawar
rant (Far
olan,Jr
.vs.CourtofTaxAppeal
s,
ofdet
enti
on GRNo.42204, January21,1993)

Not
if
icat
iont
oownerori
mpor
ter PLACESWHERESEARCHES&SEI
ZURES
 MAYBECONDUCTED
For
mal
hear
ing (
a)encl
osur
es
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
117
MEMORYAI
DIN TAXATI
ON LAW
(
b)dwel l
i
ng house ( there mustbe
searchwar rantissuedbyaj udge)
(
c)vesselsorai r
craft
sandper sons ACQUITTALI N CRI
MINALCHARGENOT
orarticlesconveyedt her
ein RES JUDI CATA I N SEI ZURE OR
(
d)vehicl
es, beastsandper sons FORFEITUREPROCEEDI NGS
(
e)persons ar r
ivi
ng f rom f orei
gn Reasons:
countries. 1) Cri
mi nalproceedi
ngsar eact i
onsin
personam whi l
eseizureorf or
fei
tur
e
Note: Burden ofproofi
n sei
zure or proceedingsareacti
onsinrem.
for
fei
tur
eisontheclai .(
mant Sec.2535, 2) Customs compr omise does not
TCC) exti
nguish cri
minalliabi
l
ity.(Peopl
e
vs. Desi
der
io, GR No. L-
208005,
REQUI REMENTSFORMANI FEST November26,1965)
Amani f
estincoastwiset r
adefor
cargoandpassenger stranspor t
edfrom Not
e: Atanyt
imepr
iort
othesal
e,t
he
onepl aceorpor tinthePhi l
ippi
nest o deli
nquent i mpor t
er may set tle his
anotherisrequi
redwhenoneorbot hof obli
gat ionswi t
ht heBur eauofCust oms,
suchpl acesisaportofent y(
r Sec.906, i
nwhi chcaset heaf or
esaidarti
clesmay
TCC).Mani f
est
s are also required of be del iv
ered upon pay ment of t he
vesself r
om a forei
gn port( Sec.1005, correspondi ng duties and t axes and
TCC)
. compl iance wi th al l ot her l egal
requirement s(Sec.1508, TCC)
IS MANI FEST REQUI RED ONLY FOR
IMPORTEDGOODS? ABATEMENT
NO.Ar t
icl
essubjecttosei
zuredo The reduct ion ornon- imposit
ion of
nothavetobei mportedgoods.Manifests cust
oms dut ies on cer tain i
mpor ted
are al
so requir
ed forar t
icl
esfound on materi
alsasar esultof
:
vessel
sorai rcr
aftengagedi ncoastwise 1) Damagei ncurr
eddur ingvoyage;
tade.(
r Rigorvs.Rosales,GRNo.L-33756, 2) Def i
ciencyi ncontentspackages
Oct
ober23,
1982) 3) Loss ordest ruct
ion ofar ti
cles
afterar ri
val
UNMANI FESTEDCARGOI SSUBJECTTO 4) Deat hori njur
yofani mals
FORFEI TURE whet her the act of
smuggl i
ngi sestabli
shedornotundert he FRAUDULENTPRACTI CESCONSI DERED
pri
ncipleofr esipsaloqui
tur.I
tisenough AS CRI MI NAL OFFENSES AGAI NST
thatthecar gowasunmani fest
edandt hat CUSTOMSREVENUELAWS
therewasnoshowi ngthatpay mentof 1) Unlawf ulimpor tation;
duti
est hereonhadbeenmadef ori
ttobe 2) Entryofi mpor tedorexpor tedar ti
cle
subjecttoforfei
ture. bymeansofanyf alseorf raudulent
practi
ces, i nvoi ce, decl arati
on,
SETTLEMENTOFFORFEI TURECASES affi
davit,orot herdocument s;
GeneralRule:Sett
lementofcases by 3) Entryofgoodsatl esst hant heirtrue
payment of fine or r edempt
ion of weights or measur es or upon a
for
fei
tedpr
opert
yisall
owed. classif
icationast oqual ityorv alue;
4) Pay mentofl esst hant heamountdue;
Except
ions: 5) Fil
inganyf alseorf raudul entclaimf or
1. the impor t
ati
on i s absolut
ely thepay mentofdr awbackorr efundof
prohi
bit
edor duties upon t he expor tati
on of
2. thesurrenderoft hepropert
yt o mer chandise; or
the person off
eri
ng tor edeem 6) Fil
inganyaf fidavit,cer ti
ficateorot her
wouldbecont r
arytolaw,or documentt o secur et o himsel for
3. whent hereisfraud.(Sec.2307, otherst hepay mentofanydr awback,
TCC) all
owanceorr efundofdut i
esont he
exportationofmdse.gr eaterthant hat
l
egal l
yduet hereon.( Sec.3602, TCC)
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
118
MEMORYAI
DIN TAXATI
ON LAW
business;
7. to assess damage agai nst
VI. COURTOF appellantif appealt o CTA i s
foundt obefr
ivolousordil
atory
;
TAXAPPEALS 8. tosuspendt hecol lect
ionoft he
(
RA1125asamended taxpendingappeal ;and
9. tor ender decisions on cases
byRA9282) broughtbeforeit
10.to i ssue or der aut hori
zing
 SeeANNEXOforcompari
sonofCTA distr
aintofpersonalproper
tyand
ascreat
edbyRA No.1125andthe l
ev yofrealpr
oper t
y
amendment
smadebyRANo.9282.
DISTRAI NT OF PERSONAL PROPERTY
ANDLEVYOFREALPROPERTY
NATUREANDPOWERS Upont hei
ssuanceofanyr
uli
ng,or
der
ordeci si
onbyt heCTA favor
abletothe
ELEVATIONOFRANK nati
onalgov er
nment,theCTAshalli
ssue
shallbe ofthe same levelas t
he anor derauthori
zi
ngtheBIR,thr
oughthe
Court of Appeal
s,possessing allt
he Commi ssi
oner:
i
nherentpowersofaCourtofJusti
ce
1. to sei ze and di strai
ntany goods,
COMPOSI TI
ON chat t
els,oref fectsandt heper sonal
proper ty,includingst ocksandot her
 ConsistsofaPr esidingJusticeand
secur i
ties, debt s, cr edi
ts, bank
fi
ve(5)Associat
eJust ices
account s,andi nterestsinandr ights
 Maysi tenbancorint wo(2)Divisi
ons,
toper sonal proper t
yand/ or
eachDi vi
sionconsisti
ngoft hree( 3)
2. l
ev yther ealproper t
yofsuchper sons
Justi
ces. ThePr esidi
ngJusticeand
i
nsuf f
icientquant i
tytosati
sfythet ax
the mostSeni orAssoci ate Justi
ce
or char ge t ogether wi t
h any
shallserveaschai rmenoft het wo
i
ncr ement t hereto i nci
dent t o
div
isions
deli
nquency .
QUORUM
Thisr emedyshallnotbeexcl usive
 Four( 4)Justi
cesshal
lconsti
tut
ea and shal
lnotpr ecl
ude the Cour
tf rom
quor
um f onsENBANC.
orsessi avai
l
ingofot hermeansundert heRul es
 Two ( 2)Justi
cesforsessi
onsofa ofCourt.
DIVI
SION.
PROVI DED:i ncaset herequir
edquor um
cannot be had due t o any vacancy,
JURI
SDI
CTI
ON
disqualif
icati
on,inhibi
ti
on,disabili
ty,or
I
.EXCLUSI
VEAPPELLATE
any ot herl awfulcause,t he Presiding
JURISDI
CTI
ONTOREVIEW BYAPPEAL
Justice shalldesignate any Justi
ce of
other Di visi
ons of the Cour tt o si t
(
a) Deci
si he Commi
onsoft ssi
oner
tempor aril
yther
ein.
ofI
nter
nalRevenue
1. i
n cases i nv ol
vi
ng di sput ed
POWERS
assessment s, r efunds of
1. toadmi nisteroat hs;
i
nt er
nalr evenue t axes,f ees
2. toreceiveev idence;
orot herchar ges,penal t
iesi n
3. to summon wi tnesses by
relat
iont her eto,
subpoena;
2. or ot her mat ter
s ar ising
4. torequirepr oduct i
onorpaper
sor
undert heNI RCorot herl aws
document s bysubpoena duces
admi nisteredbyt heBIR;
tecum;
(
b) I
nactionbyt heCommi ssionerof
5. topunishcont empt ;
I
nter
nalRevenue
6. to pr omul gate r ul
es and
1. i
n cases i
nvol
vi
ng di
sput
ed
regul
ationsf ort heconductofit
s
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
119
MEMORYAI
DIN TAXATI
ON LAW
assessment s, r efunds of counterv

ail
i
ngdut iesunderSecs.
i
nter nalr ev enue taxes,f ees 301and302,r especti
vely
,ofthe
orot herchar ges,penal ti
esi n Tarif
fand Cust oms Code,and
rel
at i
ont her eto, safeguardmeasuresunderRANo,
2. or ot her mat t
ers ar ising 8800,wher e either par
ty may
undert heNI RCorot herl aws appealthedecisi
ont oimposeor
admi nistered by t he BI R, nottoimposesaidduties.
wher et he NI RC pr ov i
des a
speci f
icper iodforact i
on,i n I
I. JURISDI
CTI
ON OVER CASES
whi chcaset heinactionshal l INVOLVI
NGCRIMI
NALCASES
bedeemedadeni al
;
(
c) Decisions,or der sorr esol uti
ons (
a)Excl
usi
veor
igi
nalj
uri
sdi
cti
onover
oftheRTC al
l cr imi nal cases ar ising f rom
–i nl ocalt ax cases or igi
nal ly vi
olat i
onsoft heNI RCorTar i
ffand
decided orr esolved byt hem i n Customs Code and ot her laws
theex erciseoft hei
ror iginalor admi nistered by t he BI R ort he
appel l
atejur i
sdict i
on; BureauofCust oms
(
d) Decisionsoft he Commi ssioner  Pr ovided however , wher e t he
ofCust
oms principalamountoft axes and
1. incasesi nvolv
ingl i
abil
ityfor fees,excl usi v e ofchar ges and
cust omsdut i
es, feesorot her penal ti
es cl aimed i sl ess than
moneychar ges, seizure, onemi l
lionpesos( P1,000,000.
detentionorr eleaseof 00)orwher et herei snospeci fied
proper tyaffected, fi
nes, amountcl aimed- t heof f
enses
forfeit
ur esorot herpenal ties orpenal tiesshal lbet riedbyt he
inrelationtheret o, regular cour ts and t he
2. or ot her mat ter s ar ising j
ur i
sdict i
onoft heCTA shal lbe
undert he Cust omsLaw or appel l
at e.
otherl aws admi nistered by  Anypr ov i
si onofl awort heRul es
theBur eauofCust oms; of Cour t t o t he cont rar y
(
e) Deci
sionsoft heCent ralBoar dof not withstandi ng, t he cr iminal
AssessmentAppeal
s action and t he cor r espondi ng
–i ntheexer ci
seofi tsappell
ate civilact ion f ort he recov eryof
j
urisdi
cti
onov ercasesi nvol
ving civil l i
abi li
t y f or t axes and
theassessmentandt axati
onof penal ti
es shal latal lt i
mes be
realpr
opertyor i
ginal
l
ydecidedby simul taneousl y i nsti
tut ed wi th,
the prov
incialorci ty board of and j oi ntly det ermined i nt he
assessmentappeal s; samepr oceedi ngbyt heCTA, the
(
f) Decisi
ons of t he Secretary of fi
li
ngoft hecr i
mi nalact ionbei ng
Fi
nance deemedt onecessar i
lycar r
ywi th
–oncust omscasesel ev atedt o i
tt hef il
ingoft heci vi
lact i
on,and
him automat i
callyforr ev iewf rom nor i
ghtt or eser vet hef il
ingof
decisi
onsoft heCommi ssi onerof suchci vilact i
onsepar atelyfrom
Customs whi ch ar e adv erse t o the cr imi nal act i
on wi ll be
the Gov ernmentunder Sect i
on recogni zed.
2315oft heTar i
ffandCust oms
Code; (
b)Excl
usi
veappel
lat
ejur
isdi
cti
oni
n
(
g) Decisions of t he Secr etary of cr
imi
naloffenses
TradeandI ndustryi nt hecaseof  Ov erappealsfrom thej udgment s,
nonagr i
cult
ural product , resolut
ionsoror dersoft heRTC
commodi t
y or ar ticl
e,and t he intaxcasesor i
ginallydeci dedby
Secretary ofAgr iculturei nt he them, i n t hei
r r espective
case of agr i
cul tural pr oduct , terri
tor
ialjur
isdicti
on.
commodi t
yorar ticle,  Ov erpet i
tionsf orr evi
ew oft he
–i nvolvi
ng dumpi ng and judgment s,resoluti
ons,oror ders
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
120
MEMORYAI
DIN TAXATI
ON LAW
oftheRTCi nt heexer ci
seoftheir Those controversies which can be
appell
ate jurisdict
ion ov er t
ax considered within t he scope of t he
casesor i
ginallydeci ded bythe functi
onoft heBI R/BOCunderej usdem
Metropoli
tan Tri
al Cour ts, generisrul
e( e.
g.act ionforthenul l
it
yof
Municipal Tr ial Cour ts, and dist
raint and l evy; questioni
ng t he
MunicipalCircuitTr i
alCourtsin propri
etyoftheassessment ;coll
ecti
onof
thei
rrespecti
vej uri
sdicti
on. compr omisepenal t
ies).
I
II
.JURISDICTI
ON OVER TAX APPEAL
COLLECTI
ONCASES
(
a)Excl
usi
veor
igi
nalj
uri
sdi
cti
on i
n WHEN
tax collecti
on cases i nvol
v i
ng Wit
hin 30 day
saf t
ertherecei
ptof
fi
nalandexecut or yassessments such deci
sion or r
uli
ng or af
ter t
he
for taxes, f ees, charges and expi
rat
ionoftheperi
odf i
xedbylaw for
penalti
es. acti
on.
 I
n col l
ection cases wher et he
pri
ncipalamountoft axes and MODESOFAPPEAL
fees,exclusiv e ofchar ges and (
1)Byf i
li
ngapet i
tionf orrevi
ew undera
penalti
es,cl aimed i sless than procedureanalogoust othatprovi
ded
onemi ll
ionpesos( P1,000,000. forunderRul e42of1997Rul eson
00)–shal lbet r
iedbyt heproper Civi
lProcedure
Municipal Tr i
al Court,  deci sion,r
uling,orinact
ionofthe
Met r
opolit
an Tr ial Court, and Commi ssi
oner of I nternal
RegionalTr i
alCour t. Revenue, Commi ssi
oner of
Customs, t he Secr et
ary of
(
b)Excl
usi
veappel
lat
ejur
isdi
cti
oni
n Fi
nance,t he SecretaryofTr ade
taxcol l
ecti
oncases andI ndustr
yort heSecr etaryof
 Ov erappeal sfrom t hej udgment s, Agri
culture orthe RegionalTr i
al
resol uti
onsoror der sofRTC i n Courts
tax col l
ection cases or i
ginally  t hisappealshal lbeheardbya
deci ded by t hem, i n t heir Divi
sionoftheCTA
respect iveterr
itor i
al juri
sdi cti
on. (
2)Byfil
ingapet i
ti
onf orrevi
ewundera
 Ov erpet i
ti
onsf orr eview oft he procedure anal ogous t o t hat
j
udgement s, r esol utions or provi
dedf orunderRul e43of1997
order soft heRTCi nt heex er
cise RulesonCi v
ilProcedure
oft heirappel l
atej urisdictionov er  deci si
onsorr uli
ngsoftheCentr
al
tax col l
ection cases or i
ginally Boar
d ofAssessments Appeal
s
deci dedbyt heMet r
opol i
tanTr ial andtheRegionalTr
ialCourt
sin
Cour ts,Muni cipalTr i
alCour ts the exer
cise of i
ts appel
lat
e
andMuni ci
pal CircuitTr ialCour ts, j
uri
sdi
cti
on
i
nt hei rrespectivej urisdiction.
 thi
sappealshal
lbehear
dbyt
he
CTAenbanc.
 I
ncr
imi
nalandcol
l
ect
ioncases,t
he
Gov er
nmentmaydi r
ect
lyfi
let
hesaid PROCEDURE
caseswi tht
heCTAcoveri
ngamounts A.Anypar t
yadv ersel
yaf f
ectedbyar uli
ng,
wit
hi n its excl
usi
ve and ori
ginal orderordeci sionofaDi vi
sionoft he
j
urisdict
ion. CTA may f il
e a mot ion f or
reconsider
ationornewt r
ialbefor
et he
 See ANNEX P – Compar at
ive same Di vi
sion wi t
hin 15 day sfrom
Diagr
amsonCTAj
uri
sdi
cti
on. notice
“
OTHERMATTERS” B. Any par
ty adv
ersel
y af
fect
ed by a
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
121
MEMORYAI
DIN TAXATI
ON LAW
r
esol
utionofaDivi
sionoft heCTAon r
aisedf
ort
hef
ir
stt
imeonappeal
.
amotionforreconsiderat
ionornew
t
ri
almayf i
l
eapet i
ti
onf orrevi
ewwit
h EXCEPTIONS:
t
heCTAenbanc. a. Defenseofpr
escri
pti
on
Reason:Thisi s a st
atut
oryr
ight
.
C. Any party adversely aff
ect
ed by a (Vi
sayan Land Tr
anspor
tat
ion vs.
deci
sionorr ul
ingoft heCTAenbanc Col
lector
)
mayf il
ewi tht heSupr emeCourta b. Err
orsofadmini
str
ati
veoff
ici
als
ver
ifi
ed pet i
ti
on f or r evi
ew on Reason: St
ate can nev er be in
cert
ior
aripursuantt oRule45oft he estoppel and l if
ebl
ood t heor
y.
1997RulesonCi v
ilProcedur
e. (Commissi
oner vs. Proct
er and
Gamble Phi
ls.Mf g.Cor
p,GR No.
THIRTY ( 30)DAY PRESCRI VE PERI
PTI OD FOR 66838,
Apri
l15,1988)
APPEAL
St artst or un f rom t he dat et he NOTE:However
,thi
s was r
ever
sed i
n
taxpayerr ecei vest heappeal abledeci sion. Supreme Cour t
’s subsequentr esolut
ion
If t he t axpay er’
s r equest f or whereinitwashel dt hat“i
nt heabsence
reconsi der ation( i.e.
,thepr otesti sdeni ed ofexpl i
citstatutory provi
sions tot he
ortheor iginalassessmenti smai ntained, contrar
y,theGov ernmentmustf oll
owt he
theappeal abl edeci sioni st hedeci sion same r ul
es of pr ocedur
e whi ch bind
deny ingt her equestf orreconsi deration. pri
vate parti
es.” ( Commissioner vs.
Thesai dper i
odi sj uri
sdi ctionaland Proct
er and Gamble,GR No.66838,
non- extendi ble.Request sormot i
onsf or December2,1991,
Resol
uti
on)
reconsi der ation, howev er, oper ate t o
suspend t he r unning oft he per iod t o TAX COLLECTI
ON NOT SUSPENDED DURI
NG
appeal . A pr o f orma r equest f or APPEAL
reconsi der ationoronewhi chi sdirect ed
tot he Secr et ary ofFi nance does not GeneralRule: No appealt
aken tothe
suspend t he r unning of t he 30- day CTA shallsuspendthepayment,l
evyor
reglement ar yper iod. dist
rai
nt,and/orsal
eofanypr oper
tyof
thetaxpayer.
ONLY A FI
NAL DECI
SION I
S APPEALABLE TO
THECOURTOFTAXAPPEALS Excepti
on: TheCTA i sempower ed to
suspendthecollectionofi nternalrevenue
 Pr
eli
minar
y col
l
ect
ion l
ett
ers,post taxesandcustom dut iesonl ywhent here
reportingnot icesandpr e-assessment wasa–
noticesar enotappeal abl e,because c) showingt hatcol l
ect i
onoft het ax
theyar enott hefinaldeci si
onoft he mayj eopardizet hei nterestoft he
Commi ssioner . governmentand/ort het axpayer;
 An as sessmentcan be appeal ed if d) depositoft heamountcl ai
medor
taxpay er does not seek a fi
leasuretybondf ornotmor ethan
reconsi derat i
on. doubletheamountoft axwi ththe
 Att i
mes t her eis an exchange of Courtwhenr equired; and
communi cat i
ons bet ween t axpayer e) showingbyt axpayert hatappeali s
and Commi ssionerst at es t hathi s notfr
ivol
ousnordi latory.
actioni sf inal,then,per i
odf orappeal
beginst orun. CANTHECTAENJOI
N COLLECTI
ONOFTAXES?
 Commi ssionermustst at et hathi s
decisioni sf i
nal ,forperiodofappeal  Sec.11ofRANo.1125asamended
torun. bySec.9ofRANo.9282gr ant
sCTA
 Fi naldeci sioncannotbei mpl i
edf rom powert osuspendcol
lect
ionoft axif
i
ssuanceofwar rantofdi st
raintand such col l
ect
ion wor
ks t o serious
l
ev y,unl essi tisissuedaf t erar equest prej
udice of ei t
her taxpayer or
forreconsi der ation. government.
GENERALRULE:New i ssuescannotbe  Howev er,Sec.218oftheTaxCode
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
122
MEMORYAI
DIN TAXATI
ON LAW
provi
des no cour t may gr ant November21,
1991)
i
njuncti
ont or
estrai
ncol
lect
ionofany
tax,feeorchar geimposed byTax
Code.
VI
I.
VALUE–ADDEDTAX
 Thepr ovi
sioninTaxCoder efer
st o (VAT)
court
sot herthantheCTA.(Blaquera TI
TLEIVOFNI RC
vs.Rodri
guez,GRNo.L-
11295,Mar
ch
29,1958) DEFINI ON:Th
TI ev al
ue-added tax is an
 Appeal to t he CTA does not i
ndirectt axandt heamountoft axmaybe
automat
ical
l
y suspend col lect
ion shif
ted or passed on t o the buy er
,
unl
essCTAi ssuessuspensionorder tr
ansf eree or l essee of t he goods,
atanyst
ageofpr oceedi
ngs. proper t
ies orser v i
ces.Thisr ul
e shall
l
ikewi se appl yto existi
ng contr
acts of
SI
MULTANEOUSFI
LINGOFANAPPLI
CATI
ONFOR sale orl ease ofgoods,pr opert
ies or
REFUND OR CREDI
T AND I
NSTI
TUTI
ON OF A
servicesatt hetimeoft heeff
ecti
vityof
CASEBEFORETHECTAALLOWED
Republ i
cActNo.7716.
Thel awfi
xest hesameper iodof
VATrepl
acedSalesTaxasi
mposedby
two( 2)y earsforfi
l
ingacl aimf orr efund
pr
evi
ousTaxLaws.
witht heCommi ssionerandf orfilinga
casewi t
ht heCTA.Thet wo-yearper i
od
HI
STORY:
forbot hst artsfr
om t hedat eaf tert he
a. Execut
iveOrderNo.273
paymentoft hetaxorpenal t
y,orfrom t he
b. Republ
icActNo.7716
approv aloftheappli
cationforcredi
t .
c. Republ
icActNo.8241
d. Republ
ic Act No. 8424 (
took
Obser
vat
ion:I
fwear
enotgoi
ngt
oal
l
ow
eff
ecton1January1998)
thet axpay ertof i
lear efundbef orethe
CTA and l et him wai tf or t
he CI R’
s
TRANSACTIONSCOVEREDBYVAT:
decision,andt hel at
terfai
ledtor endera
1. Sal eofCommodi ti
esorGoods( in
decisionwi thi
nt he2-yearperi
od,thesaid
thecourseoft radeorbusi ness
taxpay ercan no l ongerf il
ear ef
und
only)
beforet he CTA because hi sr ightto
2. Sal eofServi
ces( i
nt hecourseof
appeal hasprescri
bed.
tradeorbusi
nessonl y)
3. Expor tat
ion (
in the cour se of
WEI
GHTOFDECI
SIONOFCTA
tradeorbusi
nessonl y)
4. Impor tat
i whet
on ( herornoti n
 Decisions of Tax Cour t have thecourseoftr
adeorbusi ness)
persuasiveef fectandmayser veas
j
udicialgui des. They hav e more PERSONSLI ABLEF ORVAT
persuasivev al
uet hanBIRRuli
ngs. Anyper son who,i nthe course of
 CTA’sf indi
ngsoff actareenti
tl
edto trade or busi ness, sel
ls bar ters,
thehi ghestr espect.(Raymundovs. exchanges,l eases goodsorpr oper
ties,
deJoya,
GRNo.L-
27733,
December3, renders serv i
ces,and any person who
1980) i
mpor ts goods shallbe subj
ectt ot he
 TheSupr
emeCour
twi
l
lnotsetasi
de value-added t ax ( VAT) i
mposed i n
conclusi
ons r eached by Tax Cour t Sections 106 t o 108 oft he Nat i
onal
which by t he v er
y nature of its Inter
nal RevenueCode.
functi
on,isdedi cat
edexclusiv
elyt o
the consideration oft ax pr
oblems “I
N THE COURSE OF TRADE OR
andhasdev elopedanexper ti
seon BUSI
NESS”
thesubject,unlesstherehasbeenan Theregul
arconductorpur suitofa
abuseorani mpr ov
identexer
ciseof commer ci
al or an economi c act i
v i
ty,
authori
tyoni t
spar t.(Commissioner i
ncludingtr
ansact
ionsincidentaltheret
o,
vs. Court of Appeal
s & At
las byanyper sonregardl
essofwhet heror
Consol
idat
ed, GR No. 86785, notthepersonengagedt herei
ni sanon-
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
123
MEMORYAI
DIN TAXATI
ON LAW
stock, nonprofi
t pr i
vate organizat
ion thevalue-addedt
axshallbebasedon
(i
rrespecti
veoft hedisposi
ti
onofi tsnet thelandedcostpl usexciset
axes,I
f
i
ncome and whet her or not it sell
s any.customsduties.
exclusiv
elytomember sortheirguests),
orgov ernmententi
ty. B.Zer
o-r
ated(
0%)r
ateoft
ax
Theref
oreift
hedisposi
ti
onofgoods
1. Expor tSal esaspr ovi
dedi nSect i
on
orserv
icesisNOTinthecourseoftrade
106(A) (
2)(a)
orbusi
nesstheniti
snotsubjectt
oVAT;
2. Foreign Cur rencyDenomi nat
ed Sal e
wit
ht he except
ion of i
mportat
ion of
aspr ovi
dedi nSection106( A)
(2)(b)
cour
se.
3. Salet oper sonsorent iti
eswhi chi s
Ther uleofregular
ity
,t ot
hecontrar
y VAT exemptunderspeci allaws or
notwithstanding,servi
ces as defi
ned i
n i
nternational agreementst owhicht he
thi
sCoder enderedinthePhi l
ippi
nesby Phil
ippinesi sasi gnator
yaspr ovided
non-resident forei
gn persons shallbe i
nSect i
on106( A)(2)(
c)
consideredasbei ngcour seoft r
adeor 4. Transact i
ons subj ect to zero-rated
business. (0%)aspr ov i
dedinSection108( B)
I
mportati
onissubj
ecttoVATregar
dless
ofwhetherornotitisinthecour
seof REGISTRATION UNDER THE VAT
tr
adeorbusi
ness SYSTEM (SECTI
ON236OFTHENI
RC)
Ther easonf ort

herul
ei stopr otect Gener
alRul
e:Fai
l
uret
oregi
steri
ssubj
ect
ourlocalordomest icgoodsorar t
icles to t emporar
y cl osur
e of t he
andtor egulat
et heent
ryorintroducti
on establi
shmentfor5daysaspr
ovi
dedin
offoreign art
icl
esto ourlocalmar ket. Section115(
b).
Regulat
ion is one ofthe purposes of
Taxati
on. Exception: I
t does not appl yt o an
exporterwhof ail
stor egist
er.Theeffect
TaxRates: i
s,insteadoft reati
ngt hetransact
ionas
1. 10% - t he rate used in sal
e of zero-
rated(0%),iti
streatedasanexempt
commodi ties and goods,sale of tr
ansact i
on.
servi
ces,andimportat
ion.
2. Zero-
rated (0%)-t he rat
e used i
n Whati
sthedi
ff
erence?I
nzer
o-r
ated(
0%)
export
ation. tr
ansacti
ons, tax credi
ti s avail
abl
e.
However,in exempt t r
ansact
ions,tax
credi
tisnotavai
labl
e.
MANNEROFCOMPUTI
NGTHEVAT:
A.10%r
ateofTax
EXEMPTTRANSACTI ONS(SECTI
ON
1. In sal eofcommodi t
iesand goods, 109)
:
10% i s mul ti
plied wi t
ht he Gross 1. I
nSect i
on109(a)and(c)
,foodand
Sell
ingPr ice. non-
food pr s ar
oduct e VAT-exempt
2. Insal eofser vi
ces,10% i smul ti
plied aslongast hesepr
oduct
sareinits
witht heGr ossRecei pts. or
igi
nalst
ate.Thesimpl
eprocessof
3. Inimpor t
ation,10%i smul ti
pli
edwi th preparati
on orpr eser v
ation f ort he
the r ates used by t he Bur eau of mar ket such as f reezing, dr ying,
Cust oms i n imposi ng t ari
ff and salt
ing,broil
ing,roasting,smoki ng,or
customsdut i
espl uscust omsdut i
es, stri
pping does not r emov e t he
excise t axes, i f any , and ot her productf r
om i t
scat egoryofbei ngin
char ges,sucht axt obepai dbyt he i
tsor i
ginalstate.
i
mpor t
erpr i
ortot her eleaseofsuch  Howev er
,ev enift hepr oduct swer e
goods f rom cust oms cust ody: nol ongeri nitsoriginalst ate,itcan
Prov ided,Thatwher et he customs sti
llbe VAT- exemptunderSect i
on
dutiesar edet er
mi nedont hebasisof 109( r
), if sol d by agr icultural
thequant i
tyorv ol
umeoft hegoods, cooper at
ives dul y r egistered by
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
124
MEMORYAI
DIN TAXATI
ON LAW
Cooperati
veDevelopmentAut hori
ty. sold,transf err
edorexchangedi nt he
2. Under Sect i
on 109( m), pr i
vate Phili
ppinest onon-exemptper sonsor
educati
onalinst
it
utions ar
e exempt entiti
es,t hepur chasers,t r
ansf erees
fr
om VAT i fdulyaccredit
edbyt he orr eci
pient sshallbeconsi deredt he
DECS orbyt he CHED.I n case of i
mpor t
erst hereof,whoshal lbel i
able
government educati
onali nsti
tuti
on, foranyi nt ernalrevenuet axonsuch
noaccredit
ati
onisrequi
red. i
mpor t
ation.The t ax due on such
i
mpor t
ationshal lconst i
tuteal ienon
3. Transactionsinthef i
eldofArtsare thegoodssuper i
ortoal lchar gesor
VAT- exempt only,as pr ovi
ded in l
iensont hegoods, i
rrespectiveoft he
Section 109(n),ifthe sel
leristhe possessort hereof.
arti
sthi mselforthearti
st’
sservi
ces
performedf ortheproduct
ionofsuch TRANSACTI
ONSDEEMEDSALE:
works.
Thefol
lowi
ng t
ransact
ionsshal
lbe
4. Secti
on 109(
p)makes Regionalor deemed sale ther
efor
e making them
AreaHeadquar
ter
sexemptf
rom VAT. coveredbyVAT:
5. UnderSect i
on109( w)inorderf ort
he (1)
Transf er,useorconsumpt ionnoti n
saleorl easeofr ealpropertyt obe the cour se of busi ness of goods or
exempt edfrom VAT,t hetransacti
on properti
esor i
ginallyintendedf orsaleor
must NOT be conduct ed i n t he foruseint hecour seofbusi ness;
ordi
narycour seoftradeorbusi ness. (2)
Distr
ibut ionort r
ansf ert
o:
Itcompl ementsSection106( A)(1)
(a) (a) Sharehol dersori nvestorsas
wher eitstatesthatinorderf orthe shareint hepr ofitsoft heVAT- regi
stered
saleorl easeofr ealpropertyt obe persons;or
coveredbyVAT,i tmustbemadei n (b) Creditorsinpay mentofdebt ;
the or di
nary course of t rade or (3)
Consignmentofgoodsi factualsaleis
business. notmadewi thi
nsi xty(60)day sf ol
lowing
thedatesuchgoodswer econsigned;and
6. RevenueRegulat
ionsNo.6-97addsa (4)
Retir
ement f rom or cessat i
on of
requi
rementinorderfort
hel easeof business,wi thr espectt oinventori
esof
resi
denti
aluni
tswithamont hl
yrental taxable goods exi sting as of such
of not mor e than P8,
000.00,as reti
rementorcessat i
on.
provi
dedinSecti
on109(x)
,tobeVAT
exempt,t hat the annual gr oss Howt
odet
ermi
net
heVAT:Thet
axshal
l
recei
pts must not exceed be computed by mult
ipl
yi
ng the t
otal
P550,000.
00. amountindi
cat
edint heinvoi
cebyone-
el
event
h(1/11)
.
7. Secti
on109( z)prov
idest hatthesal e
orleaseofgoodsorper formancesof Exampl e:thetotalamountindi
cat
ed i
n
servi
cesot herthant hosement i
oned theinvoiceisP110.P110/11=P10.P10
i
nt hepr ecedingparagraphsar eVAT i
st heamountofVAT.
exempti ftheGr ossAnnualRecei pts
donotexceedP550, 000.00.Howev er
, TAXCREDI
TANDREFUND
the li
mitati
on ofP550, 000.00 does
applyf ort hose transactions fr
om For
mul
aforTaxCr
edi
t:
Secti
on 109( a) to( y)
,except ( x) Output
becauseRev enueRegul ati
onsNo.6- Less:I
nput
97imposesaP550, 000.00l imi
tati
on. VATdue.
 In casesoft ax-
fr
ee import
ati
on of  I
fInputisgreat
erthanOut
put
,Tax
goodsi nt
othePhil
ippi
nesbypersons, Cr
editi
savai
l
able.
enti
tiesoragenci
esexemptf r
om tax
wheresuchgoodsar esubsequentl
y
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo
SanBedaCol
legeofLaw
125
MEMORYAI
DIN TAXATI
ON LAW
"
INPUTTAX"meanst
hev
alue-
addedt
ax ref
undort axcredi
tf orval
ue-
addedt ax
due from orpai d by a VAT- register
ed andotheradj
ustments,suchaspurchase
person int he course ofhi st rade or ret
urns or al
lowances and input tax
businessoni mport
ationofgoodsorl ocal att
ri
butabl
etoexemptsale.
purchaseofgoodsorser vices,includi
ng
l
ease oruse ofpr operty
,f rom a VAT- Theclai
mf ortaxcreditr
eferr
edtoin
regist
eredperson.I
tshallalsoincludethe theforegoi
ngpar agr
aphshallincl
udenot
transi
ti
onal input t ax determi ned in onlyt hose fi
led witht he Bureau of
accordancewi t
hSection111oft heNI RC. I
nternalRevenuebutalsothosef i
l
edwith
othergovernmentagencies,suchast he
"
OUTPUT TAX"means t
he v
alue-
added BoardofI nvestmentsort heBur eauof
taxdueont hesaleorleaseoftaxable Customs.
goodsorpr opert
iesorser v
icesbyany
personregi
ster
edorr equi
redt or
egi
ster TheCommi ssi
onerwi thin120day s,
underSecti
on236oftheNIRC. i
n pr oper cases, f rom t he date of
submi ssi
on ofcompl et
e document sin
 Ifatt heendofanyt axabl equar ter suppor toftheappl icati
onshal lgranta
theout putt axexceedst hei nputt ax, refundori ssuet het axcreditcert
ifi
cat
e
theexcessshal lbepai dbyt heVAT- forcredit
ableinputtaxes.
registered per son.I fthe i nputt ax
exceedst heout putt ax,t heexcess
Remedy i n case off ull,orpartial
shall be car ri
ed ov er t o t he
denial,or f ail
ure on t he par t of the
succeedi ngquar terorquar ters.Any
Commi ssionertoactupont heapplicat
ion
i
nputt axat tri
butabletot hepur chase
fort ax cr editorr efund:t he t
axpayer
ofcapi t
algoods ort o zer o-r
ated
affectedmay ,wit
hint hir
ty( 30)daysf r
om
sales by a VAT- regi
stered per son
ther eceiptoft hedeci siondeny i
ngt he
may athi s option be r efunded or
claim oraf t
ertheexpi rati
onoft heone
credited agai nst ot her i nternal
hundr ed twent y day -
per i
od,appealt he
revenue t axes, subj ect t o t he
decisionort heunact ed cl aim wit
ht he
prov i
sionsofSect ion112.
Cour tofTaxAppeal s.
OPTI
ONSOFATAXPAYERASPROVI
DED RETURNANDPAYMENTOFVAT
I
NSECTI
ON112:
1. t
ocl
aimf
ort
axcredi
t;or Ev erypersonl i
abletopayt hev alue-
2. t
ocl
aimf
orr
efund addedt axshal lfi
leaquar terlyreturnof
theamountofhi sgrosssal esorr eceipts
Thecl ai
m,whi chmustbei nwr i
ti
ng, within25day sf oll
owingthecl oseofeach
forbot h cases,mustbe f il
ed within2 taxable quar ter prescribed f or each
years af t
er the close of the taxable taxpay er:Provided,however ,ThatVAT-
quarterwhent hesalesweremadef or:a) registered personsshal lpayt hev alue-
theissuanceofat axcr edi
tcert
if
icate;b) addedt axonamont hlybasis.
ref
undofcr edi
tabl
ei nputt
axdueorpai d
att
ri
but abl
et osuchsales. Anyper son,whoser egistr
ationhas
been cancel led in accor dance wi th
HOW TO DETERMI NE CREDI TABLE Section236, shallfi
l
ear et
urnandpayt he
INPUTTAX taxduet her eonwi t
hin25daysf rom the
The sum oft he excess i
nputt ax date of cancel lat
ion of r egistr
ati
on:
carr
iedov erfrom theprecedingmonthor Provided,That onl y one consol i
dated
quarterandt hei nputtaxcredit
abl
et oa ret
urnshal lbef i
l
edbyt hetaxpayerforhis
VAT-regi
steredper sondur i
ngthetaxable pri
ncipalplaceofbusi nessorheadof f
ice
mont horquar tershal
lbereduced andal lbr
anches.
r
educed by t
he amountof cl
aim f
or
TAXATI
ON LAW COMMI
TTEE
 CHAI
RPERSON:
Charmai
RPERSON:
RhohailCastr
o EDP:Rachel
JeminaSy
,
Casi
anoIl
agan,Jr.
,Ry
anCo,EdwinTor
taLourdesAzur
,Edi
zerEnri
quez,
Chr
ist
ianCabrer
a,Jhundee
Guil
l
ermo

Taxation Law

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Taxation Law

Uploaded by

Copyright:

Available Formats

SanBedaCol

6. Mar gi nFee– exact iondesi gnedt o andsur

Not based on any Based whol

Basedont hepower Emanat

Non-pay ment is Noi

omi ssion, fraudorf alsity. 1. Reasonable

fees or char ges t he same may be ADMI NI VE I

2002) TESTSONTAXABI TYOFI

CORPORATIONS E XEMPT F ROM I NCOME

B. TERMINATION OF THE JUDI CI

Tax exempt ion islikewi se to be LI

cont r olled or enj oy i

NRAETB may be ent it

there are no specifi

the y ear shal lbe al l

WHENCREDI TFORTAXESMAYBETAKEN NOTE:Thet

NOTE: The 3 yearper

b. Ofpr oper tyconnect ed,wi tht he Gener alr ul e:Lossesf r

TAXTREATMENT 1. Theempl oyermusthav eestabl ished

due f rom such cor porat

thefringebenef itshal lnotbededuct i

 Non-  Capi tal l osses

 taxpay ermustbeent itl

1. topayanypor tionofthet aximposed 30% -donor

B.TRANSFERTAXES 2.Personal 2.Per

1. Franchisewhi chmustbeexer cisedin 1)Real

2.TRANSFER IN CONTEMPLATI ON OF a. thepossessi onorenj oy

Intheabsenceofsuchcont r act,orif 2. 5%ofthegrossest

mustbei ncludedaspar tofthegr oss

1. one i ncorporated as a non- stock NGoutsi

TAX REMEDIES OF THE GOVERNMENT TO

1. They enhance and suppor t the 1. Compr se(

ther ei sr easont obel i

PROCEDURE FOR THE CONSTRUCTI

FUNDAMENTALPRI NCIPLESGOVERNI NG LOCAL

10.Taxesont hegr ossr ecei ptsof 2. TaxonBusi nessofPr i

2. Muni cipal non-revenue fees and CI

a. Taxes – On st ores orr etailers

oft axt olocaltreasurer( Sec.196 st

JURISDICTION OF COLLECTOR OF Mayei

1. Nat ure Imposed upon f or

3. Imposi ngAut hor ity Secr

proceedings. The Col l

assessment s, r efunds of counterv

Ther easonf ort

You might also like