Possibilities in Taxation

for the 2017 Bar Examinations

(Project Phoenix)
 General Principles
Double Taxation:

Sec. 143 of the LGC on business tax:

a) Manufacturers;
b) Wholesalers, Distributors and Dealers;
c) Exporters, Manufacturers, Wholesalers, Distributors of Non essential
commodities;
d) Retailers;
e) Contractors;
f) Banks;
g) Peddlers
h) “Catch all provision.” – on any business, not otherwise specified in the
preceding paragraphs
 General Principles
Double Taxation:

It is apparent from a perusal thereof that when a municipality or city has

already imposed a business tax on manufacturers, etc. of liquors, distilled
spirits, wines, and any other article of commerce, pursuant to Section
143(a) of the LGC, said municipality or city may no longer subject the
same manufacturers, etc.to a business tax under Section 143(h) of the
same Code. Section 143(h) may be imposed only on businesses that are
subject to excise tax, VAT, or percentage tax under the NIRC, and that are
"not otherwise specified in preceding paragraphs." In the same way,
businesses such as respondent’s, already subject to a local business tax
under Section 14 of Tax Ordinance No. 7794 [which is based on Section
143(a) of the LGC], can no longer be made liable for local business tax
under Section 21 of the same Tax Ordinance [which is based on Section
143(h) of the LGC]. (Nursery Care Corporation vs. Acevedo, GR No. 180651
dated July 30, 2014, J. Bersamin)
 General Principles

Tax Treaties:

The obligation to comply with a tax treaty must take precedence over
the objective of the BIR’s requirement of a prior treaty relief
application to avail of the lower tax treaty rate. (Deutsche Bank AG
Manila Branch vs. CIR, GR No. 188550 dated August 19, 2013; CBK
Power Company Limited vs. CIR, GR No. 193383-84 dated January 14,
2015)
 General Principles

Taxes vs. Fees:

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

regulate certain construction activities of the identified special
projects, which includes "cell sites" or telecommunications towers, is
not a tax because the fees imposed in the said ordinance are primarily
regulatory in nature, and not primarily revenue-raising. (Smart vs.
Municipality of Malvar, Batangas, GR No. 204429 dated February 18,
2014.)
 Income Tax
Deposit Substitutes:

Under Sec. 22(Y) of the NIRC, the term ‘deposit substitutes’ shall mean
an alternative form of obtaining funds from the public (the term
“public” means borrowing from twenty (20) or more individual or
corporate lenders at any one time) xxx.
 Income Tax
Deposit Substitutes:

1. A BIR ruling stating that all government bonds regardless of the

number of lenders/purchasers are deposit substitutes is invalid
because it disregards the 20 lender rule;

2. A BIR ruling stating that the 20 lender rule is determined only at the
time of origination is invalid. The phrase “at any one time” for
purposes of determining the 20 lender rule would mean every
transaction executed in the primary or secondary market in connection
with the purchase or sale of securities.
 Income Tax
Deposit Substitutes:

3. If the debt instrument has 20 or more lenders, the interest income

or discount is generally subject to the 20% Final Withholding Tax; and,

4. If the debt instrument has 19 or less lenders, the interest income or

discount forms part of gross income and is subject to regular income
tax. (BDO vs. Republic, GR No. 198756 dated January 13, 2015)
 Income Tax
Capital Gains Tax:

Sale of machineries by a corporation is not subject to the 6% capital

gains tax. Rather, the gain forms part of gross income and is subject to
the regular corporate income tax. (SMI-ED Philippines Technology
Corporation, Inc. vs. CIR, GR No. 175410 dated November 12, 2014)
 Income Tax

Deductions:

1. Loss on Auction Sale – show proof of proceeds and cost;

2. Expenses - (a) the expenses must be ordinary and necessary; (b)
they must have been paid or incurred during the taxable year; (c) they
must have been paid or incurred in carrying on the trade or business of
the taxpayer; and (d) they must be supported by receipts, records or
other pertinent papers.
3. Loss on fire and theft – File sworn declaration of loss with the BIR
within forty-five (45) days from date of occurrence. (H. Tambunting
Pawnshop, Inc. vs. CIR, GR No. 173373 dated July 29, 2013)
 Income Tax
International Air Carriers:

1. An international air carrier without landing rights in the Philippines

is not subject to the 2.5% Gross Philippine Billings Tax under Section
28(A)(3) of the Tax Code.

2. Even without landing rights in the Philippines, if it sells tickets in the

Philippines, it is nonetheless liable for 30% Regular Corporate Income
Tax since it is considered a Resident Foreign Corporation. We follow
the activity test.

3. Under the RP-Canada Tax Treaty, an international air carrier could

only be taxed at a maximum of 1½% of gross revenues. (Air Canada vs.
CIR, GR No. 169507 dated January 11, 2016)
 Income Tax
Withholding Tax:

In relation to Sec. 34(K) of the Tax Code, which provides that an

expense, whether the same is paid or payable, “shall be allowed as a
deduction only if it is shown that the tax required to be deducted and
withheld therefrom was paid to the BIR,” the obligation of the
payor/employer to deduct and withhold the related withholding tax
arises at the time the income was paid or accrued or recorded as an
expense in the payor’s/employer’s books, whichever comes first. (ING
Bank N.V. vs. CIR, GR No. 167679 dated July 22, 2015)
 Estate Tax

1. In determining the dedutible claims against the estate, we follow

the death-of death valuation principle. Post death developments are
not considered. (Dizon vs. CTA, GR No. 140944 dated April 30, 2008)

2. Allowable judicial expenses are expenses of administration. All

expenses "essential to the collection of the assets, payment of debts
or the distribution of the property to the persons entitled to it." In
other words, the expenses must be essential to the proper settlement
of the estate. (CIR vs. CA and Pajonar, GR No. 123206 dated March 22,
2000)
 Donor’s Tax
Section 100. Transfer for Less Than Adequate and full Consideration. -
Where property, other than real property referred to in Section 24(D),
is transferred for less than an adequate and full consideration in
money or money's worth, then the amount by which the fair market
value of the property exceeded the value of the consideration shall, for
the purpose of the tax imposed by this Chapter, be deemed a gift, and
shall be included in computing the amount of gifts made during the
calendar year.

Formula:

Fair Market Value - Consideration = Deemed Donation

 Donor’s Tax

Absence of donative intent, if that be the case, does not exempt the
sale of stock transaction from donor’s tax since Sec. 100 of the NIRC
categorically states that the amount by which the fair market value of
the property exceeded the value of the consideration shall be deemed
a gift. Thus, even if there is no actual donation, the difference in price
is considered a donation by fiction of law. (Philamlife vs. SOF, GR No.
210987 dated November 24, 2014)
 General Principles - VAT
Situs Rules for VAT:

Destination Principle - goods and services are taxed only in the country
where they are consumed.

Cross Border Doctrine - mandates that no VAT shall be imposed to

form part of the cost of the goods destined for consumption outside
the territorial border of the taxing authority. Hence, actual export of
goods and services from the Philippines to a foreign country must be
free of VAT, while those destined for use or consumption within the
Philippines shall be imposed with 12% VAT.
 General Principles - VAT
Sales to ECONZONE Enterprises:

Under RMC 74-99 dated October 15, 1999, all sales of goods,
properties, and services made by a VAT-registered supplier from the
Customs Territory to an ECOZONE enterprise shall be subject to VAT, at
zero percent (0%) rate, regardless of the latter's type or class of PEZA
registration; and, thus, affirming the nature of a PEZA-registered or an
ECOZONE enterprise as a VAT-exempt entity. (Coral Bay Nickel
Corporation vs. CIR, GR No. 190506 dated June 13, 2016)
 VAT Refund
How do you construe “complete submission of documents” for
purposes of counting the 120-day period?

Starting June 11, 2014, the reckoning of the 120-day period is from the
filing of the administrative claim for refund. Under RMC 54-2014, the
application for VAT refund/tax credit must be accompanied by
complete supporting documents. In addition, the taxpayer shall attach
a statement under oath attesting to the completeness of the
submitted documents. The affidavit shall further state that the said
documents are the only documents which the taxpayer will present to
support the claim. (Pilipinas Total Gas, Inc. vs. CIR, GR No. 207112
dated December 8, 2015)
 VAT Refund
Prior to June 11, 2014, what are the rules on the reckoning of the
120-day period?

1. For purposes of determining when the supporting documents have

been completed - it is the taxpayer who ultimately determines when
complete documents have been submitted for the purpose of
commencing and continuing the running of the 120-day period.

2. Except in those instances where the BIR would require additional

documents in order to fully appreciate a claim for tax credit or refund,
in terms what additional document must be presented in support of a
claim for tax credit or refund - it is the taxpayer who has that right and
the burden of providing any and all documents that would support his
claim for tax credit or refund.
 VAT Refund
3. Thereafter, whether these documents are actually complete as
required by law - is for the CIR and the courts to determine.

4. Lest it be misunderstood, the benefit given to the taxpayer to

determine when it should complete its submission of documents is not
unbridled. Under RMC No. 49-2003, if in the course of the investigation
and processing of the claim, additional documents are required for the
proper determination of the legitimacy of the claim, the taxpayer-
claimants shall submit such documents within thirty (30) days from
request of the investigating/processing office. Notice, by way of a
request from the tax collection authority to produce the complete
documents in these cases, is essential.
 VAT Refund
5. In all cases, whatever documents a taxpayer intends to file to
support his claim must be completed within the two-year period under
Section 112(A) of the NIRC. (Pilipinas Total Gas, Inc. vs. CIR, GR No.
207112 dated December 8, 2015)
 VAT – Other Matters
Other matters:

1. Transport of passengers are now exempt from VAT (Sec. 109S)

under RA 10378 dated March 7, 2013.
2. New Thresholds effective January 1, 2012:

Section Amount in Pesos 2005 Adjusted Threshold Amounts

109 (P) 1,500,000 1,919,500
109 (P) 2,500,000 3,199,200
109 (Q) 10,000 12,800
109 (V) (now W) 1,500,000 1,919,500
 Remedies
Sec. 228 Doctrines:

1. Failure to submit relevant supporting documents during the 60-day

period does not render the assessment final and executory. The BIR
cannot demand what type of supporting documents should be
submitted. Otherwise, a taxpayer will be at the mercy of the BIR,
which may require the production of documents that a taxpayer
cannot submit. (CIR vs. First Express Pawnshop, GR Nos. 172045-46
dated June 16, 2009)
 Remedies
Sec. 228 Doctrines:

2. The 60-day period to submit documents only applies to a request for

reinvestigation.

3. Administrative appeal with the Commissioner is allowed if the Final

Decision on the Disputed Assessment (“FDDA”) is signed by the CIR’s
duly authorized representative. It is in the form of a request for
reconsideration only.

4. The term “the assessment shall become final” in relation to the 60-
day period shall mean that the taxpayer is barred from disputing the
correctness of the issued assessment by introduction of newly
discovered or additional evidence, and the FDDA shall consequently be
issued. (RR No. 18-2013 dated November 28, 2013)
 Remedies
Assessment vs. FDDA:

1. The FDDA must state the facts and law on which it is based to
provide the taxpayer the opportunity to file an intelligent appeal. An
FDDA which contains a taxpayer’s supposed tax liabilities, without
providing any details on the specific transactions which gave rise to its
supposed tax deficiencies is void.
 Remedies
Assessment vs. FDDA:

2. However, a void FDDA does not ipso facto render the assessment
void.

Clearly, a decision of the CIR on a disputed assessment differs from the

assessment itself. Hence, the invalidity of one does not necessarily
result to the invalidity of the other—unless the law or regulations
otherwise provide. The nullity of the FDDA does not extend to the
nullification of the entire assessment. As if there was no decision
rendered by the CIR. It is tantamount to a denial by inaction by the
CIR, which may still be appealed before the CTA and the assessment
evaluated on the basis of the available evidence and documents. (CIR
vs. Liquigaz Phils. Corporation, GR No. 215534 dated April 18, 2016)
 Remedies
Suspension of Collection with the CTA:

General Rule: An appeal to the CTA from the decision of the CTA will
not suspend the payment, levy, distraint, and/or sale of any property
of the taxpayer for the satisfaction of his tax liability as provided by
existing law.

Exception: The CTA may order suspension of collection by the BIR if

collection may jeopardize the interest of the Government and/or the
taxpayer. Taxpayer must file a bond with the CTA. Amount of Bond: (a)
cash bond = amount claimed; (b) surety bond = amount not more than
double the amount (claimed). Amount claimed = principal amount of
taxes excluding penalties, interests and surcharges.
 Remedies
May the bond requirement be dispensed with?

1. Bond should be dispensed with:

a) Prescription has already set in; or,

b) Whenever it is determined by the courts that the method employed
by the Collector (Commissioner) of Internal Revenue in the collection
of tax is not sanctioned by law.
 Remedies
May the bond requirement be dispensed with?

2. The purpose of the rule is not only to prevent jeopardizing the

interest of the taxpayer, but more importantly, to prevent the absurd
situation wherein the court would declare “that the collection by the
summary methods of distraint and levy was violative of law, and then,
in the same breath require the petitioner to deposit or file a bond as a
prerequisite for the issuance of a writ of injunction.” (Spouses
Pacquiao vs. The CTA, GR No. 213394 dated April 6, 2016.
 Remedies
May the bond requirement be dispensed with?

3. CTA must consider other factors recognized by the law itself towards
suspending collection of the assessment, like whether or not the
assessment would jeopardize the interest of the taxpayer, or whether
the means adopted by the CIR in determining the liability of taxpayer
was legal and valid.

Simply prescribing such high amount of the bond would practically

deny to the petitioner the meaningful opportunity to contest the
validity of the assessments, and would likely even impoverish it as to
force it out of business.
 Remedies
May the bond requirement be dispensed with?

4. Moreover, Section 11 of R.A. 1125, as amended, indicates that the

requirement of the bond as a condition precedent to suspension of the
collection applies only in cases where the processes by which the
collection sought to be made by means thereof are carried out in
consonance with the law, not when the processes are in plain violation
of the law that they have to be suspended for jeopardizing the
interests of the taxpayer.

5. If the taxpayer raises the illegality of the assessment, the CTA should
conduct a preliminary hearing in order to determine whether the
required surety bond should be dispensed with or reduced. (Tridharma
Marketing Corporation vs. CTA, GR No. 215950 dated June 20, 2016)
 Local Taxation
Are Sections 13 and 14 of RA No. 9167 (An Act Creating the Film
Development Council of the Philippines), which provides an
“Amusement Tax Reward Scheme,” constitutional?

1. No, the Amusement Tax Reward Scheme granted to “graded films”

under Secs. 13 and 14 of RA No. 9167 violates the local fiscal
autonomy provision under Sec. 5 Art. X of the Constitution which
provides that: “Each local government unit shall have the power to
create its own sources of revenues and to levy taxes, fees and charges
subject to such guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy. Such taxes, fees,
and charges shall accrue exclusively to the local governments.”
 Local Taxation
Constitutionality of Secs. 13 and 14 of RA 9167:

2. It also violates Sec. 130(d) of the LGC which provides that “The
revenue collected xxx shall inure solely to the benefit of, and be
subject to the disposition by, the local government unit levying the
tax, fee, charge or other imposition unless otherwise specifically
provided herein x x x.

3. Congress did not remove the power to impose amusement taxes

unlike Sec. 133 of the LGC. What Congress did in this instance was not
to exclude the authority to levy amusement taxes from the taxing
power of the covered LGUs, but to earmark, if not altogether
confiscate, the income to be received by the LGU from the taxpayers in
favor of and for transmittal to FDCP, instead of the taxing authority.
 General Principles
Constitutionality of Secs. 13 and 14 of RA 9167:

This, to Our mind, is in clear contravention of the constitutional

command that taxes levied by LGUs shall accrue exclusively to said LGU
and is repugnant to the power of LGUs to apportion their resources in
line with their priorities.

4. The Amusement Tax Reward Scheme is not a grant of tax exemption

in favor of the producers of the graded films. Exempting a person or
entity from tax is to relieve or to excuse that person or entity from the
burden of the imposition. (Film Development Council of the Philippines
vs. Colon Heritage Realty Corporation, GR No. 203754 dated June 16,
2015)
 Local Taxation
Common Limitations (Section 133):

1. An LGU cannot impose business tax on petroleum products under

Sec. 133(h) of the LGC. (Petron Corp. Vs. Mayor Tobias Tiangco – GR
No. 158881, April 16, 2008)

2. An LGU cannot impose business tax on common carriers under Sec.

133(j) of the LGC and Sec. 117 of the NIRC. (City of Manila vs. Colet, GR
No. 120051 etc. dated December 10, 2014)
 Local Taxation
Amusement Tax:

1. Under Sec. 140 of the LGC, the Amusement Tax may be imposed on
proprietors, lessees, or operators of theaters, cinemas, concert halls,
circuses, boxing stadia, and other places of amusement.

2. Sec. 131 (c) defines "Amusement Places“ as to include theaters,

cinemas, concert halls, circuses and other places of amusement where
one seeks admission to entertain oneself by seeing or viewing the
show or performances.
 Local Taxation
Amusement Tax:

3. Criteria of Amusement Places in PBA vs. CA – “artistic expression”

has been modified by the LGC.

4. Resorts, swimming pools, bath houses, hot springs and tourist spots
do not belong to the same category or class as theaters, cinemas,
concert halls, circuses, and boxing stadia. It follows that they cannot be
considered as among the “other places of amusement” contemplated
by Section 140 of the LGC and which may properly be subject to
amusement taxes. (Pelizloy Realty Corp., vs. Province of Benguet, GR
No. 183137, April 10, 2013)
 Local Taxation
Amusement Tax:

5. In light of Pelizloy Realty, a golf course cannot be considered a place

of amusement. People do not enter a golf course to see or view a
show or performance. Petitioner also, as proprietor or operator of the
golf course, does not actively display, stage, or present a show or
performance. People go to a golf course to engage themselves in a
physical sport activity, i.e., to play golf. (Alta Vista Golf and Country
Club vs. The City of Cebu, GR No. 180235 dated January 20, 2016)
 Local Taxation
Remedies:

1. Section 187 of the LGC which outlines the procedure for questioning
the constitutionality of a tax ordinance, is inapplicable, if what is
imposed by the ordinance is a mere regulatory fee and not a local tax.
(Smart vs. Municipality of Malvar, Batangas, GR No. 204429 dated
February 18, 2014.)

2. The Regional Trial Court, in deciding an appeal taken from a denial

of a protest by a local treasurer under Section 195 of the Local
Government Code, exercises "original jurisdiction”. (Yamane vs. BA
Lepanto – GR No 154992, October 25, 2005)
 Real Property Taxation
General Principles/Assessment of Real Property Tax:

1. In determining whether machinery is real property subject to real

property tax, the definition and requirements under the Local
Government Code (not the Civil Code) are controlling. Machinery may
or may not be permanently attached to the real property and may
even be mobile under Section 199(o) of the LGC.

2. A notice of collection is not a notice of assessment. Failure to

comply with the requirements on the issuance of an assessment under
Sec. 223 of the LGC are attempts at deprivation of property without
due process of law and, therefore, renders the assessment null and
void. (Meralco vs. The City Assessor and City Treasurer of Lucena City,
GR No. 166102 dated August 5, 2015)
 Real Property Taxation
Remedies:

1. If the taxpayer/real property owner questions the excessiveness or

reasonableness of the assessment, Section 252 directs that the
taxpayer should first pay the tax due before his protest can be
entertained. (Olivarez vs. Marquez 438 SCRA 679). On the other hand,
if what is questioned is the validity or legality of the assessment
payment under protest is not necessary. (NPC vs. Municipal
Government of Navotas, GR No. 192300 dated November 24, 2014)
 Real Property Taxation
Remedies:

2. Remedies if an assessment has already been issued:

a) Erroneous Assessment – Payment Under Protest – LBAA – CBAA
– CTA En Banc – SC;
b) Illegal Assessment – RTC (injunction) – CTA Division – CTA En
Banc – SC. Petition for declaratory relief is not the proper
remedy.
 Real Property Taxation
Remedies:

3. Other Scenarios:
a) Notice of Delinquency - RTC (injunction) – CTA Division – CTA En
Banc – SC.
b) Already sold at auction – RTC (Sec. 267 – Action Assailing
Validity of Sale) CTA Division – CTA En Banc – SC. (City of Lapu-
Lapu vs. PEZA, GR No. 184203 dated November 26, 2014)
 Remedies
Remedies:

4. Section 226 of the LGC lists down the two entities vested with the
personality to contest an assessment: (1) the owner and, (2) the
person with legal interest in the property. A person legally burdened
with the obligation to pay for the tax imposed on a property has legal
interest in the property and the personality to protest a tax
assessment on the property.

However, contractual stipulation to assume payment of the real

property tax does not clothe the party legal interest for purposes of
contesting an assessment. Corollary thereto, the LGU can neither be
compelled to recognize the protest of a tax assessment from an entity
against whom it cannot enforce the tax liability. (NPC vs. Province of
Quezon, GR No. 171586 dated July 15, 2009)
 Remedies
5. Posting of surety bond (instead of payment in cash), may be
considered substantial compliance with Section 252 of the LGC for the
said bond already guarantees the payment to the alleged real property
tax. (Meralco vs. The City Assessor and City Treasurer of Lucena City,
GR No. 166102 dated August 5, 2015)
 Percentage Tax

Percentage Tax – is a national tax measured by a certain percentage of

the gross selling price or gross value in money of goods sold, bartered
or imported; or of the gross receipts or earnings derived by any person
engaged in the sale of services. (CIR vs. Citytrust Investment Phils., Inc.,
GR No. 139786 dated September 27, 2006)
 Documentary Stamp Tax

1. Documentary Stamp Tax is a tax on documents, instruments, loan

agreements, and papers evidencing the acceptance, assignment, sale
or transfer of an obligation, right or property incident thereto. A DST is
actually an excise tax because it is imposed on the transaction rather
than on the document. A DST is also levied on the exercise by person
of certain privileges conferred by law for the creation, revision or
termination of specific legal relationships through the execution of
specific instruments. Hence, in imposing the DST, the Supreme Court
considers not only the document but also the nature and character of
the transaction. (Philippine Banking Corporation vs. CIR, GR No.
170574 dated January 30, 2009)
 Documentary Stamp Tax

2. Documentary Stamp Tax is imposed on the exercise of (these)

privileges through the execution of specific instruments,
independently of the legal status of the transactions giving rise
thereto. The DST must be paid upon issuance of these instruments,
without regard to whether the contracts which gave rise to them are
rescissible, void, voidable, or uneforceable. (CIR vs. Manila Bankers’
Life Insurance Corporation, GR No. 169103 dated March 16, 2011)
 Documentary Stamp Tax

3. As a general rule, any of the parties to a transaction shall be liable

for the full amount of the documentary stamp tax due, unless they
agree among themselves on who shall be liable for the same. (Republic
vs. Soriano, GR No. 211666 dated February 25, 2015)

4. The person liable for the payment of the DST are the person (a)
making; (b) signing; (c) issuing; (d) accepting; or (e) transferring the
taxable documents, instruments or papers. Should these parties be
exempted from paying tax, the other party who is not exempt would
then be liable. (Philacor Credit Corporation vs. CIR, GR No. 169899
dated February 6, 2013)
 Excise Tax

1. Under Section 129 of the NIRC, as amended, excise taxes are

imposed on two kinds of goods, namely: (a) goods manufactured or
produced in the Philippines for domestic sales or consumption or for
any other disposition; and (b) things imported. Undoubtedly, the
excise tax imposed under Section 129 of the NIRC is a tax on property.

2. With respect to imported things, Section 131 of the NIRC declares

that excise taxes on imported things shall be paid by the owner or
importer before the release of such articcles from the customs house.
For this purpose, the statutory taxpayer is the importer of the things
subject to excise tax.
 Excise Tax
Section 135 of the NIRC states:

Sec. 135. Petroleum Products Sold to International Carriers and

Exempt Entities or Agencies. – Petroleum products sold to the
following are exempt from excise tax:

(a) International carriers of Philippine or foreign registry on their use or

consumption outside the Philippines: xxx.
(b) Exempt entities or agencies covered by tax treaties, conventions
and other international agreement for their use or consumption: xxx.
(c) Entities which are by law exempt from direct and indirect taxes.
 Excise Tax

3. Pursuant to Section 135(c), petroleum products sold to entities that

are by law exempt from direct and indirect taxes are exempt from
excise tax. The phrase which are by law exempt from direct and
indirect taxes describes the entities to whom the petroleum products
must be sold in order to render the exemption operative. Section
135(c) should thus be construed as an exemption in favor of the
petroleum products on which the excise tax was levied in the first
place. The exemption cannot be granted to the buyers – that is, the
entities that are by law exempt from direct and indirect taxes –
because they are not under any legal duty to pay the excise tax.
 Excise Tax

4. Inasmuch as its liability for the payment of the excise taxes accrued
immediately upon importation and prior to the removal of the
petroleum products from the customshouse, Chevron was bound to
pay, and actually paid such taxes. But the status of the petroleum
products as exempt from the excise taxes would be confirmed only
upon their sale to CDC in 2007 (or, for that matter, to any of the other
entities or agencies listed in Section 135 of the NIRC). Before then,
Chevron did not have any legal basis to claim the tax refund or the tax
credit as to the petroleum products.

Consequently, the payment of the excise taxes by Chevron upon its

importation of petroleum products was deemed illegal and erroneous
upon the sale of the petroleum products to CDC.
 Excise Tax

5. Excise tax on petroleum products is essentially a tax on property, the

direct liability for which pertains to the statutory taxpayer (i.e.,
manufacturer, producer or importer). Any excise tax paid by the
statutory taxpayer on petroleum products sold to any of the entities or
agencies named in Section 135 of the National Internal Revenue Code
(NIRC) exempt from excise tax is deemed illegal or erroneous, and
should be credited or refunded to the payor pursuant to Section 204 of
the NIRC. This is because the exemption granted under Section 135 of
the NIRC must be construed in favor of the property itself, that is, the
petroleum products. (Chevron Philippines, Inc. vs. CIR, GR No. 210836
dated September 1, 2015)