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NIRC REMEDIES AGENCIES INVOLVED IN TAX ADMINISTRATION There are 3 agencies involved in tax administration: o o 1.

BIR, which collects the largest or the bulk o the taxes that the government can collect !. B"#

o 3. $ocal government units, re%resented b& the assessors or real %ro%ert& taxes and the treasurers or the local business taxes 'ba, local business tax, b& the time o the 3 rd o (anuar&, local business taxes will have to be %aid b& all businesses.

OFFICIALS OF THE BIR )ince we are still in the tax code, it means that we have to discuss the BIR onl&. *ho are the o icials o the BIR+ o 1. #IR The single most %ower ul %erson in the BIR. I he does not want to assess this s%eci ic %erson on the belie that there,s actuall& nothing wrong with the books o accounts o that entit&, nobod& can orce him to issue an assessment. There,s onl& one #IR. The term o the #IR is co-terminous with the -resident. )o the -resident has to have trust and con idence in his #IR, who will deliver the unds in the budget or his term. )o b& the time the -resident will leave o ice, new -resident, i he does not have trust and con idence with the current #IR, can actuall& change the #IR.

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!. . de%ut& commissioners 3. Regional directors There are as man& as there can be BIR regions. #ebu is revenue region 13. )o we onl& have 1 regional director or region 13.

.. R'" There are as man& revenue district o ices in 1 region.

/. Revenue en orcement o icers or examiners The& are the ones we can meet on regular basis. The& are those who make assessments and audits 0 the ront-liners.

POWERS AND DUTIES OF THE BIR *hat are the %owers and duties o the BIR+ o o o 1. 1ssessment and collection o 2IR# taxes, ees and charges !. 3n orcement o all ore eitures, %enalties and ines 3. 3xecution o 4udgments in all cases decided in its avour b& the #T1 5 regular courts

)o since the BIR is involved in tax administration, tax collection or that matter, the irst and oremost %ower o the BIR o ice is to issue assessment o tax de iciencies, collect taxes ees and charges and on to% o that, i there are violations, the BIR can en orce the or eiture o %roducts, inventories or an& other su%%lies o the tax%a&ers, im%ose %enalties, surcharges and ines. 1nd therea ter, as a last recourse, execute the 4udgment in all cases decided in its avor b& the #T1, regular courts and even the )#.

GENERAL POWERS OF THE CIR Those a orementioned are the %owers o the BIR as a whole. But s%eci icall&, what are the %owers o the #IR himsel + o 1. Inter%ret the tax code and other tax laws 6exclusive and original 4urisdiction7

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*hen a #IR has the %ower to inter%ret the tax code, how does he deliver this %ower+ *here does he exercise such %ower+ *hat is the role o the #IR in the issuance o a revenue regulation+ 'oes he issue a revenue regulation+ Is he the a%%roval o icer or the recommending o icer+ I &ou recall in general %rinci%les, the #IR, even i he,s the head o the tax de%artment o the BIR, he,s not actuall& the %erson who,s going to issue, a%%rove and sign the revenue regulations. 8e onl& has the recommending %ower and such recommendation will be directed to the )ecretar& o 9inance, who actuall& issues the rules and regulations. The last stage o rules and regulations will bear ! signatures 0 a%%roval and recommendation. Recommendation is done b& the #IR. 8ow else will he inter%ret tax laws a%art rom making-u% or dra ting rules and regulations or recommendations+ o o *hen he issues rulings and o%inions *hen does the #IR issue rulings and o%inions+ Rules and regulations are the general inter%retations o the tax laws, which seeks to ex%lain those %rovisions o the law. But an o%inion or ruling is more s%eci ic in nature. It addresses the %articular needs o the tax%a&er, which is not h&%othetical in nature. )o whenever a tax%a&er would in:uire as to the a%%licabilit& o a certain tax law, an o%inion would have to be issued b& the #IR or his subordinate.

It is a %ower that is exclusive and original on the %art o the commissioner. But is his %ower sub4ect to review b& someone else+ )ub4ect to review b& the secretar& o inance

!. -ower to decide dis%uted assessments, re unds, %enalties and other matters )ince the unction o the BIR and the #IR is to collect taxes, one ma4or %ower is to decide assessments 6that has not been agreed u%on b& the tax%a&er7, claims or re und and to im%ose %enalties and other ines and or eitures. It sim%l& means that an& issues regarding taxes would have to go through the administrative stage o being resolved b& an agenc& involved. )ince remedies o the tax%a&er, in so ar as taxes are concerned, cannot directl& go through the 4udicial %rocess. It has to go through administrativel& irst, then i not, resolve 4udiciall&. That,s wh& we have #T1.

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3. "btain in ormation and to summon, examine and take testimon& o %ersons *hat do &ou mean b& that+ In ormation rom whom+ $ets take the case, i &ou have a business and &ou maintain ! sets o books 0 one or the government and one or &oursel . In cases o assessments, would &ou show them the ! sets o books that &ou,re kee%ing+ 8ow can this be an e ective %ower o the #IR 0 obtaining in ormation rom whom+ *hat is the ob4ective o the BIR again+ To collect %ro%er taxes and to in determining the taxes that have been %aid are correct, exact and %ro%er, on the belie that it needs to obtain in ormation, to issue summons, examine and take testimon& o %ersons in order to gather su icient in ormation in making the correct assessment o taxes. But rom whom can the BIR gather in ormation and such in ormation would be a valid assessment against the tax%a&er+ o "ther agencies involved 0 the BIR can work hand-in-hand with the local government units in the sense that $;<s receive annuall& whenever a business renews its business %ermit, it is able to obtain the gross recei%ts or the entire &ear. )o the BIR can actuall& make a com%arison whether the gross recei%ts declared or BIR %ur%oses and or the $;< %ur%oses are the same. I not, then, it ma& be sub4ect to urther investigation. But is the government onl& allowed to take in ormation or obtain in ormation rom other government agencies and is that the onl& in ormation that remains to be valid in ormation+ 1lso rom the tax%a&er himsel 0 but the %erson who is alread& under investigation or the government is :uestioning such %erson alread&, that %erson would onl& issue statements that are sel -serving and issue documents that would onl& su%%ort whatever he has iled as tax returns and %a& the taxes. It will never actuall& give out an& in ormation that is %re4udicial to himsel . *hat t&%e

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and rom whom would this in ormation come rom that would become a valid basis or assessing or making an assessment o taxes+ #an it be an& %erson+ =3). The %rimar& source o assessment is the tax%a&er himsel . But i the BIR is not agreeable with the declaration o taxes and the %ament o taxes made b& the tax%a&er himsel , its other sources is to obtain in ormation and as the law %rovides, in ormation rom an& %erson. It can be an& %erson and we call that in ormation as a 3rd %art& in ormation. But o course, it has to be reliable 3 rd %art& in ormation. 3>1?-$3 6reliable 3rd %art& in ormation7: Those actors and actresses who have been charged with tax evasion+ 'o &ou think the #IR made the assessment o tax evasion %urel& based on what was declared b& these artists+ I 6?am Tiu7 don,t think those artists will be giving out the documents that would %re4udice themselves. The BIR can gather in ormation rom an& %erson so long as that in ormation is reliable in so ar as making the assessment o taxes is concerned. In the exam%le o the actors and actresses or an& other %ro essionals who have been charged with tax assessments and tax evasion, more o ten than not, the sources made b& the BIR is not %urel& the documents %rovided b& these %ro essionals or artists. It came rom another sources with whom that %erson has contracted an& business with. )o i &ou,re a %ro essional model and &ou earn 1@@m or a%%earing in a %articular advertisement, so i &ou get 1@@m, the obligation o the %a&or-com%an&, lets sa& )an ?iguel, would have to, as a withholding agent, under the law, withhold 1/A o the %ro essional ee. *hat will be given is onl& B/m. 1/m will be remitted to the BIR. 8ow much will that %ro essional or model declare as an income at the end o the &ear+ 1@@m because the tax withheld is a creditable withholding tax 6not a inal withholding taxC not a %assive incomeC it,s an income that &ou earned in the regular course o &our %ro ession7. )o, lets sa&, ?ann& -ac:uiao has to declare 1@@m, com%ute his taxes according to the table o /-3!A and whatever tax is le t, deduct whatever has been withheld. )o i he does not declare ull& the 1@@m, lets sa& /@m lang, but he deducts the 1/m withheld because the 1/m is su%%orted b& a certi icate that it has been withheld, it,s good i there,s no com%arison with the records o )an ?iguel. "n the ace o the %ro essional, it,s %er ect 0 /@m less 1/m, there,s no reall& individualiDation. But when there,s matching o records alread&, )an ?iguel will be re lecting how much in ex%enses+ 1@@m. 'o &ou think )an ?iguel will onl& re lect lower than what it has actuall& %aid+ 2o. It will re lect the true ex%enses because it is or its own bene it in the business. It will re lect 1@@m in ex%enses. 1nd what will the BIR do with the 1@@m+ It will check whether it has withheld the taxes and check 6because there,s submission o who among the %ersons have been withheld b& )an ?iguel7, it will have to be traced back. *ith the advent o com%uteriDation in the BIR, it,s ver& eas& to match the records and it will automaticall&, /@m x 3!A, will be &our tax assessment as the %ro essional has not declared the true income %lus the surcharges. )o an& in ormation. It,s not 4ust about the tax%a&er so long as his transaction can be traced with another tax%a&er, either it be sale o service or goods or ex%enses, it is %ossible to match the records. (ust like the E-rem&o sa ResiboF in BIR wherein &ou get to win 1m i &ou ke&-in or i &our cell %hone number is %icked out. *hat &ou need to do is sim%l& get a recei%t rom the establishment rom where &ou bough &our item, ke&-in the TI2 o that business and the amount o %urchase. I &our number gets %icked, &ou ma& win as much as 1m. It will be traced back to the establishment. The government will check the o icial recei%t or invoice issued b& that establishment. I the du%licate re lects onl& hal or little o what was declared b& the customer, who text-in the details o the invoice or o icial recei%t, that is another area o de icienc& or discre%anc& o amount, sub4ect to immediate assessment o taxes. )o an& %erson can be the source o in ormation.

o .. ?ake assessments

1s an overview, be ore we dig-in dee%er on how to go about the assessment, what do &ou understand about assessments made b& the BIR+ 1ssessments ma& be made b& the BIR through:

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1. 3xamination o returns and determination o tax due o )a& or exam%le, the assessment is initiall& made u%on the examination o the returns that have been iled vis-G-vis the taxes that have been %aid. I a tax%a&er does not ile a tax return or a %articular tax liabilit&, what will be the basis o the assessment or will there be an& assessment at all+ =3), there will still be assessment and the basis would be on the best-evidence obtainable. 1ssessment is not %urel& de%endent on the availabilit& o tax returns that have been iled. )o whether or not the tax return has been iled b& a %articular tax%a&er, assessments ma& be made. I a return has been iled, &ou have a starting %oint. =ou look at the return. #om%are it with the books o the tax%a&er. 1n& de icienc& or discre%anc& would have to be %aid or issued an assessment or %a&ment. I no return is iled, &ou sim%l& have to rel& on the best evidence obtainable b& the BIR.

!. 1ssess the %ro%er tax on the best-evidence obtainable o *hat do &ou mean b& best evidence obtainable+ #an &ou 4ust illustrate or give an exam%le+ )a& this is what has been re lected b& the tax%a&er: sales o 1b, but its income tax due at 3@A is onl& 1m. )o its taxable income is around 3m. I &ou,re rom the BIR, would &ou rel& on such records+ 8ow will &ou know the %ro%er tax due+ *hat is the best evidence that &ou can get in order to determine the %ro%er tax due+ I no books o accounts is made available+ 6It,s %ossible because some tax%a&ers do not reall& give out books o accounts or details7 *hat are the methods which the BIR can use in order to determine the %ro%er taxes i it a%%ears that the taxes declared are not believable or unconscionabl& low+ *hat about the net worth method+ 2et worth method can be another method wherein the BIR can determine the %ro%er taxes or a tax%a&er who has not ull& declared its income or %aid %ro%erl& its taxes or a number o &ears. )a& or exam%le, in a s%an o 3 &ears, onl& 1m ever& &ear is %aid b& a com%an&. The net worth or !@@H is 1@b. The net worth in !@1@ is !@b. *hat is the ormula or net worth+ 1ssets minus liabilities. 'ba, in ever& business or in ever& individual tax%a&er, &ou sim%l& determine what &our assets are, how much &our liabilities are, then, &ou will arrive at what is reall& &our true value. I the net worth has increased 1@b in 3 &ears and it is determined that ever&thing, the increase in income, is not %a%er income, it,s realiDed income, the taxes ma& be directl& com%uted against the 1@b 0 the increase in net worth. 'ba, it,s im%ossible or a business to grow 1@b net worth with onl& 3m income ever& &ear or 3 &ears. )o this is one method wherein the BIR can determine the %ro%er taxes.

3. #onduct inventor&-taking, surveillance and to %rescribe %resum%tive gross sales and recei%ts o o In some cases, the BIR will conduct inventor&-taking, surveillance o the business itsel and its o%erations, and to %rescribe %resum%tive gross sales and recei%ts. -rescribing %resum%tive gross sales and recei%ts is another t&%e o method to determine the true income o the tax%a&er and therea ter its assessments. I a tax%a&er, sa& or exam%le, a %articular manu acturing com%an& has been declaring sales at 1@m a &ear. #ost o sales at I.Im with a taxable income o 1@@k. I it,s unbelievabl& low, the BIR will %resume gross recei%ts and sales, how will it make %resum%tive gross sales and recei%ts+ B& looking at similar businesses within the same industr&. I it,s a shi%building com%an&, it will determine what are the gross sales and recei%ts on the average o other shi%building com%anies in that same industr&. I it,s at 1b and the other com%an& is re lecting 1@b, it ma& use the data rom all other com%anies on the average so long as the& are in the same business. It,s like com%aring green a%%les to green a%%les or red a%%les to red a%%les but not to red a%%les to green a%%les. It must be the same business.

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.. Issue 4eo%ard& assessments and terminate the taxable %eriod o *hat is the di erence between assessment as a general rule rom 4eo%ard& assessment+ *hat is 4eo%ard& assessment+ It,s a tax assessment made b& an authoriDed Revenue " icer without the bene it o a com%lete or %artial audit in light o the Revenue " icer,s belie that the assessment and collection o the de icienc& tax will be 4eo%ardiDed b& dela& caused b& the tax%a&er,s ailure to: 1. #om%l& with audit and investigation re:uirements to %resent his books o accounts andJor %ertinent records !. )ubstantiate all or an& o the deductions, exem%tions or credit claimed in his return

*hen the BIR makes assessment, the general rule is that it can onl& be made valid against the tax%a&er i a com%lete and ull audit has been made in so ar as the documents obtainable are concerned. But sometimes, the law allows incom%lete and %artial and even in the absence o an& ormal audit made, an assessment ma& be considered valid and it,s called 4eo%ard& assessment. *hat is the reason wh& a 4eo%ard& assessment can be made b& the #IR+ I it,s not the tax%a&er,s ault and %rescri%tion is about to la%se, will 4eo%ard& assessment be allowed+ 2". The law is not so unreasonable as to %re4udice the tax%a&er in allowing BIR to at an& time issue assessments without an& ormal audit and investigation. The general rule is that a ull audit and investigation has to be made detailing all the violations under the tax law, detailing all the discre%ancies and igures and the demand or %a&ment, that is the ormal wa& o issuing an assessment. "ther than that, it will be an invalid assessment. The tax%a&er can sim%l& consider it as nonexistent and not %a& the taxes that has been assessed. In some s%ecial cases, 4eo%ard& assessment can be made and the term 4eo%ard& assessment, it im%lies that the BIR did not exert the same e ort as he would have exerted i he made the ormal assessment. In short, dinalian 0 the assessment is made ha%haDardl& without the bene it o a ull nor %artial audit or investigation o the books o the tax%a&er. But it has to be su%%orted b& a valid cause on wh& 4eo%ard& assessment has been made, such as when the %rescri%tion is about to la%se without the ault o the government due to reasons within the control o the tax%a&er. But more im%ortantl&, 4eo%ard& assessment is issued whenever the government,s right to collect is 4eo%ardiDed or will be 4eo%ardiDed because the %rescri%tion %eriod is about to la%se with the tax%a&er not having com%lied with the re:uirements or ull investigation. 3xam%le: BIR issues a notice that it will be investigated. But the tax%a&er does not %rovide %ro%er in ormation and there,s onl& a remaining month to make the audit investigation. I the BIR sees that the collection will be 4eo%ardiDed, i no assessment is issued, then 4eo%ard& assessment is allowed. But there are onl& certain glaring instances when 4eo%ard& assessment is allowed or wherein the government,s right to collect will be 4eo%ardiDed. *hat are these instances that will give rise to the issuance o 4eo%ard& assessments+ *hen the tax%a&er is: o o o 1. Retiring rom business sub4ect to taxC or because he,s tr&ing to avoid the %a&ment o taxes b& sto%%ing ever&thing and leave the assessment hanging !. Intending to leave the -hils. or to remove his %ro%ert& there rom or to hide or conceal his %ro%ert&C 3. -er orming an& act tending to obstruct the %roceedings or the collection o the tax or the %ast or current :uarter or &ear or to render the same totall& or %artiall& ine ective unless such %roceedings are begun immediatel&

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/. -rescribe real %ro%ert& values The #IR has the %ower to %rescribe real %ro%ert& values or the 9?K o real %ro%erties. 'ba, there are two 9?Ks under the law in so ar as real %ro%erties are concerned 0 those 9?K identi ied or issued b& the #IR himsel or the Donal valuation b& the local assessors. But the #IR himsel has the %ower to determine Doning or the 9?K o ever& Dones in the area.

L. In:uire into bank de%osits <nder the Bank )ecrec& $aw, our de%osits are con idential, as a general rule. 2obod& can get the records o our bank de%osits, as a rule. But there are man& exce%tions in various laws. But R1 1.@/ under Regular -eso 'e%osits and under the 9oreign #urrenc& 'e%osits 1cts, ever& de%osit is held secret or sworn to secrec& b& the inancial institutions. 2obod& can sim%l& get the records in order to %rotect the con identialit& o the records. But the tax code is one o those laws, which %rovides or an exce%tion. *hat are the exce%tions o the Bank )ecrec& $aw+ 1. *hen the #IR is given the %ower to in:uire into the bank de%osits o a decedent or %ur%oses o determining his gross estate and in the end, determining the correct estate tax due to the government o In this case, no need o written waiver.

!. I the tax%a&er has waived in writing his %rivilege under R1 1.@/ 6Bank )ecrec& $aw7 or under other general or s%ecial laws and such tax%a&er has iled an a%%lication or com%romise o his tax liabilit& b& reason o inancial inca%acit& to %a& his tax liabilit& o )a& or exam%le, &ou do not believe on the veracit& and truth ulness o that assessment issued b& the #IR. =ou have grounds to believe that &our com%utation is correct. )o it makes the assessment doubt ul. =ou o ered a com%romise to %a& onl& a %ercentage, sa& hal o what has been assessed. 'oes that give the #IR the right to in:uire into &our bank de%osits+ 2", because the #IR onl& has the right to in:uire into the bank de%osits i the tax%a&er has iled an a%%lication or com%romise o his tax liabilit& b& reason o inancial inca%acit& to %a& his tax liabilit& and not b& reason o the existence o reasonable doubt as to the validit& o the claim against the tax%a&er. )ince there are ! grounds or asking a com%romise o tax liabilit& 0 one is when &ou,re inanciall& inca%able o settling the tax assessment and number two is when there is reasonable doubt as to the validit& o the assessment made b& the BIR 0 onl& one o these ! grounds in asking or a com%romise will give the #IR the right to in:uire into bank de%osits and that would onl& be the asking or com%romise under the ground o inancial inca%acit&.

3. The exchange o in ormation b& the BIR o tax matters %ursuant to internationall&-agreed tax standards 6R1 1@@!17

)ection 3. 1uthorit& o the #ommissioner o Internal Revenue to In:uire into Bank 'e%osit 1ccounts and Related In ormation 8eld b& 9inancial Institutions. - )ection L697 o Re%ublic 1ct 2o. B.!., as amended, otherwise known as the 2ational Revenue #ode o 1IIH, as amended, is hereb& urther amended to read as ollows:

M)3#. L. -ower o the #ommissioner to ?ake 1ssessments and -rescribe

1dditional Re:uirements or Tax 1dministration and 3n orcement. -

Mxxx

M697 1uthorit& o the #ommissioner to In:uire into Bank 'e%osit 1ccounts and

"ther Related In ormation 8eld b& 9inancial Institutions. - 2otwithstanding an& contrar&

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%rovision o Re%ublic 1ct 2o. 1.@/, Re%ublic 1ct 2o. L.!L, otherwise known as the 9oreign #urrenc& 'e%osit 1ct o the -hili%%ines, and other general and s%ecial laws, the #ommissioner is hereb& authoriDed to in:uire into the bank de%osits and other related in ormation held b& inancial institutions o :

M617 1 decedent to determine his gross estate.

M6!7 1n& tax%a&er who has iled an a%%lication or com%romise o his tax liabilit& under )ec. !@. 6176!7 reason o inancial inca%acit& to %a& his tax liabilit&.

MIn case a tax%a&er iles an a%%lication to com%romise the %a&ment o his tax liabilities on his claim that his inancial %osition demonstrates a clear inabilit& to %a& the tax assessed, his a%%lication shall not be considered unless and until he waives in writing his %rivilege under Re%ublic 1ct 2o. 1.@/, Re%ublic 1ct 2o. L.!L, otherwise known as the 9oreign #urrenc& 'e%osit 1ct o the -hili%%ines, or under other general or s%ecial laws, and such waiver shall constitute the authorit& o the #ommissioner to in:uire into the bank de%osits o the tax%a&er.

M637 1 s%eci ic tax%a&er or tax%a&ers sub4ect o a re:uest or the su%%l& o tax in ormation rom a oreign tax authorit& %ursuant to an international convention or agreement on tax matters to which the -hili%%ines is a signator& or a %art& o : -rovided, That the in ormation obtained rom the banks and other inancial institutions ma& be used b& the Bureau o Internal Revenue or tax assessment, veri ication, audit and en orcement %ur%oses.

MIn case o re:uest rom a oreign tax authorit& or tax in ormation held b& banks and inancial institutions, the exchange o in ormation shall be done in a secure manner to ensure con identialit& thereo under such rules and regulations as ma& be %romulgated b& the )ecretar& o 9inance, u%on recommendation o the #ommissioner.

MThe #ommissioner shall %rovide the tax in ormation obtained rom banks and inancial institutions %ursuant to a convention or agreement u%on re:uest o the oreign tax authorit& when such re:uesting oreign tax authorit& has %rovided the ollowing in ormation to demonstrate the oreseeable relevance o the in ormation to the re:uest:

M6a7 The identit& o the %erson under examination or investigationC

M6b7 1 statement o the in ormation being sought including its nature and the orm in which the said oreign tax authorit& %re ers to receive the in ormation rom the #ommissionerC

M6c7 The tax %ur%ose or which the in ormation is being soughtC

M6d7 ;rounds or believing that the in ormation re:uested is held in the -hili%%ines or is in the %ossession or control o a %erson within the 4urisdiction o the -hili%%inesC

M6e7 To the extent known, the name and address o an& %erson believed to be in %ossession o the re:uested in ormationC

M6 7 1 )tatement that the re:uest is in con ormit& with the law and administrative %ractices o the said oreign tax authorit&, such that i the re:uested in ormation was within the 4urisdiction o the said oreign tax authorit& then it would be able to obtain the in ormation

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under its law or in the normal course o administrative %ractice and that it is con ormit& with a convention or international agreementC and

M6g7 1 statement that the re:uesting oreign tax authorit& has exhausted all means available in its own territor& to obtain the in ormation, exce%t those that would give rise to dis%ro%ortionate di iculties.

MThe #ommissioner shall orward the in ormation as %rom%tl& as %ossible to the re:uesting oreign tax authorit&. To ensure a %rom%t res%onse, the #ommissioner shall con irm recei%t o a re:uest in writing to the re:uesting tax authorit& and shall noti & the latter o de iciencies in the re:uest, i an&, within sixt& 6L@7 da&s rom the recei%t o the re:uest.

MI the #ommissioner is unable to obtain and %rovide the in ormation within ninet& 6I@7 da&s rom the recei%t o the re:uest, due to obstacles encountered in urnishing the in ormation or when the bank or inancial institution re uses to urnish the in ormation, he shall immediatel& in orm the re:uesting tax authorit& o the same, ex%laining the nature o the obstacles encountered or the reasons o re usal.M

MThe term N oreign tax authorit&N, as used herein, shall re er to the tax authorit& or tax administration o the re:uesting )tate under the tax treat& or convention to which the -hili%%ines is a signator& or a %art& o .M

3>1?-$3: The -hils. and 1ustralia. <nder the R--1ustralia tax treat&, towards the end %rovisions o such treat&, there is a sti%ulation that both government have the right to exchange in ormation o its constituents. *ho is conducting an investigation+ Is it the -hil. government or the oreign authorities+ It,s a re:uest rom oreign authorities.

*ithout such re:uest, can the #IR, b& himsel , look into the bank de%osits o the tax%a&ers+ 2".

*hat could be the one reason wh& a oreign tax authorit& would be interested in determining the bank de%osits o a -hil. tax%a&er or -hil. individual+

)ection !. 'eclaration o -olic&. - It is the declared %olic& o the )tate to %romote and %ursue a tax environment that contributes in sustaining a avorable international investment climate and instills con idence in the ade:uac& and ca%acit& o the countr&Ns tax administration to com%l& with its commitments under existing international conventions or agreements on tax matters. -ursuant to this declared %olic&, the government shall com%l& with or commit to the internationall&-agreed tax standards re:uired or the exchange o tax in ormation with its tax treat& %artners to hel% combat international tax evasion and avoidance and to hel% address tax concerns that a ect international trade and investment. The government shall likewise ado%t measures and %rocedures to enhance coo%eration with other countries in the e icient collection o taxes, consistent with the international understanding to ensure the %a&ment o taxes due the res%ective taxing 4urisdictions o the treat& %artners. o But even under this law, the law re:uires utmost con identialit& o records. 3ven i the BIR is allowed to re:uest the inancial institutions to %rovide these data to be transmitted to the oreign tax authorities, such should be made in a secure manner. It would not be made available to all BIR o icers and an& violation o its con identialit& and getting it in a secure manner would give rise to a ine or im%risonment or both. 1nd i a inancial institution also re uses to give out the in ormation to the BIR or the BIR to transmit to the oreign tax authorities, it will give rise to the same ine or im%risonment or both under the same law. But what is the condition, under this law, that the oreign tax authorit& must be able to %rove in re:uesting our own tax authorit& to get such con idential in ormation+ The oreign tax authorit& must be able to demonstrate the oreseeable relevance o the in ormation to the re:uest and it must be able to %rove that it has

-age 8 o 186

exhausted all means available in its own territor& to obtain the in ormation, exce%t those that would give rise to dis%ro%ortionate di iculties. o H. 1ccredit and register tax agents o This sim%l& means that the #IR has the sole %ower to accredit %ractitioners or #-1s who can audit inancial statements.

B. -rescribe additional %rocedural or documentar& re:uirements This is a catch-all %rovision. 1re these general %owers o the #IR allowed to be delegated to his subordinates+ 1ll o these general %owers+ 1re the general %owers o the #IR himsel delegable+ =3), but not all o the general %owers.

AUTHORITY OF THE COMMISSIONER TO DELEGATE POWER ;R: The #IR ma& delegate %owers vested in him to subordinate o icials 6with a rank e:uivalent to a division chie or higher7. 3xce%tion 0 non-delegable %owers are: o o 1. -ower to recommend the %romulgation o rules and regulations b& the )ec. o 9inance !. -ower to issue rulings o irst im%ression or to reverse, revoke, modi & an& existing ruling *hat are rulings o irst im%ression+ These are rulings that are novel as to the issues. I there are issues raised b& a tax%a&er asking or an o%inion or ruling rom the #IR or the subordinates, which issue has never been addressed similarl& in the %ast, meaning there are no %recedent BIR rulings available, it has to be the #IR who will sign such rulings, otherwise, i it,s not a ruling o irst im%ression, general rule is that the de%ut& commissioner or the assistant commissioner will be allowed to sign a ruling that alread& has man& %recedents.

1nother t&%e o ruling, which can onl& be issued and signed b& the #IR+ I there are existing rulings, which the #IR believes that should have been inter%reted the other wa& around, onl& the #IR can issue and sign the reversal, modi ication and revocation o such existing ruling. 'ba, in general %rinci%les, a #ommissioner or an " icer o the Bureau is not bound b& the inter%retations made b& his %redecessors.

Jan. 11, 2011 Tuesday o 3. -ower to com%romise or abate an& tax liabilit& 6exce%t assessments issued b& the regional o ices involving basic de icienc& taxes o /@@k or less, and minor criminal violations7 *hat is the di erence between the %ower to com%romise and the %ower to abate tax liabilit&+ 6)ec. !@.7 Both have di erent grounds. The %ower to com%romise is the %ower to lessen the tax liabilit& o the tax%a&er while the %ower to abate is the %ower to cancel the tax liabilit& o the tax%a&er. The #IR can enter into com%romise reducing the tax liabilit& to the extent o onl& 1@A or .@A de%ending on what ground &ou are entering into such com%romise or the #IR can abate the tax liabilit& b& oregoing totall& the collection o taxes, sometimes onl& the %enalties will have to be oregone or the collection o surcharges or interests. In most cases, what is oregone is the collection o the surcharges, %enalties and interests, such as i it ha%%ens that &ou have iled in a wrong venue due to miscommunication o the BIR a ter &ou have actuall& trans erred to a di erent Revenue 'istrict " ice but due to the ault o the BIR, &ou iled in the wrong venue. )u%%osedl&, &ou will be liable or the surcharge o !/A or iling in the wrong venue but due to reasons not

-age

o 186

entirel& within &our control or due to e:ual ault between the government and the tax%a&er, &ou ma& ask or abatement o the surcharge o !/A. But would com%romise and abatement exclusivel& belong to the #IR+ *ould the %ower to enter into a com%romise or abatement exclusivel& belong to the #IR, such as i &ou,re seeking or an abatement o 1@@ %eso tax liabilit&, would &ou have to go to ?anila and ask or the a%%roval o the #IR+ #an he delegate such %ower+ The %ower to com%romise or abate an& tax liabilit& is non-delegable exce%t assessments issued b& the regional o ices involving basic de icienc& taxes o /@@k or less, and minor criminal violations.

*hat are the grounds or entering into com%romise+ 1. 1 reasonable doubt as to the validit& o the claim against the tax%a&er existsC or o The tax%a&er contends as to the reasonable doubt.

!. The inancial %osition o the tax%a&er demonstrates a clear inabilit& to %a& the assessed tax

8ow about abatement+ *h& is it that it,s onl& the #IR who has the %ower to abate tax liabilities+ The grounds or abatement are: 1. The tax or an& %ortion thereo a%%ears to be un4ustl& or excessivel& assessedC or !. The administration and collection costs involved do not 4usti & the collection o the amount due

.. -ower to assign or reassign internal revenue o icers to establishments where articles sub4ect to excise tax are %roduced or ke%t *h& does it have to be the #IR+ *hat is the %ur%ose o this %rovision+ Because the articles ke%t or %roduced are sub4ect to excise tax. )o what makes excisable articles s%ecial+ o 3xcisable articles, the liabilit& o excise tax would all at the time or would be due at the time that these are withdrawn rom its %lace o %roduction or rom its %lace where it,s ke%t. =ou will notice that the word EsoldF is not %rovided therein. )o excisable articles in )? and ;aisano ?etro, such as cigars, cigarettes, wines, and li:uors, there,s no more need o assignment and reassignment o internal revenue o icers but or warehouses and %roduction %laces o excisable articles, it has to be assigned a revenue o icer because the %a&ment o taxes would be u%on withdrawal o these items. 'ba, &ou will see the seal o tax %a&ment in ever& cigarette %ack or bottle o li:uor 0 the rectangular or 4ust like a stam%. )o in order to avoid building good relations and amiliarit& between the owner o the establishment and the internal revenue o icer, there has to be continuous assignment and reassignment or reshu ling o o icers, otherwise, it would be eas& to esca%e excise taxes with sim%l& an agreement between the o icer such as withdrawal without %a&ment o excise o taxes u%on withdrawal. )o being a s%ecial case, it has to be the #IR who will not be %riv& to the di erent %laces nationwide where establishments are kee%ing or %roducing excisable articles.

)o i the articles ke%t or %roduced are not excisable, sa& soa%, tooth%aste, will it be the #IR who will make the assignment or reassignment o o icers+ 2".

RULE ON ESTOPPEL *ould esto%%el run against the tax%a&er+ o =3), because o li eblood doctrine.

*ould esto%%el run against the government+ o o 2", because o li eblood doctrine still. )o esto%%el would not run against the government as %rovided in the case o -2"# vs. #1.

-age 1! o 186

-2"# K) #1 The Government cannot be estopped from collecting taxes by the mistake, negligence, or omission of its agents. 9acts: The new BIR #ommissioner, #ommissioner "ng, had acted well within his %owers when he set aside the com%romise agreement, dated !! (une 1IBH, a ter inding that the said com%romise agreement was without legal basis. *hen he took over rom his %redecessor, there was still a %ending motion or reconsideration o the said com%romise agreement, iled b& %rivate res%ondent )avellano on !. ?arch 1IBB. To resolve the said motion, he reviewed the com%romise agreement and, therea ter, came u%on the conclusion that it did not com%l& with 3.". 2o. .. and its im%lementing rules and regulations. It had been declared b& this #ourt in Hilado v. Collector of Internal Revenue, et al., that an administrative o icer, such as the BIR #ommissioner, ma& revoke, re%eal or abrogate the acts or %revious rulings o his %redecessor in o ice. The construction o a statute b& those administering it is not binding on their successors i , therea ter, the latter becomes satis ied that a di erent construction should be given. It is evident in this case that the new BIR #ommissioner, #ommissioner "ng, construed 3.". 2o. .. and its im%lementing rules and regulations di erentl& rom that o his %redecessor, ormer #ommissioner Tan, which led to #ommissioner "ng,s revocation o the BIR a%%roval o the com%romise agreement, dated !! (une 1IBH. )uch a revocation was onl& %ro%er considering that the ormer BIR #ommissioner,s decision to a%%rove the said com%romise agreement was based on the erroneous construction o the law 6i.e., 3.". 2o. .. and its im%lementing rules and regulations7 and should not give rise to an& vested right on -2"#. 9urthermore, a%%roval o the com%romise agreement and acce%tance o the com%romise %a&ment b& his %redecessor cannot esto% BIR #ommissioner "ng rom setting aside the com%romise agreement, dated !! (une 1IBH, or lack o legal basisC and rom demanding %a&ment o the de icienc& withholding tax rom -2B. 1s a general rule, the ;overnment cannot be esto%%ed rom collecting taxes b& the mistake, negligence, or omission o its agents because: o . . . <%on taxation de%ends the ;overnment abilit& to serve the %eo%le or whose bene it taxes are collected. To sa eguard such interest, neglect or omission o government o icials entrusted with the collection o taxes should not be allowed to bring harm or detriment to the %eo%le, in the same manner as %rivate %ersons ma& be made to su er individuall& on account o his own negligence, the %resum%tion being that the& take good care o their %ersonal a airs. This should not hold true to government o icials with res%ect to matters not o their own %ersonal concern. This is the %hiloso%h& behind the governmentNs exce%tion, as a general rule, rom the o%eration o the %rinci%le o esto%%el.

TI<: The a%%roval b& the %revious or %redecessor #IR o the com%romise agreement and subse:uent acce%tance o the com%romise settlement would not esto% the government rom collecting the correct taxes i it so determines that the %revious com%romise is without legal basis. 1s a general rule, esto%%el cannot run against the government and would allow the collection o taxes des%ite the mistake, negligence or omissions o its o icers or agents.

REMEDIES OF THE TAXPAYER "INDS OF REMEDIES Tax laws are not and even li eblood doctrine is not so unreasonable as to de%rive tax%a&ers remedies against the government. There is a balance between the government and the tax%a&er. There is a remed& b& the government against the tax%a&er and a remed& b& the tax%a&er against the government. "ridinaril&, when &ou go into business, what &ou reall& encounter rom the BIR is the assessment 0 the collection o de icienc& taxes, those that the& have identi ied as &ou having not actuall& re%orted the correct sales, etc.. But would &ou be automaticall& re:uired to settle these obligations+ 2"T 23#3))1RI$=. =ou are a orded certain remedies, which are both extra4udicial and 4udicial remedies. 1. 1dministrative Remedies 6extra4udicial remedies7 o 1. Be ore %a&ment

-age 11 o 186

a. -etition or re:uest or reinvestigation 8ere, &ou %rotest &our assessment that has alread& been issued against &ou. ?otion or reconsideration is the same as motion or reevaluation. The& reevaluate the existing documents. But motion or reinvestigation is something else. =ou re:uire a reinvestigation with an introduction o new evidence.

b. 3ntering into a com%romise 8ere, i &ou are %artiall& agreeable to the assessment, &ou ma& enter into a com%romise lowering the %a&ment o taxes to the extent o .@A onl& or even 1@A. #om%romise is a mutual covenant between ! %arties. It can be o ered b& the government. It can be o ered b& the tax%a&er.

!. 1 ter %a&ment a. #laim or tax re und b. #laim or tax credit *e lodged these administrative remedies be ore the BIR 0 the #IR or his delegates. *ould these . remedies sto% at the administrative level+ *ould the . remedies end at the administrative level onl&+ o o 2". The remedies available to &ou administrativel& is sim%l& a sto%-over. =ou are re:uired to exhaust all &our administrative remedies in order to give chance to those actuall& involved in the assessment or collection o taxes to reevaluate their actions. 2ow, i and when &our motion or reinvestigation or reconsideration or &our %rotest or &our o er o com%romise or claims or re und or claims or tax credit is denied b& the administrative agenc& involved, which is the BIR, &our next ste% is to go or 4udicial remedies. But can &ou directl& avail o an& o these . remedies to the 4udicial level without going through the administrative level+ 2". *ith the %rinci%le o exhaustion o administrative remedies, all these . remedies must undergo the extra4udicial stage. It has to be %resented with the BIR because the 4udicial courts, the #T1, will not have 4urisdiction over a sim%le assessment, over a claim or re und, unless there has been a decision rendered b& the BIR or the #IR. That,s the general rule. (urisdiction would onl& be the decision o the agenc& concerned. *ithout an& decision, no 4urisdiction o the #T1, no 4urisdiction o the )#. But that,s the general rule. *e will learn later on that there are exce%tions such as inaction b& the BIR o 1B@ da&s, no decision, &ou can elevate the case to the )#, even in cases o demand, when the %eriod is about to la%se, &ou can elevate it to the #T1 but it re:uires com%liance with certain re:uirements.

B. (udicial Remedies o 1. #ivil action a. 1%%eal to the #T1, )# b. 1ction to contest or eiture o chattel This is an action to contest the administrative remed& o the government in or eiting &our goods or %ro%erties.

c. 1ction or damages 9or an& whimsical or ca%ricious act resulting to actual damages to the tax%a&er, the tax%a&er is allowed to ile a civil case or damages against the government.

-age 12 o 186

!. #riminal action a. 9iling o criminal com%laint against erring BIR o icials

TAX ASSESSMENTS BY THE BIR '39I2ITI"2 "9 T3R?) The tax assessment o the BIR, the %ower o the BIR through the #IR, will commence with the issuance o what+ o The $etter o 1uthorit& 6$"17

*hat is a $"1+ o o 1n o icial document that em%owers a Revenue " icer to examine and scrutiniDe a tax%a&er,s books o accounts and other accounting records, in order to determine the tax%a&er,s correct internal revenue tax liabilities. 1 $"1 is a love letter coming rom the BIR, signed b& an o icer, em%owering a revenue examiner or o icer to examine, investigate and audit the books o accounts o a certain tax%a&er whose %rinci%al %lace o business is within its 4urisdiction or the %ur%ose o collection o additional taxes or or the %ur%ose o issuing an assessment o de icienc& taxes.

*ho will sign the $"1+ o o o o #ommissioner 6#IR7 0 or those units re%orting directl& to him Regional directors 6R'7 0 or tax%a&ers covered b& his %articular region. I the #ommissioner has alread& issued an $"1 to investigate a %articular tax%a&er, the Regional director shall desist rom issuing another $"1 or the same tax%a&er. I$$<)TR1TI"2: 8ere is a $"1 that is signed b& the Regional 'irector o the BIR. Is it valid+ 1ssuming all other items are valid. $ets concentrate on the signature. "nl& the R' has signed the $"1+ Is it valid+ o =3), i the tax%a&er sought to be investigated or audited in the $"1 is covered b& such R',s %articular region.

The %ower to make assessments b& the #IR is a delegable %ower, there ore, it,s not necessar& that the #IR himsel has to sign. It can be his subordinates. )o it ma& be the #IR or it ma& be the R' or the 'e%ut& #ommissioner, etc.

*hat are the re:uirements or a $"1 to be valid a%art rom the signature o the %ro%er o icer+ o o o o o 1. The tax%a&er has to be %ro%erl& identi ied. !. The $"1 must be given to the %ro%er address. 3. Taxes to be audited must be identi ied but it,s enough to sa& all national internal revenue taxes .. It has to s%eci & the &ear to be audited /. )igned b& the %ro%er o icer

Is a $"1 the same as the $etter 2otice 6$27+ o o 2". The& are ! inde%endent letters that &ou will receive.

*hat is a $2+ *hat is the %ur%ose o the $2+ o It,s a notice issued b& the #IR or his alter egos to the tax%a&er sa&ing that it has been ound out that &ou have discre%ancies, either under-declaration o &our sales or over-declaration o &our ex%enses, through a no-contact audit a%%roach, meaning to sa& that audit has been conducted without &ou having known that an audit has alread& been made. 8ow+ 'ba, 3rd %art& in ormation or in ormation rom an& %erson ma& be obtained through the %rocess o matching, either com%uteriDed or manual matching, o sales and %urchases rom di erent %ersons, tax%a&ers against his su%%liers, tax%a&ers against his %urchasers. 1n& discre%ancies ound out to have sales under-declared or %urchases over-declared will be reason or a $2 to be issued and it will alread& state there the discre%anc&. I &ou agree with the indings, %a& the de icienc&.

January 12, 2011

-age 13 o 186

TAX ASSESSMENTS BY THE BIR


STAGES OF MA"ING ASSESSMENT $"1 2I# 61/ da&s7 -12 61/ da&s7 912 63@ da&s7

'39I2ITI"2 "9 T3R?) #an &ou distinguish what a $"1 and a $2 is+ o 1 $"1 is intended to noti & the tax%a&er that he will be sub4ect to an audit or investigation and such $"1, the word authorit& there, is giving authorit& to the BIR Revenue " icers who are em%owered to conduct such scrutin& o the books or investigation o the tax%a&er,s records. )o no investigation &et, no audit &et, when &ou receive the $"1, onl& therea ter. The $"1 is a letter in orming, aside rom em%owering the BIR o icers to conduct the audit, it,s to in orm the tax%a&er that he will therea ter be sub4ected to audit and investigation in accordance with the s%eci ic taxes as identi ied in a %articular calendar &ear at issue. 8ow did the $2 come about+ I &ou are the Revenue " icer, which will &ou issue irst+ "r what,s &our basis or issuing a $2+ 1 $2 is longer than a $"1 considering that the $2 would include therein a noti ication that %er examination o available records with the BIR in com%arison with 3rd %art& in ormation or b& the %rocess o matching through com%uteriDed or manual method o matching &our sales and &our %urchases with &our su%%liersJcustomers, it is ound out that &ou have a discre%anc& which would result to tax de icienc& %lus surcharges and interests. I at all, &ou are agreeable with this assessment, &ou need to settle the obligation within how man& da&s. I &ou,re not agreeable, make &our %osition %a%er or re%l&, go to the BIR examiner concerned and make &our arguments. )o it,s a limited orm o audit and investigation as alread& been conducted through available records with the BIR. There,s no visit as &et to the tax%a&er. 3>1?-$3: I the BIR has with it alread& income tax returns that has been iled and through matching o records with the su%%liersJcustomers o the tax%a&er, it,s ound out to be inconsistent, there is discre%anc&. 2aturall&, the di erence would be sub4ected to income tax and automaticall&, a $2 would be issued that there is a %ossible de icienc& tax. 1lthough it,s called a no-contact audit a%%roach because it,s an audit whose a%%roach is that &ou don,t visit the tax%a&er as &et.

2otice o In ormal #on erence 62I#7, technicall& s%eaking, would ollow the $"1. *hen there is a $"1, dba, that is the commencement o a ormal audit and investigation. =ou receive a $"1. 1 ter how man& da&s, &our books o accounts will be audited and investigated. 1n& result o the audit and investigation will be detailed in a 2I# that &ou are invited b& the BIR to discuss the %reliminar& indings. I agreeable, &ou %a&. I not, %osition %a%er or arguments. But it has the same e ect with the $2 that it states therein %ossible de icienc& taxes but not inal assessments as &et. I$$<)TR1TI"2: I &ou receive the $2 sa&ing that there has been a discre%anc& between &our sales that &ou have declared against &our customer,s re%ort o its %urchases, dba &ou make the sales and somebod& else makes the %urchase, &ou re%orted 1@m in sales but &our sole customer re%orted !@m in %urchases rom &ou evidenced b& an o icial recei%t. )o &ou have under-declared /@A o &our sales. /@A x 3@A income tax rate, &ou are to %a& 3m in de icienc& taxes %lus surcharges, interests and other com%romise %enalties. That %ertains to income tax or !@@B. #an the BIR issue a $"1 authoriDing Revenue " icers to conduct an audit and investigation or &our income tax o !@@B, same &ear+ #an the government or the BIR issue a $2 and the $"1 or the same tax covering the same taxable %eriod+ )o i income tax o !@@B has alread& been sub4ected to a $2, discre%anc& ound out, de icienc& assessment alread& identi ied, can the BIR therea ter issue another notice, this time a $"1, that the same %eriod o !@@B, the same tax o income tax, will still be sub4ected to audit and investigation via a $"1, no longer a $2 since &ou,ve alread& received a $2+ Is it valid or the BIR to issue both letters covering the same tax t&%e, same taxable %eriod+ "r is it double 4eo%ard&+

-age 14 o 186

IT,) K1$I'. The issuance b& the BIR o the $2 and the subse:uent recei%t b& the tax%a&er o such $2 will not %revent the #IR himsel or his authorities rom issuing a $"1 covering the same %eriod, the same tax, considering that the $"1 is or the %ur%ose o a com%rehensive audit o the tax%a&er,s tax liabilit&. =ou will notice that the $2 is ver& %articular, s%eci ic, as to its target. It onl& re lected therein the discre%anc& as ound out in the available records with the BIR 0 the discre%anc& between the sales re%orted and the %urchase o the customer as re lected in the customer,s income tax return or other records. There are various areas or audit in income taxation. There are o%erating ex%enses, costs, administrative ex%enses. 8ow will this be identi ied i a $2 is the onl& assessment made or the entire income tax o !@@B, dba. I &ou have a subse:uent :uestion on what i the tax%a&er has alread& settled the assessment in the $2+ *ill he still be liable under the $"1+ =3), so long as it does not %ertain exactl& to the same violation. I the violation as ound out in the $"1 is or over-declaration or over-claiming o ex%enses, that,s another stor&. 8e will still have to settle his assessment or de icienc& taxes as ound in the com%rehensive audit.

o o

o -

)o issuance o a $2 is not a waiver o the #IR,s right to look into com%rehensivel& the records o the tax%a&er or books o accounts.

*ill a $2 bar the tax%a&er rom amending, modi &ing, or withdrawing his tax return+ Is the tax%a&er, at all, allowed to modi &, amend or withdraw the tax return that he has alread& iled+ o o =3), i the error made in the original return iled is substantial such as a change in tax liabilit& 6not a change o name or address7. )o i &ou ound out that &our ex%enses would have been 1@ times higher than what &ou have re lected, is it not a substantial amendment i &ou decide to amend it and is it allowed to increase &our ex%enses as alread& declared+ *hat ha%%ens to the tax that &ou,ve alread& %aid+ *hat is the legal basis that ma& be invoked b& the tax%a&er who wishes to amend, modi & or withdraw the tax return that he has alread& iled+ Is it su%%orted b& a %rovision in the tax code+ ;R: 1$$"*3' T" 1?32'. $3;1$ B1)I) 0 )ec. L6a7: 1n& return, statement or declaration iled in an& o ice authoriDed to receive the same shall not be withdrawn: rovided, that within 3 &ears rom the date o such iling, the same ma& be modi ied, changed or amended: rovided, further, that no notice or audit or investigation o such return, statement or declaration has, in the meantime, been actuall& served u%on the tax%a&er. 1s between the two 0 the $2 or $"1 0 which would act as notice or audit or investigation+ B"T8

I$$<)TR1TI"2: $ets sa& that &ou have received the $"1 or income tax o !@@B to be audited. #an &ou amend the income tax o !@@B a ter recei%t o the $"1 but the actual audit 6the o%ening o the books o accounts7 has not &et commenced+ )o the da& a ter receiving the $"1, &ou decided to amend the return o !@@B income tax return. 1llowed to amend or not+ 1ssuming that &ou received toda& the $"1 sa&ing that &ou will be audited next month o &our income tax liabilit& or !@@B, can &ou tomorrow withdraw the return and ile a substitute income tax return amending some o the items+ 2", since the law %rovides that E%rovided, urther, no notice or audit or investigation o such return, statement, declaration has, in the meantime, been actuall& served u%on the tax%a&erF. In this case, a $"1 was received and was there ore, actuall& served u%on the tax%a&er, thus, no amendment, modi ication, or withdrawal is allowed.

12"T83R I$$<)TR1TI"2: =ou received a $"1 that &our income tax liabilit& or !@@B will be audited. 2ow, &ou realiDed that &our !@@I income tax return should be amended. #an &ou amend &our !@@I income tax return a ter the recei%t o such $"1+ =3), because the $"1 %ertains to the income tax liabilit& or !@@B and not or !@@I. 8ow about i the return that &ou will amend is a %rior &ear, meaning a &ear %rior to the &ear sub4ect o audit, such as !@@H+ #an &ou still amend that+ o o =3). I &ou receive a $"1 or audit o a %articular &ear, it,s a notice or audit or investigation or that %articular &ear onl&. )o long as !@@I and !@@H, which are still o%en &ears or the BIR to make assessments, so long as there,s no notice or audit or investigation or the &ear %rior and &ear a ter, &ou can still amend, modi &, or withdraw the returns that &ou,ve iled.

-age 15 o 186

The re:uirements or amendment, modi ication or withdrawal o tax returns iled: *ithin 3 &ears and 2o notice or audit and investigation. 2"T3: 9or ever& $"1, onl& 1 &ear at issue. =ou cannot indiscriminatel& sa& that &ou will audit or investigate or a number o &ears. 12"T83R I$$<)TR1TI"2: )ec. L o the law sa&s that &ou ma& be able to amend, modi & or withdraw and substituted it with another return within 3 &ears rom the date o iling so long as no notice or audit or investigation has been issued to &ou. $ets go to $2. 'oes a $2 come within the %hrase Eno notice or audit or investigationF+ I &ou have received a $2 sa&ing that there has been a discre%anc& or an underdeclaration o &our sales re%orted or 1@m, taxable &ear !@@B, can &ou still amend &our tax return or !@@B and therea ter re lect &our true sales+ *hat is the law re erring to+ Is it re erring to onl& a $"1 or to all letters coming rom the BIR+ *ould &ou still be allowed to amend i &ou onl& received a $2, not the $"1+ 2", because with more reason that when &ou receive a $2 wherein the BIR has alread& identi ied the discre%anc& in the igures and the disallowance or %robabl& the de icienc& assessment, with more reason &ou are no longer allowed to amend the return or that %articular %ur%ose or or additional items in the income tax return or other returns that &ou,ve iled. 1lthough technicall&, i &ou have a $"1, &ou,re noti ied or audit or investigation. I &ou have a $2, &ou,re noti ied that &ou have discre%anc&, sim%le audit has alread& been conducted. It,s not reall& a notice that &ou will be audited because there has been a %artial audit. But or %ur%oses o disallowing &ou rom amending, modi &ing and withdrawing a return that has alread& been iled and is sub4ect to a $2, the e ect o a $2 would have the same e ect as the $"1. It would have the e ect as i there,s a notice or audit or investigation so as to be included in )ec. L, %robabl& because when R1 B.!. was dra ted or enacted, the ormalit& o the word $2 has not been identi ied. "nl& in R?" .!-@3, the BIR clari ied that the nature o a $2, or %ur%oses o amending the return, will be the same as a notice or audit or investigation in relation to )ec. L.

*hat is a -re-1ssessment 2otice 6-127+ o o 1 communication issued b& the regional assessment division or an& other concerned BIR o ice, in orming a tax%a&er who has been audited o the indings o the revenue o icer, ollowing the review o these indings. The assessment shall be: o o o In writing, and )hould in orm the tax%a&er o the law and the acts on which the assessment is madeC "therwise, the assessment shall be void

I the tax%a&er disagrees with the indings in the -12, he has 1/ da&s rom his recei%t o the -12 to ile a written re%l& contesting the %ro%osed assessment. 1 ormal audit or investigation would start-o with the issuance o the $"1. Right a ter &our books are o%ened to the BIR or examination, the BIR will gather initial indings and either %lace it in the %ost-re%orting notice or a 2I#. <suall& the standard date is within 1/ da&s, &ou are to have an in ormal con erence with the revenue examiner or the BIR examiner. 'uring this in ormal con erence, what will ha%%en is that there will be discussion o what the indings are and i &ou,re agreeable, &ou %a& the assessed tax. I not, &ou are re:uested either to ile a %osition %a%er. I &ou don,t want to ile, it doesn,t matter. =ou can actuall& ignore this one. But that will not avorable to &ou. 1 ter a 2I#, usuall&, i &ou don,t %a& the tax, the BIR will not dro% this in ormal con erence. This is %robabl& the assessment or audit. It will %roceed on to issue the %reliminar& indings in a more ormal but not &et the ormal demand o %a&ment. This is what we call the -12.

Is a -12 necessar& at all times+ o o o o 2", since there are instances where -12 is not necessar&. 1 -12 is sim%l& a written notice in orming semi- ormall& the tax%a&er o the indings related to the de icienc& over which has not been settled during the in ormal con erence or in the absence o an in ormal con erence. This is not &et the ormal demand to %a&. But i &ou,re not agreeable with the -12, within 1/ da&s, &ou can ile a %osition %a%er stating therein &our arguments, &our legal basis, and wh& &ou should not be liable to %a&. 'ue to li eblood doctrine, usuall&, an& %osition %a%er that &ou ile will be denied or will be decided against &our avor.

-age 16 o 186

1re &ou re:uired at all times to res%ond with a %osition %a%er within 1/ da&s a -12+ Is it necessar& that &ou have to answer a -12 within the 1/-da& re:uirement, otherwise, i &ou don,t, the assessment will become inal, una%%ealable and the tax assessment demandable+ o o 2". It is not mandator& that &ou re%l& to a -12. (ust like an in ormal con erence, &ou can sim%l& avoid res%onding to a -12. I &ou don,t re%l& with a %osition %a%er a -12, what ha%%ens to &our assessment+ o The tax assessment made in the -12 will be carried over or re lected in the 9inal or 9ormal 1ssessment 2otice 69127.

To the extent %ossible, that,s wh& there are various ste%s, that &ou can settle &our issues with the BIR. 'ba, negotiation stage, agreeing on the amount that will be %aid. )o &ou,re given the in ormal con erence, %ost-re%orting notice, -12, so that it will not become a 912 because a 912, once decided on a ter %rotested, will be sub4ect to the 4urisdiction o the 4udicial courts. I &ou,re a tax%a&er, &ou,re a businessman, &ou don,t want &our assessment to go to court, otherwise, it will take so long to be resolved and i it,s resolved inall& against &ou, &ou will have to %a& the interest or the number o &ears that it has la%sed. I the )# decided a ter 1@ &ears, !@A interest or ever& &ear in 1@ &ears, that,s a lot. )o we have to settle it in the administrative level. But not mandator& that &ou have to re%l& the -12. But -12, as a rule, is re:uired ever& time an assessment is made or ever& time an audit conducted be ore a 912 is issued. This is or %ur%oses o due %rocess giving the tax%a&er ever& chance to contest the assessments or indings. )o in the absence o a -12, sometimes, a 912 becomes invalid. But there are instances when a -12 is not necessar&. *hat are these instances or -12 not necessar&+ 1. The inding or an& de icienc& tax is the result o mathematical error in the com%utation o the tax as a%%earing on the ace o the returnC or The right to be in ormed is not available to &ou via -12 i the de icienc& arose sim%l& rom a mathematical error that is %atent on the ace o the return itsel . )o i &our tax liabilit& is su%%osed to be 1@m but when &ou t&%e-in the 1@m, &ou lost one @, 1m ra imo gba&aran, so &ou,re liable or Im to the BIR. The BIR can %roceed rom the $"1, the %ost-re%orting notice a ter the in ormal con erence, ski% the -12, go direct to the issuance o a 912. =ou don,t need to ex%lain nah because it,s ver& clear that &ou have a de icienc& tax.

!. 1 discre%anc& has been determined between the tax withheld and the amount actuall& remitted b& the withholding agentC or *ho is the withholding agent here+ o The tax%a&er under audit.

*h& is -12 not necessar& %rior to 912 or a tax%a&er under audit in cases where the de icienc& is ound out to be arising rom under-remittance o a tax that he has withheld+ *h& should he not be given additional chance to ex%lain+ o o *henever &ou withhold the tax, &our obligation is to remit it in ull to the government because it,s not &our mone&. It,s an obvious obligation that &ou have. )o whenever &ou %ocket the mone& o someone else, the tax o someone else, dba a withholding tax that &ou withhold is not &our tax liabilit&, it,s someone else. =ou,re onl& a withholding agent. )o i &ou under-remit the amount that &ou,ve withheld, it,s an obvious obligation on &our %art&. It,s a de icienc&. 2o need to ex%lain. =ou are liable. )o the BIR examiner can %roceed with the issuance o a 912. 'ba, how will &ou ex%lain it otherwise.

3. 1 tax%a&er who o%ted to claim a re und or tax credit o excess creditable withholding tax or a taxable %eriod was determined to have carried over and automaticall& a%%lied the same amount claimed against the estimated tax liabilities or the taxable :uarter or :uarters o the succeeding taxable &earC or Is this wrong+ *h& is -12 not necessar&+ *h& would someone who a%%lied or a tax credit o his excess taxes be assessed i he carried over the same+ Is that not mathematicall& correct+ *h& would he not be given a chance to ex%lain with a %osition %a%er in res%onse to a -12+ *h& is the government allowed to ski% issuing the -12 when it,s a re:uirement o due %rocess+ o *henever &ou have excess taxes that &ou,ve %aid, whenever &ou,ve over%aid taxes, illegall& or wrong ull& or erroneousl&, &our right is either to ile a claim or re und or to carr&

-age 17 o 186

it over and be o setted against &our uture tax liabilities. It,s an o%tion. =ou don,t take both. o )o in this case, a -12 is not necessar& when &ou have iled a claim or re und or tax credit or an over%aid tax and at the same time, that same amount has been carried over and o setted against &our tax liabilit& because it,s a double 4eo%ard& against the government. =ou,re getting a re und and &ou,re o setting it against &our tax liabilit&, which diminish &our tax %a&ment to the government. =ou,re getting both o%tions. )o &ou don,t need to ex%lain. It,s a total no-no. =ou don,t carr&-over what &ou have iled a claim or re und.

3>1?-$3: 1 cor%oration is re:uired or an& business is re:uired to ile an income tax return :uarterl& and it,s annualiDed a ter the end o the &ear. 1ssuming that or the irst 3 :uarters, &ou made 1m :uarterl& %a&ments 6so 3m all in all7 but towards the .th :uarter, &our business slowed down and &ou ex%erienced losses. =ou ound out that &our actual tax liabilit& or the entire &ear is onl& 1m. )o &ou actuall& over%aid !m. =our o%tion either is to carr& it over or a%%l& or re und. I &ou carr& it over, &ou sim%l& deduct !m rom &our &ear ! tax liabilit&. I &ou ile or re und, no carr&over. I &ou have taken both o%tions, it,s a sub4ect or assessment. 2o need o -12.

.. The excise tax due on excisable articles has not been %aidC or 3xcisable articles is given s%ecial %lace in taxation that whenever excisable articles have not been %aid o excise tax, no need to ex%lain, directl& 912.

/. 1n article locall& %urchased or im%orted b& an exem%t %erson, such as, but not limited to, vehicles, ca%ital e:ui%ment, machineries and s%are %arts, has been sold, traded or trans erred to a non-exem%t %erson In short, in technical im%ortation, we ex%ect that ever& trans er o a %ro%ert& %urchased b& an exem%t %erson, usuall& in vat, dba remember when &ou im%ort or locall& %urchased a %roduct, that,s sub4ect to vat, but i it,s %urchased or im%orted b& an exem%t %erson, it,s ree o vat, but once it is trans erred to a non-exem%t %erson, it will be considered as sub4ect to tax being a technical im%ortation. I that,s the case, no need o -12.

8owever, in the case o #IR K) '"?I21'"R ?32;<IT", what did the government sa&+ It should be emphasi!ed that the stringent re"uirement that an assessment notice be satisfactorily proven to have been issued and released or, if receipt thereof is denied, that said assessment notice have been served on the taxpayer, applies only to formal assessments prescribed under #ection $$% of the &ational Internal Revenue Code, but not to post'reporting notices or pre'assessment notices. The issuance of a valid formal assessment is a substantive prere"uisite to tax collection, for it contains not only a computation of tax liabilities but also a demand for payment (ithin a prescribed period, thereby signaling the time (hen penalties and interests begin to accrue against the taxpayer and enabling the latter to determine his remedies therefor. )ue process re"uires that it must be served on and received by the taxpayer. * post'reporting notice and pre'assessment notice do not bear the gravity of a formal assessment notice. The post'reporting notice and pre'assessment notice merely hint at the initial findings of the +IR against a taxpayer and invites the latter to an ,informal- conference or clarificatory meeting. &either notice contains a declaration of the tax liability of the taxpayer or a demand for payment thereof. Hence, the lack of such notices inflicts no pre.udice on the taxpayer for as long as the latter is properly served a formal assessment notice. In the case of respondent, a formal assessment notice (as received by him as ackno(ledged in his etition for Revie( and /oint #tipulation0 and, on the basis thereof, he filed a protest (ith the +IR, +aguio City and eventually a petition (ith the CT*. Tiu: In this case, the BIR, although it %resented %hotoco%ies o letters %revious to the issuance o the 912, these were mere %hotoco%ies, no original %resented, no registr& recei%t %resented that the tax%a&er indeed received the -12. )o was this not a denial o due %rocess+ 2". This case is not among the / instances wherein -12 is not necessar& but the )# decided still again sa&ing that -12 in this case, where raud has been ound out, is not necessar& so long as the 912 su icientl& in orming the tax%a&er that he has de icienc& tax has been com%lied with. But i &ou will notice, even be ore the )e%t. !, 1IIH issuance o the 912 demanding the %a&ment o de icienc& taxes, there were various letters that were given to the tax%a&er although it was not reall& in the orm o a -12. But it,s su icient to sa& that the tax%a&er here has been su icientl& in ormed through various corres%ondence and that the tax%a&er was able to intelligentl& answer the 912. I &ou intelligentl& %rotest a 912, it,s as i &ou understood what the BIR is asking or. =ou

-age 18 o 186

cannot sa& that EI have not been su icientl& warned or in ormed through -12F there ore, the 912 should not be valid. This is not the case. )o in this case, the )# ruled again that -12 is not necessar&. But outside this case, would an otherwise void 912 be validated b& an intelligent answer or %rotest to such 912+ Towards our discussion on assessment, there are items that &ou will learn as basic re:uirements to make a 912 valid 0 the acts, the law or legal basis, rules and regulations, 4uris%rudence, statement o the liabilit& and the demand or %a&ment. These are the re:uirements that must be set orth in order or an assessment to be valid. There ore, absent an& o the acts, or the legal basis su%%orting the BIR,s contention that &our liable or no demand or %a&ment, the assessment is void. )o would it be validated, assuming as assessment is com%lete exce%t that it did not state a clear legal basis anchored b& the BIR,s assessment+ *ould that void assessment be validated i the tax%a&er makes an intelligent %rotest su%%l&ing therein legal basis+ o 2". I the assessment is at irst instance alread& void, it cannot be validated b& the tax%a&er,s intelligent %rotest.

)o in this %resent case, would it have been decided otherwise+ o 2", because the 912 issued b& the BIR against the ?enguito s%ouses were actuall& valid in the irst %lace. The tax%a&ers were su icientl& in ormed. )o an& minor re:uirements which do not %ertain to the 912 itsel would not invalidate a valid assessment.

-R3#I)I"2 3$3#TR"2I#) R31$T= #"R-. K) #IR *ould the %ost-re%orting notice or 2I# be necessar& at all times+ 1n intelligent %rotest to a valid assessment notice 0 in the absence o 2I# or %ost-re%orting notice, it was not given much weight so long as there is a valid assessment notice, there was an intelligent %rotest, the tax%a&er was su icientl& in ormed, knew the legal basis and the acts.

*hat is a ormal letter o demand or 912+ o o 1 declaration o de icienc& taxes issued to a tax%a&er who ails to res%ond to a -12 within the %rescribed %eriod o time, or whose re%l& to the -12 was ound to be without merit. It,s a inal assessment issued b& the BIR.

*hen &ou sa& that the BIR is onl& given 3 &ears within which to audit and assess the tax%a&er, the 3-&ear %eriod must include all stages until the 912 or in some cases, exce%tion o -12. It sim%l& means that or the BIR to sa& that it was able to validl& audit the tax%a&er within 3 &ears, the 3-&ears must have included nah the 912 stage. I &ou,re audited with an $"1 within 3 &ears but the 912 is issued 3 &ears and 1 da&, outside the %rescri%tive %eriod, the BIR has not made a valid assessment, because the 912 must be issued within the 3-&ear %rescri%tive %eriod. But what is reall& the e ect o a 912+ *hat does it tell the tax%a&er+ 'ba, a -12 would tell the tax%a&er that a ter the initial examination, it has been ound out that &ou are liable or de icienc& taxes in such and such amount. =ou are ex%ected to res%ond to that but not mandatoril&. But the e ect o 912 is di erent rom a -12. I &ou receive a 912, what would the 912 tell &ou+ o The 912 is a ormal demand o %a&ment, otherwise, i &ou don,t %a&, &ou would,ve to mandatoril& ile a %rotest. Ignoring a 912 would mean, dba when &ou ignore a -12, nothing untoward the tax%a&er will ha%%en exce%t that the tax authorities would %roceed rom -12 to issuing the 912. I &ou ignore a 912, what will ha%%en+ 9ailure to %rotest the 912 would make the assessment inal and una%%ealable. =ou can no longer raise it to 4udicial courts. =ou can no longer :uestion the BIR a ter the %eriod within which to %rotest it and the tax that has been stated is ull& demandable and additional interest will run a ter the date o 912.

Relevant )u%%orting 'ocuments 6R)'7 o #IR K) 9IR)T 3>-R3)) -1*2)8"- #"?-12= 1e re.ect petitioner2s vie( that the assessment has become final and unappealable. It cannot be said that respondent failed to submit relevant supporting documents that (ould render the assessment final because (hen respondent submitted its protest, respondent attached the GI# and +alance #heet. 3urther, petitioner cannot insist on the submission of proof of )#T payment because such document does not exist as respondent claims that it is not liable to pay, and has not paid, the )#T on the deposit on subscription. The term ,relevant supporting documents- should be understood as those documents necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer. The +IR can only inform the taxpayer to submit additional documents. The +IR cannot demand (hat type of supporting documents should be submitted. 4ther(ise, a taxpayer (ill be at the mercy of the +IR, (hich may re"uire the production of documents that a taxpayer cannot submit.

-age 1 o 186

Tiu: *ho determines whether the document is relevant to the assessment or not+ T83 T1>-1=3R, not the BIR. The R)' are those documents necessar& to su%%ort the arguments o the tax%a&er in his %rotest. *ho determines whether a document is relevant or not+ It is the tax%a&er, otherwise, the tax%a&er will be at the merc& o the BIR with the BIR unreasonabl& asking or additional documents 4ust so the tax%a&er cannot com%l& with the re:uirements. *hen should the R)' be iled+ Be ore, during or a ter the %rotest+ o o It should be iled within L@ da&s rom iling o the %rotest. It can be iled together with the %rotest.

9or R)' issue, in this case, the R)' were submitted together with the %rotest, not a ter the %rotest. The res%ondent attached the ;eneral In ormation )heet 6;I)7 and the Balance )heet together with the %rotest showing that the de%osit or uture stock subscri%tion is not %art o the ca%ital stock o the cor%oration. The BIR was looking or the %roo that 'ocumentar& )tam% Taxes 6')T7 have been %aid. The tax%a&er merel& su%%orted it with the ;I), the Balance )heet, showing that it,s still a de%osit. It,s not an ownershi%. The %roo o %a&ment o ')T could not be submitted clearl& because it believed that it was not liable. )o who determines whether such is relevant or not+ It,s the tax%a&er. The tax%a&er did not consider it relevant because it was not liable or ')T. )o the BIR cannot orever sa& or anchor on sa&ing that since no %roo o ')T %a&ment has been submitted, no R)' submitted, &our %rotest is not valid and the assessment becomes inal. That,s not the case.

<2IO<3 '=3*"RP) I2#. K) #IR R)' can be submitted be ore, during or a ter the %rotest. =ou will notice dba, when is &our %rotest submitted to the BIR+ *hen is %rotest submitted to the BIR+ -rotest against the 912 is due within 3@ da&s a ter receiving the 912. )o &ou,re given 3@ da&s u%on recei%t o the 912 to %rotest the 912.

)o when &ou receive a 912, &ou,re given 3@ da&s within which to res%ond through a %rotest, either a motion or reinvestigation or reconsideration, whatever %leases &ou. 'ba, be ore &ou ha%%en to submit a %rotest, &ou will undergo several %rocesses. =ou are invited to 2I#. =ou will be given a -12, wherein &ou can actuall& ile a %osition %a%er stating &our arguments. )o i and when, &ou have submitted R)' alread& during an& o the stages %rior to the 912, or even 4ust %rior to the %rotest that &ou have iled, it can be considered a R)' so long as it still re ers to the same issue that has been discussed %rior and the issue that &ou,re arguing in &our %rotest. )o i there are no changes in the assessment made b& the BIR, &ou don,t have to re%eat &our documents. 1n& documents that &ou,ve submitted be orehand will be recogniDed as R)'. 2o re%etition o submission o R)' is necessar&. 5. . . *s stated earlier, the determination of the relevant supporting documents5 initially rests upon the one (ho filed the protest, the petitioner. Ho(ever, in cases (here the +IR finds that additional documents must be submitted, it should have informed the taxpayer'protester to submit (hatever documents are lacking in order that a complete determination of the propriety of the assessment may be had. Thus, Respondent has been remiss in informing the petitioner of any other additional supporting documents to be submitted (hich fact should not unduly pre.udice petitioner6s protest.5

(eo%ard& 1ssessments o o *ithout the bene it o ull or %artial audit and investigation. )o what are the other instances when 4eo%ard& assessment ma& be issued+ 1. *hen it shall come to the knowledge o the #IR that the tax%a&er is retiring rom business sub4ect to tax, a 4eo%ard& assessment ma& be issued !. *hen the tax%a&er is %er orming an& act tending to obstruct the %roceeding or tax collection or when the tax%a&er %er orms an act to render a %roceeding or tax collection as totall& or %artl& ine ective

-age 2! o 186

3. *hen the tax%a&er is intending to leave the -hils. or remove his %ro%ert& or to hide or conceal his %ro%ert&

Pinds o 1ssessments o 1. )el -assessment 0 one which is assessed b& the tax%a&er himsel . The amount o tax assessed is re lected in the tax return that is iled b& him and the tax assessed is %aid at the time he iles the return. o o o )el -assessment is not like the usual assessment that we have discussed 0 the %rocess o audit or investigation. 3ver& tax%a&er, when he is re:uired to ile an income tax return or an& other tax returns, will makeQ. That,s an initial assessment %rocessQ. I mean to sa&, he himsel assesses whether he is liable or tax or not. The earlier discussion that we have is alread& the assessment made b& the BIR in determining whether the sel -assessment made b& the tax%a&er himsel is correct or not.

!. Illegal and void assessment 0 this is an assessment wherein the tax assessor has no %ower to act at all 3. 3rroneous assessment 0 this is an assessment wherein the assessor has the %ower to assess but errs in the exercise o that %ower .. 'e icienc& assessment 0 this is an assessment made b& the tax assessor whereb& the correct amount o the tax is determined a ter an examination or investigation is conducted. Is there a di erence between a de icienc& tax and a delin:uenc& tax+ =3). In de icienc& tax, the tax%a&er alread& %aid the amount o tax due but the BIR ound out later on that such amount was incorrect. 8owever, in delin:uenc& tax, the tax%a&er ailed to %a& the amount o tax due.

/. 'is%uted assessment 0 this is an assessment wherein a 912 is %rotested b& the tax%a&er. *henever a 912 is %rotested b& the tax%a&er, it becomes alread& a dis%uted assessment.

;"K3R2I2; -RI2#I-$3) "2 T1> 1))3))?32T) 1. 1ssessments are %rima acie %resumed correct and made in good aith. o *hen we sa& that assessments are deemed to be %rima acie correct and made in good aith, we are anchoring actuall& on the %rinci%le that ever& o icer o the government is %er orming his duties regularl&. *e %resumed that it is made in good aith unless %roven otherwise.

!. 1ssessments should not be based on %resum%tions no matter how logical the %resum%tion might be. It must be based on actual acts. o That is one re:uirement or a 912. In order or it to be valid, it must state ver& clearl& the acts o the case.

3. 1ssessment is discretionar& on the %art o the #IR. ?andamus will not lie to com%el him to assess a tax i a ter investigation he inds no ground to assess. o The #IR cannot be com%elled b& an& o his subordinates to issue assessments unless he believes there is reason to issue an assessment.

.. The authorit& vested in the #IR to assess taxes ma& be delegated. 8owever, the %ower to make 912 cannot be delegated. o )o i the #IR has alread& made an assessment, no subordinate can actuall& make another assessment or the same tax and or the same &ear.

/. 1ssessments must be directed to the right %art& or to the correct tax%a&er as identi ied. o )o i it,s a sole %ro%rietorshi%, to whom will &ou address the assessment+ o To the sole %ro%rietor

In the case o #IR K) '"?I21'"R ?32;<IT", actuall& the res%ondent tax%a&er argued that there were ! se%arate tax%a&ers 0 sole %ro%rietorshi% business and the cor%oration. 'ba, the assessment was directed to the s%ouses but the de icienc& that the& were talking about was an income o the cor%oration. 'ba, a cor%oration has a se%arate and distinct %ersonalit& rom the tax%a&er even i such %erson is a stockholder o the cor%oration. *h& did the )# still decided against the stockholder s%ouses+ *h& did it consider the assessment as valid+

-age 21 o 186

1%%l&ing the %rinci%le o %iercing the veil o cor%orate iction in case o raud, which is also a%%licable in taxation. The )# disregarded the se%arate %ersonalit& o the stockholders and the cor%oration. It was a liabilit& o the cor%oration but the stockholders, in their %ersonal ca%acit&, was made as well liable because there was actuall& raud that was ound out and the cor%oration %ierced the veil o cor%orate iction. 'ba, or tax %ur%oses, under the li eblood doctrine, to the extent %ossible that &ou can determine that there is reall& de icienc& taxes, no %ro%er %a&ment o taxes, &ou can %ierce the veil o cor%oration iction.

R3O<I)IT3) "9 1 K1$I' 1))3))?32T *hat are the re:uisites o a valid assessment+ o o o o o o 1. There must be a 2I#. !. The issuance o a -12 unless it is excused or under the exce%tional cases. 3. It must be in writing. .. It must state the law, legal basis, and 4uris%rudence and the acts u%on which the assessment is made. /. It must contain a demand or %a&ment. L. It must be made within the %rescri%tive %eriod.

I a tax%a&er is issued a 912 right a ter the issuance o a $"1, valid or not+ o 2"T K1$I', because it must ollow the %rocedures or stages o making assessments 0 such as the 2I# and the issuance o a -12.

Jan. 13, 2011 Thursday

R3O<I)IT3) "9 1 K1$I' 1))3))?32T *hat are the re:uirements to make an assessment b& the BIR valid+ o o o o o o 1. There must be a 2I#. !. The issuance o a -12 unless it is excused or under the exce%tional cases. 3. It must be in writing. .. It must state the law, legal basis, and 4uris%rudence and the acts u%on which the assessment is made. /. It must contain a demand or %a&ment. L. It must be made within the %rescri%tive %eriod.

)hould all o the above re:uirements be %resent in order or an assessment made b& the BIR to be considered valid+ 1ssessment can be used in the sense that it,s the %rocess o examining the books o accounts o the tax%a&er in order to determine its true tax liabilit&. $ater on, assessment will be considered as the document that is the demand to %a& alread& but what makes the assessment b& the BIR valid in the %rocess itsel + )o would absence o an& o the stages make the assessment invalid+ o The assessment %rocess would start irst with the issuance o a $"1 ollowed b& an invitation to in ormal con erence. 1n& indings will be re lected in the %ost-re%orting notice. Therea ter, a -12 be ore the 912 is released. But or %ur%oses o determining whether the tax%a&er has received the assessment, it,s the 912 nah. 1nd the re:uisites o the 912 is that it must be: 1. It must be in writing. !. It must state the tax, the law, 4uris%rudence, acts, legal basis and the com%utation o the liabilit& on how it was arrived 3. 1 demand to %a&

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.. The %rocess o assessment, ever&thing until the %oint o issuing the 912 must be made within the %rescri%tive %eriod.

#1)3: #IR K) 32R"2 o In 7this8 case, 7the CIR8 merely issued a formal assessment and indicated therein the supposed tax, surcharge, interest and compromise penalty due thereon. The Revenue 4fficers of the 7the CIR8 in the issuance of the 3inal *ssessment &otice did not provide 9nron (ith the (ritten bases of the la( and facts on (hich the sub.ect assessment is based. 7The CIR8 did not bother to explain ho( it arrived at such an assessment. :oreso, he failed to mention the specific provision of the Tax Code or rules and regulations (hich (ere not complied (ith by 9nron. The CIR insists that an examination of the facts sho(s that 9nron (as properly apprised of its tax deficiency. )uring the pre'assessment stage, the CIR advised 9nron2s representative of the tax deficiency, informed it of the proposed tax deficiency assessment through a preliminary five'day letter and furnished 9nron a copy of the audit (orking paper allegedly sho(ing in detail the legal and factual bases of the assessment. The CIR argues that these steps sufficed to inform 9nron of the la(s and facts on (hich the deficiency tax assessment (as based. 1e disagree. The advice of tax deficiency, given by the CIR to an employee of 9nron, as (ell as the preliminary five' day letter, (ere not valid substitutes for the mandatory notice in (riting of the legal and factual bases of the assessment. These steps (ere mere perfunctory discharges of the CIR2s duties in correctly assessing a taxpayer. The re"uirement for issuing a preliminary or final notice, as the case may be, informing a taxpayer of the existence of a deficiency tax assessment is markedly different from the re"uirement of (hat such notice must contain. /ust because the CIR issued an advice, a preliminary letter during the pre'assessment stage and a final notice, in the order re"uired by la(, does not necessarily mean that 9nron (as informed of the la( and facts on (hich the deficiency tax assessment (as made. Tiu: The ormal letter o demand, which is the culmination o the assessment %rocess, is re:uired to be in writing, although it doesn,t re:uire an& orm. There is no orm that &ou can get rom the BIR so long as the 912 would state therein the acts, the legal basis, 4uris%rudence, the com%utation, and the demand to %a&, su icient in orm that the tax%a&er would be enlightened as to its violation and in this case, the )# said that notwithstanding, assuming that there was reall& a statement o acts and legal basis in the %revious notice given %rior the 912, even the act that the BIR said that a su icient in ormation verball& was given to the re%resentative o the tax%a&er, it does not e:uate to a substitute o having the acts and the legal basis stated in the 912 itsel . )o %rior acts, %rior legal basis, has to be restated again in the 912 because it is that notice which has to be mandatoril& %rotested.

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$<#1) 1'1?)"2 K) #1 o 1e rule that the recommendation letter of the Commissioner cannot be considered a formal assessment. 9ven a cursory perusal of the said letter (ould reveal three key points; o <. It (as not addressed to the taxpayers. $. There (as no demand made on the taxpayers to pay the tax liability, nor a period for payment set therein. =. The letter (as never mailed or sent to the taxpayers by the Commissioner.

Tiu: In various cases, the )# has decided that an assessment notice is not necessar& be ore the tax authorities can criminall& charged &ou or tax raud or evasion. The document that was submitted, either a com%laint or an a idavit in orm, stating therein that &ou committed a tax raud amounting to non-%a&ment o the ollowing taxes does not amount to the 912 because the 912: 1. Is directed to the tax%a&er. The tax%a&er, who must be %ro%erl& named and with the correct address as a%%earing in the records o the BIR. )o that alone, would tell the tax%a&er that it is not an assessment as &et. It is a criminal charge because it was not given to him. It was iled or submitted b& the tax authorities to the '"(. !. *e have the re:uirements that must be strictl& com%lied with in the assessment such as acts, law, etc. Thus, it was wrong or 1damson to %rotest, through a re:uest or reinvestigation, the a idavit or com%laint iled b& the BIR to the '"( or such documents were not considered as 912.

)o an a idavit, a com%laint or criminal charge is not a 912. The BIR, as o that %oint, does not issue a 912, which %robabl& would amount to %rescri%tion i and when the 3-&ear %eriod would set in and no assessment has been issued. )o that document, the a idavit, the 4oint com%laint, would never be considered as an assessment notice.

#IR K) 9?9 o Tiu: The last re:uirement or an assessment %rocess to be valid is that 912 must be issued, mailed and sent within the 3-&ear %rescri%tive %eriod.

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2ow the issue in this case is *"2 the assessment was issued within the %rescri%tive %eriod but it has an extensive discussion on waiver on the %rescri%tive %eriod. >nder #ection $?= of the &IRC, internal revenue taxes must be assessed (ithin three years counted from the period fixed by la( for the filing of the tax return or the actual date of filing, (hichever is later. This mandate governs the "uestion of prescription of the government6s right to assess internal revenue taxes primarily to safeguard the interests of taxpayers from unreasonable investigation. *ccordingly, the government must assess internal revenue taxes on time so as not to extend indefinitely the period of assessment and deprive the taxpayer of the assurance that it (ill no longer be sub.ected to further investigation for taxes after the expiration of reasonable period of time. *n exception to the three'year prescriptive period on the assessment of taxes is #ection $$$ @bA of the &IRC, (hich provides; xxxx @bA If before the expiration of the time prescribed in #ection $?= for the assessment of the tax, both the Commissioner and the taxpayer have agreed in (riting to its assessment after such time, the tax may be assessed (ithin the period agreed upon. The period so agreed upon may be extended by subse"uent (ritten agreement made before the expiration of the period previously agreed upon. xxxx The above provision authori!es the extension of the original three'year period by the execution of a valid (aiver, (here the taxpayer and the +IR agreed in (riting that the period to issue an assessment and collect the taxes due is extended to an agreed upon date. >nder R:4 &o. $?'B?, (hich implements #ections $?= and $$$ @bA, the follo(ing procedures should be follo(ed; The (aiver must be in the form identified as *nnex 5*5 hereof.... <The (aiver shall be signed by the taxpayer himself or his duly authori!ed representative. In the case of a corporation, the (aiver must be signed by any of its responsible officials. #oon after the (aiver is signed by the taxpayer, the$ Commissioner of Internal Revenue or the revenue official authori!ed by him, as hereinafter provided, shall sign the (aiver indicating that the +ureau has accepted and agreed to the (aiver. =The date of such acceptance by the +ureau should be indicated. +oth the date of execution by the taxpayer and date of acceptance by the +ureau should be before the expiration of the period of prescription or before the lapse of the period agreed upon in case a subse"uent agreement is executed. In the Regional 4ffices The Revenue )istrict 4fficer (ith respect to tax cases still pending investigation and the period to assess is about to prescribe regardless of amount. xxxx The C(aiver must be executed in three @=A copies, the original copy to be attached to the docket of the case, the second copy for the taxpayer and the third copy for the 4ffice accepting the (aiver. The fact of receipt by the taxpayer of hisDher file copy shall be indicated in the original copy. The foregoing procedures shall be strictly follo(ed. *ny revenue official found not to have complied (ith this 4rder resulting in prescription of the right to assessDcollect shall be administratively dealt (ith. @9mphasis supplied.A *pplying R:4 &o. $?'B?, the (aiver in "uestion here (as defective and did not validly extend the original three'year prescriptive period.

1<)TR1$1)I1 #=$I2'3R #"R-. K) #IR o The second issue raised herein is (hether or not the assessment notice is void for failure to inform the petitioner of the la( and the facts on (hich the assessment is made. Exx Respondent posits that although #ection $$% of the Tax Code, as amended, specifically re"uires that the taxpayer be informed in (riting of the la( and the facts on (hich the assessment is made, the same article does not specifically re"uire that the la( and the facts on (hich the assessment (as made be embodied in the assessment notice itself. 1e agree. In (hatever manner and form the assessment notice is (ritten, as long as the taxpayer is informed on ho( the assessment (as arrived at, then the re"uirement of said la( is sufficiently met.

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Respondent thus asserts that the demand letter @9xhibit +A attached to the assessment notice @9xhibit *A contains the necessary information on ho( the assessment came about. 1e beg to differ. The demand letter (as devoid of factual as (ell as legal bases that (ould enlighten anyone, this court included, on ho( and (hy the assessment (as reached. The computation made by the respondent lacked any support and did not state the basis either in fact or in la( for the disallo(ances made. To explicitly illustrate, said demand letter is hereby reproduced; o The demand letter did not expound on ho( the respondent arrived at the taxable income per investigation of =,<$<,FFG.CB. &or did it provide for the details of the difference bet(een petitioner6s net income of %F=,B$C.=< as reported in the <BBF income tax return @9xhibits 30 <A and the said net income per investigation or (hat (ere added up by the examiners to the audited net income to come up (ith the net income per returnDinvestigation. In fact, it (as clearly indicated in the demand letter that there (ere no audit findingsDor discrepancies per revie(. Tiu: There are various issues here. $ets 4ust answer the issue on *"2 the assessment given was valid because according to the case, the acts and the legal basis were not %laced in the assessment notice itsel but the argument o the BIR was that, although it was not in the assessment notice itsel , there was an attachment, another document, which contained the acts and the legal basis. 'id the #T1 sustain that argument+ =3). In some instances, a tax authorit& or the BIR will submit ! documents 0 the 912 and the ormal letter o demand. 1s we ex%ect, the acts and the legal basis should be stated in the 912. The argument o the BIR was that the acts and the legal basis was contained in the ormal letter o demand. )uch letter was submitted together with the 912. The 912 did not contain the acts and the legal basis. The #T1 said that in whatever manner and orm the assessment notice is written, as long as the tax%a&er is in ormed on how the assessment was arrived at, then the re:uirement o said law is su icientl& met.

*832 1))3))?32T I) '33?3' ?1'3 I$$<)TR1TI"2: *hen is assessment considered to have been made b& the BIR+ 'ba, the %rocess o assessment starts rom the $"1 and or an assessment %rocess to be considered valid, there must be, as a ;R, a $"1, 2I#, -12, although in some cases even a -12 is ski%%ed so long as it,s one o the instances as su%%orted b& the law or 4uris%rudence, and ollowed b& the 912. 1nd the re:uirement or it to be valid re:uires that ever&thing must be made within 3 &ears. $ets take an exam%le o an income tax return or !@@L, when should the !@@L income tax return be iled+ 1ssuming calendar &ear, !@@H, 3 &ears rom the iling o a return or the !@@L return would end 1%ril 1/, !@1@. )o the BIR would onl& have until 1%ril 1/, !@1@ to do ever&thing. *hen is the assessment considered to have been made+ I the 912 is dated 1%ril 1/, !@1@ but mailed 1%ril 1L, !@1@, can &ou consider the assessment to have been made within the %rescri%tive %eriod o 3 &ears+ o o 2". 1n assessment is deemed to have been made when the 912, the culmination %oint, the %roduct o the assessment is inall& released, mailed and sent to the tax%a&er. I it,s not released, it,s not considered to have been com%letel& made. =ou lack 1 inal %rocess. In this case, i the 912 is dated 1%ril 1/, !@1@ 0 the last da& or making the assessment but it was onl& mailed the ollowing da&, 1%ril 1L, !@1@ 0 can &ou consider it still as a valid assessment or can &ou, as a tax%a&er, sim%l& ignore it to be out o the %rescri%tive %eriod+ I;2"R3, %rescri%tion lies in this case. It is ver& eas& or the BIR i the BIR is running out o time, lets sa& it exceeded / da&s in issuing the 912, i we allow the BIR to have made the assessment u%on the issuance o the date, then, it,s ver& eas& to antedate lang dba+ )o what is reall& re:uired is that the BIR be able to %rove that it was indeed issued, released, mailed and sent be ore the %eriod %rescribes. 8ow should it make the deliver& o the assessment notice+ <nder the law what is recogniDed+ Through registered mail or %ersonal deliver&

*ho has the burden o %roo in case the tax%a&er, dba i &ou,re the tax%a&er, denies receiving the 912+ *ho has the burden o %roo that the assessment has been validl& made+ o o o The BIR. 8ow will it rebut+ Because the %resum%tion is assessments are %rima acie correct and made in good aith and the tax authorities or the BIR o icers are %resumed to have regularl& %er ormed its duties. #1)3: B1R#3$"2 K) #IR

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*n assessment is made (ithin the prescriptive period if notice to this effect is released, mailed or sent by the CIR to the taxpayer (ithin said period. Receipt thereof by the taxpayer (ithin the prescriptive period is not necessary. *t this point, it should be clarified that the rule does not dispense (ith the re"uirement that the taxpayer should actually receive, even beyond the prescriptive period, the assessment notice (hich (as timely released, mailed and sent. 1hen a mail matter is sent by registered mail, there exists a presumption, set forth under #ection =@vA, Rule <=< of the Rules of Court, it (as received in the regular course of mail. The facts to be proved in order to raise this presumption are; @aA that the letter (as properly addressed (ith postage prepaid0 and @bA that it (as mailed. 1hile a mailed letter is deemed received by the addressee in the ordinary course of mail, this is still merely a disputable presumption sub.ect to controversion, and a direct denial of the receipt thereof shifts the burden upon the party favored by the presumption to prove that the mailed letter (as indeed received by the addressee. In the present case, petitioner denies receiving the assessment notice, and the respondent (as unable to present substantial evidence that such notice (as, indeed, mailed or sent by the respondent before the +IR2s right to assess had prescribed and that said notice (as received by the petitioner. The respondent presented the +IR record book (here the name of the taxpayer, the kind of tax assessed, the registry receipt number and the date of mailing (ere noted. The +IR records custodian, Ingrid Hersola, also testified that she made the entries therein. Respondent offered the entry in the +IR record book and the testimony of its record custodian as entries in official records . In this case, the entries made by Ingrid Hersola (ere not based on her personal kno(ledge as she did not attest to the fact that she personally prepared and mailed the assessment notice. &or (as it stated in the transcript of stenographic notes ho( and from (hom she obtained the pertinent information. :oreover, she did not attest to the fact that she ac"uired the reports from persons under a legal duty to submit the same. 3urthermore, independent evidence, such as the registry receipt of the assessment notice, or a certification from the +ureau of osts, could have easily been obtained. Iet respondent failed to present such evidence. 1hile (e have held that an assessment is made (hen sent (ithin the prescribed period, even if received by the taxpayer after its expiration, this ruling makes it the more imperative that the release, mailing, or sending of the notice be clearly and satisfactorily proved. :ere notations made (ithout the taxpayer2s intervention, notice, or control, (ithout ade"uate supporting evidence, cannot suffice0 other(ise, the taxpayer (ould be at the mercy of the revenue offices, (ithout ade"uate protection or defense. In the present case, the evidence offered by the respondent fails to convince this Court that 3ormal *ssessment &otice &o. 3*&'<'%J'B<'???GCB (as released, mailed, or sent before <F *pril <BB<, or before the lapse of the period of limitation upon assessment and collection prescribed by #ection $?= of the &IRC. #uch evidence, therefore, is insufficient to give rise to the presumption that the assessment notice (as received in the regular course of mail. Conse"uently, the right of the government to assess and collect the alleged deficiency tax is barred by prescription. Tiu: 1lthough there is a %resum%tion that whenever the BIR sa&s that the assessment has been made within the %rescri%tive %eriod, it,s %rima acie correct. But then the burden o %roo still belongs to the BIR once the tax%a&er denies recei%t o such 912. 1nd it,s ver& eas& or the BIR to actuall& %rove that it actuall& issued and mailed the 912 via the registr& recei%t or an& document evidencing the %ersonal deliver& and the recei%t b& the tax%a&er because in so ar as the tax%a&er is concerned, what is ver& im%ortant is that it has received the notice. 3ven i there is an argument b& the BIR that it made a 912, it must in act be %roven that there was actual recei%t. )o in this case, even the log book o the BIR containing the details o the deliver& o the 912, it was not considered as su icient evidence to rebut the argument o the tax%a&er that no 912 has in act been received. #an the BIR instead, i it was not able to %rove that the assessment notice was made within the 3-&ear %eriod, can the BIR use the warrant o distraint or lev& as a substitute or the assessment+ 2". It,s not the same as the 912 and usuall& a warrant o distraint or lev& is used alread& as a collection mode or method em%lo&ed b& the BIR. 3ven i it was considered as an assessment, it was alread& mailed or sent, in this case, be&ond the %rescri%tive %eriod.

#1)3: #IR K <2IT3' ,*lthough an assessment is deemed made (hen notice to this effect is released, mailed or sent by the Commissioner and it is not re"uired that the notice be received by the taxpayer (ithin the prescriptive period, due process re"uires at the very least that such notice must be served on and received by the

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taxpayer to enable him to determine his remedies thereon. Conse"uently, an assessment that has not been received by the person liable for the payment of the tax, cannot become final and executory. In the absence of evidence sho(ing that the final assessment notices and demand letters dated /anuary <B, <BB% (ere indeed sent to the respondent, (hat then can be considered as the assessment for purposes of reckoning the prescriptive periodsK The Highest Court elucidated the importance of an assessment in this manner; 5The issuance of an assessment is vital in determining the period of limitation regarding its proper issuance and the period (ithin (hich to protest it. . . &ecessarily, the taxpayer must be certain that a specific document constitutes an assessment. 4ther(ise, confusion (ould arise regarding the period (ithin (hich to make an assessment or to protest the same, or (hether interest and penalty may accrue thereon.5

January 18, 2011 Tuesday

PERIOD OF LIMITATION UPON ASSESSMENT *ithin how man& &ears or what is the %rescri%tive %eriod or the government to make an assessment and during that %eriod, what must be com%lied with or covered b& such %rocess+ o ;R: *ithin 3 &ears a ter the last da& %rescribed b& law or iling o the return or rom the da& the return was iled in case the return was iled be&ond the %eriod %rescribed b& law

)o in case o an Income Tax Return 6ITR7, sa& or exam%le, calendar &ear !@1@, until when can the tax authorities make a valid assessment or income tax liabilit& covering calendar &ear !@1@+ o o 1-RI$ 1/, !@1. *hen is the last da& or iling o the !@1@ ITR+ 1-RI$ 1/, !@11 )ince the law sa&s that the %rescri%tive %eriod will run rom such date and end 3 &ears a ter such date, so i it was indeed iled 1%ril 1/, !@11, the 3-&ear %eriod will start rom there 0 !@1!, !@13, !@1.. )o the right o the government to make assessment shall end until 1%ril 1/, !@1..

I &ou remember, income tax liabilities are %aid on a :uarterl& basis or the irst 3 :uarters. The&,re actuall& estimates o &our income tax liabilit&. But it is inaliDed on a &ear-to-&ear basis. )o i &ou ollow the calendar &ear, &ou have irst 3 :uarters ending )e%tember, then b& 'ecember, &ou end &our entire calendar &ear, &ou have until 1%ril 1/. *h& 1%ril 1/+ Because the law sa&s E1%ril 1/ or on or be ore the 1/ th da& o the .th month ollowing the close o the taxable &earF. I &our taxable &ear is sim%l& the calendar &ear, don,t com%ute the on or be ore the 1/ th da& o the .th month because the .th month is 1%ril. "n or be ore the 1/th is the 1/th da& o 1%ril. But that %hrase 6Eon or be ore the 1/th da& o the .th month ollowing the close o the taxable &earF7 is im%ortant when &ou deal with tax%a&ers who o%erate not on the calendar &ear basis, sa& or exam%le, the& o%erate on a iscal &ear basis ending on an& da& exce%t 'ec. 31. "ther cor%orations, the most number o cor%orations who end other than 'ec. 31, the& usuall& end at ?arch 31. Reason 0 to avoid the rush iling on 1%ril 1/. 1nd most auditors are actuall& bus& or 1%ril 1/ so the& choose ?arch 31. I it,s ?arch 31 iscal &ear ending, when is the .th month ollowing ?arch 31+ It,s (ul&. )o the iling da& is actuall& (ul& 1/. I it,s (ul& 1/, then &ou start the 3 &ears rom there. That,s the 3-&ear %rescri%tive %eriod.

3>1?-$3: The cor%oration, o%erating the calendar &ear, iled the return not on 1%ril 1/, !@11 but on 1%ril 1@, !@11. <ntil when is the government allowed to make an assessment+

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1-RI$ 1/, !@1., because the law %rovides that a return iled be ore the last da& %rescribed b& law or the iling thereo shall be considered as iled on such last da&. $et,s sa& the return was actuall& iled ! da&s later, 1%ril 1H, !@11. <ntil when is the government allowed to make an assessment+ 1-RI$ 1H, !@1., because the return was iled be&ond the %eriod %rescribed b& law, thus, the 3-&ear %rescri%tive %eriod will run rom the actual date o iling, which is 1%ril 1H, !@11.

I the return is iled later than the due date, the government would still be given the ull 3 &ears within which to make an assessment, so reckoning %oint will start at the time the return is actuall& iled later than the due date and will end 3 &ears later. )o it,s all or the bene it o the government. 9iled earlier 0 the 3 &ears will still end 3 &ears a ter the due date. I it,s iled later 0 3 &ears a ter the actual iling later than the due date. The 1%ril 1/ or the 1/th da& o the .th month would a%%l& onl& to income tax liabilit&.

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I$$<)TR1TI"2: $ets sa& that &ou,re being audited or 3 rd :uarter vat liabilit& !@1@. <ntil when is the government allowed to make an assessment+ Kat liabilit& covered b& the 3 rd %eriod o !@1@. I,ll give &ou a clue 0 3 rd :uarter vat liabilit& is su%%osed to be iled, the return and the tax %aid, on or be ore the !/ th da& o the month ollowing, so what,s the month ollowing o )e%tember+ "ctober. )o on or be ore "ctober !/, !@1@. I the return was actuall& iled "ctober !/, !@1@, until what &ear, assuming that the vat liabilit& is being audited together with the liabilit& or income tax o !@1@+ <ntil when is the government allowed to make an assessment+ o o "#T"B3R !/, !@13, so it will not coincide with the income tax %rescri%tive %eriod even i it %ertains to the same calendar &ear. #812;3 "9 91#T): I &ou remember, the vat liabilit& will be %aid monthl& and :uarterl&. 9or ever& :uarter, there will be ! months vat return and the 3 rd month will be the :uarterl& vat return. )o (anuar&, 9ebruar&, monthl& vat returns. B& ?arch, &ou consolidate and it becomes a :uarterl& vat return. )a& that it is the 1ugust vat return, which has a %articular gross sales, that is sub4ect to vat liabilit&, 1ugust !@1@ monthl& vat return 0 that return which contains the income sub4ect o the assessment. *hen will the %rescri%tive %eriod end, assuming a monthl& vat return is due on the !@th da& o the ollowing month, so it was iled )e%t. !@+ )o until when can the government make the assessment+ *hat was audited was the monthl& vat return o 1ugust !@1@, which was iled )e%t. !@, !@1@. *hen will the %rescri%tive %eriod end+ "#T"B3R !/, !@13 The general rule states Ewithin 3 &ears rom the last da& %rescribed b& law or iling or the actual date i it,s laterF. It sim%l& re:uires that the reckoning %oint o the 3-&ear %eriod would be the date o iling o the inal return whatever t&%e o tax it is. Remember in income tax, how man& ITRs do &ou ile in a &ear+ . 0 3 :uarters and 1 &ear. But the basis o audit, whether it is an income or ex%ense ound in an& o the irst 3 :uarters, would be the iling o the last return, which sums u% or summariDes the entire &ear o%eration. 9or vat, when do we have the inal vat return+ Is it on a monthl& basis or on a :uarterl& basis+ Ouarterl&. Remember, it,s usuall& rom the end o the :uarter, etc. 1nd, the irst ! months o ever& :uarter will be added u% and inaliDed in the 3 rd month, which is the :uarterl& return. There ore, i it,s an audit o the 3 rd :uarter vat return o !@1@, which is to be iled "ct. !/, !@1@, the 3-&ear %rescri%tive %eriod will end "ct. !/, !@13. It will not coincide with the ITR o !@1. %rescri%tive %eriod, even i it %ertains to the same !@1@. *h&+ K1T is taken on a :uarterl& basis. $ets go to the 1ugust vat return 0 i it was audited, still it will be considered as 3 rd :uarter audit o the vat. -rescri%tive %eriod will run rom the last da& o iling or the :uarterl& vat return, which is "ct. !/, !@1@ and "ct. !/, !@1@ until "ct. !/, !@13 0 &ou don,t consider the monthl& basis. #IR K) ?IR12T Tiu: There is another t&%e o tax that has been mentioned 0 the withholding tax. 1lthough it,s an ex%anded withholding tax in this case, &ou have other taxes 0 withholding tax on &our wages or salaries, inal withholding taxes, and the ex%anded withholding taxes. These taxes are to be iled, the returns are to be iled on a monthl& basis 0 on or be ore the 1@ th o the ollowing month. )o i it,s (anuar& withholding tax, it has to be iled 9ebruar& 1@. 1nd there,s no :uarterl& or annual or that. ?eaning to sa&, ever& month withholding tax is a inal return in itsel . 1nd i &ou sub4ect (anuar& !@1@ withholding tax return, the right o the BIR will %rescribe 9eb. 1@, !@13, which is 3 &ears a ter the last da& o iling %rescribed b& law o the (anuar& withholding tax return. )o &ou will notice, i &ou anal&De this case, actuall&, the withholding tax and the vat were no longer sub4ect o the waivers because the execution o the waivers were actuall& made be&ond the %rescri%tive %eriod o withholding tax and the vat. But or income tax, although the waiver was

-age 28 o 186

executed within the %rescri%tive %eriod o the income tax, but since there were errors or invalidities in the waiver itsel , it became a void waiver, %eriod was not extended, the right to assess has alread& %rescribed. *hen a return is amended, until when is the government allowed to make an assessment+ o o It is counted rom the iling o the amended return. In all cases o amendment will the %rescri%tive %eriod be moved+ 2". "nl& when the amended return is substantiall& di erent rom the original return. 3>1?-$3: 1ssuming &ou iled a return on 1%ril 1/, !@11 or &our !@1@ calendar &ear. =ou realiDed that &ou ailed to %ut-in one additional ex%ense, which could,ve lowered &our tax liabilit&, there ore, &ou iled an amended return ! months a ter on (une 1/, !@11. *hen is the reckoning %oint o the 3-&ear %rescri%tive %eriod and until when will it end+ *ill it be 1%ril 1/, the iling o the original return, or (une 1/, the iling o the amended return+ The reckoning %oint is (une 1/, !@11, thus, the %rescri%tive %eriod will end on (une 1/, !@1..

I &ou change the comma o &our name, will it move the %rescri%tive %eriod or the government to make assessment+ 2", because such amendment is not substantial.

)o the law sa&s actuall& that i &ou ile an amended tax return, the %rescri%tive %eriod ma& be moved based on the date o iling the amended return but onl& i the amendment that &ou,ve made is substantial. *hen is an amendment substantial+ I it changes the tax liabilit& o the tax%a&er, it becomes a substantial amendment and the %rescri%tive %eriod is actuall& moved. 3>1?-$3: I &ou ile an ITR, wherein &ou re lected losses o 1@m. 2o tax %a&ment because it,s a loss. =ou realiDed that there was a loss, casualt& loss incurred, and &ou were not com%ensated or b& the insurance and &ou have to ile an amended return and claim the loss, otherwise, the loss cannot be claimed the subse:uent &ear. *h&+ $osses have to be claimed in the &ear when it is incurred, sustained or charged-o . )o &ou cannot use that or the ollowing &ear. =ou have to amend the return. )o when &ou amended the return, instead o 1@m losses, it became 1/m in losses. )till, no tax liabilit& because there was net o%erating loss instead o net taxable income. *ill it be considered as substantial amendment and move the %rescri%tive %eriod or the government to assess+ o o =3). 1lthough it a%%ears that it does not a ect the tax liabilit& o the current &ear, remember that o%erating losses or the current &ear can be carried orward to the 3 succeeding &ears as net o%erating loss carr&-over and can a ect the tax liabilit& or the uture &ears. There ore, it does not onl& concern the current &ear. 8aving a net o%erating loss higher than what &ou,ve iled in the original return means that &ou have a higher net o%erating loss carr&-over, which will decrease &our uture tax liabilit&. )o changing losses 0 rom a loss to another loss 0 without a ecting current tax liabilit& is still a substantial amendment and will move the %rescri%tive %eriod rom the original date o iling to the date o iling the amended return. )o &ou have a di erent reckoning %oint and ending %oint or the %rescri%tive %eriod.

*hen &ou sa& that the assessment has to be made within the %rescri%tive %eriod o 3 &ears, u% to what %oint is the obligation o the BIR or the tax authorities in order or us to sa& that the& have validl& made the assessment within the 3-&ear %eriod+ *hat must the& be able to come u% with+ *hat must be com%lied with b& the BIR so that we can sa& that the& have beaten the deadline o the 3-&ear %rescri%tive %eriod+ o o The& must reach the stage o sending, releasing, or mailing the 912 on or be ore the %rescri%tive %eriod, regardless o when the tax%a&er is able to receive it. )o long as the 912 is released, mailed, or sent within the %rescri%tive %eriod, it doesn,t matter when the tax%a&er is able to receive the 912 even i it,s wa& be&ond the %rescri%tive %eriod o 3 &ears.

*hat are the exce%tions to the 3-&ear %eriod and the %eriod or iling an amended return+ o 1. *ithin 1@ &ears a ter the discover& o the alsit&, raud or omission

-age 2 o 186

9raud or alsit& would result to iling a alse return or iling a raudulent return. Is there an& di erence between a alse return and a raudulent return+ =3). *hen &ou sa& alse return, there is %urel& mistake. But raudulent return, there is intent to de raud or there is intent to evade the tax 6tax evasion7. I a raudulent return has been discovered, the tax authorities are given 1@ &ears rom the time o discover& o the raudulent return. 9alsit& or alse return is not necessaril& the same as the raudulent return. *hen &ou sa& iling a alse return, it is a return not somehow re lecting the true data but without the intent o evading the %a&ment o taxes. It can be the result o gross mistake, gross neglect, or gross carelessness o the tax%a&er.

I no return is iled, even i a return is necessar&, until when is the government allowed to make an assessment+ 1@ &ears rom the discover& o the omission.

There are 3 instances which alls under the 1@-&ear %rescri%tive %eriod: 1. 9iling a alse return !. 9iling a raudulent return 3. 2on- iling o an& return at all when it is necessar&

!. *here there is a waiver o the statute o limitations *aiver in a sense that the tax%a&er is actuall& relin:uishing or waiving his right to the 3-&ear %eriod. It means urther that government is given b& the tax%a&er more time than 3 &ears within which to com%l& with the assessment %rocess and issuing the 912. It,s an extension b& mutual agreement. 1lthough it,s in avor with the government, some tax%a&ers in some cases would readil& enter into waiver in order to avoid grudge with the government. 'ba, i &ou,re able to esca%e one taxable &ear rom audit because the government was not able to com%l& with the 3-&ear %eriod, remember that there are uture &ears or %ast &ears, wherein the government can readil& make an assessment. )o kung mag%adili-dili ka ug sign ug waiver, %robabl&, the government will readil& issue $"1s or the succeeding &ears that are available. *hat are the re:uirements to make a waiver valid+ 1. The waiver must be in the %ro%er orm %rescribed b& R?" !@-I@. The %hrase Ebut not a ter RRRRRR 1I RRRF, which indicates the ex%ir& date o the %eriod agreed u%on to assessJcollect the tax a ter the regular three-&ear %eriod o %rescri%tion, should be illed u%. !. The waiver must be signed b& the tax%a&er himsel or his dul& authoriDed re%resentative. In the case o a cor%oration, the waiver must be signed b& an& o its res%onsible o icials. In case the authorit& is delegated b& the tax%a&er to a re%resentative, such delegation should be in writing and dul& notariDed. 3. The waiver should be dul& notariDed. .. The #IR or the revenue o icial authoriDed b& him must sign the waiver indicating that the BIR has acce%ted and agreed to the waiver. The date o such acce%tance b& the BIR should be indicated. 8owever, be ore signing the waiver, the #IR or the revenue o icial authoriDed b& him must make sure that the waiver is in the %rescribed orm, dul& notariDed, and executed b& the tax%a&er or his dul& authoriDed re%resentative. /. Both the date o execution b& the tax%a&er and date o acce%tance b& the Bureau should be be ore the ex%iration o the %eriod o %rescri%tion or be ore the la%se o the %eriod agreed u%on in case a subse:uent agreement is executed. L. The waiver must be executed in three co%ies, the original co%& to be attached to the docket o the case, the second co%& or the tax%a&er and the third co%& or the " ice acce%ting the waiver. The act o recei%t b& the tax%a&er o hisJher ile co%& must be indicated in the original co%& to show that the tax%a&er was noti ied o the acce%tance o the BIR and the %er ection o the agreement.

In the case o #IR K) ?IR12T, there was a discussion, which distinguished between a signature o the #IR in the acce%tance and signature in the attestation.

-age 3! o 186

Ho(ever, in the assailed decision, the CT* held that the (aiver of the statute of limitations executed by respondent on #eptember $=, <BB% (as defective and invalid since the latter did not comply (ith the re"uirement of #ection $$$ @bA of the &ational Internal Revenue Code @&IRCA, (hich provides that the (aiver must be agreed upon and signed by both the Commissioner and the taxpayer. In the present case, the CT* observed that the (aiver, (hile signed by the respondent, (as merely attested to by the petitioner through Revenue )istrict 4fficer *nselmo G. *driano. It further argued that an agreement is different from an attestation. To agree means to give assent (hile to attest means to bear (itness. #ection $$ @bA of the &IRC re"uires that the (aiver be agreed upon and not attested to only. * (aiver of the statute of limitations under the &IRC, to a certain extent, is a derogation of the taxpayer6s right to security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed. *s correctly found by the CT*, the (aiver executed by the respondent on #eptember $=, <BB% (as defective and invalid because it does not conform (ith the provisions of R:4 &o. $?'B?. The (aiver (as defective on the government side because it (as not accepted and agreed to by the Revenue )istrict 4fficer, as mandated by the &IRC and R:4 &o. $?'B?. The signature of the Revenue )istrict 4fficer merely attested to the existence of the (aiver. His signature could not in any (ay indicate that the +ureau has accepted and agreed to the (aiver. The (aiver is not a unilateral act by the taxpayer or the +IR, but is a bilateral agreement bet(een t(o parties to extend the period to a date certain. >nder R:4 &o. $?'B?, there is perfection of the agreement only upon acceptance of the (aiver by the +IR. Hence, (e rule that the (aiver in this case is invalid and defective and the three @=A'year prescriptive period (as not tolled or extended.

The execution o the waiver, both the signing b& the tax%a&er and the #IR, his date o acce%tance, must all be made within the 3-&ear %rescri%tive %eriod, otherwise, i the waiver is executed and signed a ter the %rescri%tive %eriod, then there is reall& nothing to waive, nothing to extend. #IR K) P<'") #ection $?= of the &ational Internal Revenue Code of <BBJ @&IRCA mandates the government to assess internal revenue taxes (ithin three years from the last day prescribed by la( for the filing of the tax return or the actual date of filing of such return, (hichever comes later. Hence, an assessment notice issued after the three'year prescriptive period is no longer valid and effective. 9xceptions ho(ever are provided under #ection $$$ of the &IRC. The (aivers executed by respondent2s accountant did not extend the period (ithin (hich the assessment can be made. etitioner does not deny that the assessment notices (ere issued beyond the three'year prescriptive period, but claims that the period (as extended by the t(o (aivers executed by respondent2s accountant. 1e do not agree. * perusal of the (aivers executed by respondent2s accountant reveals the follo(ing infirmities; o o o <. The (aivers (ere executed (ithout the notari!ed (ritten authority of asco to sign the (aiver in behalf of respondent. $. The (aivers failed to indicate the date of acceptance. =. The fact of receipt by the respondent of its file copy (as not indicated in the original copies of the (aivers.

)ue to the defects in the (aivers, the period to assess or collect taxes (as not extended. Conse"uently, the assessments (ere issued by the +IR beyond the three'year period and are void. Tiu: 1uthoriDation cannot be done b& a mere board resolution. There must be a notariDed )-1 designating the re%resentative o the tax%a&er as the one authoriDed to enter into waivers. It,s reall& a relin:uishing o the right. It is not su icient that the tax%a&er is able to receive a co%& o the waiver. It must be stated in the ile itsel and in the original co%& that the tax%a&er was able to receive it.

-age 31 o 186

1s to the issue o whether the 1ssistant #ommissioner has the right to execute the waiver or to sign in behal o the #ommissioner, was it %ro%erl& addressed in the case+ o o =3). *hat did the )# sa&+ 'oes the 1ssistant #ommissioner have the right to execute a waiver+ =3). <nder the Tax 9raud 'ivision, the 1ssistant #ommissioner has the right because the $"1 was issued b& the Tax 9raud 'ivision, the 2ational Tax 9raud 'ivision. 4n appeal, the CT* 9n +anc affirmed the cancellation of the assessment notices. *lthough it ruled that the *ssistant Commissioner (as authori!ed to sign the (aiver pursuant to Revenue )elegation *uthority 4rder @R)*4A &o. ?F'?<, it found that the first (aiver (as still invalid based on the second and third grounds stated by the CT* #econd )ivision. ertinent portions of the )ecision read as follo(s; 1hile the Court 9n +anc agrees (ith the second and third grounds for invalidating the first (aiver, it finds that the *ssistant Commissioner of the 9nforcement #ervice is authori!ed to sign the (aiver pursuant to R)*4 &o. ?F' ?<, (hich provides in part as follo(s; *. 3or &ational 4ffice cases )esignated Revenue 4fficial o o o <. *ssistant Commissioner @*CIRA, 3or tax fraud and policy 9nforcement #ervice cases $. *CIR, Large Taxpayers #ervice 3or large taxpayers cases other than those cases falling under #ubsection + hereof =. *CIR, Legal #ervice 3or cases pending verification and a(aiting resolution of certain legal issues prior to prescription and for issuanceDcompliance of #ubpoena )uces Tecum C. *CIR, *ssessment #ervice @*#A 3or cases (hich are pending in or sub.ect to revie( or approval by the *CIR, *#

+ased on the foregoing, the *ssistant Commissioner, 9nforcement #ervice is authori!ed to sign (aivers in tax fraud cases. * perusal of the records reveals that the investigation of the sub.ect deficiency taxes in this case (as conducted by the &ational Investigation )ivision of the +IR, (hich (as formerly named the Tax 3raud )ivision. Thus, the sub.ect assessment is a tax fraud case.

January 19, 2011 Wednesday PERIOD OF LIMITATION UPON ASSESSMENT R3O<IR3?32T) "9 1 K1$I' *1IK3R #IR K) 9?9 o *pplying R:4 &o. $?'B?, the (aiver in "uestion here (as defective and did not validly extend the original three'year prescriptive period. 3irstly, it (as not proven that respondent (as furnished a copy of the +IR'accepted (aiver. #econdly, the (aiver (as signed only by a revenue district officer, (hen it should have been signed by the Commissioner as mandated by the &IRC and R:4 &o. $?'B?, considering that the case involves an amount of more than < million, and the period to assess is not yet about to prescribe. Lastly, it did not contain the date of acceptance by the Commissioner of Internal Revenue, a re"uisite necessary to determine (hether the (aiver (as validly accepted before the expiration of the original three'year period. +ear in mind that the (aiver in "uestion is a bilateral agreement, thus necessitating the very signatures of both the Commissioner and the taxpayer to give birth to a valid agreement. etitioner contends that the procedures in R:4 &o. $?'B? are merely directory and that the execution of a (aiver (as a renunciation of respondent2s right to invoke prescription. 1e do not agree. R:4 &o. $?'B? must be strictly follo(ed.

-age 32 o 186

To the Government, its tax officers are obliged to act promptly in the making of assessment so that taxpayers, after the lapse of the period of prescription, (ould have a feeling of security against unscrupulous tax agents (ho (ill al(ays try to find an excuse to inspect the books of taxpayers, not to determine the latter2s real liability, but to take advantage of a possible opportunity to harass even la('abiding businessmen. 1ithout such legal defense, taxpayers (ould be open season to harassment by unscrupulous tax agents. Tiu: 1lthough &ou will notice in this case that the )# did not actuall& decide on when should we start to reckon the counting o the 3-&ear %rescri%tive %eriod, whether it,s iling rom the original return or the amended return. <nderstandabl&, the )# is not a trier o acts, so what is Deroed-in was on another issue o the case.

)<)-32)I"2 "9 T83 R<22I2; "9 T83 )T1T<T3 "9 $I?IT1TI"2) 9"R ?1PI2; 1))3))?32T) *hat are the instances when the 3-&ear %rescri%tive %eriod or making an assessment is sus%ended+ o o 1. *hen the #ommissioner is %rohibited rom making the assessment !. *hen the tax%a&er re:uests or the reinvestigation which is granted b& the #ommissioner *hen &ou sa& a tax%a&er makes a re:uest or reinvestigation and is granted b& the #IR, it sus%ends the running o the 3-&ear %eriod. 8ow do &ou make a re:uest or reinvestigation+ *hat is that+ 1 re:uest or reinvestigation re ers to a %lea or reinvestigation o an assessment on the basis o newl&-discovered or additional evidence that a tax%a&er intends to %resent in the reinvestigation.

I a re:uest or reinvestigation is made but it,s not granted b& the #IR, would it sus%end the running o the %rescri%tive %eriod+ 2".

9or how long will the %rescri%tive %eriod be sus%ended+ It is sus%ended during the time that the #IR is actuall& making the reinvestigation and will resume again once a decision has been made.

3. *hen the tax%a&er cannot be located in the address given b& him in the return iled u%on which a tax is being assessed or collectedC %rovided, that i the tax%a&er in orms the #ommissioner o an& change in address, the running o the )tatute o $imitations will not be sus%ended I a tax%a&er trans ers its %rinci%al %lace o business rom one building to the other within I.T %ark and the 912 cannot be served, will it at all times sus%end the running o the %rescri%tive %eriod+ 2", because the %rescri%tive %eriod will onl& be sus%ended i the tax%a&er ailed to in orm the #IR o his change o address, so in case that he in ormed the #IR o his change o address, then the running o the %rescri%tive %eriod will not be sus%ended.

8ow would a tax%a&er in orm the #IR o the change o address+ #an he sim%l& change his address in the return and make it o icial or %ur%oses o making as assessment+ $ets sa& &ou,re registered within the #ebu #it& 'istrict. =ou change &our business to ?andaue, there ore, &ou belong to another revenue district o ice. =ou %h&sicall& change &our business o%erations but &ou did not go through the %rocess o in orming ormall& the BIR. *hat &ou did was sim%l& that in the subse:uent returns that &ou iled, &ou sim%l& %lace there ?andaue #it&. Is that %ro%er in ormation to the BIR o the change in address+ 2". There is a legal %rocedure or changing &our address in so ar as the tax authorities are concerned. *henever &ou start-u% a business, &ou register &our business and it has a de inite %rinci%al %lace o business. I &ou change an address, &ou have to ile a return s%eci icall& or the %ur%ose o changing &our address with the current district o ice and it has to be transmitted to the other district o ice o the BIR. That,s the %ro%er legal %rocedure. I that has been legall& made b& &ou and the tax authorities still sent the 912 to &our old address des%ite the %ro%er %rocedure taken or change o address, then 912 would %robabl& have %rescribed or it will %rescribe i it,s not actuall& received b& &ou because &ou %ro%erl& in ormed the government.

o -

.. *hen the tax%a&er is out o the -hili%%ines

?12"T"P R31$T= K) #IR

-age 33 o 186

In the normal course o things, when &ou receive the 912 and &ou %rotest such notice or iled a re:uest or reinvestigation or reconsideration, the BIR will normall& issue a decision o denial. In this case, the link between the irst 912 and the second 912 is that the 912, the !nd one, is sim%l& a revision o the irst one, so it has a link to the irst 912. 1nd during the %eriod when &ou ask or a re:uest or reinvestigation on the irst 912 u% to the time that the !nd 912 was issued, the %rescri%tive %eriod has been sus%ended. There ore, actuall& the 3-&ear %eriod has not terminated as &et. There is still enough time to make an assessment 0 the ! nd 912 cannot be treated inde%endentl& and se%aratel& rom the the irst 912, there ore, even the ! nd 912 was issued within the %rescri%tive %eriod and on time. 1lthough technicall&, &ou would sa& it,s be&ond the %rescri%tive %eriod but because there was sus%ension in between, it,s still within the 3-&ear %rescri%tive %eriod.

ADMINISTRATIVE PROTEST TO THE ASSESSMENT 8ow do &ou make a %rotest to a 912+ *hat are the kinds o %rotest to an assessment notice+ o 1. 9iling a Re:uest or Reconsideration re ers to a %lea or re-evaluation o an assessment on the basis o exiting records without need o additional evidence. *hen &ou sa& reconsideration, &ou sim%l& ask or reconsideration rom the #IR to re-assess the assessment that he has issued based on the same documents, records, evidence. But i &ou introduce additional evidences to su%%ort &our argument against the assessment, &ou,re actuall& asking alread& or a reinvestigation.

!. 9iling a Re:uest or Reinvestigation re ers to a %lea or reinvestigation o an assessment on the basis o newl&-discovered or additional evidence that a tax%a&er intends to %resent in the reinvestigation.

*ould the ! kinds o administrative %rotests sus%end the running o the %rescri%tive %eriod+ o o 2", onl& the re:uest or reinvestigation sus%ends the running o the %rescri%tive %eriod, not the re:uest or reconsideration. *h& is that+ *h& is there a di erence o treatment+ #IR K) -8I$I--I23 ;$"B1$ #"??<2I#1TI"2 *mong the exceptions provided by the aforecited section, and invoked by the CIR as a ground for this petition, is the instance (hen the taxpayer re"uests for a reinvestigation (hich is granted by the Commissioner. Ho(ever, this exception does not apply to this case since the respondent never re"uested for a reinvestigation. :ore importantly, the CIR could not have conducted a reinvestigation (here, as admitted by the CIR in its etition, the respondent refused to submit any ne( evidence. Revenue Regulations &o. <$'%F, the rocedure Governing *dministrative rotests of *ssessment of the +ureau of Internal Revenue, issued on $J &ovember <B%F, defines the t(o types of protest, the re"uest for reconsideration and the re"uest for reinvestigation, and distinguishes one from the other in this manner; #ection G. rotest. ' The taxpayer may protest administratively an assessment by filing a (ritten re"uest for reconsideration or reinvestigation specifying the follo(ing particulars; x x x x 3or the purpose of protest hereinM o @aA Re"uest for reconsideration'' refers to a plea for a re'evaluation of an assessment on the basis of existing records (ithout need of additional evidence. It may involve both a "uestion of fact or of la( or both. @bA Re"uest for reinvestigationMrefers to a plea for re'evaluation of an assessment on the basis of ne(ly'discovered evidence or additional evidence that a taxpayer intends to present in the investigation. It may also involve a "uestion of fact or la( or both.

The main difference bet(een these t(o types of protests lies in the records or evidence to be examined by internal revenue officers, (hether these are existing records or ne(ly discovered or additional evidence. * re'evaluation of existing records (hich results from a re"uest for reconsideration does not toll the running of the prescription period for the collection of an assessed tax. #ection $J< distinctly limits the suspension of the running of the statute of limitations to

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instances (hen reinvestigation is re"uested by a taxpayer and is granted by the CIR. The Court provided a clear'cut rationale in the case of +ank of the hilippine Islands v. Commissioner of Internal Revenue explaining (hy a re"uest for reinvestigation, and not a re"uest for reconsideration, interrupts the running of the statute of limitations on the collection of the assessed tax; o >ndoubtedly, a reinvestigation, (hich entails the reception and evaluation of additional evidence, (ill take more time than a reconsideration of a tax assessment, (hich (ill be limited to the evidence already at hand0 this .ustifies (hy the former can suspend the running of the statute of limitations on collection of the assessed tax, (hile the latter cannot.

In the present case, the separate letters of protest dated G :ay <BBC and $= :ay <BBC are re"uests for reconsideration. The CIR2s allegation that there (as a re"uest for reinvestigation is inconceivable since respondent consistently and categorically refused to submit ne( evidence and cooperate in any reinvestigation proceedings. Tiu: There are various di erences between reconsideration and reinvestigation. The tax%a&er here consistentl& did not submit an& additional document, so what he sim%l& asks or in his re:uest was to reconsider the assessment issued b& the tax authorit&. *ithout submitting new evidences, there,s no need to sus%end the running o the %rescri%tive %eriod. There was nothing to reinvestigate, but sim%l& reconsider the law a%%lied to the acts. There ore, the right to collect has alread& %rescribed.

8ow do &ou make a %rotest+ 1side rom distinguishing that the %rotest ma& be a re:uest or reconsideration or a re:uest or reinvestigation, how does the %rotest look like and what must it include in order or it to be a valid %rotest+ o o o o 1. It is made in writing, and addressed to the #IR !. It contains the in ormation re:uired b& the rule 3. It states the acts, a%%licable law, rules and regulations or 4uris%rudence on which his %rotest is based, otherwise the %rotest shall be considered void and without orce and e ect .. It is iled within the %eriod %rescribed b& law

*hen should &ou make the %rotest+ o o *ithin 3@ da&s rom recei%t o the 912 1n assessment is deemed made when the 912 is mailed, released and sent to the tax%a&er, regardless o when the tax%a&er receives actuall& the 912. The recei%t ma& be be&ond the %rescri%tive %eriod so long as it,s actuall& received. I it,s not received due to the ault o the tax%a&er and no %rotest is made, the 912 becomes inal, executor& and demandable, such as when the tax%a&er ailed to in orm the change in address, there ore, the %rescri%tive %eriod o 3@ da&s within which to ile %rotest is not sus%ended. It becomes inal, executor& and demandable. The same is true with making an invalid %rotest. I &our %rotest is in a letter orm without stating therein the legal basis o &our argument, it becomes an invalid %rotest. It,s void. It,s considered a scra% o %a%er and it will not dis%ute the 912. *hatever is stated in the 912 becomes inal, executor& and demandable. )o once &ou come u% with a valid %rotest, com%lete in orm, &ou have to ile it within 3o da&s rom the date o recei%t o the 912. In so ar as the tax%a&er is concerned, in iling the %rotest, &ou wouldn,t mind when the 912 was released, mailed or sent, because it is rom the date which he actuall& received the 912. *hen is the 912 released, mailed or sent im%ortant+ "nl& or determining whether the entire assessment %rocess was covered b& the 3-&ear %rescri%tive %eriod. *henever assessment is made, the remed& o the tax%a&er is to ile a %rotest, whether it be in a orm o reinvestigation or reconsideration.

o -

1 ter iling the %rotest, what are &our other obligations+ o o *ithin L@ da&s rom iling o the %rotest, all R)' must be submitted, otherwise the assessment shall become inal. *ould all cases o %rotest, a ter it is iled, re:uire the submission o R)' 6those documents which the tax%a&er consider as necessar& to su%%ort its %rotest+ *ould all cases o iling a %rotest re:uire the submission within L@ da&s the R)'+ 2".

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The R)' ma& be submitted during the time that the %rotest is iled or even be ore when &ou iled %osition %a%ers against the %ost-re%orting notice and -12. These documents, which have been submitted earlier, can be considered as R)'. This is not mandator& i &ou have submitted R)' be ore. This will onl& a%%l& where no R)' are submitted. This is 4ust additional time or &ou to gather all the documents.

9rom the time that all the documents are with the BIR, sa& or exam%le that &ou have consumed all the dates allowed &ou b& the law. =ou consumed the 3@ da&s so &ou iled on the 3@ th. =ou consumed the L@ da&s so &ou iled the R)' on the L@ th da&. *hat is the next ste%+ I &ou,re the tax%a&er, what will &ou do+ I &ou,re the BIR, what will &ou do+ o o The BIR ma& decide or not decide the %rotest. *ithin how man& da&s must the tax authorities decide on &our %rotest+ 1re the tax authorities re:uired to mandatoril& decide within 1B@ da&s+ 2". The 1B@ da&s is sim%l& a%%lied to the tax%a&er. It,s not a mandator& re:uirement or the #IR or his subordinates to decide within 1B@ da&s. In act, in one o the cases, decisions came out even a ter the 1B@ da&s and the case is alread& elevated to the #1. )o it,s not mandator& or the BIR to issue a decision or release a decision o denial or a%%roval within 1B@ da&s. The 1B@ da&s is sim%l& a guide to the tax%a&er that once there is 1B@ da&s alread& and the BIR has not acted on &our %rotest, &ou ma& elevate the case to the #T1, within 3@ da&s a ter the ex%iration o the 1B@-da& %eriod.

*hen do &ou start counting the 1B@ da&s+ 9rom the recei%t o the %rotest or rom the recei%t o the R)'+ I &ou,re the #IR, &ou will receive the %rotest irst ollowed b& R)'. I &ou want to exercise &our right to ile a %etition or review be ore the #T1 within 3@ da&s a ter the ex%iration o 1B@ da&s, when would the 1B@ da&s start+ -rotest or R)'+ I R)' are not iled because &ou %reviousl& iled R)' during the initial assessment %rocess, when do &ou start counting the 1B@ da&s+ I &ou,re the tax%a&er, &ou would know whether &ou have submitted R)' or not so &ou would also know when to count the 1B@ da&s. *hen would the 1B@ da&s start+ #an &ou utiliDe the additional L@ da&s even though &ou have not submitted R)'+ )o when should the 1B@ da&s reckon+ I &ou have not iled an& R)', &ou start counting the 1B@ da&s rom the time &ou submitted the %rotest. I &ou submitted the %rotest the da& a ter the 912, then start counting rom such da& i &ou have no R)'. I &ou have R)' submitted on the L@ th da&, the da& a ter such da&, &ou start the 1B@ da&s. I &ou,ve submitted on the 3@th da&, then &ou start the 1B@ da&s rom such da&. 'o not utiliDe the time that &ou have not actuall& consumed. 2o R)' or %artial lng o the L@ da&s, then &ou start counting rom the da& that the BIR actuall& received the %rotest or the last R)', res%ectivel&.

I a decision o denial is handed out on the 1HIth da&, what,s &our remed&+ 1%%eal to the #T1 within 3@ da&s rom the recei%t o the decision den&ing the %rotest. I a decision is given within the 1B@ da&s, the remed& is to a%%eal &our case to the #T1 in division within 3@ da&s rom recei%t o the denial.

I a decision is not handed out during the 1B@ da&s and &ou did not ile an a%%eal be ore the #T1 within 3@ da&s a ter the la%se o the 1B@ da&s, would &ou lose &our right to a%%eal to the #T1+ 2", because &ou can still await the inal decision o the #IR on the dis%uted assessments and a%%eal such inal decision to the #T1 within 3@ da&s a ter recei%t o a co%& o such decision, regardless o when the decision will come out.

'ba, ! things can ha%%en. 9rom the submission o the R)', the BIR will actuall& decide but we don,t know when. 9or the tax%a&er,s guide, i the decision does not come out within 1B@ da&s, it has the right to a%%eal be ore the #T1 within 3@ da&s a ter the ex%iration o the 1B@ da&s, which we call the inaction %eriod. I the decision comes out a da& a ter iling the R)', &ou have the same remed& o iling an a%%eal be ore the #T1 within 3@ da&s a ter the decision comes out. 2ow, lets sa& that there was no decision which came out during the 1B@ da&s. =ou ailed to a%%eal. =ou counted it wrong. =ou ailed to a%%eal within 3@ da&s. *ould &ou lose &our right to a%%eal to the #T1+ 2", because &ou still have the remed& o awaiting the inal decision o the #IR on the dis%uted assessment and a%%eal such inal decision to the #T1 within 3@ da&s a ter recei%t o a co%& o such decision, regardless o when the decision will come out.

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1ccording to a case and according to the #T1 Rules o -rocedure, i the #IR did not act u%on the %rotest within 1B@ da&s, the tax%a&er ma& either: 1. 1%%eal to the #T1 within 3@ da&s rom the la%se o the 1B@ da&sC or !. *ait until the #IR decides be ore he elevates the case to the #T1 o o )o it is o%tional. The BIR is not re:uired to issue a decision, %robabl& because o com%lexit& reasons and li eblood doctrine, to ha%haDardl& issue a decision within 1B@ da&s. But or securit& to the tax%a&er not to inde initel& or orever await the decision or to sto% the running o interest, so or the bene it o the tax%a&er, who wants to have an earl& settlement o the assessment notice, he ma& actuall&, once the 1B@ da&s has la%sed and no decision comes out, elevate the case or the matter to the #T1 and have it decided b& the 4udicial courts. But since it,s an o%tion lang, &ou ma& decide to orever await the decision because it ma& come out. The %roblem is when the decision comes ver& late, it ma& a ect the %rescri%tive %eriod o the government,s right to collect. The government,s right to collect is onl& within / &ears rom issuance o the assessment and i it,s decided L &ears rom assessment, then no right to collect nah.

I &ou %rotest a 912, are &ou re:uired to %a& under %rotest, meaning %a& under %rotest 0 &ou can onl& %rotest it i &ou %a& the assessed tax and held it in trust or &ou i later on it,s decided in &our avor+ Is %a&ment under %rotest necessar&+ 2". It,s onl& necessar& or real %ro%ert& taxes and tari and customs duties. 2ational internal revenue taxes do not re:uire the tax%a&er to settle the obligation irst %rior to exercising his right to :uestion or dis%ute the 912.

1$$I3' B12PI2; K) #IR o o The case is an exception to the rule on exhaustion of administrative remedies Ho(ever, a careful reading of the 3ormal Letter of )emand (ith *ssessment &otices leads us to agree (ith petitioner that the instant case is an exception to the rule on exhaustion of administrative remedies, i.e., estoppel on the part of the administrative agency concerned. 1e find the CIR estopped from claiming that the filing of the failed to exhaust all administrative remedies. The 3ormal Letter of )emand (ith *ssessment &otices reads; +ased on your letter'protest dated :ay $G, $??C, you alleged the follo(ing; <. That the said assessment has already prescribed in accordance (ith the provisions of #ection $?= of the Tax Code. $. That since the exemption of 3C)>s from all taxes found in the 4ld Tax Code has been deleted, the (ording of #ection $%@*A@JA@bA discloses that there are no other taxes imposable upon 3C)>s aside from the <?N 3inal Income Tax. Contrary to your allegation, the assessments covering GRT and )#T for taxable year $??< has not prescribed for 7sic8 simply because no returns (ere filed, thus, the three year prescriptive period has not lapsed. 1ith the implementation of the CTR , the phrase ,exempt from all taxes- (as deleted. lease refer to #ection $J@)A@=A and $%@*A@JA of the ne( Tax Code. *ccordingly, you (ere assessed for deficiency gross receipts tax on onshore income from foreign currency transactions in accordance (ith the rates provided under #ection <$< of the said Tax Code. Like(ise, deficiency documentary stamp taxes (as 7sic8 also assessed on Loan *greements, +ills urchased, Certificate of )eposits and related transactions pursuant to #ections <%? and <%< of &IRC, as amended. The $FN surcharge and $?N interest have been imposed pursuant to the provision of #ection $C%@*A and $CB@bA, respectively, of the &ational Internal Revenue Code, as amended. It is re"uested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of penalties incident to delin"uency. This is our final decision based on investigation. If you disagree, you may appeal this final decision (ithin thirty @=?A days from receipt hereof, other(ise said deficiency tax assessment shall become final, executory and demandable. @9mphasis suppliedA etition for Revie( (as premature because petitioner

o o

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o o o

It appears from the foregoing demand letter that the CIR has already made a final decision on the matter and that the remedy of petitioner is to appeal the final decision (ithin =? days. In 4ceanic 1ireless &et(ork, Inc. v. Commissioner of Internal Revenue, (e considered the language used and the tenor of the letter sent to the taxpayer as the final decision of the CIR. In this case, records sho( that petitioner disputed the *& but not the 3ormal Letter of )emand (ith *ssessment &otices. &evertheless, (e cannot blame petitioner for not filing a protest against the 3ormal Letter of )emand (ith *ssessment &otices since the language used and the tenor of the demand letter indicate that it is the final decision of the respondent on the matter. 1e have time and again reminded the CIR to indicate, in a clear and une"uivocal language, (hether his action on a disputed assessment constitutes his final determination thereon in order for the taxpayer concerned to determine (hen his or her right to appeal to the tax court accrues. Hie(ed in the light of the foregoing, respondent is no( estopped from claiming that he did not intend the 3ormal Letter of )emand (ith *ssessment &otices to be a final decision. :oreover, (e cannot ignore the fact that in the 3ormal Letter of )emand (ith *ssessment &otices, respondent used the (ord ,appeal- instead of ,protest-, ,reinvestigation-, or ,reconsideration-. *lthough there (as no direct reference for petitioner to bring the matter directly to the CT*, it cannot be denied that the (ord ,appeal- under prevailing tax la(s refers to the filing of a etition for Revie( (ith the CT*. *s aptly pointed out by petitioner, under #ection $$% of the &IRC, the terms ,protest-, ,reinvestigation- and ,reconsideration- refer to the administrative remedies a taxpayer may take before the CIR, (hile the term ,appeal- refers to the remedy available to the taxpayer before the CT*. #ection B of R* B$%$, amending #ection << of R* <<$F, like(ise uses the term ,appeal- (hen referring to the action a taxpayer must take (hen adversely affected by a decision, ruling, or inaction of the CIR. *s (e see it then, petitioner in appealing the 3ormal Letter of )emand (ith *ssessment &otices to the CT* merely took the cue from respondent. +esides, any doubt in the interpretation or use of the (ord ,appeal- in the 3ormal Letter of )emand (ith *ssessment &otices should be resolved in favor of petitioner, and not the respondent (ho caused the confusion. To be clear, (e are not disregarding the rules of procedure under #ection $$% of the &IRC, as implemented by #ection = of +IR Revenue Regulations &o. <$'BB. It is the 3ormal Letter of )emand and *ssessment &otice that must be administratively protested or disputed (ithin =? days, and not the *&. &either are (e deviating from our pronouncement in #t. #tephen2s Chinese Girl2s #chool v. Collector of Internal Revenue, that the counting of the =? days (ithin (hich to institute an appeal in the CT* commences from the date of receipt of the decision of the CIR on the disputed assessment, not from the date the assessment (as issued. 1hat (e are saying in this particular case is that, the 3ormal Letter of )emand (ith *ssessment &otices (hich (as not administratively protested by the petitioner can be considered a final decision of the CIR appealable to the CT* because the (ords used, specifically the (ords ,final decision- and ,appeal-, taken together led petitioner to believe that the 3ormal Letter of )emand (ith *ssessment &otices (as in fact the final decision of the CIR on the letter' protest it filed and that the available remedy (as to appeal the same to the CT*. Tiu: "rdinaril&, we have to ollow the ste%s in the assessment %rocess with regard to the tax%a&er,s remedies to give o%%ortunit& as well the administrative agenc& who is in charge o the matter, the BIR, so that all 912s must be %rotested irst be ore the #IR or his subordinates. 'ue to the tenor o the letter, which re:uired the tax%a&er to make an a%%eal rather than to %rotest or re:uest or reconsideration or reinvestigation against the assessment, it was natural or the tax%a&er to elevate the case because when &ou sa& a%%eal, it e:uates to %etitions or review be ore the 4udicial courts. =ou don,t a%%eal be ore the #IR.

I a decision is handed out, lets sa& the 912 was issued b& the BIR o #ebu. =ou would,ve to re%l& in a orm o %rotest addressed to the Regional 'irector 6R'7 o #ebu, though &ou can sa& #IR, 1ttention: R'. I the R' issues a decision den&ing &our %rotest within the 1B@-da& %eriod, what is &our remed&+ o o ?otion or Reconsideration be ore the R' I denied, what,s next+ #an &ou not directl& a%%eal the decision o denial issued b& the R' to the #T1+ Is the right to decide dis%uted assessments a non-delegable %ower o the #IR+ 'oes it come within the 4urisdiction alread& o the #T1+ "r what is within the 4urisdiction o the #T1 0 decision alone o the #IR or does it include decision o the R's as well+ 2", it,s not a non-delegable %ower. It,s a delegable %ower o the #IR so that the tax%a&er can directl& a%%eal the decision o denial issued b& the R' to the #T1 within 3@ da&s rom recei%t o such decision. I &ou look at the law ex%anding 4urisdiction o the #T1, &ou would see there that what is within the 4urisdiction o the #T1 are dis%uted assessments decided b& the #IR. But since this is not a non-delegable %ower, wherein %rotested assessments can be decided b& the #IR,s subordinates, but not lower than the R', a decision o the R', which is inal in nature, can be sub4ect to a%%eal be ore the #T1. Bu& &ou have to be ver& care ul. 'ecisions o the R', which &ou, as a tax%a&er, have elevated to the #IR or the #IR,s inal decision, meaning to sa&, &ou have exhausted all the remedies within the administrative

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agenc&. The %oint is i &ou &oursel :uestion still the decision o the R' be ore the #IR, it,s not considered inal, &ou cannot elevate the case to the #T1, because it,s %ending review b& the #IR. But i &ou consider the decision o the R' a ter asking or a motion or reconsideration, still was denied, inal, &ou ma& o%t to bring the matter directl& to the #T1. It,s alread& %rovided in the Revenue Regulations. But &ou use all &our e orts during the administrative stage. I &ou can avoid the BIR issuing the 912, then do so, with all negotiations during the earlier stages o in ormal con erence, %ost-re%orting notice or -12, because once it comes to the %oint o 912, &ou,re strictl& guided b& dates and i &ou missed out on a date, &ou lose &our right. The 912, whatever igure it has, the tax becomes demandable. I &ou ile an invalid %rotest. =ou ile a %rotest out o time, etc.. )o avoid 912. But i &ou can,t hel% avoiding 912, avoid the 4udicial courts because it would take a ver& long %rocess and it would be ver& costl& since #T1 is in ?anila alone. )o ask or motion or reconsideration be ore the #IR or the R'. It,s allowed.

-8I$1? -$12) K) #IR o The tax%a&er here availed o the bene it o elevating the case be ore the #T1 within 3@ da&s a ter the 1B@-da& inaction. )o a ter the R)' were submitted on 2ov. 3, the tax%a&er has until ?a& 1 to consider *"2 a decision is coming out. That,s the 1B@ da&s rom submission o R)' until ?a& 1. "n ?a& 1, it,s considered the end o the inaction %eriod, the tax%a&er is given 3@ da&s, i he decides to take the o%tion, to a%%eal the case be ore the #T1. )o on ?a& !/, he iled, !. da&s a ter the inaction %eriod, an a%%eal be ore the #T1. 1 month later, a decision o denial came out. )o what will ha%%en to the decision o denial and the 4urisdiction o the #T1+ Considering that the etition for Revie( filed by petitioner that "uestioned the assessment made by the respondent (as filed on :ay $F, $??C and the Revised Rules of the Court of Tax *ppeals took effect only on )ecember <F, $??F, applicable here is the correct interpretation of the last paragraph of #ection $$% of the <BBJ &ational Internal Revenue Code @5&IRC5A or Republic *ct &o. %C$C, as amended, (hich took effect on /anuary <, <BB%, "uoted hereunder for easy reference; 5#9C. $$%. rotesting of *ssessment. M xxx xxx xxx If the protest is denied in (hole or in part, or is not acted upon (ithin one hundred eighty @<%?A days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax *ppeals (ithin thirty @=?A days from receipt of the said decision, or from the lapse of the one hundred eighty @<%?A'day period0 other(ise, the decision shall become final, executory and demandable.5 The last paragraph of #ection $$% of the <BBJ &IRC depicts t(o options that a taxpayer may do in order to protect its rights by virtue of the (ay the (ord 5or5 (as used. The (ord 5or5 is defined as a dis.unctive particle that marks an alternative generally corresponding to 5either,5 as 5either this or that.5 In the case of hilippine +anking Corporation vs. Commissioner of Internal Revenue, this Court has already ruled that under #ection $$% of the <BBJ &IRC, a taxpayer has t(o options; first, if the protest remained not acted upon by the Commissioner (ithin one hundred eighty @<%?A days from submission of documents in support of the protest, he may appeal to this Court (ithin thirty @=?A days from the lapse thereof0 or second, he may (ait until the Commissioner decides on his protest before elevating his case before this Court. It is like(ise important to note that even before the implementation of the Revised Rules of the Court of Tax *ppeals, that took effect on )ecember <F, $??F, the tenet about the taxpayer6s t(o options (ere already existing by virtue of the afore"uoted last paragraph of #ection $$% of the <BBJ &IRC. In the case at bar, petitioner, by filing its option. etition for Revie( on :ay $F, $??C, evidently chose the first

The petitioner cannot argue that respondent cannot anymore issue his 3))* after petitioner has already filed its etition for Revie( before this Court because it is clear under #ection $$% of the <BBJ &IRC that respondent still has the authority to do so. 1hat if the belatedly issued 3))* (as favorable to the petitionerK 1ould petitioner still file the present 5:otion to Resolve Issue of /urisdiction5K In vie( of this, 1e are constrained to reiterate the Court6s ruling in the case of Lascona Land Co., Inc. vs. Commissioner of Internal Revenue, <% upon (hich the ruling in the above'mentioned case of hilippine +anking Corporation vs. Commissioner of Internal Revenue (as based, to "uote; 5Herily, in cases of inaction, #ection $$% of the Tax Code merely gave the taxpayer an option; first, he may appeal to the Court of Tax *ppeals (ithin thirty @=?A days from the lapse of the one hundred eighty @<%?A day period provided for under the said section, or second, he may (ait until the Commissioner decides on his protest before he elevates his case. This Court believes that the taxpayer (as given this option so that in case his protest is not acted upon (ithin the <%?'day period, he may be able to seek immediate relief and need not (ait for a positive action on the part

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of the Commissioner, then the same could not result in the assessment becoming final, executory and demandable.5 Clearly, by virtue of the last paragraph of #ection $$% of the <BBJ &IRC, respondent still has the authority to issue the 3))* despite petitioner6s filing of its etition for Revie( before this Court. It should be emphasi!ed that this does not necessarily mean that the 3))* issued by the respondent after an appeal for his inaction has already been filed (ill prevail over the findings of this Court, because if it is offered or presented by respondent, the 3))* is still sub.ect to this Court6s final evaluation of the facts and the la(s applicable to the case. Tiu: It does not mean that once, dba &ou,re given ! o%tions: a%%eal within 3@ da&s a ter the inaction %eriod o 1B@ or wait or the decision lng, whether it comes out sooner or later. I &ou take the 1 st o%tion in order to shorten the %eriod, wherein &our liabilit& is to be determined %a, it does not mean that &ou shut out the BIR rom issuing a decision to &our %rotest. The BIR can still issue the decision to &our %rotest, whether it,s denial or in agreement to &our arguments, and it will sim%l& be consolidated nalng with the a%%eal that &ou,ve made be ore the #T1. )till, the inal determination o *"2 the decision o the #IR is %ro%er belongs to the #T1. =ou don,t have to remove the #T1 o its 4urisdiction or remove the BIR rom an& 4urisdiction. Both will have to be consolidated. *hen &ou elevate &our case to the #T1, it,s not necessar& that there was a inal decision o the #IR because an inaction would also result to a 4urisdiction o the #T1.

R#B# K) #IR o

3rom the date of petitioner2s filing of protest @/uly $?, $??<A it had until #eptember <%, $??< to submit relevant documents and from #eptember <%, $??<, the Commissioner had until :arch <J, $??$ to issue his decision. *s admitted by petitioner, the protest remained unacted by the Commissioner of Internal Revenue. Therefore, it had until *pril <G, $??$ (ithin (hich to elevate the case to this court. Thus, (hen petitioner filed its etition for Revie( on *pril =?, $??$, the same is outside the thirty @=?A period. 3rom the foregoing, it is clear that the .urisdiction of the Court of Tax *ppeals has been expanded to include not only decisions or rulings but inaction as (ell of the Commissioner of Internal Revenue. The decisions, rulings or inaction of the Commissioner are necessary in order to vest the Court of Tax *ppeals (ith .urisdiction to entertain the appeal, provided it is filed (ithin =? days after the receipt of such decision or ruling, or (ithin =? days after the expiration of the <%?'day period fixed by la( for the Commissioner to act on the disputed assessments. This =?'day period (ithin (hich to file an appeal is .urisdictional and failure to comply there(ith (ould bar the appeal and deprive the Court of Tax *ppeals of its .urisdiction to entertain and determine the correctness of the assessments. #uch period is not merely directory but mandatory and it is beyond the po(er of the courts to extend the same. In case the Commissioner failed to act on the disputed assessment (ithin the <%?'day period from date of submission of documents, a taxpayer can either; <A file a petition for revie( (ith the Court of Tax *ppeals (ithin =? days after the expiration of the <%?'day period0 or $A a(ait the final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax *ppeals (ithin =? days after receipt of a copy of such decision. Ho(ever, these options are mutually exclusive, and resort to one bars the application of the other. In the instant case, the Commissioner failed to act on the disputed assessment (ithin <%? days from date of submission of documents. Thus, petitioner opted to file a petition for revie( before the Court of Tax *ppeals. >nfortunately, the petition for revie( (as filed out of time, i.e., it (as filed more than =? days after the lapse of the <%?'day period. Conse"uently, it (as dismissed by the Court of Tax *ppeals for late filing. etitioner did not file a motion for reconsideration or make an appeal0 hence, the disputed assessment became final, demandable and executory. +ased on the foregoing, petitioner can not no( claim that the disputed assessment is not yet final as it remained unacted upon by the Commissioner0 that it can still a(ait the final decision of the Commissioner and thereafter appeal the same to the Court of Tax *ppeals. This legal maneuver cannot be countenanced. *fter availing the first option, i.e., filing a petition for revie( (hich (as ho(ever filed out of time, petitioner can not successfully resort to the second option, i.e., a(aiting the final decision of the Commissioner and appealing the same to the Court of Tax *ppeals, on the pretext that there is yet no final decision on the disputed assessment because of the Commissioner2s inaction. Tiu: In this case, the 912 had become inal, executor& and demandable or having a%%ealed be&ond the 3@-da& %eriod a ter the 1B@-da& inaction. #an &ou cure the de ect sa&ing EI disregard m& 1 st o%tion. I will go or the ! nd o%tion, which is 3@ da&s a ter the denialF+ 2", because both o%tions are alternative remedies. "nce &ou,ve taken the o%tion o iling an a%%eal a ter the 1B@-da& inaction, &ou can no longer o%t or the other one.

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1ssessment is di erent rom collecting taxes. 1 ter the assessment %rocess, &ou move on to collect, either in cash or %ro%ert& o the tax%a&er. "nce it reaches the level o #T1, there is no inaction %eriod or the #T1. =ou have to wait or the decision. o o o *hen &ou elevate a case to the #T1, this time, the denial o &our %rotest or the inaction, &ou have to ile it be ore the #T1 in division, not &et the #T1 en banc. I the #T1 in division in &our avor, ine. I it decides against &ou or in denial o &our %etition, &ou have 1/ da&s to ile a motion or reconsideration be ore the same #T1 in division. I it,s denied, elevate the case to the #T1 en banc, alwa&s. =ou cannot directl& ile it be ore another court. 1 ter in division, then, en banc. 1nd i the #T1 en banc decides the case in &our avor, case closed. I it,s not decided in &our avor, elevate the case, no longer to the #1, but rather directl& to the )# because the #T1 is given alread& the e:uivalent rank o the #1.

PERIOD OF LIMITATION UPON COLLECTION *ithin how man& &ears can the BIR %roceed to collect the taxes+ o o ;R: *ithin / &ears rom the time assessment has been made *hen is assessment deemed made+ 9rom the time the 912 is released, mailed or sent. )o rom that %oint orward, counting / &ears, the BIR should be able to %roceed with the %rocess o collecting the tax, either, through summar& remedies, 4udicial remedies, unless o course, the %eriod to collect is sus%ended.

*hat are the exce%tions to the /-&ear rule+ 1. *ithin 1@ &ears a ter the discover& o the alsit&, raud or omission 2"T3: I no return is iled, it is im%rescri%tible. It becomes im%rescri%tible. )o what is &our solution to make it %rescri%tible+ 9ile a return, otherwise, the government,s right to assess becomes %er%etual.

!. *here there is a waiver o the statute o limitations 3. Revised assessment o the government 6%rescri%tive %eriod or the collection is counted rom the last or revised assessment7 )imilarl&, when the revised 912 is issued, then &ou start counting the second or the latest 912 when it was deemed made, meaning to sa&, the date when latest 912 has been mailed, released or sent.

.. *ithin 1@ &ears rom the time the right o action accrues i the action is brought to en orce a com%romise I the right to collect is anchored on the com%romise agreement entered into b& the tax%a&er and the government, so what are the instances when the government and the tax%a&er can enter into a com%romise+ o 1. 1 reasonable doubt as to the validit& o the claim against the tax%a&er exists o Reasonable doubt as to the validit&, &ou can lower it down to .@A o the basic assessed tax

!. The inancial %osition o the tax%a&er demonstrates a clear inabilit& to %a& the assessed tax 9inancial inca%acit&, to the extent o 1@A o the basic assessed tax

*henever a bilateral agreement or com%romise is entered into, it,s removed out rom the rules o %rescri%tive %eriod under the tax code. It becomes a normal written agreement and under the 2##, it would have a %rescri%tive %eriod o 1@ &ears. I the government ails to collect on a com%romise agreement because the tax%a&er breached its obligation under the com%romise agreement, the government is given actuall& 1@ &ears within which to make the collection or to en orce the com%romise. The right o the 1@-&ear %rescri%tive %eriod will run rom the time that there is a breach o the com%romise agreement.

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I$$<)TR1TI"2: I the tax authorities would directl& %roceed to collect taxes, without going through the %rocess o assessment, within how man& &ears should the collection be made+ )a& or exam%le, directl& ile a case be ore the RT# or collection o taxes 0 a civil case 0 within how man& &ears should the collection be made in the absence o an assessment+ ;enerall&, the BIR is onl& given 3 &ears, whether to collect or to assess, because the tax%a&er is onl& re:uired to kee% its books o accounts within 3 &ears rom the date o the last entr& but i it goes through the %rocess o making an assessment within 3 &ears, the collection is moved not rom the date o iling the return but rather, the collection o the assessed tax is reckoned rom the date the assessment is deemed made and until / &ears therea ter. But i no assessment is made, it,s as i the 3-&ear %eriod or assessment is substituted as the collection %eriod because the BIR actuall& knows what to collect nah because it did not undergo the %rocess o determining de icienc& taxes.

;overnment,s right to recover erroneousl& re unded tax o I it re unds taxes to the tax%a&er, even i the tax%a&er has not legal right to such re und, the government can collect within 3 &ears rom the time it makes an assessment.

WHEN IS A TAX DEEMED COLLECTED *hen is a tax deemed collected+ o 1. Through summar& remedies *hen &ou sa& summar& remedies, how would the government en orce collection+ i. 'istraint %rocedure o 'istraint o %ersonal %ro%ert&

ii. $ev& %rocedure o lev& o real %ro%ert&

!. Through 4udicial remedies *hen can &ou consider that the tax authorities have begun action to collect the taxes+ #ollection o tax is begun b& iling the com%laint with the %ro%er court. 8owever, this onl& a%%lies i the tax authorities institute an action be ore the court. I it iles an action or collection or a sum o mone& or a tax civil liabilit&, then it,s alread& an action or collection. *hat i it,s the tax%a&er who institutes an action+ *hen is the tax authorities deemed to have made its collection+ *hen is the #IR or his subordinates considered to have instituted collection in cases where it does not make the irst ste% be ore the 4udicial courts+ o o #ollection o tax is considered begun when the government iles it answer to the tax%a&er,s %etition or review. *hen the government answers or %etition or review iled b& the tax%a&er, it is considered alread& as instituting the collection %rocess, then, still between the /-&ear %rescri%tive %eriod, the right to collect has not %rescribed.

#an the tax%a&er en4oin the collection o taxes+ o o ;R: 2", because otherwise, it will ham%er the o%erations o the government to meet the basic needs o its constituents 6li eblood doctrine7 3xce%tion: )us%ension is allowed when the ollowing conditions concur 0 o 1. Issued onl& b& the #T1 !. Issued onl& b& the #T1 in its a%%ellate 4urisdiction 3. I the #T1 determine that it will 4eo%ardiDe the interest o the tax%a&er or the government with the re:uirement o iling a bond

#an the RT# issue an in4unction in the collection o taxes+

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2". It,s onl& the #T1.

#an the #T1, at irst instance, issue an in4unction+ 2". It can onl& issue in4unction i it,s in the exercise o its a%%ellate 4urisdiction. Taxes can be en4oined onl& b& the #T1 when it is exercising its a%%ellate 4urisdiction. 1t irst instance, original 4urisdiction, it cannot en4oin. =ou cannot directl& ile an in4unction case be ore the #T1 o a tax collection case that is with the RT#. It must be within the 4urisdiction o the #T1. I it determines that it will 4eo%ardiDe the interest o either the government or the tax%a&er, with the re:uirement o iling o a bond.

SUSPENSION OF THE RUNNING OF THE STATUTE OF LIMITATIONS FOR MA"ING TAX COLLECTIONS The same with assessment, exce%t that &ou might want to add that in collection, the %eriod is sus%ended when: o o 1. The #IR is %rohibited rom beginning or commencing the distraint or lev& %rocedure in court and or L@ da&s therea terC !. *hen a warrant o distraint or lev& has alread& been served but no %ro%erties can be located.

ADMINISTRATIVE REMEDIES AFTER PAYMENT *hat is the di erence between claiming or a tax re und and claiming or a tax credit+ o Tax re und takes %lace when there is actual reimbursement while tax credit takes %lace u%on the issuance o a tax certi icate or tax credit memo, which can be a%%lied against an& sum that ma& be due and collected rom the tax%a&er.

I &ou,re granted a re und, what do &ou ex%ect rom the government+ o The restitution o the mone& or the tax that &ou,ve actuall& %aid to the government

1nd i it,s a tax credit that is granted, what can &ou receive rom the government+ o o It,s merel& a tax certi icate. 1nd what do &ou do with the tax certi icate+ =ou a%%l& it against &our other existing tax liabilities, such as+ )a& or exam%le, &ou,re granted a tax credit or over%a&ment o income taxes. #an it be a%%lied against real %ro%ert& taxes+ *ould &ou a%%l& a tax credit certi icate granted b& the BIR to o set or %a&-o liabilities with another agenc&, the B"# or the $;<s+ 2". )o, it can be a%%lied to an& existing tax liabilities be ore the BIR onl& because it,s the BIR which granted &ou the tax credit certi icate.

#an &ou a%%l& a tax credit against a withholding tax on the salaries o &our em%lo&ees or on &our %a&ments or rents, etc+ 2", because there are ! se%arate tax%a&ers in this case. *ithholding taxes are not the liabilit& o the withholding agent. It,s the tax o the %ersons against whom &ou withheld the taxes, such as em%lo&ees.

3xam%le o tax a credit certi icate can be o setted against: Income tax Kat "ther national internal revenue taxes

January 20, 2011 Thursday

-age 43 o 186

ADMINISTRATIVE REMEDY AFTER PAYMENT *hat is the di erence between a claim or re und and a claim or tax credit+ o Tax re und takes %lace when there is actual reimbursement while tax credit takes %lace u%on the issuance o a tax certi icate or tax credit memo, which can be a%%lied against an& sum that ma& be due and collected rom the tax%a&er. 1 claim or re und is when &ou a%%l& or a claim that &our tax %a&ments will be given back to &ou or restituted. "n the other hand, i &ou ile a claim or tax credit, although it has the same basis, what will be given &ou is not the actual cash or mone& that &ou,ve %aid as tax %a&ments but &ou,ll be given a certi icate evidencing that &ou,ve made over%a&ments and such over%a&ments in the credit certi icate can be used to %a&-o other existing tax liabilities with the same agenc& that issued the tax credit certi icate. 8ow di erent is being given a tax credit certi icate rom carr&-over+ *hen &ou carr&-over, dba &ou can o set it against &our uture tax liabilities. But the basic di erence there is that when &ou carr&-over, dba, &ou have ! o%tions: whenever &ou have excess tax %a&ments 0 either &ou ile a claim or re und or carr& it over. 1nd the o%tions are alternative in nature. =ou can,t a%%l& or both. I &ou go or re und or tax credit, &ou cannot carr&-over. I &ou carr&-over, &ou cannot ile a re und or tax credit. I &ou,re given a tax credit, because in most cases, the government will not re und &ou with actual mone& or cash. 1ll it can give &ou is a certi icate evidencing over%a&ment and that certi icate will be converted to a tax debit memo and the tax debit memo will be used to %a&-o existing tax liabilities. *hat,s the di erence between carr&-over+ 1ng carr&-over, &ou don,t need to go through the %rocess o a%%l&ing or a claim or tax credit certi icate. 1nd it,s o setting against uture tax liabilities would be concentrated on the same tax liabilit&. #arr&-over to the same tax liabilit& 0 income tax against income tax. But i &ou over%a& and &ou a%%l& or a tax credit certi icate and &ou,re given a tax credit certi icate, &ou can use to %a&-o %ercentages taxes, documentar& stam% taxes, other taxes ound under the 2IR#, so long as it,s not a tax o somebod& else, like withholding taxes, dba. =ou cannot %a& tax credit certi icate against a withholding tax because withholding tax liabilit& is a liabilit& o another %erson. <nlike i &ou,re given cash as re und nah, &ou can use that to %a&-o all kinds o tax %a&ments even i it,s a tax %a&ment to other agencies.

*hat is &our basis or iling a claim or re und+ #an an&bod& 4ust ile a claim or re und+ o 2". =ou can onl& ile a claim or re und or or tax credit i &ou have made actual %a&ments o taxes. That is the irst thing that &ou,ve to be establish. 1nd the %a&ments were made under mistake o acts, such as that &ou thought that &ou were not exem%t but under a certain law, &ou could have been exem%ted. It,s an erroneous %a&ment, an excessive %a&ment o taxes, illegal %a&ment, wrong ul collection b& the tax authorities and others so long as it can be established that actual cash went to the government. )o when can claim or re und or tax credit be iled+ o 1. *hen the tax has been erroneousl& or illegall& assessed or collected !. *hen an& %enalt& is claimed to have been collected without authorit& 3. *hen an& sum is alleged to have been excessivel& or in an& manner wrong ull& collected .. *hen internal revenue stam%s are returned in good condition b& the %urchaser 6value is re unded7 /. In the #ommissioner,s discretion, redeem or change unused stam%s that have been rendered un it or use and re und their value u%on %roo o destruction

o o

#IR K) 1$$T3$ I2T3R21TI"21$ 3ver& claim or re und will be taken into consideration, strictl& construed. =ou should be able to establish &our claim or iling a re und that &ou,ve made over%a&ments, excess %a&ments, erroneous %a&ments, or wrong ul %a&ments. In this case, there was a claim or re und that was iled. The %roblem was that the amount that has been claimed or re und belongs to a certain taxable &ear that is sub4ect as well o an assessment. )o since there is still a :uestion as to whether the income taxes that &ou have %aid or a %articular &ear is valid or not, it cannot be ri%e or determination that &ou would be granted or a re und even i it,s reall& there was over%a&ment because there is still a :uestion as to the validit& o the return that &ou,ve iled.

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The )# said that so long as &ou have iled a claim or re und within the %rescri%tive %eriod, there,s no worr&, automatic grant. In this case, cannot be made because it,s sub4ect to a de icienc& income tax assessment. The )# said that i a re und is granted and the assessment has not &et been ull& determined or inaliDed, it ma& ha%%en that the government ma& have wrong ull& granted the government and it would be a tedious %rocess to seek the collection o the tax that has been re unded and also to avoid multi%licit& o suits. The granting o the re und has to wait or the settlement o the assessment. But i &ou,re considering a re und o an amount that is sub4ect to assessment, &ou can do so, com%l& lng with the %rescri%tive %eriod so as not to bar &ou rom making a re und later on made out o time.

;enerall&, who can ile a claim or re und is the %erson who actuall& made the %a&ment o tax that is his tax burden. But these ! cases do not come within the normal %rocess o a tax%a&er iling a claim or re und, like or exam%le: o #IR K) -R"#T3R 12' ;1?B$3 Tiu: It has long been a standing case with the )# sa&ing that -5;, as the -hili%%ine domestic cor%oration, %a&ing to its %arent com%an& abroad, acts onl& as a withholding agent and i the %a&ment is ound out to have been over%a&ments, -5; -hili%%ines cannot ile a claim or re und because the liabilit& is not that o the -5; -hils. as withholding agent but the tax burden actuall& alls on -5; %arent com%an& in the <.). )o in the irst initial cases, -5; has not been considered as the %ro%er %art& to ile a claim or re und in behal o its %arent com%an&. But throughout motions or reconsideration, the )# realiDed in a later case and it granted the withholding agent the right to ile a claim or re und or over%a&ments o taxes in behal o its %arent com%an& abroad. But what is %eculiar here is it,s not the withholding agent between ! domestic cor%orations, -hil. cor%orations and a certain 9ili%ino individual as em%lo&ee. *hat is covered here in this case, it,s a withholding agent as a domestic cor%oration and the real income earner is a 2R9#. )o subse:uentl&, even -5; has been granted a right to ile a claim or re und. *h& did the )# allow -5;, onl& as a withholding agent, not the real income earner, wh& was it allowed to claim or re und in behal o its %arent com%an&+ The "uestion of the capacity of OG' hil. to bring the claim for refund has substantive dimensions as (ell (hich, as (ill be seen belo(, also ultimately relate to fairness. >nder #ection =?G of the &IRC, a claim for refund or tax credit filed (ith the Commissioner of Internal Revenue is essential for maintenance of a suit for recovery of taxes allegedly erroneously or illegally assessed or collected; o #ec. =?G. Recovery of tax erroneously or illegally collected. M &o suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected (ithout authority, or of any sum alleged to have been excessive or in any manner (rongfully collected, until a claim for refund or credit has been duly filed (ith the Commissioner of Internal Revenue0 but such suit or proceeding may be maintained, (hether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be begun after the expiration of t(o years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment; . . . @9mphasis suppliedA

#ection =?B @=A of the &IRC, in turn, provides; o #ec. =?B. *uthority of Commissioner to Take Compromises and to Refund Taxes.MThe Commissioner may; xxx xxx xxx @=A credit or refund taxes erroneously or illegally received, . . . &o credit or refund of taxes or penalties shall be allo(ed unless the taxpayer files in (riting (ith the Commissioner a claim for credit or refund (ithin t(o @$A years after the payment of the tax or penalty. @*s amended by .). &o. GBA @9mphasis suppliedA

#ince the claim for refund (as filed by OG' hil., the "uestion (hich arises is; is OG' hil. a 5taxpayer5 under #ection =?B @=A of the &IRCK The term 5taxpayer5 is defined in our &IRC as referring to 5any person sub.ect to tax imposed by the Title 7on Tax on Income8.5 It thus becomes important to note that under #ection F= @cA of the &IRC, the (ithholding agent (ho is 5re"uired to deduct and (ithhold any tax5 is made 5 personally liable for such tax5 and indeed is indemnified against any claims and demands (hich the stockholder might (ish to make in "uestioning the amount of payments effected by the (ithholding agent in accordance (ith the provisions of the &IRC. The (ithholding agent, OG' hil., is directly and independently liable for the correct amount of the tax that should be (ithheld from the dividend remittances. The (ithholding agent is, moreover, sub.ect to and liable for deficiency assessments, surcharges and penalties should the amount of the tax (ithheld be finally found to be less than the amount that should have been (ithheld under la(.

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* 5person liable for tax5 has been held to be a 5person sub.ect to tax5 and properly considered a 5taxpayer.5 The terms liable for tax5 and 5sub.ect to tax5 both connote legal obligation or duty to pay a tax. It is very difficult, indeed conceptually impossible, to consider a person (ho is statutorily made 5liable for tax5 as not 5sub.ect to tax.5 +y any reasonable standard, such a person should be regarded as a party in interest, or as a person having sufficient legal interest, to bring a suit for refund of taxes he believes (ere illegally collected from him. In hilippine Guaranty Company, Inc. v. Commissioner of Internal Revenue, this Court pointed out that a (ithholding agent is in fact the agent both of the government and of the taxpayer, and that the (ithholding agent is not an ordinary government agent; o The la( sets no condition for the personal liability of the (ithholding agent to attach. The reason is to compel the (ithholding agent to (ithhold the tax under all circumstances. In effect, the responsibility for the collection of the tax as (ell as the payment thereof is concentrated upon the person over (hom the Government has .urisdiction. Thus, the (ithholding agent is constituted the agent of both the Government and the taxpayer. 1ith respect to the collection andDor (ithholding of the tax, he is the Government6s agent. In regard to the filing of the necessary income tax return and the payment of the tax to the Government, he is the agent of the taxpayer. The (ithholding agent, therefore, is no ordinary government agent especially because under #ection F= @cA he is held personally liable for the tax he is duty bound to (ithhold0 (hereas the Commissioner and his deputies are not made liable by la(. @9mphasis suppliedA

If, as pointed out in hilippine Guaranty, the (ithholding agent is also an agent of the beneficial o(ner of the dividends (ith respect to the filing of the necessary income tax return and (ith respect to actual payment of the tax to the government, such authority may reasonably be held to include the authority to file a claim for refund and to bring an action for recovery of such claim. This implied authority is especially (arranted (here, is in the instant case, the (ithholding agent is the (holly o(ned subsidiary of the parent'stockholder and therefore, at all times, under the effective control of such parent'stockholder. In the circumstances of this case, it seems particularly unreal to deny the implied authority of OG' hil. to claim a refund and to commence an action for such refund. 1e believe that, even no(, there is nothing to preclude the +IR from re"uiring OG' hil. to sho( some (ritten or telexed confirmation by OG'>#* of the subsidiary6s authority to claim the refund or tax credit and to remit the proceeds of the refund., or to apply the tax credit to some hilippine tax obligation of, OG'>#*, before actual payment of the refund or issuance of a tax credit certificate. 1hat appears to be vitiated by basic unfairness is petitioner6s position that, although OG' hil. is directly and personally liable to the Government for the taxes and any deficiency assessments to be collected, the Government is not legally liable for a refund simply because it did not demand a (ritten confirmation of OG' hil.6s implied authority from the very beginning. * sovereign government should act honorably and fairly at all times, even vis'a'vis taxpayers. 1e believe and so hold that, under the circumstances of this case, OG' hil. is properly regarded as a 5taxpayer5 (ithin the meaning of #ection =?B, &IRC, and as impliedly authori!ed to file the claim for refund and the suit to recover such claim.

Tiu: The )# said that withholding agent, being the one %ersonall& liable or it,s a %ersonal liabilit& o the withholding agent in case o non-withholding, it,s 4ust but %ro%er to allow it to ile a claim or re und. 1nd another thing, the 2R9#, who has excessivel& %aid the tax, through the withholding agent, does not have a legal standing to ile a claim or re und in the -hils. It is not established to do business in the -hils. 1nd the 2R9# should be able to establish that &ou,re o%erational in the -hils. to ile a claim that is avorable to &ou.

)I$P1IR K) #IR In this case, it,s about the excise tax %a&ments o )ilkair, although )ilkair is not a domestic cor%oration. It,s a oreign cor%oration but it o%erates #ebu-)inga%ore and 'avao-)inga%ore lights. 1long the wa&, it %urchased uel rom -etron and accordingl& it was granted Dero-rating 0 sales o uel to those engaged in international air trans%ortations, etcQ ma& be granted Dero-rating. 1nd in act, its exem%tion is %ursuant to a treat& agreement. But then, -etron, notwithstanding the Dero-rating, %assed on excise taxes to )ilkair, to which )ilkair actuall& %aid on to% o the cost o the uel.

-age 46 o 186

*hen it realiDes over%a&ments, it iled a claim or re und. Ouestion as to whether it was able to establish that it indeed o%erated during those &ears covered b& its claim or re und, it was not able to establish such act. 1nd number !, the %a&ments made b& )ilkair were not reall& taxes. *hen excise tax was %aid b& )ilkair, it was not in the orm o tax. It orm %art o the %urchase %rice o the uel so in the hands o )ilkair, it,s no longer a tax but rather a %urchase %rice or the cost o the uel and -etron is still considered and recogniDed b& law as the one who is liable or the taxes. )o i ever, as between the ! %arties, i ever there,s one who is a %ro%er %art& to ile a claim or re und, it,s not )ilkair but it should be -etron.

*hat are the re:uisites to make a valid claim or re und+ o 1. 1 written claim or re und or credit must be iled with the #IR )hould all claims or re und be %receded b& a written claim+ ;R: =3). 3xce%tions: o o o o 1. *here on the ace o the return u%on which %a&ment was made, such %a&ment a%%ears clearl& to have been erroneousl& made !. *ithin 3@ da&s a ter recei%t o the adverse decision or inaction o the #IR, and the tax%a&er iled an a%%eal be ore the #T1

!. The claim or re und must be a categorical demand or reimbursement o mone& or granting o tax credit certi icate 3. It must be iled within ! &ears rom the date o %a&ment o the tax or %enalt& regardless o an& su%ervening cause that ma& arise a ter %a&ment. #an the !-&ear %rescri%tive %eriod be sus%ended+ Remember that the !-&ear %rescri%tive %eriod is in avor o the tax%a&er. ;R: 2", because the law %rovides Eregardless o an& su%ervening causeF 3xce%tion 0 i the ollowing conditions concur 6arose rom a case7: o 1. There is a %ending litigation between the government and the tax%a&er as to the %ro%er tax to be %aid and o the %ro%er inter%retation o the tax%a&er,s charter in relation to the dis%uted taxC and !. The #IR in that dis%uted case agreed to abide b& the decision o the )# as to the collection o the tax relative thereto, even i it,s be&ond the !-&ear %rescri%tive %eriod.

o -

I claim or re und is denied b& the #IR, &ou can a%%eal to the #T1 within 3@ da&s rom recei%t o such decision. o I$$<)TR1TI"2: 9iled ITR or !@@H &ear on 1%ril 1/, !@@B and %aid the tax. =ou have until 1%ril 1/, !@1@ to ile a claim or re und. I &ou ile the claim or re und on 1%ril 1, !@1@ and the decision comes out den&ing &our claim or re und on 1%ril !I, !@1@, what is &our remed&+ The tax%a&er must ile a claim be ore the #T1 be ore the !-&ear %eriod la%ses, in this case, be ore 1%ril 1/, !@1@, otherwise he ma& no longer ile a claim be ore the #T1 in case the #IR render an adverse decision be&ond the !-&ear %eriod. 2"T3: B"T8 the written claim and the a%%eal to the #T1 must be iled within the !-&ear %rescri%tive %eriod. This means that both administrative and 4udicial claim or re und must be iled within the !-&ear %rescri%tive %eriod. )o, what should the tax%a&er do i his claim or re und is denied or is not acted u%on b& the #IR+ )ituation 1: The #IR denies the claim or re und 0 the tax%a&er ma& a%%eal to the #T1 within 3@ da&s rom the recei%t o the #IR,s decision and within ! &ears rom the date o %a&ment )ituation !: The #IR does not act on the claim, and the !-&ear %eriod is about to la%se 0 the tax%a&er must ile a claim be ore the #T1 be ore the !-&ear %eriod la%ses, otherwise he ma& no longer ile a claim be ore the #T1 in case the #IR render an adverse decision be&ond the !-&ear %eriod.

#an &ou directl& ile a claim or re und to the #T1+

-age 47 o 186

o o

2". =ou must be able to %rove that &ou have actuall& exhausted administrative remedies to allow the tax authorities to determine at irst instance whether indeed &ou should be allowed the re und or the tax credit certi icate. #T1 would not be receiving &our %etition or review without %roo that &ou,ve ile an administrative claim or re und. )o i &ou,re making it on the same da&, make sure &ou go irst be ore the BIR to ile the claim, then ile a claim be ore the #T1.

2"T3: The !-&ear %rescri%tive %eriod cannot be a%%lied in case o advance %a&ments, which are not erroneous %a&ment, not an excessive %a&ment, not a wrong ul collection or illegal collection. o #onsidering that the advance %a&ment is not an erroneous %a&ment, not an excessive %a&ment, not a wrong ul collection, not illegal collection, it does not come within the ambit o iling a claim or re und that is covered b& the !&ear %rescri%tive %eriod. It,s sim%l& an agreement between ! %arties and i ever it,s a written agreement, the tax%a&er can get back the mone& either in a orm o re und or tax credit certi icate under the #ivil #ode %rescri%tive %eriod. )o i written 0 1@ &ears or i oral 0 ! &ears.

#IR K) -3R9: o )%ecial re:uirements or iling a claim o re und or credit or creditable withholding taxes: 1. That the claim or re und was iled within the two 6!7 &ear %eriod as %rescribed under )ection !3@ o the 2ational Internal Revenue #odeC !. That the income u%on which the taxes were withheld were included in the return o the reci%ientC 3. That the act o withholding is established b& a co%& o a statement 6BIR 9orm 1H.3.17 dul& issued b& the %a&or 6withholding agent7 to the %a&ee, showing the amount %aid and the amount o tax withheld there rom.

#IR K) 91R31)T B12P: o 2ot entitled to re und because no sales rom lease, there ore, no tax withheld. #onse:uentl&, not entitled to a re und or credit o creditable withholding taxes.

#IR K) -RI?3T"*2 o 'on,t consider the additional da& during lea% &ear in counting the !-&ear %rescri%tive %eriod

REMEDIES OF THE GOVERNMENT a. b. c. d. e. . g. h. Tax lien #om%romise and abatement #ivil action #riminal action 'istraint $ev& 9or eiture )us%ension o business o%erations

1. Tax lien - a legal claim b& the government and established b& the law as securit& in de ault in the %a&ment o taxes o *hen the tax%a&er neglects or re uses to %a& his internal revenue tax liabilit& a ter demand, the amount so demanded shall be a lien in avor o the ;overnment rom the time the assessment was made b& the #ommissioner until %aid with interests, %enalties, and costs that ma& accrue in addition thereto u%on all %ro%ert& and rights to %ro%ert& belonging to the tax%a&er. *hen we sa& a tax%a&er is deli:uent it means that even a ter demand the tax%a&er re uses to %a&. *hen is demand made+ 8ow is demand made+ o 'emand is made thru 912

*hat are exam%les o a categorical demand to %a& taxed+

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*hen the law sa&s that the lien has a duration which exist rom the time the assessment is made b& the #ommissioner until it is %aid, inclusive o interests, surcharges and %enalties It means to sa& it exist rom the time the inal assessment is made because onl& in 912 is there a categorical demand to %a& the amount sti%ulated Remember, a -12 is a %ost-re%orting notice, %rovides therein de icienc& taxes but it invites &ou to re%l&, attend an in ormal con erence, etc But i it develo%s into a 912 now, what is one re:uisite o a 912+ That there must alread& be a demand to %a&. 1nd i &ou don,t %a& the demand via 912, &ou become delin:uent rom that %oint orward. The lien attaches until it is settled together with the interest, surcharges and %enalt&.

o o o

It extends u%on all %ro%erties o the tax%a&er, it means real, %ersonal tangible, %ersonal intangible %ro%erties. 1nd during the duration o which the %ro%ert& is eventuall& trans erred, the lien ollows the %ro%ert&. Regardless o who the owner is, it ollows the %ro%ert&. Is it binding against 3rd %ersons+ It shall not be valid against a mortgagee %urchaser or 4udgment creditor unless it is registered with the Register o 'eeds.

But then again, it,s 4ust a lien, unless and until there is a %ositive action on the %art o the BIR to %roceed with the summar& %rocedure o taking charge o the %ro%ert&, it is 4ust a lien as &et. There is no actual collection rom the government.

!. #om%romise - 1 bilateral agreement between the government and the tax%a&er to avoid urther litigation or to %ut an end to one that has alread& commenced. o o *h&+ Because even be ore the )u%reme #ourt, there can still be com%romise in some cases but not in all cases. <nder the li e bood doctrine and even under the general %rinci%les o taxation, taxes are generall& %a&able in mone& to the extent %ossible the government would actuall& go or com%romise to collect taxes in cash rather than %roceed with the summar& remed& o getting %ersonal %ro%erties via distraint or real %ro%erties via lev&. *h&+ o o It ma& be di icult to dis%ose o these %ro%erties thru an auction sale. It,s not reall& a guarantee on the %art o the government to collect mone& rom the tax%a&er. But nonetheless, i it,s no longer %ossible or the government to enter into a com%romise, these are remedies that ma& be en orced.

#om%romise still gives the government tax collection and it,s in cash. Re:uisites: 1. There is an existing tax liabilit& !. There is an o er b& the tax%a&er o an amount that he o ers as a com%romise o his existing tax liabilit& 3. There is a subse:uent acce%tance b& the #ommissioner, "R i it,s delegable, de%ending on the amount, b& the Regional 'irector

'istinguished rom com%romise %enalt& #om%romise 0 reci%rocal concession between the tax%a&er and the government wherein the tax%a&er o ers to %a& an amount on the grounds %rescribed b& the law is more on the civil as%ect o the tax%a&er,s liabilit&. It,s an agreement between two %arties #om%romise %enalt& 0 when a com%romise is im%osed B= the government <-"2 the tax%a&er. #om%romise %enalt& is ver& di erent rom #om%romise as a government remed&. *hen the government collects com%romise %enalt&, it is actuall& an amount that is collected rom the tax%a&er in %a&ment or a criminal tax violation. -aid in lieu o criminal %rosecution. I &ou have been ound to be de icient o 1? in taxes, would &ou be liable or onl& 1?+ o 2o, &ou will be liable on to% o the 1? basic taxes, surcharge o either !/A or /@A, interest o !@A %er annum and on to% o that, the com%romise %enalt& in lieu o the criminal %rosecution or violating the %rovision o the Tax #ode.

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)o do not con use &oursel with com%romise as a remed& o the government and com%romise %enalt& as im%osed. Because com%romise %enalt& cannot at all time be en orced, usuall& it,s not voluntar&, it becomes voluntar& when the tax%a&er %a&s.

'istinguished rom abatement #om%romise is merel& a reduction o the assessed taxes 1batement is oregoing o collection or the cancellation o either &our tax liabilit&, &our interest, surcharge or the entire thing.

;rounds wherein &ou can enter into com%romise with the government: 1. *hen the inancial %osition o the tax%a&er demonstrates a clear inabilit& to %a& the assessed tax, "R Instances wherein &ou can move or a com%romise based on inancial inca%acit& 1. =ou have to be in a net worth de icit o at least /@A, "R o !. 3. 3x: &our assets is 1? and &our liabilties is !?

=ou have been ound to be su ering rom losses or a number o &ears, "R =ou,re ound to be closing down, or dissolving &our business, or ceasing o%eration. o I &ou dissolve &our business, )3# can onl& validl& dissolve the cor%oration i there is a clearance rom tax authorities and clearance can onl& be given i &ou have settled all &our tax obligations. 1nd this %robabl& is the best time to ask or a com%romise. I &ou are closing and &ou have no cash, &ou can ask or a com%romise in settling o &ou assessed taxes.

But remember this is one o the grounds as well wherein &ou have to waive in writing &our rights under the Bank )ecrec& $aw or 9oreign #urrenc& 'e%osits 1ct. 9or cases o inancial inca%acit&, the minimum com%romise rate is e:uivalent to ten %ercent 61@A7 o the basic assessed tax o o I &our basic tax is 1? and &our %enalt& is 1?, &ou can o er to %a& 1@A o the basic tax o 1?. O: Is it %ossible or &ou to o er /A o the basic tax as a com%romise in cases o inancial ca%acit& =es. I the amount involved exceeds 1? while the settlement o ered is lower than the minimum re:uired b& law, &ou can still go or it, sub4ect to the a%%roval o the 3valuation Board national level headed b& the #ommissioner and his de%ut& #ommissioners.

!. *hen there is a reasonable doubt as to the validit& o the claim against the tax%a&er ?inimum com%romise rate is e:uivalent to ort& %ercent 6.@A7 o the basic assessed tax. o o But still, it ma& be lowered sub4ect to a%%roval. It,s better higher, no need or the 3valuation Board to a%%rove. =ou don,t have to stick with .@A, &ou ma& o er B@A,etc.

Instances when there is reasonable doubt as to the validit& o the claim against the tax%a&er o o *hen &ou have a reason to believe that the 912 is lacking in actual basis. 8ow about receiving a 4eo%ard& assessment instead o 912+ =es, it is a ground or com%romise. #onsidering that a 4eo%ard& assessment has been RR without the bene it o a %artial nor ull audit or investigation, &ou can actuall& move or a com%romise.

-age 5! o 186

In some cases wherein the assessment is arbitrar& in nature or based on %resum%tions and there is a reason to believe that the assessment is doubt ul as to its legal and actual basis, move or a com%romise. "r in cases where &ou have been ound to have ailed to exercise &our right to %rotest &our 912 but &ou argue that &ou ailed to receive a 912, then move or the ground so long as &ou have the reason to believe that there is a de ect in the legal and actual basis

There are various other instances wherein &ou can move or com%romise. These grounds are the general, &ou have other situations wherein the assessment is not su%%orted with legal and actual basis.

#an criminal cases be com%romised+ ;R: #riminal cases ma&be com%romised 3xce%t: 617 those alread& iled in court and 6!7 those involving raud )o those iled in court cannot be com%romise is an absolute rule 1lso criminal cases involving raud *"2 iled in court

)a& or exam%le there is a criminal tax violation not involving raud, BIR %roceeded to ile the com%lain with the %rosecutor,s o ice. #an it still be com%romised+ =es, because it is still iled with the %rosecutor

Is there a di erence between a criminal tax violation 2"T involving raud and no com%laint has been iled be ore the %rosecutor 12' criminal tax violation 2"T involving raud but a com%laint has alread& been iled be ore the %rosecutor+ *ould this ! be still com%romisable+ 'iba or raud, &ou don,t have to know i it has been iled or not, automaticall& it is not com%romisable. 9or criminal tax violation 2"T involving raud and no com%laint has been iled be ore the %rosecutor, the #ommissioner has ull discretion to enter into a com%romise. 8owever, or those that has alread& been iled with the %rosecutor, the #ommissioner can still enter into a com%romise but sub4ect to the a%%roval o the %rosecutor.

I the %rosecutor has elevated the case as an in ormation be ore the court, is it com%romisable or not+ 2", because it has alread& been iled in court.

#an civil tax cases be com%romised+ #ollection cases iled in courts also includes civil tax cases be ore the lower courts, #T1, and )#. It can still be com%romised, so long as no inal and executor& decision has come u%.

*hat are other com%romisable cases+ 'elin:uent accounts 0 when &ou ailed to %a& a ter demand #ases under administrative %rotest %ending in regional o ices #ases involving -12 *ith more reason that -12 is com%romisable when administrative %rotest that is %ending is com%romisable -12 is in its intial stageC administrative %rotest is alread& in res%onseJdis%ute to 912 which is still com%romisable, what more would a -12 be.

2on-com%romisable cases 1. #an a withholding tax be com%romised+ 2o, because the tax%a&er6++7 is merel& a withholding agent or the government and the tax%a&er.

-age 51 o 186

=ou will notice that withholding taxes is alwa&s an exce%tion to the rule. *hen &ou studied the exce%tions when -12 is necessar& - when there is discre%anc& between the taxes withheld and the taxes remitted. *hen &ou studied about to what kind o taxes a tax credit certi icate under a claim or re und be a%%lied against, it does not include withholding taxes. Because withholding taxes is not reall& a tax liabilit& and a burden. It,s 4ust an obligation to withhold and remit.

o o

!. #riminal tax raud cases, *"2 iled in court 3. #riminal tax case which has alread& been iled in court not involving raud .. 'elin:uent account with dul& scheduled %a&ments /. #ases where inal re%orts o reinvestigation or reconsideration have been issued resulting in the reduction o the original assessment agreed to b& the tax%a&er when he signed the re:uired agreement orm Remember the case o ?anotok Realt& wherein a subse:uent 912 was issued in re%lacement o the original 912 or the reduction o the assessed tax liabilt&. 1nd In the reduction, i the tax%a&er, but in this case there was no agreement, in the exce%tion to the com%romisable cases, when a Tis agreeable to the reduction in the 912 and there is alread& a inal re%ort to the agreement it becomes non-com%romisable.

L. *hen there is a inal and executor& 4udgment o an& o the courts, it is now non-com%romisable

-2"# case There was com%romise and the com%romise was valid B<T eventuall& it was set aside b& the #ommissioner-successor. *h& was it considered a void com%romise agreement+ =ou will notice that this %ertains to com%romisable tax liabilties o those existing as o 'ec 31, 1II/ and earlier, so it could not have been based under the 1IIH Tax #ode. 1nd under 3" .. wherein com%romise ma&be had, it re ers onl& to sel -assessed tax, those taxes where the tax%a&er com%utes voluntaril&, on its own. But the tax that has been com%romised %ertains to withholding tax that has been sub4ect o a BIR assessment. )o it does not come within 3" .., withholding taxes since time immemorial cannot be com%romised.

February 2, 2011 )u%%osing a com%romise agreement has been entered into b& the tax%a&er and the government, and at the time s%eci ied or the com%liance o the com%romise agreement the tax%a&er re uses to abide b& the terms and sti%ulations. *hat is the remed& o the government+ o 3n orce a com%romise agreement. o The government,s irst o%tion is to en orce a com%romise agreement. *ithin how man& &ears shall it be allowed to en orce the terms and sti%ulations o the transactions+ )o that is the onl& remed& o the government+ 2o.

I the government en orce the com%romise agreement, i that o%tion is taken,would there be a di erence i the com%romise is executed with the aid o 4udicial courts or without the aid o 4udicial courts+ There are com%romise agreements that are entered into with the aid o 4udicial courts, sa& or exam%le i the case was alread& %ending be ore the )#, civil case, and a com%romise agreement has been entered into between the tax%a&er and the government, so that,s the com%romise was executed with the hel% o the 4udicial courts or courts. There are cases when com%romises entered extra4udiciall& or exclusivel& between the government and the tax%a&er, sa& or exam%le in %ending or %re-assesment notices stage. )o with there be a di erence in en orcing this irst t&%e o com%romise agreement and the second t&%e o com%romise agreement+ 8ow do &ou en orce+ 1n action would have to be iled in court because in the irst %lace, the com%romise was entered extra4udiciall&. )o this time, the courts will inter ere b& the government iling a civil action.

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But i a com%romise agreement has been handed out b& the courts itsel how will the terms and sti%ulations be en orced+ B& the execution o the inal 4udgment.

I the govnerment would not wish to en orce a com%romise agreement, does it have an& other o%tion then+ (ohn,s answer %ero di kaau sure ka& hina& kaau si&a tingog: #riminal %rosection. "n what ground+ Rescission o the com%romise agreement.

)o &ou mean to sa& en orce the original demand or taxes and %enalties under either the inal assessment notice or those which has been %ending with the courts. )o en orce the original demand b& the government.

)o there are ! o%tions i the tax%a&er re uses to com%l& with the %rovision o the com%romise agreement: 617 3ither en orce the com%romise agreement b& a inal and executor 4udgment b& the courts. )o iling a civil case in court. 6!7 I the government would not wish to en orce the %rovisions o the com%romise agreement which usuall& is less than the original demand, the government can sim%l& rescind the com%romise agreement and go or the original demand o taxes and %enalties. F# G$%&'() *%$ A+,-./.'-

*hat are the grounds o abatement+ ;ive me an exam%le o each. 6*ithout reading7 o 1. Tax or an& %ortion a%%ears to be un4ustl& or excessivel& assessed. *hen it a%%ears that there is un4ust or excessive assessment o taxes, it ma& resort to abatement o taxes or %enalties such as exam%le when: venue o iling. Remember &ou are to ile in the venue or in the revenue district o ice that has 4urisdiction over &our %rinci%la %lace o business or over &our own %erson i &ou are an individual tax%a&er. I &ou ile at the wrong revenue district o ice it is as i &ou have not iled in the %ro%er venue. That means to sa& in the correct venue where &ou should ile, &ou have not %aid an& amount, &ou are liable or the ull 1@@A %lus !/A surcharge and interests until the time that &ou are able to %a& in the correct venue. But i &ou are able to %rove that, this is one instance wherein &ou can ask or abatement o the %a&ment o the tax all over %a&ing 1@@A o the tax all-over to the correct venuw b& sim%l& re:uesting or the trans er o %a&ment to the correct venue but &ou cannot avoid the surcharge and interests or %a&ing in the wrong venue.

1nother instance when the %a&ment is made in mistake due to a written o icial advice rom the BIR. )o due to a mistake which is not within &our control, it was due to the advice o the BIR, &ou can ask or the abatement o an& %enalties or surcharges.

!. 1dministration and collection costs involved do not 4usti & the collection o the amount due. The administration and collections costs, to %ursue the collection o taxes is not 4usti ied with the amount that can be collected. That,s sim%le. )o i the amount due rom the tax%a&er is -h% 1,@@@ in taxes. The government would not %ush through with iling a case, or exam%le, etc., or other administrative costs. 9or exam%le its -h% 1@@ in tax liabilit&. )" the best recourse %robabl& or the government to avoid urther administrative and collection costs is sim%l& to abate the %a&ment o such tax.

3. "ther meritorious circumstances. )o there are other meritorious grounds, this is not reall& all inclusive. <nlike com%romise, &ou onl& have ! s%eci ic grounds or com%romise: 6a7 9inancial inca%acit& and 6b7when there is reasonable doubt as to the validit& o the claim or assessment made against him. But or abatement, since it can go or abatement o either the tax, %enalt& or ever&thing, there are other analogous circumstances or meritorious cases which are even granted b& the )#. )a& or exam%le, the #T1 has alread& granted or the %a&ment o the surcharges, %enalties and interest, the )# can overturn the %a&ment and abate the taxes in the inal stage i or exam%le it is ound it that the mistake or the de icienc& in the %a&ment o taxes was due to the di icult inter%retation o an existing tax law. )o there are other meritorious grounds.

G# D0)-0'1-0%') +.-2..' 1%/3$%/0). ,'( ,+,-./.'-

-age 53 o 186

)o can we summariDe the di erences or similarities between abatement and com%romise+ o 1s to grounds: o o )ee 3 grounds or abatement and the all inclusive ! grounds or com%romise.

9or com%romise, it is Reduction o the basic assessed taxes. *hile or abatement, it is the total condonation, cancellation or abatement o taxes, %enalties, liabilities or surcharges. 8ow about the authorit& who can com%romise or abate taxes+ ;enerall& the commissioner has the authorit& to com%romise or abate taxes. 8owever, the %ower to com%romise can be delegated b& the commissioner i the amount does not exceed -h% /@@,@@@.

XXII# C0405 A1-0%' A# F.,-&$.) 1. actions or %roceedings instituted in behal o the ;overnment under the authorit& o the Tax #ode or other law en orced b& the BIR shall be brought in the name o the ;overment o the -hili%%ines and shall be conducted b& the legal o icers o the BIR. !. B<T no civil actoin or the recover& o taxes or the en orcement o an& ine, %enalt& or or eiture shall be iled without the a%%roval o the #IR. 3. the iling o a civil case is tantamount to a denial o the re:uest or reinvestigation 6remed& is to ile with the #T17. 1nother remed& o the government in en orcing the %rovisions o the tax code and other tax laws is to ile a civil action. o <nder whose name will the civil action be iled and what are the re:uisites to have a validl& instituted civil action+ *hat is that im%ortant re:uisite be ore a civil case can be iled in behal o the government+ *henever a 4udicial case or a case has to be iled, in this case, a civil case has to be iled be ore the courts, it must be: 6a7 Brought in the name o the government 12' 6b7 must be conducted b& the legal o icers o the bureau o internal revenue 6c7 and no case shall be iled without the a%%roval o the commissioner But as we said, the %ower is non-delegable meaning it is delegable, it can be delegated to his subordinates, the least in rank will be the regional director, not lower than the regional director. *hat is the %ur%ose o iling a civil action usuall& b& the government+ o <susall& or %ur%oses o collecting internal revenue taxes.

Be ore what courts can these civil actions tax collection cases be iled+ o 'e%ends on the amount o the claim: 617 I it is more than -h% 1?, #T1. 1re &ou sa&ing that the #T1 ma& have an original exclusive 4urisdiction over a tax collection case+ =es. )o i &ou are sa&ing that i it is more than -h%1? o tax collection, it should be iled be ore the #T1+ 1nd i it is less than -h%1?, be ore the regular courts, ?T#, RT#, ?T## de%ending on who has 4urisdiction as studied in civil %rocedure+ =es. *hat about in the amount o -h%1? exactl& where do &ou ile the case+ #T1.

6!7 I it is -h%1? below, regular courts.

$et us assume that the tax%a&er has been assessed o -h%1? basic taxes, -h% !@@,@@@, which is !/A surcharge, a total o -h%1?. 1nd to add to that another -h%!@@,@@@ in interest, where should the government ile the civil case at a total o -h%1.!?+ 9or %ur%oses o determining what court has 4urisdiction over a civil tax collection case, &ou don,t need to include in the 4urisdictional amount the surcharges, interests and other com%romise %enalties. It is onl& the basic assessed taxes.

#an &ou give us instances when the government can ile a civil tax collection case+ o 6a7 2o. 1, irst instance, ailure o the tax%a&er to %rotest the 912 within 3@ 0da& %eriod.

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9ailure to ile a %rotest a inal assessment notice, within the 3@ da& %eriod a ter recei%t, will give the government an o%tion to ile a civil action to collect the assessed taxes.

6b7 2o. !, ailure to ile an a%%eal be ore the #T1 within the 3@-da& %eriod a ter the denial o &our %rotest. 8ere, do we have a inal assessment notice+ =es. *as it %rotested+ =es. *as a decision rendered+ =es. 1nd a ter the decision o denial, the government can %roceed to ile a civil case i the tax%a&er did not a%%eal be ore the #T1 within 3@ da&s. )o in the irst ! instances, actuall& resorted to a inal and executor demandable tax. 2ow, let us sa& that the government did not decide on &our %rotest, can it %roceed to ile a civil case or tax collection without rendering an& decision+ There was a 912 within 3@ da&s, a %rotest was made but the government did not decide on &our %rotest, can a civil case or tax collection on the assessed taxes as a%%earing in the 912, be instituted+ =es, based on the 3rd instance. "therwise stated, is the government irst re:uired to render a decision be ore %roceeding to ile a civil case or tax collection+ 2o. Based on 3rd instance.

6c7 *hen the BIR does not decide within 1B@ da&s and &ou ail to ile an a%%eal within 3@ da&s rom the ex%iration o the 1B@ da& %eriod. 1lthough here it is not &et inal or &ou still have the o%tion to wait or the inal decision o the BIR. I there is no decision within 1B@ da&s, actuall& it is the government who has not acted on the case, the tax%a&er has the o%tion to wait or the decision o the commissioner and not rel& on the 1B@ da& inaction %eriod. )o as to that %oint, i the tax%a&er has not taken the o%tion to a%%eal within the 1B@-da& inaction %eriod, the tax%a&er can still wait or the decision to come out and the 912 is not &et inal and executor& and demandable. )o during the %eriod o decision, the government can ile a civil action or tax collection and not decide irst on den&ing the %rotest be ore it can ile a civil action.

Take note &ou will not concern the government with the 1B@-da& %eriod. In act, under the law, the government is not mandated to decide within 1B@-da&s. It is not in the tax code. I ever there is regulation or a circular sa&ing that the commissioner is re:uired to render a decision as soon as %ossible, it is not under the law. 2ow, i a %rotest is iled toda& against the 912, can the commissioner tomorrow ile a civil case to collect the taxes detailed in 912+ =es. *h&+ *h& is the government allowed to ile a civil case even i the issue is %ending on the administrative level+ There is no re:uirement under the law that the government is re:uired to decide on a %ending %rotest %rior to iling a civil action under 4uris%rudence, %ursuant to the li e blood doctrine, or the collection o taxes can be made b& the government. 1nd the e ect, i a civil case is iled b& the government, directl& in relation to the %ending %rotest and the 912 which is still %ending, it is tantamount, it has the e ect o a denial o &our %rotest. It is as i it is a decision o the denial o &our %rotest. *hat is &our remed&+ 1s a tax%a&er+ 1%%eal to the #T1 within 3@ da&s rom the recei%t o notice that a civil case has been iled.

The civil case was iled with the RT# &ou did not ile an a%%eal be ore the #T1 instead &ou iled an in4unction case be ore the same RT# that has received the civil case or the tax collection to en4oin the collection o taxes rom &ou on the ground that there is %ending %rotest that has not been decided, is it allowed+ #an the RT# en4oin the collection o taxes in that civil case+ 2o. "nl& the #T1 has the %ower to issue in4unctions. 1nother scenario: )till the civil case was iled with the RT#, &ou iled a case or in4unction be ore the #T1, can the #T1 en4oin the tax collection+ 2o because this is not in the exercise o it,s a%%ellate 4urisdiction. )o when will it be allowed+ In the exercise o #T1,s a%%ellate 4urisdiction. Taxes can be en4oined onl& b& the #T1 when it is exercising its a%%ellate 4urisdiction. 1t irst instance, original 4urisdiction, it cannot en4oin.

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)o is it %ossible or &ou to sto% the collection o the case in the meantime+ =es. Remember the #T1 would onl& ac:uire 4urisdiction, i what is a%%ealed is a decision o the commissioner as a general rule. )o &ou a%%eal the denial o &our %rotest within 3@ da&s, now it comes within the 4urisdiction o the #T1, a%%ellate 4urisdiction. 2ot a%%eal lang. O: In civil action, what t&%e o action iled b& the government be ore the RT#+ Tax #ollection #ase. Tax collection can be made at an& stage, %rior assessment, during assessment, a ter assessment, a ter %rotest, etc. In that exam%le given above, in the instances given, a ter assessment and a ter %rotest, it became inal and a%%ealable. The natural tendenc& or the government is to ile a civil tax collection case, i it cannot readil& receive %a&ment rom the tax%a&er. o )o &our :uestion is what t&%e o civil case was iled+ Tax collection. #ollection o the taxes that was detailed in the 912. )o instead o deciding on the %rotest against the 912 o the BIR, the government %roceeded on to ile a tax collection case which would constitute actuall& a denial, although not a written decision, o the denial o the %rotest. 1nd a denial o the %rotest would mean that the tax%a&er has the remed& to ile an a%%eal be ore the #T1. 1nd when it,s with the #T1, it,s now within the 4urisdiction o the #T1, the decision o denial, through iling a civil case, it,s with the #T1 na that %robabl& the case will be consolidated.

XXIII# C$0/0',5 A1-0%' A# F.,-&$.)6 1. 1ctions or %roceedings instsituted in behal o the ;overnment under the authorit& o the Tax #ode or other wa& en orced b& the BIR shall be brought in the name o the ;overnment o the -hili%%ines and shall be conducted b& the legal o icers o the BIR. !. B<T no criminal action or hte recover& o taxes or the en orcement o an& ine, %enalt&, or or eiture shall be iled without the a%%roval o the #IR. 3. The ac:uittal o the tax%a&er in a criminal action does not necessaril& result in the exoneration o the said tax%a&er rom his civil liabilit& to %a& taxes. .. )ubsidiar& im%risonment- in civil cases o non-%a&ment o the ine due to tax%a&er,s insolvenc& B<T 2"T or the ailure to %a& the tax due. 8ow would the government bring a criminal action be ore the courts+ o o o 617 Brought in the name o the ;overnment o the -hili%%ines and 6!7 )hall be conducted b& the legal o icers o the BIR. 637 *ith the a%%roval o the #IR. #an the de%artment o 4ustice on it,s own institute a criminal action or tax evasion+ 2o. It should be with the 1--R"K1$ 6not mere recommendation7 o the #IR.

*hat,s the %ur%ose o iling a criminal action+ I &ou remember tax laws are not %enal in nature but wh& do we ile criminal actions+ o o 2o %rior assement as well because the %rimar& %ur%ose o the criminal action is to en orce the statutor& %enalties as ound under the tax code. Remember the tax laws are civil in nature, not %enal in nature but nonetheless &ou will ind criminal violations in order to %enaliDe tax%a&ers with non-com%liance with the tax laws. But ever& criminal violation or ever& criminal case iled without the other %ur%ose o collecting the taxes due.

*here do &ou ile the criminal cases+ *here should the government ile criminal cases+ o o 6a7 In cases o criminal o enses o the Tax #ode or other tax laws where the %rinci%al amount o taxes and ees, exclusive o other charges and %enalties is -h% 1,@@@,@@@ and above, the government ma& directl& ile a criminal case be ore the #T1. 6b7 I the %rinci%al amount is less than -h%1?, &ou ile it with the regular courts. o 1nd or those cases in determining 4urisdiction, &ou onl& consider the %rinci%al amount o tax without regard to %enalties, interest and surcharges.

6c7 In cases where the tax liabilit& cannot be measured or there is no %ecuniar& estimation o the liabilit&, what court will have 4urisdiction+ Regional Trial #ourts.

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In cases o amounts which cannot be estimated, with %ecuniar& estimation, it cannot be iled be ore the #T1 regardless o the raud committed b& the tax%a&er.

1ssuming the tax%a&er is ound guilt& o the criminal charge, and he settles the civil as%ect o the case b& %a&ing the taxes, can he move or the exoneration o his criminal liabilit& a ter %a&ing tax liabilit& or the civil as%ect o the case+ 1ssuming he was convicted o the criminal charge, he %aid the civil liabilit&, can he be ac:uitted+ o o 2o. The criminal charge is se%arate and distinct rom the civil liabilit&, the civil liabilit& long existed as %rovided in the tax code, %rior to the commission o the tax evasion or the raudulent act. *hile the conviction under the criminal case is to cover or the criminal charges or violations o the tax code. 1 criminal action is instituted %rimaril& to %enaliDe the tax%a&er or violations o the tax code 12', together with it, or the collection o taxes that has been im%osed under the same tax law. But take note, the criminal action cannot be instituted solel& as a mode o collecting taxes, it cannot. The collection o taxes is secondar&. 1s held in one o the cases, the )# said that the ac:uittal in a criminal case could not o%erate to discharge the tax%a&er rom the dut& to %a& the tax. )ince the dut& to %a& the tax has been im%osed or is im%osed b& the tax law %rior to or inde%endent o an& attem%ts o the tax%a&er to evade the %a&ment o such taxes.

But in case the tax%a&er is ound convicted o the criminal case, and is not solvent to %a& the tax liabilit&, what is the o%tion o the tax%a&er+ Insolvenc& means &our liabilities exceed &our assets. *hile &ou have no %a& o %a&ing &our taxes, can &ou o er or subsidiar& im%risonment+ o =ou can o er subsidiar& im%risonment or non-%a&ment o the ine in case o insolvenc& but non-%a&ment o the tax itsel , &ou cannot exchange it or subsidiar& im%risonment. *h&+ *hat is the e:uivalent in %esos+ I &ou have -h% B? in taxes+ 1? da&s....

B# C0405 L0,+050-7 0' C$0/0',5 C,).) *hat ha%%ens i the criminal case is iled against a cor%oration, who shall be ound eventuall& as criminall& liable because the cor%oration is not a natural %erson+ I cor%oration, %artnershi%, or an& other entit& that,s not a natural %erson, liabilit& shall be im%osed on the %ersons res%onsible. o ?eans to sa&, in a cor%oration, i has been decided on, %a&er o taxes has been decided on b& the board o directors in a board resolution or as agreed u%on, it ma& be be board o directors, the %resident, the general manager, or the %ersons who are res%onsible

XXIV# D0)-$,0'$et,s move on to the next remed&, 'istraint. This is %art o %rocedure diba+ *hat is distraint+ o It is the seiDure b& the government o %ersonal %ro%ert&, tangible or intangible, to en orce the %a&ment o taxes, to be ollowed b& its %ublic sale, i the taxes are not voluntaril& %aid.

8ow is distraint di erent rom lien+ o o In lien, it attaches to the %ro%ert& as a right o the government. But in distraint, there is an actual seiDure b& the government o %ersonal %ro%erties belonging to the tax%a&er. ?ust there alwa&s be an actual taking o %ersonal %ro%erties b& the government to constitute distraint+ 2o. There are ! kinds o distraint: 617 1ctual 'istraint In actual distraint, there is alwa&s %h&sical taking o the %ro%ert&+ 2". Because i it concerns intangible %ro%erties, since the& have no %h&sical orm, there can be no %h&sical taking. 6!7 #onstructive 'istraint There is no %h&sical taking or %h&sical %ossession o the government o the %ro%ert&.

2onetheless, there are ! kinds o distraint under the tax code which is actual distraint and constructive distraint.

*hat are the eatures o distraint as a remed& o the government+ *e now that it is a mode o collection but the mode o collection is not in cash but is in a %ersonal %ro%ert&.

1. summar& administrative en orcement remed& en orced on %ersonal %ro%ert&

-age 57 o 186

2o iling o case.

!. 1mount o tax involved must exceed -h% 1@@ o I the amount involved is -h%1@@, will the government serve a warrant o distraint over what kind o %ro%ert& o the tax %a&er to answer or the -h%1@@ tax liabilit&+ )o the collection and administration cost would not 4usti & the amount that would be collected.

3. no or eiture is allowed to the government o It is allowed in lev&. *e will discuss later. The government cannot or eit the %ro%ert&.

.. no right o redem%tion is allowed to the tax%a&er o *hen &ou sa& no right o redem%tion, redem%tion is allowed in other cases. Real %ro%erties can be redeemed b& the tax%a&ers.

/. the remed& ma& be re%eated i necessar& until the ull amount o tax delin:uenc& due and all ex%enses isJare collected. o o *hat is the re:uisite that is necessar& be ore the government can %roceed or the summar& o the remed& o distraint+ Be ore the warrant o distraint can be made, what must be established b& the government+ Tax delin:uenc&. 'e icienc& or delin:uenc&+ 'elin:uenc& ha%%ens when the tax%a&er ails to %a& the taxes on or a ter demand. 1 ter demand has been made b& the government and %a&ment has been made, &ou call the tax%a&er a delin:uent tax%a&er. In cor%oration code, there is a delin:uent stockholder.

I the tax%a&er is ound to be delin:uent, the government can actuall& go or the summar& remed& o distraint, %h&sical %ossession or %h&sical taking o the %ro%ert& in order to actuall& answer or the taxes, %enalties, interests due to the government. The re:uisite or distraint to a%%l& is that: 617 there is delin:uenc&. 6!7 1nd delin:uenc& can onl& ha%%en i there is demand or %a&ment and 637 there is a ailure to %a& the tax on time. 6.7 But the distraint ?<)T be made within / &ears. 1 remed& o distraint is a mode o collection, and collection can onl& be made within / &ears rom the time the assessment is made or the time that demand was made b& the government.

I &ou were the BIR, how would &ou go about a valid en orcement o the remed& o distraint+ o o )a& or exam%le, i the %ro%ert& sub4ect o distraint is a bank account, what will &ou search+ Be ore whom+ *hat is re:uired under the law+ )ince there are man& kinds o %ersonal %ro%erties that can be sub4ect o distraint, the tax code was actuall& di erentiating how the service shall be made o the warrants o distraint. 1nd i the sub4ect o distraint is a bank account, is it reall& an exce%tion to the bank secrec& law. "nce the tax authorities will serve the warrant o garnishment o the bank account, both to the tax%a&er and the bank through its %resident, ;?, etc., it is encumbent u%on the bank to turn over the %roceeds but onl& to the extent o the tax liabilit&. I the tax liabilit& is more than the bank account, then ever&thing has to be turned over. )o it is reall& an exce%tion to the bank secrec& law on in:uiring on bank de%osits because it is alread& sub4ect to RRRRRRRRRRR. 1nd i the distraint is im%osed on an indebtedness, is it %ossible+ I the tax%a&er has no existing %ersonal %ro%ert& exce%t those that are exem%t under the law, sa& clothing, carabao, instruments, law books, so there is no existing %ersonal %ro%ert& but the tax%a&er has a collectible rom someone, can &ou sub4ect it to distraint+ #an &ou consider that as %ersonal %ro%ert&+ 6R&an answers I think so. Ingon mam naa si&a teacher na di ganahan ug answer I think so..:'7 )o can we serve a warrant o distraint over an existing indebtedness or collectible+ =es. )o to whom shall &ou serve the warrant o distraint+

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I one has %ossession or control over the indebtedness or %a&able to the tax%a&er, collectible b& the tax%a&er, %a&able b& the other %art&, and u%on recei%t o the warrant, it has to turnover or %a& the amount e:uivalent to the tax liabilit& i it,s su icient to the commissioner. 1nd i the %ro%erties involved are stocks, to whom do &ou serve the warrant o distraint+ )a& or exam%le the tax%a&er is %ro%ert&-less, again he does not have an& other %ro%ert&, exce%t ownershi% in a cor%oration, to whom do &ou serve the warrant+ To the tax%a&er and the res%ective o icers o the issuing cor%oration.

9or other %ersonal %ro%erties, 4ust serve the warrant o distraint, make sure the recei%t is received and signed b& the tax%a&er and it will be %h&sicall& %ossessed b& the government. 61:!B:@@7

2ow a ter serving the warrant o distraint and a ter taking %h&sical %ossession o the %ro%ert&, what ha%%ens next+ o 2otice. Be ore the sale, there should be notice. 8ow+ -ublication or %osting+ *here do &ou %ut the notice+ 1 noti ication to be exhibited in not less than ! %ublic %laces in the munici%alit& or cit& where the distraint is made, s%eci &ing the time and %lace o sale and the articles distrained. The time shall not be less than !@ da&s a ter notice to the owner or %ossessor o the %ro%ert& as above s%eci ied and the %ublication or %osting o such notice. "ne %lace or the %osting o such notice shall be at the " ice o the ?a&or o the cit& or munici%alit& in which the %ro%ert& is distrained. 1 ter %osting is made in ! %ublic %laces, two cons%icuous and %ublic %laces, outside the cit& halls o ice or cit& hall, %ublic market, etc., what will ha%%en next is the eventual sale o the %ro%ert& to answer or the tax liabilities and %enalties.

It,s good i somebod& actuall& bu&s the %ro%ert& su icient in amount to answer or the tax liabilit& and %enalties. *hat ha%%ens i there is no bigger or there is a bid but the amount is not su icient to cover the tax liabilit& and %enalties. "r even i there is a bid, the amount is ver& much less than the actual market value o the %ro%ert&, what remed& is le t to the government+ o o The commissioner or his de%ut& ma& %urchase the %ro%ert& in behal o the 2ational ;overnment or the amount o taxes, %enalties and cost due thereon. #an the %ro%ert& be or eited in avor o the government in case there is no bidder+ 1ssuming there is no real %ro%ert&, what will ha%%en to the %ersonal %ro%ert& that is sub4ect o the distraint+ The government will have to %urchase it. It cannot be automaticall& or eited in avor o the government. 1nd whatever the government,s %urchase %rice will be used to answer the tax liabilit& o the tax %a&er.

#an the government issue a warrant o distraint during the %endenc& o a %rotest to a inal assessment notice+ o o o =es. (ust like a civil case that can be ile b& the government, during the %endenc& o a %rotest without a decision being issued, the government can issue warrants o distraints or warrants o garnishments to answer or the tax liabilit&. 2ow, i the BIR instead o den&ing the %rotest issues a (arrant of distraint, and des%ite the re%eated demands o the tax%a&er to act on the %rotest that is %ending, it means that there is alread& a denial o his %rotest and the tax%a&er need not wait or the ex%iration o the 1B@-da& %eriod. *ithin 3@ da&s rom receiving the warrant, he can ile an a%%eal be ore the #T1. It,s one o the acts which is deemed as a denial o &our %rotest.

2# C%')-$&1-04. D0)-$,0'T or 9. 1 constructive distraint is a mode o collection. o o 9alse. It is an additional remed& o the government in the meantime that the government cannot move or actual distraint. 'iba in actual distraint, there must be actual delin:uenc& o the tax%a&er. I the tax%a&er is not as &et delin:uent, &ou cannot move or actual distraint. But i in the instances wherein constructive distraint is allowed, like when the tax%a&er is retiring rom business, des%ite a huge assessment which is %ending, I mean in the initial stages o %re-assessment no demand as &et. I that is the case, actual distraint cannot ha%%en but &ou can ile a civil case or tax collection, but %h&sical distraint is not allowed, so as an additional remed&, in order to answer the lack o basis to go or actual distraint, constructive distraint ma& in the meantime be made as a %revention because the -<R-")3 o constructive distraint are: 1. #onstructive distraint is used as a means to %rohibit the tax%a&er in the meantime to dis%ose o the %ro%ert& and !. -reserve the %ro%ert& or the government because it cannot be %h&sicall& taken b& the government.

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=ou are %rohibited rom dis%osing it and at the same time &ou are re:uired to %reserve it. Because i it is onl& to %rohibit &ou rom dis%osing, &ou can 4ust do an&thing with it and when the government takes charge o it then actual distraint is useless na. )o constructive distraint is still useless.

In constructive distraint it was mentioned earlier, there is no %h&sical taking o the %ro%ert&. 'oes constructive distraint re:uire delin:uenc& as a %re-re:uisite+ o o 2o. The re:uisite o delin:uenc& is not necessar& in constructive distraint. 1nd there are instances, there are instances when constructive distraint ma& be made.

*hat are the instances where a warrant o constructive distraint ma& be made: 6)ection !@L, 2IR#7 1. Tax%a&er is delin:uent. B. Tax%a&er is retiring rom business sub4ect to tax. #. Tax%a&er intends to leave the -hili%%ines. '. Tax%a&er removes his %ro%ert&. 3. Tax%a&er hids or conceals his %ro%ert&. 9. Tax%a&er %er orms an& act tending to obstruct the %roceedings or collecting the tax due or which ma& be due rom him. o 6)ee details below7.

=ou ind these grounds or instances amiliar+ *hat is that act o the government wherein these instances are im%ortant+ (eo%ard& assessment remember class when the government can issue an assessment without the bene it o that %artial or ull audit or investigation considering the tax%a&er or because the tax%a&er ma& 4eo%ardiDe the collection o taxes or ailure to com%l& with the re:uirements o the government. )o the 4eo%ard& assessment in the meantime will be used to answer or the non-issuance o the inal assessment notice within the %rescri%tive %eriod o time. In the same case, these are the same instances when the government can move or the issuance o a constructive distraint because it cannot as &et issue the warrant o actual distraint. These instances will actuall& give us an idea that the tax%a&er ma& be tr&ing to avoid the %a&ment o taxes: 617 )a&, the tax%a&er is retiring rom business wherein there is a %ending amount o assessment that is huge that is %ending. 8uge meaning more than the ca%ital o the tax%a&er. 6!7 *hen a tax%a&er under tax investigation, has a record o leaving the -hili%%ines atleast twice a &ear unless it is 4usti ied as a business travel. 637 *here the tax%a&er uses aliases in bank accounts. This is one o the instances wherein constructive distraint can be issued. *hen the tax%a&er kee%s bank de%osits under the name o other %ersons and the same is not under an& law ul, iduciar& or trust ca%acit&. 6.7 *hen the tax%a&er has a big amount o undeclared income.

8ow about this instance+ *hen there is an in ormant, in orming the tax authorities that a certain tax%a&er has undeclared income o more than 3@A o the gross sale as re lected in the iled income tax return. *ould it be ground or the government to issue a warrant constructive distraint on the basis o the in ormation given b& someone+ 'iba i there is a declared gross sales o -h%1? and here comes in ormant B telling the BIR that the actual gross sales is actuall& under declaration o /@A o the true income. "n the basis o the in ormation, can it be a ground or the issuance o a warrant o constructive distraint+ 8ow would &ou assess the credibilit& o the in ormant+ =es. The circular sa&s that des%ite %rovided b& the %erson o an underdeclaration o more than 3@A o the gross sales re lected in the income tax return that has been iled, the BIR must have enough reason to believe that the in ormation is correct and it must be su%%ortedb& substantial and credible evidence. It is not enough that there is no in ormation, it must be su%%orted b& substantial and credible evidence.

The %ersons who ma& conduct constructive distraint usuall& is the commissioner but it is not one o those non-delegable %owers so it must have to be delegated otherwise the commissioner will have to travel nationwide 4ust to serve warrants o distraint. 8ow do &ou serve a warrant o constructive distraint+ o It is 4ust a mere signing o the recei%t. <nlike the actual distraint where &ou 4ust sim%l& serve a warrant o distraint.

-age 6! o 186

XXV# L.47 'e inition o )ummar& administrative remed& o seiDure on real %ro%ert& to en orce the %a&ment o taxes.

9eatures o o o 1. )ummar& administrative en orcement remed& en orced on real %ro%ert& !. 1mount o tax involved must exceed -h% 1@@. 3. 9or eiture is allowed to the government. .. Right o redem%tion is allowed to the tax%a&er. /. ?a& be made be ore, simultaneousl& or a ter distraint. L. The remed& ma& be re%eated i necessar& until the ull amount o tax delin:uenc& due and all ex%enses isJare collected.

The basic di erence would have to be automatic or eiture in avor o the government in the absence o a bigger or the bid amount is not su icient to cover the tax liabilit& o the delin:uent tax%a&er. 1nd redem%tion is allowed giving the tax%a&er 1 &ear rom the date o the con irmation o sale as %rovided in the case o #IR vs. <nited -lanters Bank. CIR 4)# U'0-.( P5,'-.$) B,'8 3or purposes of reckoning the one'year redemption period in the case of individual mortgagors, or the three'month redemption period for .uridical personsDmortgagors, the same shall be reckoned from the date of the confirmation of the auction sale (hich is the date (hen the certificate of sale is issued.

8ow do &ou en orce or e ect a lev&+ o o 1. IR" shall %re%are a dul& authenticated certi icate showing the name o the tax%a&er and the amount o the tax and %enalt& due rom him. !. $ev& shall be e ected b& writing u%on the said certi icate a descri%tion o the %ro%ert& u%on which lev& is made. 1. 1t the same time, written notice o lev& shall be mailed to or served u%on: i. The Register o 'eeds o the %rovince or cit& where the %ro%ert& is located. Ii. The delin:uent tax%a&er, or i he is absent, to his agentJmanager, or to the occu%ant o the %ro%ret& in :uestion. To whom is notice necessar&+ 2otice o lev&+ Is that a must+ It is necessar& that &ou to serve the warrant o lev& to the tax%a&er and the register o deeds. o o 3. )ervice o the warrant o lev&. .. 1dvertisement o )ale 8ow soon should &ou advertise the sale a ter the service o the warrant o lev&+ *ithin !@ da&s rom serving the warrant o lev& &ou have to advertise the sale.

1nd the advertisement shall run or how man& da&s+ 1tleast 3@ da&s.

8ow do &ou advertise the sale+ 1. -osting must run or 3@ da&s i. in %ublic and cons%icuous %laces. Ii. 1t the main entrance o the munici%al or cit& hall where the %ro%ert& is located B. -ublished or 3 weeks in a news%a%er o general circulation in the munici%alit& or cit& where the %ro%ert& is located.

.. 1 ter advertisement, a %ublic auction sale shall be made. There is no bidder o the %ro%ert& or i the highest bid is or an amount insu icient to cover or the tax liabilit&, it is or eited in avor o the government.

-age 61 o 186

But the government can actuall& decide to sell it all over or the second %ublic auction sale and i it is eventuall& sold, an& excess can be returned@KA, i it is sold. (ust like in the lev& that &ou have studied, during the time that redem%tion is not as &et made, %h&sical %ossession would have to be with the tax%a&er. The& will en4o& all the rights as an owner o the %ro%ert& with certain exce%tions o course.

$ev&, class, can be made be ore, during, or a ter the institution o the warrants o distraint. o But how will the government en orce these two kinds o remedies+ )hould lev& me made irst or distraint+ 'istraint. *h& distraint+ -reservation o the real %ro%ert&. -ersonal %ro%ert& must be exhausted irst.

XXVI# F%$*.0-&$. This remed& is ver& restricted. Because or eitures it cannot be used to %a& o the tax liabilities. I or eitures are made, it doesn,t end there. 3ven i the or eited %ro%ert& is more than the value o the tax liabilit&, i ever there is a tax liabilit&, no excess can be given. *hat is or eiture+ *hat are the %ro%erties that ma& be sub4ect o or eiture+ o o o 1. Real -ro%ert& B. -ersonal -ro%ert&

1. These are articles or %ro%erties or an& %roduction materials used in the unlicensed %roduction o exciseable articles. !. 1nother instance is when exciseable articles have alread& been %aid o excise taxes and still retained in the %roduction or warehouse area, it is sub4ect to or eiture. 3. 1nd those which have not %assed, or customs, the %ro%er %rocedure be ore claiming the %ro%ert& or goods im%orted.

It is not onl& the Bureau o #ustoms who can or eit %ro%ert&. 3ven the bureau o internal revenue can do that. 8ow to en orce or eiture i is a real %ro%ert& and or eiture o a %ersonal %ro%ert&+ 8ow will the tax authorities go about it+ o Take note, i is distraint, it is 4ust the mere service o warrant o distraint, %h&sical taking. *hat ha%%ens in or eiture+ 8ow to en orce the remed& o or eiture is not like lev& or distraint, i &ou would like to or eit or condemnation %ur%oses, 1. I it,s a real %ro%ert&, a 4udgment o condemnation either in a civil or criminal %roceeding and subse:uent sale o the %ro%ert&. 9or real %ro%ert&, don,t sa& destruction, usuall& &ou sell it. B. I it,s a %ersonal %ro%ert&, it is an actual seiDure o the %ro%ert& and subse:uent sale or destruction de%ending on whether or not the %ersonal %ro%ert& is a %rohibited article or not. 9or %rohibited li:uors,etc., seiDure and destruction.

TAX F.+# 89 2!11 T&.)(,7 XXVI# F%$*.0-&$. :S.1# 224;226< *e were last discussing on or eiture and how to en orce or eiture: o I it,s R31$ -R"-3RT=, it,s b& a 4udgment o condemnation and eventual sale. 2o need to destro& the real %ro%ert& because o its value. 1nd usuall& or sale, real %ro%erties are not reall& illegal. o =ou cannot destro& %arcels o land. I it,s a building, because o its value, &ou need not destro& it.

But i the or eited %ro%ert& or seiDed %ro%ert& is a %ersonal %ro%ert&, it would have to de%end whether &ou need to destro& it or sim%l& sell it. I it,s not illegal %er se, sell it. I it,s illegal, destro& it.

XXVII# S&)3.')0%' %* B&)0'.)) O3.$,-0%') 0' V0%5,-0%' %* VAT L,2) :S.1# 115<

-age 62 o 186

*e have su icientl& discussed this in K1T. o 1 business ma& be tem%oraril& sus%ended or a %eriod o not less than / da&s or an& o the ollowing violations: 1. 9ailure to issue recei%ts and invoices !. 9ailure to ile K1T return as re:uired under the tax code 3. <nderstatement o taxable sales or recei%ts b& 3@A or more o his correct taxable sales or recei%t or the taxable :uarter .. 9ailure o an& %erson to register as re:uired under the tax code

XXVIII# A((0-0%') -% -=. T,> D&. :S.1# 247;252< *hat are the add-ons that the BIR ma& im%ose on to% o the basic de icienc& taxes+ o 1. !/A civil %enalt& or surcharge i. 9or ailure to ile an& return and to %a& the tax due thereon ii. 9iling a return with an internal revenue o icer other than those with whom the return is re:uired to be iled 3xam%le: 9iling o a return with an internal revenue o icer who has no 4urisdiction over &ou.

iii. 9ailure to %a& the de icienc& tax within the time %rescribed or its %a&ment in the notice o assessment iv. 9ailure to %a& the ull or %art o the amount o tax shown on an& return or the ull amount o tax due or which no return is re:uired to be iled, on or be ore the date %rescribed or its %a&ment *hat is the de ault+ Is it !/A surcharge or /@A surcharge+ o o o o !/A surcharge. It,s a civil %enalt& which is mandator& in nature i in case an& o the instances is availing. )o i an& o the instances is availing, it is mandator& or the government to im%ose the !/A surcharge, which is a civil %enalt&. It,s not waivable because it,s %rovided b& law. I &ou,ve read the case o Kda. de )an 1gustin, the )#, even i it decided in avor o the T-, still it continued to im%ose the mandator& surcharge because o an instance, which will be discussed later.

!. /@A civil %enalt& or surcharge i. *ill ul neglect to ile the return within the %eriod %rescribed ii. 9alse or raudulent return is will ull& made "n the ace o the return, when can &ou sa& that it,s raudulent+ *hat is an indication that it,s raudulent+ Because raud must be actual, not circumstantial, not constructive. It must be an actual raud or the heav& burden o /@A to be im%osed. o I on the ace o the return, there is: 1. )ubstantial underdeclaration o taxable sales, recei%ts or income in an amount exceeding 3@A o actual amount !. )ubstantial overdeclaration o deductions in an amount exceeding 3@A o actual amount

Is the /@A surcharge a criminal %enalt&+ o 2", des%ite the indings o raud. It,s onl& a civil %enalt&.

*hat is the %ur%ose wh& it,s higher than usual+ *h& it,s /@A+ o o The /@A is not reall& a criminal %enalt& but a civil sanction o surcharge, an administrative sanction. The reason wh& it,s higher at /@A as civil %enalt& is to reimburse the government or the heav& costs o litigation and investigation and the losses resulting rom the raud or the evasion o taxes.

-age 63 o 186

3. !@A interest 6%er annum7 *hat are the di erent t&%es o interest+ i. 'e icienc& interest o In case o an& de icienc& in the tax due, such de icienc& shall be sub4ect to the interest o !@A %a 6assessed and collected rom the date %rescribed or its %a&ment until the ull %a&ment thereo 7 3>1?-$3: I 3 &ears ago, &ou iled a return with a de icienc&. =ou underdeclared but not to the extent o de rauding the government. I it is later ound out 3 &ears a ter, the de icienc& interest would start to run rom the da& that &ou ailed to %a& in ull. )o i it,s due 3 &ears be ore, sa& or exam%le, it should have been 1./m and &ou onl& %aid 1m, &ou,re de icient /@@k 3 &ears ago. )o interest would start rom that da& until ull %a&ment.

ii. 'elin:uenc& interest o o o a. In case o ailure to %a& the amount o the tax due on an& return re:uired to be iled b. In case o ailure to %a& the amount o tax due or which no return is re:uired c. In case o ailure to %a& de icienc& tax or an& surcharge or interest thereon on the due date a%%earing in the notice and demand o the #IR

iii. Interest on extended %a&ment o o a. *hen the T- has o%ted to %a& b& installment but he ails to %a& the tax or an& installment on the %rescribed date or %a&ment b. *here the #IR has authoriDed the extension o the time or %a&ment o the tax

*hen &ou com%ute the interest, do &ou base it on the basic de icienc& tax alone or do &ou com%ute it on the basic de icienc& tax %lus the surcharge+ 3>1?-$3: =ou iled a return and %aid the tax a month later than the due date. 1utomaticall&, the government has the right to collect the surcharge o !/A. I it,s 1m tax, surcharge o !/A is !/@k. 'uring the 1 month that &ou belatedl& iled, or the %eriod, &ou are liable or interest %ro rata o !@A %a. *ould &ou base the !@A %a interest on the 1m basic de icienc& tax or the total o the de icienc& tax %lus surcharge or late %a&ment and late iling+ I &ou,ve read the case o Kda. de )an 1gustin, &ou would know how it was com%uted. The interest is not com%uted on the surcharge. It is onl& com%uted on the basic de icienc& tax unless i we,re talking about legal interest rate, which runs rom the date o delin:uenc& or which &ou com%ute nah the interest on the total amount due 6basic tax, surcharge, the de icienc& interest7

o o

.. #om%romise %enalt& /. "ther civil %enalties and administrative ines The government can im%ose ines and %enalties. In act, i &ou go the BIR and ask or the table o %enalties, the& would reall& have table o %enalties or amount due or ines and %enalties or s%eci ic and di erent violations. 3>1?-$3): 2on-%roduction o books o accounts, &ou,re in tax ma%%ing, ailure to register on time. o 9ailure to register on time 0 'ba, i &ou incor%orate the business with the )3#, then &ou have to register it with the BIR. I &ou register &our business with the BIR more than 3@ da&s a ter having it a%%roved b& the )3#, &ou would be liable or a %enalt& o 1k. )o or ever& dela&, ailure to register invoices or ".Rs, the& would have table o %enalties or that.

I &ou ail to ile an ITR during the income tax holida&, would &ou be liable or an& %enalt& with the BIR+ =3). But 2" B1)I) or surcharge and interest because &ou,re exem%t. 8owever, or non- iling, &ou would be liable or %enalties ranging rom 1k-1@@k de%ending on the sales volume or sales recei%ts that &ou have.

XXIX# O-=.$ M,--.$) :S.1# 253;282<

-age 64 o 186

)hould the government decide to ile a criminal case or violations o the tax code, it can be against: o o o 1. The %rinci%al 0 an& %erson convicted o a crime %enaliDed b& the tax code !. 1n& %erson who will ull& aids or abets in the commission o a crime %enaliDed in the tax code 3. 1n& %erson who causes the commission o an& such o ense b& another

*ithin what %eriod is the government allowed to institute or ile a criminal case+ o #riminal cases must be instituted within / &ears rom the da& o : o i. The commission o the violation o the lawC or ii. I the same be not known at the time, rom the discover& thereo and the institution o 4udicial %roceedings or its investigation and %unishment

3>1?-$3: The government denies knowing that there was a commission o a criminal o ense b& a certain T-. )o it would actuall& allege that it has onl& recentl& discovered the crime. )o i the crime was discovered (an. !, !@11. 2o 4udicial %roceedings have been instituted. *hen would the right to institute the criminal action %rescribe+ *ould the /-&ear %rescri%tive %eriod begin to run+ 2"T =3T. The %rescri%tive %eriod would not start to run in this case because there must also be an institution o 4udicial %roceedings or the criminal o ense,s investigation and %unishment in order or the %rescri%tive %eriod to run. )o it is reall& within the control o the government. I it decides not to institute as &et the 4udicial %roceeding, the /-&ear %eriod will never start and it will never ex%ire. 'oes it make it an im%rescri%tible action 0 no %rescri%tive %eriod+ ?"R3 "R $3)). The /-&ear %rescri%tive %eriod or iling criminal cases against the T- would begin to run rom the commission o the violation but i it,s discovered later, then it would start rom the discover& o the violation and the institution o the 4udicial %roceedings or its investigation and %unishment. )o in the meantime, i no 4udicial %roceeding is instituted, the %eriod does not run. 1nd it onl& begins to run i there was %roceeding and it was dismissed later on. )o it is as i it,s im%rescri%tible because: o o 1. It ma& be alleged as a later discover& b& the internal revenue o icersC and !. It would have to de%end on the institution as well o the 4udicial %roceedings. 2o 4udicial %roceedings, no %rescri%tion o the %eriod.

*hat is an in ormer,s reward+ o o o It is a reward given to %ersons instrumental in the discover& o violations o the 2IR# and in discover& and seiDure o smuggled goods. Be ore &ou,ll be given the reward, &ou have to do a %ositive act, meaning, &ou have to become an in ormant. *hat is &our reward actuall& i &ou become an in ormant+ 1@A o the taxes, the ines, the %enalties, even surcharges, ees that have been im%osed and collected or 1m, whichever is lower. E#"$$3#T3'F 0 I the government was not able to collect, &ou will not have an& reward. )o make sure that i &ou in orm or betra& &our em%lo&er, make sure that he has read& cash to %a&, otherwise, &ou don,t get an& reward. I$$<)TR1TI"2: I it is 1m, the maximum amount that &ou can get or being an in ormer is how much+ The maximum amount is I@@k because the cash rewards shall be sub4ect to income tax at the rate o 1@A. 1re &ou limited to earning I@@k as an in ormer,s reward ever& calendar &ear or during &our entire li etime+ )o meaning, onl& once will &ou become an in ormer or onl& once ever& calendar &ear will &ou earn this income+ *hat does the law %rovide+ 8ow o ten can &ou earn in ormer,s reward+ o -3R #1)3

-age 65 o 186

3>1?-$3: =ou re%orted / di erent T-s, which resulted to / im%ositions and collections o taxes, can &ou get 1m rom each o the / T-s+ =3). 8ow about i &ou onl& have 1 em%lo&er. =ou know or sure that i the government reall& %ushes through with assessment and collection to that s%eci ic em%lo&er o &ours, it could collect millions o taxes. #an &ou get more than 1m out o that+ =3). =ou,re not limited to collect 1 in ormer,s reward or ever& T- or 1 T- or or ever& calendar &ear lang. I there are di erent cases, even or 1k T-s, &ou can collect as man& in ormer,s reward, but make sure that &ou com%l& with all the re:uisites. )o i &ou know or a act that or / di erent tax liabilities, there are millions in taxes that the government can collect, do not re%ort them all at once. Re%ort it one b& one in the ho%e that during the investigation that will be conducted b& the BIR, the& will onl& stick to a certain tax liabilit&. The& will not branch out to other tax liabilities. But i the& do, it,s alread& be&ond &our reach.

The in ormer,s reward is sub4ect to income tax. *hat t&%e o tax+ 9inal Income tax withheld. )o &ou will never get to receive the ull 1m. It,s onl& I@@k. o )hould &ou, at the end o the calendar &ear, declare the 1m as %art o &our gross income sub4ect to income tax+ 2", because the income tax on the reward is a inal withholding tax. 1 inal withholding tax is a tax with inalit&. =ou don,t need to declare the reward as %art o &our gross income. But &ou have no o%tion as well to credit it against &our tax due at the end o the &ear.

*hat are the re:uisites or &ou to receive an in ormer,s reward+ *hat must &ou be able to %rove+ *hat must &ou com%l& with+ #onditions to :uali & or the reward: 1. -erson is not an internal revenue o icial or em%lo&ee, or other %ublic o icial or em%lo&ee, or his relative within the Lth degree o consanguinit& Take note as well that it does not sa& that &ou must not be a relative o the internal revenue o icer within the district that &ou belong to. 3>1?-$3: =ou,re not reall& a relative o an& internal revenue o icer in #ebu %rovince but a relative o an internal revenue o icer in ?anila. *ould that dis:uali & &ou+ o =3). The law does not distinguish.

1ll %ublic o icials, whether the& have retired or still in service, can be an in ormant but the& are not :uali ied to receive the reward. o It means to sa& that i &ou,re a government or %ublic o icial and &ou ac:uired in ormation in the course o &our dut& or %er ormance o services in the government, &ou are automaticall& %rohibited rom receiving the reward, whether &ou,re still in service or actuall& retired.

!. Koluntaril& gives de inite and sworn in ormation: a. 2ot &et in %ossession o BIR b. $eading to discover& o rauds c. Resulting in: o o i. the recover& o revenues, surcharges and ees andJor ii. conviction o the guilt& %art&

d. 2ot re er to a case alread& %ending or %reviousl& investigated or examined b& the #IR or his agents or the )"9 or his agents

Inso ar as goods covered b& the B"# is concerned, can this be sub4ect to an in ormer,s reward+ =3). The cash reward is 1@A o the 9?K o the smuggled and con iscated goods, or 1m, whichever is lower.

-age 66 o 186

#1)3 I2 -"I2T: *ith the -3S1 in ?actan, the&,re exem%t rom im%ort taxes and vat. )o there are T-s reall& or %eo%le who use this as a convenient excuse or im%orting items, so it will be dut&- ree. Recentl&, it has been a %ractice or certain %eo%le to use the names o com%anies registered within the economic Done to im%ort items inside container vans 4ust so in order to give it a resemblance o an& connection with the manu acturing activit&. The& %ut in there the declaration that it is metal rods, etcQ. But when the B"# o%ens it, recentl&, there has been discovered man& trailer vans o im%orted rice rom Kietnam. )o de initel&, it becomes sub4ect o or eiture because there has been misdeclaration o the im%ortation. I &ou,re one o those who has lead to the discover& o that, what will &ou get+ The rice or cash+ #1)8 R3*1R'. 3ven i there,s no actual collection o cash, but since the government was able to seiDe and or eit actual %ro%ert& that can be sold, 1@A o it or 1m, whichever is lower, will be rewarded to &ou.

I$$<)TR1TI"2: I &ou led to the discover& o boxes o uka&!x that was smuggled backdoor, do &ou get an& reward rom it+ The& are actuall& declared as excesses o other countries. =3). <nder the Tari s and #ustoms #ode, entr& o an& im%ortation not going through the %orts o the B"# are considered as smuggled items, whether the& are legal %er se or illegal.

TAX Feb. 9, 2011 Wednesday COURT OF TAX APPEALS II;III# C$.,-0%' ,'( N,-&$.? T=. C%&$- %* T,> A33.,5) ,'( 0-) @&)-01.)? H.,$0'A -=. C,).) The #T1 has I 4ustices: o o 1 -residing (ustice and B 1ssociate (ustices

The& ma& decide en banc or in division: o o In division o 3 4ustices each. I ever the #T1 would convene en banc, the :uorum would be / 4ustices. 8ow would the& decide+ I it concerns sim%le decisions, not reversals, modi ications o %reviousl& decided cases, it will onl& re:uire sim%le ma4orit& o those who are %resent constituting the :uorum. )o i there are / attending, onl& 3 votes necessar& to a%%rove or issue a decision. But i all I are %resent, then, at least / would have to vote a irmativel& or denial.

But i the #T1 en banc is to decide whether to reverse the case or modi & an existing decision, the vote o a minimum o / 4ustices is necessar&. )o i there,s a :uorum o /, all / then should arrive at the same decision.

o -

But i the #T1 decides in division with 3 4ustices, :uorum is onl& !. 'ecisions still !.

The #T1 is alread& a 4udicial bod&. It,s not an administrative bod&. It,s a court o s%ecial 4urisdiction, meaning, it,s a tax court. Tax cases would have to be decided b& the #T1, no longer the #1. 1nd being elevated to the rank o collegiate court, its decision is e:uivalent to that o the decision o the #1. But are the& governed strictl& b& the technical rules o evidence+ o o 2". T9) vs #IR In the instant case, R* B$%$ took effect on *pril $=, $??C, (hile petitioner filed its etition for Revie( on Certiorari (ith the C* on *ugust $C, $??C, or four months after the effectivity of the la(. +y then, petitioner2s counsel should have been a(are of and familiar (ith the changes introduced by R* B$%$. Thus, (e find petitioner2s argument on the ne(ness of R* B$%$ a bit of a stretch. etitioner like(ise cannot validly claim that its erroneous filing of the petition (ith the C* (as .ustified by the absence of the CT* rules and regulations and the incomplete membership of the CT* 9n +anc as these did not

-age 67 o 186

defer the effectivity and implementation of R* B$%$. In fact, under #ection $ of R* B$%$, the presence of four .ustices already constitutes a "uorum for 9n +anc sessions and the affirmative votes of four members of the CT* 9n +anc are sufficient to render .udgment. Thus, to us, the petitioner2s excuse of ,inadvertence or honest oversight of counsel- deserves scant consideration. Ho(ever, (e (ill overlook this procedural lapse in the interest of substantial .ustice. *lthough a client is bound by the acts of his counsel, including the latter2s mistakes and negligence, a departure from this rule is (arranted (here such mistake or neglect (ould result in serious in.ustice to the client. rocedural rules may thus be relaxed for persuasive reasons to relieve a litigant of an in.ustice not commensurate (ith his failure to comply (ith the prescribed procedure. #uch is the situation in this case. In fine, although strict compliance (ith the rules for perfecting an appeal is indispensable for the prevention of needless delays and for the orderly and expeditious dispatch of .udicial business, strong compelling reasons such as serving the ends of .ustice and preventing a grave miscarriage may nevertheless (arrant the suspension of the rules. In the instant case, (e are constrained to disregard procedural rules because (e cannot in conscience allo( the government to collect deficiency H*T from petitioner considering that the government has no right at all to collect or to receive the same. +esides, dismissing this case on a mere technicality (ould lead to the un.ust enrichment of the government at the expense of petitioner, (hich (e cannot permit. Technicalities should never be used as a shield to perpetrate or commit an in.ustice. Tiu: The %etitioner here is not reall& liable to %a& the de icienc& vat. It would be an in4ustice toward such %etitioner i such liabilit& would arise onl& rom mere technicalities, such as ailure to ile be ore the #T1 en banc. IV# @&$0)(01-0%' %* -=. CTA 1. 3xclusive 1%%ellate (urisdiction 6to review b& a%%eal7: 1. 'ecisions o the #IR in cases involving: o a. 'is%uted assessments K'1. '3 )12 1;<)TI2 vs #IR The case has a striking resemblance to the controversy in Roman Catholic *rchbishop of Cebu vs. Collector of Internal Revenue. The petitioner in that case paid under protest the sum of F,$?<.F$ by (ay of income tax, surcharge and interest and, forth(ith, filed a petition for revie( before the Court of Tax *ppeals. Then respondent Collector @no( CommissionerA of Internal Revenue set up several defenses, one of (hich (as that petitioner had failed to first file a (ritten claim for refund, pursuant to #ection =?G of the Tax Code, of the amounts paid. Convinced that the lack of a (ritten claim for refund (as fatal to petitioner6s recourse to it, the Court of Tax *ppeals dismissed the petition for lack of .urisdiction. 4n appeal to this Court, the tax court6s ruling (as reversed0 the Court held; 51e agree (ith petitioner that #ection J of Republic *ct &o.<<$F, creating the Court of Tax *ppeals, in providing for appeals from P o 6@<A )ecisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the &ational Internal Revenue Code or other la( or part of the la( administered by the +ureau of Internal Revenue P Take note: -awnsho% businesses are no longer sub4ect to vat, but sub4ect to %ercentage tax.

allo(s an appeal from a decision of the Collector in cases involving6 disputed assessments6 as distinguished from cases involving6 refunds of internal revenue taxes, fees or other charges, x x60 that the present action involves a disputed assessment60 because from the time petitioner received assessments &os. <J'9C'??=?<'FF and <J'*C'G??<?J'FG disallo(ing certain deductions claimed by him in his income tax returns for the years <BFF and <BFG, he already protested and refused to pay the same, "uestioning the correctness and legality of such assessments0 and that the petitioner paid the disputed assessments under protest before filing his petition for revie( (ith the Court a "uo, only to forestall the sale of his properties that had been placed under distraint by the respondent Collector since )ecember C, <BFJ. To hold that the taxpayer has no( lost the right to appeal from the ruling on, the disputed assessment but must prosecute his appeal under section =?G of the Tax Code, (hich re"uires a taxpayer to file a claim for refund of the taxes paid as a condition precedent to his right to appeal, (ould in effect re"uire of him to go through a useless and needless ceremony that (ould only delay the Q disposition of the case, for the Collector @no( CommissionerA (ould certainly disallo( the claim for refund in the same (ay as he disallo(ed the protest against the assessment. The la(, should not be interpreted as to result in absurdities.5

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Tiu: There are di erent re:uisites to ile an a%%eal or dis%uted assessment and claims or re und. I &ou are iling a claim or re und, &ou should satis & the re:uirements o the claim or re und, otherwise, the #T1 will not have 4urisdiction over &ou. The %etition or review was actuall& or the reversal o the denial o his motion or reconsideration. 1nd because he has %aid under %rotest, that would be the e ect o the reversal. 'ba, i a reversal o the denial o the motion or recon is given with the #T1, naturall&, whatever was %aid under %rotest would have to be returned. )till, this is covered under the categor& o decisions o dis%uted assessments, which is within the 4urisdiction o the #T1.

#IR vs I)1B3$1 #<$T<R1$ #"R-"R1TI"2 In the normal course, the revenue district officer sends the taxpayer a notice of delin"uent taxes, indicating the period covered, the amount due including interest, and the reason for the delin"uency. If the taxpayer disagrees (ith or (ishes to protest the assessment, it sends a letter to the +IR indicating its protest, stating the reasons therefor, and submitting such proof as may be necessary. That letter is considered as the taxpayer6s re"uest for reconsideration of the delin"uent assessment. *fter the re"uest is filed and received by the +IR, the assessment becomes a disputed assessment on (hich it must render a decision. That decision is appealable to the Court of Tax *ppeals for revie(. rior to the decision on a disputed assessment, there may still be exchanges bet(een the commissioner of internal revenue @CIRA and the taxpayer. The former may ask clarificatory "uestions or re"uire the latter to submit additional evidence. Ho(ever, the CIR6s position regarding the disputed assessment must be indicated in the final decision. It is this decision that is properly appealable to the CT* for revie(. Indisputably, respondent received an assessment letter dated 3ebruary B, <BB?, stating that it had delin"uent taxes due0 and it subse"uently filed its motion for reconsideration on :arch $=, <BB?. In support of its re"uest for reconsideration, it sent to the CIR additional documents on *pril <%, <BB?. The next communication respondent received (as already the 3inal &otice +efore #ei!ure dated &ovember <?, <BBC. In the light of the above facts, the 3inal &otice +efore #ei!ure cannot but be considered as the commissioner6s decision disposing of the re"uest for reconsideration filed by respondent, (ho received no other response to its re"uest. &ot only (as the &otice the only response received0 its content and tenor supported the theory that it (as the CIR6s final act regarding the re"uest for reconsideration. The very title expressly indicated that it (as a final notice prior to sei!ure of property. The letter itself clearly stated that respondent (as being given 5this L*#T 4 4RT>&ITI5 to pay0 other(ise, its properties (ould be sub.ected to distraint and levy. Ho( then could it have been made to believe that its re"uest for reconsideration (as still pending determination, despite the actual threat of sei!ure of its propertiesK

#IR vs <2I"2 )8I--I2; There appears to be no dispute that petitioner did not rule on private respondent6s motion for reconsideration but contrary to the above ruling of this Court, left private respondent in the dark as to (hich action of the Commissioner is the decision appealable to the Court of Tax *ppeals. Had he categorically stated that he denies private respondent6s motion for reconsideration and that his action constitutes his final determination on the disputed assessment, private respondent (ithout needless difficulty (ould have been able to determine (hen his right to appeal accrues and the resulting confusion (ould have been avoided. :uch later, this Court reiterated the above'mentioned dictum in a ruling applicable on all fours to the issue in the case at bar, that the revie(able decision of the +ureau of Internal Revenue is that contained in the letter of its Commissioner, that such constitutes the final decision on the matter (hich may be appealed to the Court of Tax *ppeals and not the (arrants of distraint @*dvertising *ssociates, Inc. v. Court of *ppeals, <== #CR* JGB 7<B%C8 emphasis suppliedA. It (as like(ise stressed that the procedure enunciated is demanded by the pressing need for fair play, regularity and orderliness in administrative action. >nder the circumstances, the Commissioner of Internal Revenue, not having clearly signified his final action on the disputed assessment, legally the period to appeal has not commenced to run. Thus, it (as only (hen private respondent received the summons on the civil suit for collection of deficiency income on )ecember $%, <BJ% that the period to appeal commenced to run. The re"uest for reinvestigation and reconsideration (as in effect considered denied by petitioner (hen the latter filed a civil suit for collection of deficiency income. #o. that on /anuary <?, <BJB (hen private

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respondent filed the appeal (ith the Court of Tax *ppeals, it consumed a total of only thirteen @<=A days (ell (ithin the thirty day period to appeal pursuant to #ection << of R.*. <<$F. o o Tiu: 9iling a civil case b& the BIR alread& constitutes a denial, although not written denial o the motion or reconsideration but a denial which would allow the T- to ile a %etition or review.

b. Re unds o internal revenue taxes, ees or other charges, %enalties in relation thereto c. "ther matters arising under the tax code and other laws administered b& the BIR

!. Inaction b& the #IR in cases involving: o a. 'is%uted assessments *hen would there be an inaction b& the #IR on dis%uted assessments, which would lead to the #T1 ac:uiring 4urisdiction over the case+ o 1B@-da& inaction

b. Re unds o internal revenue taxes, ees or other charges, %enalties in relation thereto 1s to re unds, when would the inaction o the #IR lead to the #T1 ac:uiring 4urisdiction over the case+ *hen would #T1 have 4urisdiction over claims or re und and it is an inaction b& the #IR+ 'ba, i there,s a decision to the claim or re und issued b& the #IR, the T- is given 3@ da&s rom the decision to ile a %etition or review be ore #T1. But are there cases wherein no decision came out rom the #IR,s o ice on claims or re und and it,s alread& a%%ealable to the #T1+ *hen the !-&ear %eriod in iling a claim or re und is about to la%se and there,s no decision coming rom the #IR

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c. "ther matters arising under the tax code and other laws administered b& the BIR

3. 'ecisions, orders or resolutions o the RT# in local tax cases originall& decided or resolved b& them in the exercise o their original 4urisdiction o 3>1?-$3: 'is%utes on $ocal business taxes be ore the RT# can be elevated to the #T1

.. 'ecisions o the #"# in cases involving o o o o o o a. $iabilit& or customs duties, ees or other mone& charges b. )eiDure c. 'etention d. Release o %ro%ert& a ected e. 9ines, or eitures or other %enalties in relation thereto . "ther matters arising under the #ustoms $aw or other laws administered b& the B"# T1P3 2"T3: There are 3 revenue collecting agencies o the government 0 1. BIR !. B"# 3. $;<

1ll o these would all under the 4urisdiction o the #T1 being a s%ecial 4urisdiction tax court.

/. 'ecisions o the #B11 in the exercise o a%%ellate 4urisdiction over cases involving the assessment and taxation o real %ro%ert& originall& decided b& the %rovincial or cit& board o assessment a%%eals o *hat bod& is the #B11+ It is the bod& exercising 4urisdiction o real %ro%ert& tax cases elevated directl&, without going through the regular courts, to the #T1.

L. 'ecisions o the )"9 on customs cases elevated to him automaticall& or review rom decisions o the #"# which are adverse to the government o 'ba, generall&, decisions o the #"# are elevated to the #T1. But the )"9 can intervene in s%ecial cases wherein the #"# will decide in avor o the T-, adverse to the government. It,s %art o the check and balance. *h&+ I the decision o the #"# is in avor o the T-, there,s no wa& or the government to know whether it was indeed the %ro%er decision

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because a T-, that has been given a avorable decision, would never a%%eal the case be ore the #T1. )o check and balance. 1utomaticall&, whenever an adverse decision against the government is given b& the )"9, it,s within the #T1. H. 'ecisions o the )"TI in the case o non-agricultural %roduct, commodit& or article, and the )"1 in the case o agricultural %roduct, commodit& or article, involving dum%ing and countervailing duties under the T##, and sa eguard measures under R1 BB@@, where either %art& ma& a%%eal the decision to im%ose or not to im%ose said duties

B. (urisdiction over the ollowing criminal cases: T;overnment ma& directl& ile said cases with the #T1 covering amounts within its exclusive and original 4urisdictionU 1. 3xclusive original 4urisdiction over all criminal o enses arising rom: o a. Kiolations o the tax code and other laws administered b& the BIR -rovided that, where the %rinci%al amount o taxes and ees, exclusive o charges and %enalties, claimed is less than 1m or where there is no s%eci ied amount claimed 0 original 4urisdiction is with the regular courts, and the 4urisdiction o the #T1 is a%%ellate

b. Kiolations o the T## and other laws administered b& the B"# -rovided that, where the %rinci%al amount o taxes and ees, exclusive o charges and %enalties, claimed is less than 1m or where there is no s%eci ied amount claimed 0 original 4urisdiction is with the regular courts, and the 4urisdiction o the #T1 is a%%ellate 2"T3: 9or those that cannot be iled directl& as belonging to the exclusive original 4urisdiction o the #T1, the #T1 will nonetheless have the exclusive a%%ellate 4urisdiction such as in cases where the RT# decided a case originall& or the RT# decided a case in its a%%ellate 4urisdiction over an original case b& the lower courts.

!. 3xclusive a%%ellate 4urisdiction in criminal o enses: o o a. "ver a%%eals rom the 4udgments, resolutions or orders o the RT# in tax cases originall& decided b& them, in their res%ective territorial 4urisdiction b. "ver %etitions or review o the 4udgments, resolutions or orders o the RT# in the exercise o their a%%ellate 4urisdiction over tax cases originall& decided b& the ?eT#, ?T#, ?#T#, in their res%ective 4urisdiction

#. (urisdiction over the ollowing tax collection cases: T;overnment ma& directl& ile said cases with the #T1 covering amounts within its exclusive and original 4urisdictionU 1. 3xclusive original 4urisdiction in tax collection cases involving inal and executor& assessments or taxes, ees, charges and %enalties o -rovided that, where the %rinci%al amount o taxes and ees, exclusive o charges and %enalties, claimed is less than 1m 0 original 4urisdiction is with the %ro%er ?T#, ?eT# and RT#

!. 3xclusive a%%ellate 4urisdiction in tax collection cases o o a. "ver a%%eals rom the 4udgments, resolutions or orders o the RT# in tax collection cases originall& decided b& them, in their res%ective territorial 4urisdiction b. "ver %etitions or review o the 4udgments, resolutions or orders o the RT# in the exercise o their a%%ellate 4urisdiction over tax collection cases originall& decided b& the ?eT#, ?T#, in their res%ective 4urisdiction

VI# APPEAL 1n& %erson who was adversel& a ected b& the decision o an& o the ollowing o icers 0 the #IR, #"#, )"9, )"TI, )"1, #B11, RT# 0 will have the right to ile an a%%eal be ore the #T1 within 3@ da&s: o o 1. 9rom recei%t o the decision or !. 9rom the ex%iration o the %eriod ixed b& law to act thereon, in case o inaction

To whom do &ou ile the a%%eal+ #T1 in division or #T1 en banc+ o ;R or '391<$T: #T1 in division

*ould all cases within the 4urisdiction o the #T1 be iled be ore the #T1 in division+ o 2".

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#ases where a%%eal shall be made be ore the #T1 en banc: 1. 'ecisions or rulings o the #B11 in the exercise o its a%%ellate 4urisdiction !. 'ecisions or rulings o the RT# in the exercise o its a%%ellate 4urisdiction

The decisions coming rom the #B11 are a%%ealable be ore the #T1 en banc but the decisions o the RT# ma& be in division or ma& be en banc. It,s in division i it,s originall& decided b& the RT#. But i it,s decided b& the RT# in its a%%ellate 4urisdiction, it would have to go directl& en banc.

I ever there,s a :uestion on what are the areas o 4urisdiction o #T1 en banc, those are not the onl& ! a orementioned 4urisdictions o the #T1 en banc, there are other ! cases, which are: o o 1. 1 %art& adversel& a ected b& a resolution o a 'ivision o the #T1 on a motion or reconsideration or new trial, ma& ile a %etition or review with the #T1 en banc !. In administrative matters o the #T1, alwa&s, the 4ustices convene en banc

I$$<)TR1TI"2: I the decision o the #T1 in division is adverse to &ou as a T-, what,s &our remed&+ o o 9ile a motion or reconsideration or a motion or new trial within 1/ da&s rom the recei%t o the decision 1nd i the resolution is still adverse to &ou+ 9ile a %etition or review with the #T1 en banc 1nd the decisions o the #T1 en banc is a%%ealable to+ )#

LOCAL TAX I# L%1,5 G%4.$'/.'- U'0-) ,'( S1%3. %* L%1,5 T,>,-0%' :S.1# 128< The territorial 4urisdiction o the R- is divided into how man& kinds o $;<s+ o o . 1nd the& are the+ -rovinces #ities ?unici%alities Baranga&s

II# P%2.$ -% C$.,-. S%&$1.) %* R.4.'&. :S.1# 12 < Is the %ower o the $;<s to raise sources o revenue an inherent %ower+ Is the %ower to tax b& $;<s an inherent %ower+ o o 2". It,s delegated. -ursuant to the #onstitution itsel , the %ower to tax b& the $;<s is not an inherent %ower. It,s delegated but not b& #ongress. It,s enshrined in the #onstitution b& direct authorit& o the #onstitution. *ithout the #onstitution, no %ower o the $;<s to tax. But the reason wh& there,s a $;# is that the #onstitution itsel authoriDes the #ongress to enact a law which would embod& the %owers o the $;<s to raise its own sources o revenues. *hat is the reason wh& the $;<s are given such %ower+ *h& not have a centraliDed government or %ur%oses o raising revenues through taxes+ -ursuant to the $ocal 1utonom& %rovision o the #onstitution s%eci icall& to sa eguard the viabilit& and sel su icienc& o each and ever& $;< b& directl& granting them the %ower to raise its own sources o revenues.

2ot being an inherent %ower o the $;<, meaning onl& delegated b& the #onstitution, it,s sub4ect to various limitations. The limitations on its residual taxing %ower. *hat do &ou mean b& residual taxing %ower+ o It means that those taxes not otherwise im%osed b& the 2ational ;overnment through the B"# and the BIR ma& all within the %ower o the $;<. )o it cannot overla%, generall&, because o the %rinci%le o avoidance o double taxation.

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This means that $;<s can also im%ose those taxes, ees and charges which do not all within the sco%e o taxes which are enumerated under the $;#, as well as those which are levied on sub4ects or bases which are not taxed under the 2IR# or other a%%licable laws. 6)ec. 1BL7

There are various limitations o the residual taxing %ower o $;<s: o o o o 1. #onstitutional $imitations B. 9undamental -rinci%les #. -ublic 8earing Re:uirement '. -rinci%le o -re-em%tion or 3xclusionar& Rule *hat is the %rinci%le o %re-em%tion or exclusionar& rule+ It means that where national government elects to tax a %articular area, the delegated %ower o the $;<s to tax the same ield is im%liedl& limited. It re ers to an instance wherein the 2ational ;overnment elects to tax a %articular area, im%liedl& withholding rom the local government the delegated %ower to tax the same ield.

*hat do &ou mean b& a E%articular areaF+ The sub4ect matter o taxation 0 %ersons or kinds o taxes, etcQ

3>1?-$3: Income tax since income taxation is alread& covered b& the 2ational ;overnment, no $;<, as a rule, can im%ose income taxes. *hat it can im%ose is in lieu o that, which is business taxes.

3. )ec. 133 0 #ommon $imitations on the taxing %ower o $;<s

III# A&-=%$0-7 -% G$,'- T,> E>./3-0%' P$0405.A.) :S.1# 1 2< #an the $;< grant tax exem%tions or tax %rivileges or tax relie s+ o o =3), under )ec. 1I!. Is it an inherent %ower+ )ince the authorit& to tax is not inherent, the authorit& to grant tax exem%tion %rivileges is not inherent. <suall&, the $;<s do not have the %ower to grant tax exem%tion but because it was delegated the %ower to tax, within the con ines o that %ower to raise revenues or to im%ose taxes would come the %ower to grant tax exem%tion, such as i it can im%ose local business taxes, it has the %ower to exem%t local business taxes but under certain rules.

#an it grant tax incentives or relie s+ =3). Tax incentives or relie s are strictl& governed b& ordinances. I there,s no ordinance granting the incentive or relie , there can be no tax incentive or tax relie .

*ould the %ower to grant tax exem%tions, tax incentive and tax relie s o the $;< extend to exem%tion o regulator& ees+ 2". *hile $;<s ma& grant tax exem%tions, incentive or relie s, such grant shall not a%%l& to regulator& ees which are levied under the %olice %ower o the $;<s.

3>1?-$3 o entit& exem%t rom local taxation under the $;# 6)ec. 1I37: o o o o $ocal water districts #oo%eratives dul& registered under R1 LI3B 6#'17 2on-stock and non-%ro it hos%itals 2on-stock and non-%ro it educational institutions

'oes the $;# %rovide or categorical exem%tion o various entities+ o =3), under )ec. 1I3.

*hen can the $;< sa& that it has granted exem%tion o a %articular entit&+

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Through the issuance o a Tax 3xem%tion #erti icate, which shall be non-trans erable.

?a& the $;< arbitraril& give non-trans erable exem%tion certi icates to make that %articular entit& exem%t rom tax+ o o 2". *hat are the grounds or granting exem%tion+ In cases o : o 1. 2atural calamities !. #ivil disturbances 3. ;eneral ailure o cro%s .. 1dverse economic conditions such as substantial decrease in %rices o agricultural or agri-based %roducts

*hat are the re:uirements in granting tax exem%tions+ 1. Tax exem%tions ma& be granted in cases abovementioned !. The grant o exem%tions shall be through an ordinance 3. 1n& exem%tion granted to a t&%e or kind o business shall a%%l& to all businesses similarl& situated .. 1n& exem%tion granted shall take e ect onl& during the next calendar &ear or a %eriod not exceeding 1! months as ma& be %rovided in the ordinance. In case o shared revenues, the exem%tion shall onl& extend to the $;< granting such exem%tion. *h& do &ou think next calendar &ear+ o $ocal taxes accrue ever& (anuar& 1 and is %a&able ever& (anuar& !@ ever& &ear or the %ast &ear,s o%erations. )o i there,s a natural calamit& this &ear, &ou will onl& be exem%t rom %a&ing the tax which will accrue (anuar& 1 o next &ear, %a&able on (anuar& !@ o next &ear. 2o turning back because &ou,ve alread& %aid the (anuar& !@ tax due. It cannot be this &ear because at the time that the cause occurred, &ou,ve alread& inished %a&ing-o &our tax due or the entire &ear b& (anuar& !@.

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1re ;"##s exem%t rom local taxation+ 2ational ;overnment is exem%t understandabl&. 1gencies and instrumentalities are exem%t. $;<s are exem%t rom local taxes, as a rule, but it does not mean to sa& that the 2ational ;overnment cannot enact a law im%osing taxes on these $;<s. There,s no %rohibition. But can the $;<s im%ose taxes on the 2ational ;overnment+ 2". But the :uestion is on ;"##s. 1re ;"##s sub4ect to local taxation+ o =3). The&,re not exem%t.

;ranting tax relie s. *hen can the government grant tax relie s and incentives+ o o It shall be granted onl& to new investments in the localit&. *hat are the re:uirements in granting tax relie s and incentives+ 1. The tax incentive shall be granted onl& to new investments in the localit& and the ordinance shall %rescribe the terms and conditions there ore !. The grant o tax incentive shall be or a de inite %eriod not exceeding 1 calendar &ear. 3. The grant o tax incentives shall be b& ordinance %assed %rior to the 1st da& o (anuar& o an& &ear. .. 1n& tax incentive granted to a t&%e or kind o business shall a%%l& to all businesses similarl& situated.

=ou will notice that in these cases, there,s alwa&s an ordinance that is necessar& and this is a s%ecial ordinance covering or such exem%tion, reall& or incentive because these are s%ecial cases. This is not the general rule. o I a business encounters di iculties due to adverse economic conditions, natural calamities, etc., the& ma& be granted exem%tion via an ordinance onl& e ective or 1 &ear and must a%%l& to all businesses similarl& situated. 3>1?-$3 6#ase in %oint7: *hen "ndo& ha%%ened last &ear, all business in ?arikina, etc., were actuall& a ected. =ou cannot ind exem%tion onl& to one. 1n ordinance cannot be so s%eci ic as to be avorable to one and adverse to the other businesses, otherwise, it becomes invalid or void.

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)imilar to granting tax incentives or tax relie s, new investments, etc., but then again the ordinance, being an ordinance, is generall& a%%licable to all, in the same $;<, and must be a%%licable to all businesses. But it,s not a %roblem i at the %oint o enacting the ordinance granting the exem%tion, relie or incentive, there,s onl& 1 business that is covered b& the ordinance so long as it,s not so restrictive and i ever there,s another business which comes under, still is valid. 1%%licable onl& or 1 &ear and the ordinance must onl& a%%l& to the next %oint orward or next &ear.

IV# W0-=($,2,5 %* T,> E>./3-0%' P$0405.A.) :S.1# 1 3< 'oes the $;# %rovide or exem%t entities rom local taxation+ o =3), under )ec. 1I3.

*hose tax exem%tion %rivileges were withdrawn and who has retained exem%tion+ o <nless otherwise %rovided in this #ode, tax exem%tions or incentives granted to, or %resentl& en4o&ed b& all %ersons, whether natural or 4uridical, including government-owned or -controlled cor%orations, exce%t local water districts, coo%eratives dul& registered under R.1. 2o. LI3B, non-stock and non-%ro it hos%itals and educational institutions, are hereb& withdrawn u%on the e ectivit& o this #ode.

8ow about ;"##s+ 1re the& exem%t or are the& taxable+ o o The&,re taxable. )o all exem%tions %reviousl& granted under the old $;# were withdrawn retaining a ew o them as exem%t 0 i. $ocal water district 6it,s a %ublic utilit&7 ii. #oo%eratives dul& registered under R1 LI3B 6but i &ou,re not a coo%erative dul& registered under R1 LI3B, &ou cannot have exem%tionC it re:uires registration under R1 LI3B7 iii. 2on-stock non-%ro it hos%itals iv. 2on-stock non-%ro it educational institutions v. 1dditional entit& o -3S1-registered com%anies or com%anies located within the economic Dones, whether the )ubic Ba&, -3S1, $aguna, #avite, etc., because the&,re alread& taxable to /A %re erential tax in lieu o all national and local taxes.

9or all the rest, the&,re taxable alread& to local taxation.

V# F&'(,/.'-,5 P$0'1035.) :S.1# 13!< *hat are the undamental %rinci%les 6)ec. 13@7+ o o 1. Taxation shall be uni orm in each $;< !. Taxes, ees, charges and other im%ositions shall: o a. be e:uitable and based as ar as %racticable on the T-,s abilit& to %a& b. be levied and collected onl& or %ublic %ur%oses c. not un4ust, excessive, o%%ressive, or con iscator&C and d. not be contrar& to law, %ublic %olic&, national economic %olic&, or in restraint o trade

3. The collection o local taxes, ees, charges and other im%ositions shall in no case be let to an& %rivate %erson 3>1?-$3: I we assign the collection o taxes to 1uthoriDed 1gent Banks 611B7, 4ust like the BIR delegating its authorit& to collect to the 11B, is it allowed+ 'ba, it,s the 11B who receives %a&ment or BIR taxes. 8ow about $;<s+ 2". It,s the di erence between local taxes and national taxes. In local taxation, both R- and local taxes, the collection o taxes cannot be delegated to an& %rivate irm, including banks. )ince such %rovision is not ound under the tax code, that,s wh& BIR has delegated the collection task to 11B.

.. The revenue collected shall inure solel& to the bene it o and be sub4ect to dis%osition b& the $;< lev&ing the tax, ee, charge or im%osition unless otherwise %rovided in the $;#

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/. 3ach $;< shall, as ar as %racticable, evolve a %rogressive s&stem o taxation.

VII# L%1,5 T,> O$(0','1. B P$%1.(&$. *%$ A33$%4,5 ,'( E**.1-040-7 :S.1)# 187;1 !< *e know or a act that in ever& $;<, there,s a legislative bod&. In the %rovince, there,s a sangguniang %anlalawigan. In the cit&, there,s sangguniang %anlungsod. In the munici%alit&, there,s sangguniang %amba&an. In the baranga&, there,s sangguniang %ambaranga&. 8ow do &ou make an ordinance enacted b& the local taxing authorit& valid and e ective+ 8ow do &ou come u% with a valid and e ective ordinance+ o The ordinance must observe the substantive and %rocedural due %rocess.

TAX Feb. 10, 2011 Thursday *hat are the re:uirements in order to make a tax ordinance valid and e ective 6)ec. 1BH7+ o It must observe: 1. )ubstantive due %rocess It must observe the undamental %rinci%les %rovided in )ec. 13@. $ocal tax ordinance must be within the con ines o the $;#. 1n& %rovision that is be&ond the sco%e o authorit& granted b& the $;# makes such %rovision void. o 3>1?-$3: I the $;# sa&s that the taxation o trans er o ownershi% o R- is at /@A o 1A o the 9?K or consideration, an& ordinance which sa&s that the trans er tax on R- ownershi% is 1A o the 9?K, that,s alread& inconsistent with the $;#, and it makes such %rovision void.

!. -rocedural due %rocess i. 1%%roval o the ordinance b& the )anggunian concerned o *ho has the %ower to a%%rove or veto the ordinance+ )ec. /. 5 // #9C. FC. *pproval of 4rdinances. ' @aA 9very ordinance enacted by the sangguniang panlala(igan, sangguniang panlungsod, or sangguniang bayan shall be presented to the provincial governor or city or municipal mayor, as the case may be. If the local chief executive concerned approves the same, he shall affix his signature on each and every page thereof0 other(ise, he shall veto it and return the same (ith his ob.ections to the sanggunian, (hich may proceed to reconsider the same. The sanggunian concerned may override the veto of the local chief executive by t(o'thirds @$D=A vote of all its members, thereby making the ordinance or resolution effective for all legal intents and purposes. @bA The veto shall be communicated by the local chief executive concerned to the sanggunian (ithin fifteen @<FA days in the case of a province, and ten @<?A days in the case of a city or a municipality0 other(ise, the ordinance shall be deemed approved as if he had signed it. @cA 4rdinances enacted by the sangguniang barangay shall, upon approval by the ma.ority of all its members, be signed by the punong barangay. #9C. FF. Heto o(er of the Local Chief 9xecutive. ' @aA The local chief executive may veto any ordinance of the sangguniang panlala(igan, sangguniang panlungsod, or sangguniang bayan on the ground that it is ultra vires or pre.udicial to the public (elfare, stating his reasons therefor in (riting. @bA The local chief executive, except the punong barangay, shall have the po(er to veto any particular item or items of an appropriations ordinance, an ordinance or resolution adopting a local development plan and public investment program, or an ordinance directing the payment of money or creating liability. In such a case, the veto shall not affect the item or items (hich are not ob.ected to. The vetoed item or items shall not take effect

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unless the sanggunian overrides the veto in the manner herein provided0 other(ise, the item or items in the appropriations ordinance of the previous year corresponding to those vetoed, if any, shall be deemed reenacted. @cA The local chief executive may veto an ordinance or resolution only once. The sanggunian may override the veto of the local chief executive concerned by t(o'thirds @$D=A vote of all its members, thereby making the ordinance effective even (ithout the approval of the local chief executive concerned.

I the local chie executive decides to a%%rove, no %roblem. I it vetos, does it mean it,s the end o the ordinance+ 2", since the sanggunian concerned ma& override the veto b& !J3 vote o all its members. )o a%%roval o the ordinance ma& be given ex%ressl& b& the local chie executive exce%t the %unong baranga&, who does not have the veto %ower. "r even i he vetos the entire ordinance or in an a%%ro%riation,s bill, in a %articular %rovision thereo , which does not a ect other %rovisions, the sanuggunian ma& still override the veto given b& the local chie executive. It ma& still be a%%roved b& a vote o !J3 o the sanggunian.

ii. ?andator& %rior %ublic hearing 0 to a ord due %rocess to the o%%ositors iii. -ublication o ordinances o #9C. <%%. ublication of Tax ordinances and Revenue :easures. ' 1ithin ten @<?A days after their approval, certified true copies of all provincial, city, and municipal tax ordinances or revenue measures shall be published in full for three @=A consecutive days in a ne(spaper of local circulation; rovided, ho(ever, That in provinces, cities and municipalities (here there are no ne(spapers of local circulation, the same may be posted in at least t(o @$A conspicuous and publicly accessible places. *hen an ordinance is %ublished, does it have to be the entire ordinance or can it be the salient %rovisions onl&+ o It has to be the entire ordinance 0 9<$$ T3>T.

"nce the ordinance is a%%roved, within 1@ da&s rom a%%roval, there must be dissemination to the local treasurer o the res%ective $;<, who likewise is in charge within such 1@ da&s to have it %ublished in 9<$$ or 3 consecutive da&s in a news%a%er o local circulation or where there are no news%a%ers o local circulation, have it %osted in at least ! cons%icuous and %ublicl& accessible %laces #"#1-#"$1 vs #IT= "9 ?12I$1 Respondents failed to follo( the procedure in the enactment of tax measures as mandated by #ection <%% of the Local Government Code of <BB<, in that they failed to publish Tax 4rdinance &o. JB%% for three consecutive days in a ne(spaper of local circulation. 3rom the foregoing, it is evident that Tax 4rdinance &o. JB%% is null and void as said ordinance (as published only for one day in the $$ :ay $??? issue of the hilippine ost in contravention of the unmistakable directive of the Local Government Code of <BB<. That 57I8nstead of amending 4rdinance &o. JB%%, 7herein8 respondent should have enacted another tax measure (hich strictly complies (ith the re"uirements of la(, both procedural and substantive. The passage of the amending ordinance @4rdinance &o. %?<<A did not have the effect of curing the defects of 4rdinance &o. JB%% (hich, any (ay, does not legally exist.5 The amending la(, having been declared as null and void, in legal contemplation, therefore, does not exist. If an order or la( sought to be amended is invalid, then it does not legally exist, there should be no occasion or need to amend it.

8ow would a T- :uestion the constitutionalit& or legalit& o a tax ordinance+ *hat does the $;# %rovide in :uestioning the legalit& o a tax ordinance that has alread& been enacted and made e ective, assuming that it is alread& %ublished+ *hat,s the remed& o the T- who wants to :uestion the constitutionalit& and legalit& o the tax ordinance+

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#9C. <%J. rocedure for *pproval and 9ffectivity of Tax ordinances and Revenue :easures0 :andatory ublic Hearings. ' The procedure for approval of local tax ordinances and revenue measures shall be in accordance (ith the provisions of this Code; rovided, That public hearings shall be conducted for the purpose prior to the enactment thereof; rovided, further, That any "uestion on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal (ithin thirty @=?A days from the effectivity thereof to the #ecretary of /ustice (ho shall render a decision (ithin sixty @G?A days from the date of receipt of the appeal; rovided, ho(ever, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein; rovided, finally, That (ithin thirty @=?A days after receipt of the decision or the lapse of the sixty'day period (ithout the #ecretary of /ustice acting upon the appeal, the aggrieved party may file appropriate proceedings (ith a court of competent .urisdiction. Is the decision o the )"( within the exclusive a%%ellate 4urisdiction o the #T1+ 2".

1%%eal be ore the )"( within 3@ da&s rom the e ectivit&. 1nd )"( is given L@ da&s within which to decide. I it decides within the L@-da& %eriod, as a T-, i it,s adverse to &our claim, &ou can elevate the case to the court o com%etent 4urisdiction 6RT#7 within 3@ da&s rom recei%t o decision. But i no decision comes out within L@ da&s, the %eriod or the decision, &ou have 3@ da&s a ter the la%se o the L@ da&s to a%%eal. 'uring this %eriod, would the en orcement o the ordinance be sus%ended, meaning the collection o taxes under the ordinance be sus%ended+ 2". The a%%eal shall not have the e ect o sus%ending the e ectivit& o the ordinance and the accrual and %a&ment o the tax, ee, or charge levied.

I subse:uentl& the tax ordinance is declared unconstitutional, illegal, and the government continues to im%ose the taxes based on the void tax ordinance, what are the %enalties+ #9C. <B?. *ttempt to 9nforce Hoid or #uspended Tax ordinances and revenue measures. ' The enforcement of any tax ordinance or revenue measure after due notice of the disapproval or suspension thereof shall be sufficient ground for administrative disciplinary action against the local officials and employees responsible therefor. 1dministrative cases ma& be iled against an erring local government o icial who continues to en orce the ordinance that has been declared as void. Remember, i the declaration o nullit& o the ordinance, meaning i it has been declared as void rom the start, &ou ma& seek or a re und o the taxes that &ou,ve alread& %aid during the %eriod within which &ou :uestion its legalit& or constitutionalit&.

1re the $;<s allowed to im%ose %enalties or violations o tax ordinances+ o o =3). ;enerall&, what are the %enalties that the& can im%ose+ #9C. <G%. #urcharges and enalties on >npaid Taxes, 3ees, or Charges. ' The sanggunian may impose a surcharge not exceeding t(enty'five percent @$FNA of the amount of taxes, fees or charges not paid on time and an interest at the rate not exceeding t(o percent @$NA per month of the unpaid taxes, fees or charges including surcharges, until such amount is fully paid but in no case shall the total interest on the unpaid amount or portion thereof exceed thirty'six @=GA months. #9C. F<G. enalties for Hiolation of Tax ordinances. ' The sanggunian of a local government unit is authori!ed to prescribe fines or other penalties for violation of tax ordinances but in no case shall such fines be less than 4ne thousand pesos @ R<,???.??A nor more than 3ive thousand pesos @ RF???.??A, nor shall imprisonment be less than one @<A month nor more than six @GA months. #uch fine or other penalty, or both, shall be imposed at the discretion of the court. The sangguniang barangay may prescribe a fine of not less than 4ne hundred pesos @ R<??.??A nor more than 4ne thousand pesos @ R<,???.??A. 2on-%a&ment o local taxes on time, the $;<s ma& actuall& im%ose interests and the $;<s can actuall& im%ose ines not less than 1k nor more than /k or im%risonment which shall not be less than 1 month nor more than L months.

VIII# C%//%' L0/0-,-0%') %' -=. T,>0'A P%2.$) %* LGU) :S.1# 133< "ne o the limitations on the residual taxing %ower o the $;< is that which is enumerated in )ec. 133. The& are the limitations o the $;<,s %ower to tax. The %rimar& reason wh& these are limitations is that these are alread& ound or im%osed under di erent tax laws, meaning to sa&, it ma& be either be ound under the 2IR# im%osable b& the BIR or it ma& be %art o the T## im%osable b& the B"# or it ma& be under other s%ecial tax laws and sim%l& because it is a limitation because it violates the undamental %olicies

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o the government, such as &ou cannot im%ose local taxation against the 2ational ;overnment, its agencies and instrumentalities and $;<s. It is inconsistent. )o what are these limitations+ o 1. Income tax, exce%t when levied on banks and other inancial institutions *hat is the reason wh& income tax is not within the %ower o the $;<+ Income tax is alread& im%osed b& the 2ational ;overnment 0 -rinci%le o -r-em%tion

*h& are banks and other inancial institutions not covered under this limitation+ In act, under the $;#, there,s another %rovision which im%oses taxes on banks and other non-bank inancial intermediaries, including mone&changers, %awnsho%s, etc. Because banks are highl& %ro itable institutions. The& don,t go bankru%t. Their losses might be because o delin:uent borrowers but still, the& have investment assets which the& can actuall& re%ossess. It,s not a high-risk business.

"ther taxes ma& a%%l& on banks, but the biggest chunk o the taxes which the $;<s can im%ose on banks are incomes taxes under )ec. 133 or tax on banks under )ec. 1.3.

!. 'ocumentar& stam% tax Reason: It,s alread& covered b& the 2IR#.

3. Taxes on estates, inheritance, gi ts, legacies and other ac:uisitions mortis causa, exce%t as otherwise %rovided b& the $;# Reason: The&,re alread& covered b& the 2IR#.

.. #ustoms duties, registration ees o vessel and whar age on wharves, tonnage dues, and all other kinds o customs, ees, charges and dues exce%t whar age on wharves constructed and maintained b& the $;< concerned Reason: The&,re alread& covered b& the T##.

/. Taxes, ees and charges and other im%ositions u%on goods carried into or out o , or %assing through, the territorial 4urisdictions o local government units in the guise o charges or whar age, tolls or bridges or otherwise, or other taxes, ees or charges in an& orm whatsoever u%on such goods or merchandise L. Taxes, ees or charges on agricultural and a:uatic %roducts when sold b& marginal armers or ishermen H. Taxes on business enter%rises certi ied to b& the Board o Investments as %ioneer or non-%ioneer or a %eriod o six 6L7 and our 6.7 &ears, res%ectivel& rom the date o registration TR<3 "R 91$)3: 1 '# that is registered with the B"I is not covered b& local taxation. 91$)3. *h&+ o o Because or %ioneer business enter%rises, it is not covered b& local taxation or L &ears onl&. *hile or non-%ioneer business enter%rises, it is not covered b& local taxation or . &ears.

o o

*hen &ou sa& that a '# registered with the B"I is a %ioneer enter%rise or non-%ioneer enter%rise, %ioneer, &ou are given L &ears income tax holida&, meaning not liable or taxes, and . &ears or non-%ioneer enter%rises. The di erence there is that, %ioneer, meaning &ou,re the irst to establish such kind o business in the -hili%%ines. 2on-%ioneer is alread& an existing business, meaning others have the same or similar business.

B. 3xcise taxes on articles enumerated under the 2ational Internal Revenue #ode, as amended, and taxes, ees or charges on %etroleum %roducts 3>1?-$3: =ou are engaged in the business o selling cigarettes and wines. Those are sub4ect to excise taxes. 1re &ou sub4ect to local business tax+ =3). =ou,re exem%t rom the %a&ment o local tax based on the article or %roduct itsel but &ou,re not exem%t rom the %a&ment o the tax on o%erating the business. )o it,s di erent when &ou sa& that the article itsel that is sub4ect to excise tax should no longer be sub4ect to a local tax. The exem%tion given is onl& on the %roduct itsel 0 a tax on the %roduct. But &ou,re not exem%t rom the income or rom running the business, selling exercisable articles, because under )ec. 1.3, when &ou,re im%osed o the tax on &our business, &ou call that local business taxes. =ou,re either taxable as a manu acturer, ex%orter, retailer, wholesaler, distributor, etc. )o &our business is covered.

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I. -ercentage or value-added tax 6K1T7 on sales, barters or exchanges or similar transactions on goods or services exce%t as otherwise %rovided herein *h& is %ercentage tax and vat excluded+ Because it,s alread& covered b& the 2IR#

1nd what is Eexce%t as otherwise %rovided hereinF+ 1lthough the $;<s are %rohibited rom im%osing %ercentage taxes, &ou will see in )ec. 1.3 that at some %oint, it is alread& im%osing %ercentage taxes to a %articular t&%e o business u%on reaching a s%eci ic income bracket. o 3>1?-$3: 3H./A o 1A o &our gross recei%ts is alread& a %ercentage tax.

)o that is what the law means b& sa&ing Eexce%t as otherwise %rovided hereinF.

1@. Taxes on the gross recei%ts o trans%ortation contractors and %ersons engaged in the trans%ortation o %assengers or reight b& hire and common carriers b& air, land or water, exce%t as %rovided in this #ode *h& are the& not covered b& the $;<s, %ower to tax+ Because the&,re alread& sub4ect to %ercentage tax under the 2IR#, which is the common carrier,s tax

*hat is Eexce%t as %rovided in this #odeF+ )o meaning, still within the coverage o the $;<s, %ower to tax. This means that the exce%tion is the gross recei%ts o tric&cle o%erators.

11. Taxes on %remiums %aid b& wa& o reinsurance or retrocession. TR<3 "R 91$)3. Taxes on %remiums o ire insurance taken b& &ou is not sub4ect to local tax. 91$)3. *hat makes it alse+ *h& are the& sub4ect to local taxes+ o o Because under the $;#, insurance %remiums are, as a rule, covered because it,s not an exce%tion. *hat is not within the coverage o the $;<s, %ower to tax is onl& the %remiums on reinsurance or retrocession. It means to sa& that these are the %remiums %aid b& insurance com%anies or securing itsel . The basic %remiums o the %olic&holder have alread& been covered %reviousl& b& the local taxes. )o when it is subse:uentl&, dba there is %olic&holder, insurance com%an&, reinsurance com%an&, i &our %olic& is reinsured, it,s no longer covered b& the local taxes.

1!. Taxes, ees or charges or the registration o motor vehicles and or the issuance o all kinds o licenses or %ermits or the driving thereo , exce%t tric&cles *h& is this a limitation+ *h& can,t the $;<s regulate this+ Because it is covered b& s%ecial laws, not the 2IR# and not the T##.

)o the taxes, ees, or charges or the registration o tric&cles and the issuance o licenses or tric&cles belong to the $;<s, including the %ower to tax on their gross recei%ts.

13. Taxes, ees, or other charges on -hili%%ine %roducts actuall& ex%orted, exce%t as otherwise %rovided herein *hat do &ou mean b& Eexce%t as otherwise %rovided hereinF+ "r does it mean to sa& that ex%orting %roducts would mean no local taxes or the ex%ortation o %roducts is e:uivalent to exem%tion rom local taxes+ 2". )ec. 1.3 o the $;# %rovides or taxes on ex%orters. )o it means to sa& that when we,re talking o the income rom the business o ex%orting %roducts, it,s sub4ect to local business taxes. But local tax on ever& %roduct is not allowed. Taxation on the %articular %roducts or ex%ort is not allowed.

1.. Taxes, ees, or charges, on #ountr&side and Baranga& Business 3nter%rises and coo%eratives dul& registered under R.1. 2o. LB1@ and Re%ublic 1ct 2umbered )ixt&-nine hundred thirt&-eight 6R.1. 2o. LI3B7 otherwise known as the M#oo%eratives #ode o the -hili%%inesM res%ectivel& 1/. Taxes, ees or charges o an& kind on the 2ational ;overnment , its agencies and instrumentalities, and local government units.

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)ince the im%osition o local taxes against the 2ational ;overnment would contravene the existing government %olic& or violative o the undamental %rinci%les o taxation, the $;<s cannot im%ose taxes against the 2ational ;overnment and other $;<s.

IX# C%//%' R.4.'&.;R,0)0'A P%2.$) %* LGU) :S.1)# 153;155< This sim%l& means that common revenue-raising %owers o the $;<s, these are the %owers that can be exercised b& all the . $;<s, rom the baranga&s u% to the %rovinces: o 1. )ervice 9ees and #harges o 1ll o the $;<s can im%ose service ees and charges or whatever t&%e o basic services that the& can render to its constituents. 3>1?-$3: -arking ees, garbage collection

!. -ublic <tilit& #harges This would be a%%licable i the $;<, whether baranga& u% to the %rovince, will o%erate %ublic utilities, services, such as the o%eration o buses or an& other, like water districts, within the $;<, so long as it is that $;< that is owning the %ublic utilit&, then, it can im%ose the charges. *hen the $;< will o%erate, like bus o%erations, etcQ, it can be a common charge or an&one. But there will be no baranga& bus.

3. Toll 9ees or #harges *hat,s a toll ee+ It,s a charge or the use o %ublic road, %ier or whar , waterwa&, bridge, err& or telecommunication s&stem unded and constructed b& the $;< concerned. These are %a&ments or the use o %ublic in rastructures, roads, bridges, etcQ 1ctuall& the %ur%ose o charging toll ees is to onl& or the recover& o the costs o these %ublic roads and other in rastructures.

But not all %eo%le will be covered b& the im%osition o toll ees and charges. 1re all o us sub4ect to toll ees+ 2". *ho are exem%t+ o o o o o 1. " icers and enlisted men o the 19- and members o the -2- on mission !. -ost o ice %ersonnel delivering mail 3. -h&sicall&-handica%%ed .. 'isabled citiDens who are L/ &ears or older /. *hen %ublic sa et& and wel are so re:uires, toll ees ma& be discontinued

TAX Feb. 15, 2011 Tuesday X# S1%3. %* -=. P%2.$ -% T,> :S.1)# 134;152< " the . $;<s, which %ossesses the least taxing %ower and the most o the taxing %ower+ o o $east taxing %ower 0 Baranga& ?ost taxing %ower 0 #ities because it ma& lev& taxes, ees and charges which the %rovince or munici%alit& ma& im%ose

Is there an instance wherein a %rovince and a munici%alit& can im%ose the same taxes, aside rom the common-revenue raising %owers+

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2"23. -recisel& because, aside rom the common-revenue raising %owers, when the law identi ies a s%eci ic taxing %ower o the %rovince, it does not re%eat the same enumeration or one o them in the enumeration o the taxing %ower o the munici%alit&. There,s reall& no %roblem. *hatever is taxable b& the %rovince, the munici%alit& cannot im%ose. *hatever the munici%alit& can im%ose, the %rovince cannot. "ne %re-em%ts the other.

o o o -

But we have the cities. The& %ossess the largest sco%e o taxation within a $;<. #ities can im%ose what the %rovinces can im%ose. #ities can im%ose what the munici%alities can im%ose. o I$$<)TR1TI"2: $ets sa& the trans er tax o R- ownershi% or in short, we call this the local trans er tax. -rovinces can im%ose the local trans er tax. #ities can im%ose the local trans er tax. I there,s a R- that is sub4ect o a trans er within the cit&, who has the %ower to im%ose the local trans er tax+ Is it the %rovince or the cit&+ 2ote: *hen a munici%alit& can im%ose a tax, automaticall&, the %rovince cannot encroach into the taxing %ower o the munici%alit&. *hen the baranga& has the %ower to tax, the munici%alit& cannot encroach into such %ower o the baranga&. The %roblem now is when the cit& has the same %ower o that o the %rovince. I there,s a s%eci ic sub4ect matter within the cit&, can the %rovince im%ose the tax on that sub4ect matter or is it onl& the cit& who can im%ose the tax+ In this case, the cit& would %re-em%t the %rovince because the 4urisdiction is much more closer and exclusive with the cit&.

1side rom the cit& having the same taxing %ower as the %rovince and the munici%alit&, can the cit& im%ose higher taxes than the %rovinces and the munici%alities or should the cities im%ose the same rates as the %rovinces and munici%alities can im%ose+ o The cities can im%ose higher taxes than the %rovinces and the munici%alities under )ec. 1/1. #9C. <F<. #cope of Taxing o(ers of Cities. ' 9xcept as other(ise provided in this Code, the city, may levy the taxes, fees, and charges (hich the province or municipality may impose; rovided, ho(ever, That the taxes, fees and charges levied and collected by highly urbani!ed and independent component cities shall accrue to them and distributed in accordance (ith the provisions of this Code. The rates of taxes that the city may levy may exceed the maximum rates allo(ed for the province or municipality by not more than fifty percent @F?NA except the rates of professional and amusement taxes. The cities can im%ose higher than what the %rovinces or munici%alities can im%ose to the extent o not more than /@A. 3>1?-$3: In the im%osition o the local trans er tax 6$TT7, i it is the cit& who has 4urisdiction, at what maximum rate can the cit& im%ose+ o I it,s V o 1A or the %rovinces, the cit& can im%ose W or H/A o 1A as $TT.

1. -rovince 6)ecs. 13.-1.17 1. Tax on Trans er o R- "wnershi% or the $TT 6)ec. 13/7 o #9C. <=F. Tax on Transfer of Real roperty 4(nership. ' @aA The province may impose a tax on the sale, donation, barter, or on any other mode of transferring o(nership or title of real property at the rate of not more than fifty percent @F?NA of one percent @<NA of the total consideration involved in the ac"uisition of the property or of the fair market value in case the monetary consideration involved in the transfer is not substantial, (hichever is higher. The sale, transfer or other disposition of real property pursuant to R.*. &o. GGFJ @C*RL P Comprehensive *grarian Reform La(A shall be exempt from this tax. @bA 3or this purpose, the Register of )eeds of the province concerned shall, before registering any deed, re"uire the presentation of the evidence of payment of this tax. The provincial assessor shall like(ise make the same re"uirement before cancelling an old tax declaration and issuing a ne( one in place thereof. &otaries public shall furnish the provincial treasurer (ith a copy of any deed transferring o(nership or title to any real property (ithin thirty @=?A days from the date of notari!ation. It shall be the duty of the seller, donor, transferor, executor or administrator to pay the tax herein imposed (ithin sixty @G?A days from the date of the execution of the deed or from the date of the decedent6s death. *hat kinds o trans ers are covered b& the $TT+ o 1n& mode o trans er o R- ownershi%, such as sale, donation, barter, succession, exchange, etcQ exce%t trans ers %ursuant to #1R$ and sale o socialiDed housing.

1t what rate+

-age 82 o 186

1t V o 1A based on the total consideration or the 9?K i the total consideration received is not substantial, whichever is higher

There,s a trans er o R- ownershi% that is not sub4ect to $TT. *hat is that+ Trans er o R- ownershi% %ursuant to #1R$, which means trans ers rom the landlord to the tenant or the armer. That is not covered b& the $TT.

o o o

<nder the $;#, all modes o trans er o R- ownershi% are sub4ect to $TT exce%t those which are covered under the #1R$. 1nd in a s%ecial law, it also %rovides that sale o socialiDed housing is also not covered b& the $TT. -ersonal %ro%erties are not covered b& the $TT sim%l& because $TT is due onl& on trans er o R- ownershi%. I$$<)TR1TI"2: 1 religious institution donated a %arcel o land to a non-stock non-%ro it oundation. )ub4ect to $TT+ =3). The %rovision o the $;# is clear that all modes o trans er o R- ownershi%, regardless o who the owner is, is sub4ect to the $TT. )o i the donor or even the seller or trans eror is a religious institution and des%ite the trans er to a non-stock non-%ro it oundation, it still covered b& the %rovision o $TT because what is sub4ect to tax is actuall& the trans er, regardless o who the owner is. It,s a %rivilege o trans erring the R- ownershi% to another %erson. The #onstitution %rovides or exem%tion that inso ar as religious institutions are concerned, the exem%tion is onl& R- taxes and R- tax is not the same as $TT. R-T is a %ro%ert& tax directed against the %ro%ert& itsel . *hile $TT is an excise tax. It,s a tax on the %rivilege o trans erring R- owernshi%.

)o it,s still sub4ect to $TT.

1s between the %arties, who is liable or the $TT+ It is the dut& o the seller, donor, trans eror, executor or administrator to %a& the $TT. ?a& the %a&ment o $TT be sub4ect to an agreement b& the %arties such that the donee or the bu&er will be liable or the $TT+ =3), it ma& be sub4ect o an agreement. The bu&er or donee ma& be re:uired to shoulder it but once no %a&ment is received b& the government, still the collection o the $TT shall be against the statutor& T-, who is the seller or donor.

*hen should the taxes be %aid+ *ithin L@ da&s rom the date o the execution o the deed or rom the date o the decedent,s death. I it,s a trans er through succession, tax would accrue rom the date o death o the decedent and within L@ da&s therea ter, the $TT should be %aid. In case it,s a sale or an& other deed o conve&ance, deed o donation, it is within L@ da&s rom the execution o the deed o sale or deed o donation or deed o trans er, which includes with it the notariDation o the document.

I the sale arose rom %ublic auction sale, when should &ou reckon the L@ da&s+ 9rom the time that the auction sale took %lace or at a later date+ 1t a later date, which is rom the date o the execution o the inal deed o sale.

But in ordinar& sale, &ou don,t need to wait or the registration with the R' in order to %a& or the $TT. It,s automaticall& within L@ da&s rom the deed o sale or notariDation, not rom the registration o the deed o sale. In act, the R' will not trans er ownershi% o the R- in the new owner,s name unless there,s clearance rom both agencies o the government 0 the BIR and the $;<.

There are 3 %ersons who are instrumental in the collection o $TT: 1. R' !. $ocal treasurer 3. 2otar& %ublic 62-7

-age 83 o 186

*h&+ 3ver& notariDation o a deed o sale or deed o conve&ance o R-, the 2- is re:uired to in orm the o ice o the local treasurer within 3@ da&s in order to %ut into record that there,s a collectible in avor o the government.

!. Tax on Business o -rinting and -ublication 6)ec. 13L7 o #9C. <=G. Tax on +usiness of rinting and ublication. ' The province may impose a tax on the business of persons engaged in the printing andDor publication of books, cards, posters, leaflets, handbills, certificates, receipts, pamphlets, and others of similar nature, at a rate not exceeding fifty percent @F?NA of one percent @<NA of the gross annual receipts for the preceding calendar year. In the case of a ne(ly started business, the tax shall not exceed one't(entieth @<D$?A of one percent @<NA of the capital investment. In the succeeding calendar year, regardless of (hen the business started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction thereof, as provided herein. The receipts from the printing andDor publishing of books or other reading materials prescribed by the )epartment of 9ducation, Culture and #ports, as school texts or references shall be exempt from the tax herein imposed. Is it the same as tax on the business o selling the %rinted books and %ublished books+ o 2".

*hat t&%es o materials are sub4ect o the %rinting and %ublication and the business who is sub4ect to such local tax+ -ersons engaged in the business o %rinting andJor %ublication o books, cards, %osters, lea lets, handbills, certi icates, recei%ts, %am%hlets, and others o similar nature

1t what rate is the tax on business o %rinting and %ublication im%osed+ In case o a newl& started business 0 tax shall not exceed 1J!@ o 1A o the ca%ital investment In case o a business o%erating or ! &ears or more 0 tax shall be V o 1A o the gross annual recei%ts or the %receding calendar &ear

I$$<)TR1TI"2: 1 business engaged in the %rinting o news%a%ers, magaDines, which a%%ear at regular intervals and not %rinci%all& devoted or advertisement, incor%orated in !@@B. #a%ital investment, &ou 6re erring to the class7 were the owners, invested or 1m each. )o .@m in all. =ou invested .@m ca%ital investment. <ntil !@@I, there was no o%eration and under the #or%oration #ode, &ou are given ! &ears or those newl&-incor%orated. =ou did not o%erate %a. =ou did not o%erate in !@@I. =ou onl& o%erated in !@1@. *hat are &our liabilities under this %rovision starting rom !@@B u% to !@11+ This tax alread& includes the business o %rinting and %ublication o news%a%ers, magaDines, which a%%ear at regular intervals and that are not %rinci%all& devoted or advertisement. !@@B 0 tax shall not exceed 1J!@ o 1A o the ca%ital investment )o 1A o .@m X .@@k o .@@kJ!@ X !@k business tax

!@@I 0 @ tax liabilit& Because &ou will onl& use the 1J!@ o 1A based on ca%ital investment once and that is onl& in the &ear that &ou incor%orated &our business or organiDed or established &our %artnershi% or sole %ro%rietorshi%. )o subse:uentl&, i no o%eration is made, there will be no basis o the V o 1A tax based on the gross recei%ts o the %receding calendar &ear. )o in !@@I, &ou would be com%uting the tax based on the !@@B o%erations. There was no o%eration in !@@B. )o the result is no tax.

!@1@ 0 @ tax liabilit& Because &our liabilit& in !@1@ is based on the gross recei%ts o the %receding calendar &ear, which is !@@I, and &ou did not o%erate in !@@I. )o &ou don,t %a& an& tax.

!@11 0 whether or not &ou had an o%eration in !@11, since &our liabilit& in !@11 is based on the gross recei%ts o the %receding calendar &ear in !@1@ when &ou had business o%erations, &ou would have to %a& tax o V o 1A i it,s a %rovince or W o 1A i it,s a cit&.

*ould all businesses o %rinting and %ublication be sub4ect to this V o 1A tax+ "r does the law %rovide or an exem%tion+ 2". The law %rovides or an exem%tion:

-age 84 o 186

The recei%ts rom the %rinting andJor %ublishing o books or other reading materials %rescribed b& the '3-ed as school texts or re erences shall be exem%t rom this tax.

3. 9ranchise Tax 6)ec. 13H7 o *hat,s a ranchise+ It is a right or %rivilege, a ected with %ublic interest, which is con erred u%on %rivate %ersons or cor%orations, under such terms and conditions as the government and its %olitical subdivisions ma& im%ose in the interest o %ublic wel are, securit&, and sa et&.

#9C. <=J. 3ranchise Tax. ' &ot(ithstanding any exemption granted by any la( or other special la(, the province may impose a tax on businesses en.oying a franchise, at a rate not exceeding fifty percent @F?NA of one percent @<NA of the gross annual receipts for the preceding calendar year based on the incoming receipt, or reali!ed, (ithin its territorial .urisdiction. In the case of a ne(ly started business, the tax shall not exceed one't(entieth @<D$?A of one percent @<NA of the capital investment. In the succeeding calendar year, regardless of (hen the business started to operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction thereof, as provided herein. <nder the $;#, who is liable or the ranchise tax+ 1t what rate is it im%osed+ 1nd who are exem%t rom ranchise tax, i an&+ $iable or local ranchise tax 6$9T7, Tdi erent rom national ranchise tax im%osed under the 2IR#U, are those businesses en4o&ing a ranchise at a rate not exceeding V o 1A o the gross annual recei%ts or the %receding calendar &ear based on the incoming recei%t, or realiDed, within its territorial 4urisdiction. 3>1?-$3: K3#", -$'T, and other %ublic utilit& com%anies. o 'oes it include the o%eration o taxicabs+ 2", because under the common limitations o )ec. 133, $;<s are %re-em%ted or %rohibited rom im%osing taxes on trans%ortation contractors and or %ur%oses o determining who are liable or ranchise taxes, it does not include holders o #erti icate o -ublic #onvenience 6#-#7. )o these taxicabs are not sub4ect to $9T.

*hat are covered are those engaged in telecommunications, television, broadcasting, water, electricit& ranchises granted b& the 2ational ;overnment. I$$<)TR1TI"2: 1 telecommunications com%an& in !@1@ had gross recei%ts o 1@@m and had /@m in accounts receivable. *hat is sub4ect to the $9T+ o o 1/@m 1ll throughout the $;#, &ou will notice or local taxes that the basis o taxes is usuall& the gross recei%ts o the %receding calendar &ear. This is one instance that,s di erent. $9T is not onl& im%osed on the gross recei%ts o the %receding calendar &ear but it also includes as well uncollected gross recei%ts or incoming so long as it,s realiDed recei%ts rom the customer. )o the basis is not onl& the 1@@m gross recei%ts but %lus the /@m accounts receivable that,s alread& realiDed. The entire 1/@m shall be the basis o the V o 1A as $9T.

*hat ha%%ens i the ranchise holder is o%erational in man& $;<s+ )a& or exam%le, -$'T is o%erational all throughout the nation. To what $;< will it be %a&ing+ o <nlike the 2IR# wherein the mone& would actuall& go u% centraliDed to the national level o the BIR, or this one naman, each $;< will claim its own stake in ever& o%erational business within the unit. )o i &ou,re o%erational in man& $;<s, &ou have to a%%ortion the gross recei%ts coming rom ever& $;< and %a& thereon the taxes to which $;< it belongs. =ou have to determine the di erent $;<s concerned.

8owever, in case o a newl& started business, the tax shall not exceed 1J!@ o 1A o the ca%ital investment.

TAX Feb. 16, 2011 Wednesday

-age 85 o 186

o o

The law %rovides that notwithstanding an& exem%tion granted in other laws or s%ecial laws that $9T o not exceeding V o 1A shall be im%osed on the actual gross recei%ts and the incoming recei%ts o ranchise holders. *ho are ranchise holders+ These do not include the holders o #-#.

*hether ranchise holders are still liable or the $9T des%ite its liabilit& alread& under the 2IR# 0 the %a&ment o the 3A national ranchise taxes 629T7. I &ou,ve read %art o the %ercentage taxes under the 2IR#, holders o ranchises in certain industries, such as electric, gas, water utilities, telecommunications, telegra%h, radio and television, are all sub4ect to %ercentage taxesJ ranchise taxes. -$'T vs -R"KI2#3 "9 $1;<21 In sum, it does not appear that, in approving S$= of R.*. &o. JB$F, Congress intended it to operate as a blanket tax exemption to all telecommunications entities. *pplying the rule of strict construction of la(s granting tax exemptions and the rule that doubts should be resolved in favor of municipal corporations in interpreting statutory provisions on municipal taxing po(ers, (e hold that S$= of R.*. &o. JB$F cannot be considered as having amended petitioner6s franchise so as to entitle it to exemption from the imposition of local franchise taxes. Conse"uently, (e hold that petitioner is liable to pay local franchise taxes in the amount of =,G%<,B%F.J$ for the period covering the first to the fourth "uarter of <BBB and that it is not entitled to a refund of taxes paid by it for the period covering the first to the third "uarter of <BB%. To begin (ith, tax exemptions are highly disfavored. 9xemptions from taxation are highly disfavored, so much so that they may almost be said to be odious to the la(. He (ho claims an exemption must be able to point to some positive provision of la( creating the right. The tax exemption must be expressed in the statute in clear language that leaves no doubt of the intention of the legislature to grant such exemption. *nd, even if it is granted, the exemption must be interpreted in strictissimi .uris against the taxpayer and liberally in favor of the taxing authority. Tiu: )ec. 13H o the $;# %rovides or -$'T,s liabilit& to $9T notwithstanding the s%ecial exem%tion granted under the charter o -$'T. 3xem%tion to the e ect that in lieu o all taxes, it shall not be liable to taxes o its ranchise earnings. It cannot grant an exem%tion when the $;# alread& %rovides that no other law shall remove the liabilit& o telecommunications com%an& or ranchise holders in $9T. In act, it is su%%orted as well b& the withdrawal o the exem%tion %rivileges o all exem%tion %rivileges exce%t or the . alread& mentioned 6local water district, non-stock non-%ro it hos%itals, non-stock non%ro it educational institutions, coo%eratives registered under the #'17. )o under the $;#, those are the onl& . entities which are exem%t unless there would be an instance o a s%ecial ordinance granting an exem%tion or s%ecial cases or circumstances.

2-# vs -R"KI2#3 "9 I)1B3$1 Taxation is the rule and exemption is the exception. The burden of proof rests upon the party claiming exemption to prove that it is, in fact, covered by the exemption so claimed. Tax exemptions should be granted only by clear and une"uivocal provision of la( on the basis of language too plain to be mistaken. They cannot be extended by mere implication or inference. In this case, petitioner relies solely on the exemption granted to it by its charter, arguing that its exemption from franchise tax remained despite the enactment of the LGC. #ection <B= of the LGC (ithdre(, sub.ect to limited exceptions, the s(eeping tax privileges previously en.oyed by private and public corporations. Contrary to the contention of petitioner, #ection <B= of the LGC is an express, albeit general, repeal of all statutes granting tax exemptions from local taxes. It is a basic precept of statutory construction that the express mention of one person, thing, act, or conse"uence excludes all others as expressed in the familiar maxim expressio unius est exclusio alterius. &ot being a local (ater district, a cooperative registered under R.*. &o. GB=%, or a non'stock and non'profit hospital or educational institution, petitioner clearly does not belong to the exception. It is therefore incumbent upon the petitioner to point to some provisions of the LGC that expressly grant it exemption from local taxes. +ut this (ould be an exercise in futility. #ection <=J of the LGC clearly states that the LG>s can impose franchise tax 5not(ithstanding any exemption granted by any la( or other special la(.5 This particular provision of the LGC does not admit any exception. x x x 3ranchise tax may still be imposed despite any exemption en.oyed under special la(s

-age 86 o 186

&onetheless, petitioner seeks to avoid paying the franchise tax by arguing further that it is not liable therefor under #ection <=J of the LGC because said tax applies only to a 5business en.oying a franchise.5 It contends that it is not a private corporation or a business for profit. *gain, (e do not agree. In section <=< @mA of the LGC, Congress unmistakably defined a franchise in the sense of a secondary or special franchise. This is to avoid any confusion (hen the (ord franchise is used in the concept of taxation. *s commonly used, a franchise tax is 5a tax on the privilege of transacting business in the state and exercising corporate franchises granted by the state.5 It is not levied on the corporation simply for existing as a corporation, upon its property or its income, but on its exercise of the rights or privileges granted to it by the government. Hence, a corporation need not pay franchise tax from the time it ceased to do business and exercise its franchise. It is (ithin this context that the phrase 5tax on businesses en.oying a franchise5 in #ection <=J of the LGC should be interpreted and understood. Herily, to determine (hether the petitioner is covered by the franchise tax in "uestion, the follo(ing re"uisites should concur; @<A that petitioner has a 5franchise5 in the sense of a secondary or special franchise0 and @$A that it is exercising its rights or privileges under this franchise (ithin the territory of the respondent city government. etitioner fulfills the first re"uisite. Common(ealth *ct &o. <$?, as amended by Rep. *ct &o. G=BF, constitutes petitioner2s primary and secondary franchises. It serves as the petitioner2s charter, defining its composition, capitali!ation, the appointment and the specific duties of its corporate officers, and its corporate life span. *s its secondary franchise, Common(ealth *ct &o. <$?, as amended, vests the petitioner 7(ith x x x certain8 po(ers (hich are not available to ordinary corporations etitioner also fulfills the second re"uisite. It is operating (ithin the respondent city government2s territorial .urisdiction pursuant to the po(ers granted to it by Common(ealth *ct &o. <$?, as amended. xxx etitioner (as like(ise characteri!ed therein as a private enterprise for profit, on the follo(ing ratiocination; etitioner (as created to 5undertake the development of hydroelectric generation of po(er and the production of electricity from nuclear, geothermal and other sources, as (ell as the transmission of electric po(er on a nation(ide basis. ursuant to this mandate, petitioner generates po(er and sells electricity in bulk. Certainly, these activities do not partake of the sovereign functions of the government. They are purely private and commercial undertakings, albeit imbued (ith public interest. The public interest involved in its activities, ho(ever, does not distract from the true nature of the petitioner as a commercial enterprise, in the same league (ith similar public utilities like telephone and telegraph companies, railroad companies, (ater supply and irrigation companies, gas, coal or light companies, po(er plants, ice plant among others0 all of (hich are declared by this Court as ministrant or proprietary functions of government aimed at advancing the general interest of society. etitioner nevertheless contends that respondent cannot impose a franchise tax on it because it is an instrumentality of the &ational Government. It also cites the case of +asco v. hilippine *musements and Gaming Corporation (hich held that a government'o(ned and controlled corporation (hose shares of stock are o(ned by the national government is exempt from local taxes. This contention, ho(ever, is (ithout merit. *lthough as a general rule, LG>s cannot impose taxes, fees or charges of any kind on the &ational Government, its agencies and instrumentalities, this rule admits of an exception, i.e., (hen specific provisions of the LGC authori!e the LG>s to impose taxes, fees or charges on the aforementioned entities. #ection <=J of the LGC is one of those exceptions. It authori!es the province to impose a tax on business en.oying a franchise, at a rate not exceeding fifty percent @F?NA of one percent @<NA of the gross annual receipts for the preceding calendar year based on the incoming receipt, or reali!ed, (ithin its territorial .urisdiction. In enacting the LGC, Congress empo(ered the LG>s to impose certain taxes even on instrumentalities of the &ational Government. Tiu: 2-# is characteriDed as a %rivate enter%rise or %ro it in the generation and sale o electricit&, thus, %urel& %rivate and a commercial undertaking, which is not usuall& a sovereign unction o the government. There ore, 2-# cannot invoke the last %rovision under )ec. 133 on common limitations against the taxing %ower o the $;<. 2-# is still liable to $9T.

.. Tax on )and, ;ravel and other Ouarr& Resources 6)ec. 13B7

-age 87 o 186

#9C. <=%. Tax on #and, Gravel and 4ther Tuarry Resources. ' The province may levy and collect not more than ten percent @<?NA of fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth, and other "uarry resources, as defined under the &ational Internal Revenue Code, as amended, extracted from public lands or from the beds of seas, lakes, rivers, streams, creeks, and other public (aters (ithin its territorial .urisdiction. The permit to extract sand, gravel and other "uarry resources shall be issued exclusively by the provincial governor, pursuant to the ordinance of the sangguniang panlala(igan. The proceeds of the tax on sand, gravel and other "uarry resources shall be distributed as follo(s; @<A rovince ' Thirty percent @=?NA0 @$A Component city or municipality (here the sand, gravel, and other "uarry resources are extracted ' Thirty percent @=?NA0 and @=A barangay (here the sand, gravel, and other "uarry resources are extracted ' 3orty percent @C?NA.

o o

)hortl&, we call it the sand and gravel tax 6);T7. *hat is );T+ This is a tax im%osed on ordinar& stones, sand, gravel, earth and other :uarr& resources extracted rom %ublic lands or rom the beds o seas, lakes, rivers, streams, creeks, and other %ublic waters within the territorial 4urisdiction o the $;< concerned.

1t what rate+ 2ot more than 1@A o 9?K in the localit& %er cubic meter o the :uarr& resource extracted

MOuarr& resourcesM shall mean an& common stone or other common mineral substances as the 'irector o the Bureau o ?ines and ;eo-)ciences ma& declare to be :uarr& resources such as, but not restricted to, marl, marble, granite, volcanic cinders, basalt, tu and rock %hos%hate: -rovided, That the& contain no metal or other valuable minerals in economicall& workable :uantities. I$$<)TR1TI"2: 1ssuming &ou dig u% a large hole in &our back&ard. =ou extract sand and gravel including other resources rom the earth. *ill &ou be liable or );T o 1@A o the 9?K+ 2", because what is taxed are those :uarr& resources extracted rom %ublic lands or %ublic waters and not those extracted rom %rivate lands. )o i those extracted rom extracted rom %rivate lands are not sub4ect to );T under the $;#, is it sub4ect to an& other tax+ =3), it shall be sub4ect to );T under the 2IR#.

'o &ou have to be in the business o extraction and selling the sand and gravel in order to be liable or );T+ 2", because such tax is a tax on the extraction o :uarr& resources rom %ublic lands or %ublic waters and not on the business o extraction and selling the :uarr& resources.

*hen &ou sa& that a sand and gravel and an& other :uarr& resources extracted, it must come rom a %ublic land or %ublic waters or %ublic beds. )o it means to sa& that i it,s %rivate, %ro%ert& rom where extraction is made is a %rivate %ro%ert&, it,s not sub4ect to the );T under the $;#. It,s sub4ect to the );T under the 2IR#. 9?K 0 at what %oint should &ou determine the 9?K+ Is it the 9?K at the time that &ou extracted the resources or the 9?K at the time that &ou have subse:uentl& sold and its %rice in the market+ 9?K at the time the :uarr& resources were extracted. *hen &ou sa& 9?K in the localit& %er cubic meter, it re ers to the 9?K as o the moment that &ou,ve made the extraction and not the 9?K when &ou sell it or deliver it or sale to an end-user.

The sole authorit& to give the %ermit to :uarr& resources in all areas o the -hils. is the %rovincial government but since ever& extraction would a ect not onl& the %rovince, but including the cit& and the baranga&, usuall& it would stem rom the baranga& since ever& %art o this countr& belongs to a certain baranga&, and i extraction is made there, having su ered the most rom the extraction, baranga&s would receive .@A share o the taxes collected. The cit& or munici%alit& which has 4urisdiction over the baranga&, 3@A and the %rovince, 3@A. $3-12T" #"2)"$I'1T3' ?I2I2; #" vs 8"2. 1?B12$"# The %rinci%al business o $e%anto is mining o%erations. It entered into a contract with the government and incidental to its mining activit&, normall&, it would have to extract sand and gravel or to do earth moving activities.

-age 88 o 186

$e%anto was actuall& re using to %a& the );T or the sim%le reason that it,s not engaged in the sand and gravel business and the extraction was merel& actuall& incidental onl& to the mining o%erations. It cannot mine without extraction. )o the #T1 said that the tax on the sand and gravel does not re:uire that it must be or business %ur%oses or or commercial undertakings. )o notwithstanding it,s incidental, since there,s an act o extraction, there should be im%osed the );T. In addition, it also %rovides that the argument there that when $e%anto argued that it,s not liable or the );T because the mining contract or the mining lease agreement was entered into with the government, thus, making it the agent o the 2ational ;overnment, the #T1 said that entering into contracts with the government or mining or mining lease contract does not make the other %art& an agent nor a re%resentative o the state but rather an inde%endent contractor.

/. -ro essional Tax 6)ec. 13I7 o #9C. <=B. rofessional Tax. ' @aA The province may levy an annual professional tax on each person engaged in the exercise or practice of his profession re"uiring government examination at such amount and reasonable classification as the sangguniang panlala(igan may determine but shall in no case exceed Three hundred pesos @ R=??.??A. @bA 9very person legally authori!ed to practice his profession shall pay the professional tax to the province (here he practices his profession or (here he maintains his principal office in case he practices his profession in several places; rovided, ho(ever, That such person (ho has paid the corresponding professional tax shall be entitled to practice his profession in any part of the hilippines (ithout being sub.ected to any other national or local tax, license, or fee for the practice of such profession. @cA *ny individual or corporation employing a person sub.ect to professional tax shall re"uire payment by that person of the tax on his profession before employment and annually thereafter. @dA The professional tax shall be payable annually, on or before the thirty'first @=<stA day of /anuary. *ny person first beginning to practice a profession after the month of /anuary must, ho(ever, pay the full tax before engaging therein. * line of profession does not become exempt even if conducted (ith some other profession for (hich the tax has been paid. rofessionals exclusively employed in the government shall be exempt from the payment of this tax. @eA *ny person sub.ect to the professional tax shall (rite in deeds, receipts, prescriptions, reports, books of account, plans and designs, surveys and maps, as the case may be, the number of the official receipt issued to him. *hat is this %ro essional tax 6-T7+ It is a tax on each %erson engaged in the exercise or %ractice o his %ro ession re:uiring government examination. 3>1?-$3: Teachers, #-1s, engineers, nurses, doctors o In short, those %ro essions governed b& the -R# 6-ro essional Regulations #ommission7 or the IB-. "ther %ro essions, when &ou sa& %ro essional boxers, %ro essional athletes, the&,re not re:uired to %a& the -T. The& don,t re:uire government examination.

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But is it enough or the $;<s to im%ose the -T on a %ro essional who has %assed a government examination but is not in the %ractice o his %ro ession+ 2". The %ro essional must be engaged in the exercise or %ractice o his %ro ession.

)o there are ! re:uirements: 1. ?ust be a %ro essional in a %ro ession re:uiring government examination !. ?ust be engaged in the %ractice o such %ro ession

)uch %ro essionals are liable or a maximum o 3@@ -T ever& &ear. The 3@@ cannot be increased even i the im%osing authorit& is the cit&. 'ba, remember, a cit& can im%ose u% to the extent o /@A higher than what the %rovinces or munici%alities can im%ose but excluding the -T, which at all times remain at 3@@, and amusement taxes. )o the same rates or all kinds o $;<s with res%ect to -T and amusement taxes unless a law is subse:uentl& %assed.

I$$<)TR1TI"2: I &ou have more than 1 %ro ession and &ou,re %racticing all o those %ro essions, is it enough to %a& onl& 1 -T+

-age 8 o 186

2". =ou have to %a& 3@@ -T or ever& %ractice o %ro ession. I &ou,re %racticing in man& localities, so there ma& be as man& $;<s interested in collecting the -T. 1re &ou liable to %a& -T on all the $;<s a ected+ 2". =ou are onl& re:uired to %a& one -T or ever& %ro ession. 1s to what $;< &ou will be %a&ing among the di erent areas &ou %ractice, what $;< has the right to collect the -T+ o The ;R is the $;< where &ou %ractice but i &ou %ractice in di erent localities, &ou have to %a& it where the %rinci%al o ice is located.

1ssuming that &ou,re %racticing &our %ro ession in $iloan. =ou have no other areas o %ractice. *here should &ou %a& &our -T o 3@@+ The %rovince o #ebu because a munici%alit& cannot im%ose or collect the -T.

I &ou %ractice in #ebu #it&, who has the right to collect+ #ebu #it&, not the %rovince o #ebu.

-T is %a&able on or be ore (anuar& 31. This is or the %ur%ose o issuing a -T recei%t 6-TR7 and then obtain a -TR number. But it does not mean that i &ou begin to %ractice a ter (anuar& 31, &ou,re no longer liable or -T. =ou,re still liable. )o that means to sa& that at an& %oint in time during the &ear, &ou have to %a& at least once &our -T. 2"T3: 3ver& em%lo&er who hires %ro essionals are obligated to in orm there em%lo&ees to get -TRs. That,s %robabl& the control %rovided b& the $;#. I &ou,re a %ro essional em%lo&ed b& the government, liable or -T+ IT '3-32'). I &ou,re a %ro essional exclusivel& em%lo&ed b& the government, not liable or -T. I$$<)TR1TI"2: $ets sa& (udge -aredes is em%lo&ed b& the government as member o the (udiciar& and is also em%lo&ed b& <)# as a %ro essor. 9ull-time government em%lo&ee. )ideline as %ro essor. Is he liable or -T+ o o =3), because he is not exclusivel& em%lo&ed b& the government. 8e is em%lo&ed not onl& b& the government but also b& <)#. "nl& when the %ro essional is exclusivel& em%lo&ed b& the government is he exem%t rom -T. But i he has other income derived rom the %ractice o his %ro ession, he,s liable or -T. The %ro essors and at the same time ull-time government em%lo&ees are re:uired to %a& the -T.

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The -T o ever& %ro essional, it does not reall& e:uate with ma&or,s %ermit. 'ba, a ma&or,s %ermit is a %ermit to o%erate to &our business. But since &ou,re a %ro essional, &ou don,t need to get ma&or,s %ermit. 1ll &ou need is a -T to en4o& the %ractice o &our %ro ession. But once individuals or %ro essionals %ull-in together and make a %artnershi% out o their %ro ession, it does not mean that the ;-- getting a ma&or,s %ermit to o%erate and %ractice would absolve the individual %artners rom %a&ing -T. It sim%l& means that the individual %artners are still liable or -T. The ;-- that the& have created, since it,s alread& a business or a %artnershi%, it has to get its own ma&or,s %ermit. "ne cannot be a substitute o the other.

L. 1musement Tax 6)ec. 1.@7 o #9C. <C?. *musement Tax. ' @aA The province may levy an amusement tax to be collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a rate of not more than ten percent @<?NA of the gross receipts from the admissions fees @bA In the case of theaters or cinemas, the tax shall first be deducted and (ithheld by their proprietors, lessees, or operators and paid to the provincial treasurer before the gross receipts are divided bet(een said proprietors, lessees, or operators and the distributors of the cinematographic films. @cA The holding of operas, concerts, dramas, recitals, paintings, and art exhibitions, flo(er sho(s, musical programs, literary and oratorical presentations, except pop, rock, or similar concerts shall be exempt from the payment of the tax herein imposed. @dA The sangguniang panlala(igan may prescribe the time, manner, terms and conditions for the payment of tax. In case of fraud or failure to pay the tax, the sangguniang panlala(igan may impose such surcharges, interest and penalties as it may deem appropriate.

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@eA The proceeds from the amusement tax shall be shared e"ually by the province and the municipality (here such amusement places are located. *hat,s the de inition o amusement+ It,s a %leasurable diversion and entertainment. It is s&non&mous to relaxation, avocation, %astime, or un.

8ow about amusement %laces+ It includes theaters, cinemas, concert halls, circuses and other %laces o amusement where one seeks admission to entertain onesel b& seeing or viewing the show or %er ormances.

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1musement tax 61T7 is im%osed or ever& admission to the amusement %laces at 1@A o the gross recei%ts. <nder the 2IR#, &ou will see 1T im%osed at 1@A, 1/A, etc.. )o i &ou look into the sco%e o liabilit& o 1T, who are liable+ The& are the %ro%rietors, lessees or o%erators o the ollowing amusement %laces: Theaters #inemas #oncert halls #ircuses Boxing stadia 1nd other %laces o amusement

It cannot be all o them. The liabilit& would belong to either the %ro%rietor, the lessee, or the o%erator. 'oes it include cock%its, cabarets, night or da& clubs, boxing exhibitions, %ro essional basketball games, (ai-1lai and racetracks+ 2", because the&,re alread& taxable under the 2IR# and according to the limitations o the residual taxing %ower, whatever the 2IR# has alread& im%osed b& the 2ational ;overnment, the $;< cannot encroached. 8owever, boxing exhibitions wherein *orld or "riental #ham%ionshi%s in an& division is at stake shall be exem%t rom amusement tax: -rovided, urther, That at least one o the contenders or *orld or "riental #ham%ionshi% is a citiDen o the -hili%%ines and said exhibitions are %romoted b& a citiDenJs o the -hili%%ines or b& a cor%oration or association at least sixt& %ercent 6L@A7 o the ca%ital o which is owned b& such citiDens

There are other amusement %laces which are not sub4ect to 1T under the $;#. *hat are these and wh& are the& exem%t+ The holding o : "%eras #oncerts 'ramas Recitals -aintings and art exhibitions 9lower shows ?usical %rograms $iterar& and oratorical %resentations o o o 3xce%t %o%, rock, or similar concerts The&,re exem%t because i &ou look at the listings under the exem%tion, the&,re artistic orms o entertainment to %romote. The exem%tion also includes bene it shows, athletic metes, %h&sical %rograms and %er ormances. The&,re still exem%t rom 1T.

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I &ou go and watch -B1 games in 1raneta, will &our ticket cost include 1T+ =3), but it,s the 2ational ;overnment who has the %ower to im%ose 1T on -B1 games.

1s to what is the basis o the 1@A 1T, all &ou have to do is look at the ticket because it,s charged %er admission. I the ticket cost does not detail the com%onents o the %rice, it means to sa& that the 1@A 1T will be com%uted at the total cost o the ticket. )o i it,s !@@ ticket, 1@A is !@ that should be collected b& the government.

But i there,s a detail o other com%onent o the !@@ and the 1T is onl& at 1/, so it means to sa& that the government can onl& collect 1/. There,s a de icienc& so here ma& be other taxes, surcharges that come with it.

H. 1nnual 9ixed Tax or 3ver& 'eliver& Truck or Kan o ?anu acturersJ-roducersJ*holesalers 6)ec. 1.17 o #9C. <C<. *nnual 3ixed Tax 3or 9very )elivery Truck or Han of :anufacturers or roducers, 1holesalers of, )ealers, or Retailers in, Certain roducts. ' @aA The province may levy an annual fixed tax for every truck, van or any vehicle used by manufacturers, producers, (holesalers, dealers or retailers in the delivery or distribution of distilled spirits, fermented li"uors, soft drinks, cigars and cigarettes, and other products as may be determined by the sangguniang panlala(igan, to sales outlets, or consumers, (hether directly or indirectly, (ithin the province in an amount not exceeding 3ive hundred pesos @ F??.??A. @bA The manufacturers, producers, (holesalers, dealers, and retailers referred to in the immediately foregoing paragraph shall be exempt from the tax on peddlers prescribed else(here in this Code. 3>1?-$3: =ou,re in the business o rendering deliver& and hauling services, would &ou be liable or the %a&ment o the /@@ annual ixed tax 619T7 or ever& deliver& truck or van that &ou own+ )%eci ic exam%le, &ou make contract with a s%eci ic shi%%ing line wherein all container vans will be delivered to di erent destinations in #ebu. 9or ever& deliver, &ou will be %aid service ee. 1re &ou liable or the /@@ 19T or ever& truck or van+ 2". *h&+ *hat is covered b& )ec. 1.1+ "nl& those vans or trucks used b& manu acturers, %roducers, wholesalers, dealers or retailers

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But would all manu acturers delivering their goods be liable or the 19T+ 2". "nl& or certain %roducts such as: o o o o o 'istilled s%irits 9ermented li:uors )o t drinks #igars and cigarettes 1nd other %roducts as ma& be determined b& the %rovince

The 19T o /@@ or ever& deliver& truck or van is not im%osed against all owners o deliver& trucks or vans. This onl& covers the deliver& trucks or vans o manu acturers, %roducers, wholesalers, retailers or dealers o certain %roducts such as distilled s%irits, etcQ It means to sa& that &our deliver& truck or van shall be due or /@@ 19T i that is used or deliver& or distribution and &ou are the manu acturer o such %roduct that &ou deliver. =ou,re the %roducer, retailer or wholesaler or the dealer. I &ou,re sim%l& into trucking business where &ou o er &our services to deliver the %roducts o &our clients or a ee or or &our customers or a ee. =ou won,t be covered b& )ec. 1.1 because &ou will b& then be considered alread& as a trans%ortation contractor engaged in common carrier business and i &ou,re alread& a trans%ortation contractor, will &ou be liable or local taxes+ I &ou,re a trans%ortation contractor and &ou,re not liable or 19T, will &ou be liable or an& other local tax+ 2", because under )ec. 133 on common limitations, trans%ortation contractors are be&ond the reach o $;<s. I &ou don,t :uali & or the %a&ment o 19T or deliver& o services that &ou render, &ou can,t also be im%osed o the tax on business under the catch-all %rovision under )ec. 1.3 6h7 that the $;< can identi & an& other business it seeks to tax on its business sales or recei%ts.

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But considering that there is the %rovision on the limitation o the residual taxing %ower o trans%ortation contractors and common carriers who are or hire in the reight and deliver& o goods, it seems that the $;# %rohibits $;<s rom im%osing local taxes on trans%ortation contractors. "nl& the 2ational ;overnment via 2IR# will these trans%ortation contractors be liable.

B. ?unici%alit& 6)ecs. 1.!-1/@7 The sco%e o the taxing %owers o the munici%alit& is limited but the& can im%ose the taxes which is the ma4or source o revenue or $;<s. 1. 9ees and #harges 6)ec. 1.H7 o #9C. <CJ. 3ees and Charges. ' The municipality may impose and collect such reasonable fees and charges on business and occupation and, except as reserved to the province in #ection <=B of this Code, on the practice of any profession or calling, commensurate (ith the cost of regulation, inspection and licensing before any person may engage in such business or occupation, or practice such profession or calling. The munici%alit& can im%ose ees and charges on businesses and occu%ation exce%t or those that have been sub4ected alread& to %ro essional taxes b& the %rovince or the cit&. *ho can be covered b& the munici%alit& or this t&%e o ees and charges on the %ractice o %ro ession or calling but no longer sub4ect to %ro essional tax+ -robabl&, i &ou,re a %ro essional but &our %ro ession does not re:uire government examination such as com%uter engineers. )o the& ma& be regulated under )ec. 1.H b& the munici%alities on the %ractice o an& %ro ession or calling so long as it,s not covered b& %ro essional tax o %rovinces or cities.

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!. 9ees or )ealing and $icensing o *eights and ?easures 6)ec. 1.B7 o o #9C. <C%. 3ees for #ealing and Licensing of 1eights and :easures. ' @aA The municipality may levy fees for the sealing and licensing of (eights and measures at such reasonable rates as shall be prescribed by the sangguniang bayan. @bA The sangguniang bayan shall prescribe the necessary regulations for the use of such (eights and measures, sub.ect to such guidelines as shall be prescribed by the )epartment of #cience and Technology. The sanggunian concerned shall, by appropriate ordinance, penali!e fraudulent practices and unla(ful possession or use of instruments of (eights and measures and prescribe the criminal penalty therefor in accordance (ith the provisions of this Code. rovided, ho(ever, That the sanggunian concerned may authori!e the municipal treasurer to settle an offense not involving the commission of fraud before a case therefor is filed in court, upon payment of a compromise penalty of not less than T(o hundred pesos @ R$??.??A. ?unici%alities and cities can im%ose ees or the sealing and licensing o weights and measures. *hen $;<s go to wet markets to check u%on the weights and measures and %ut in stickers to those who have %assed the test.

3. 9isher& Rentals, 9ees and #harges 6)ec. 1.I7 o #9C. <CB. 3ishery Rentals, 3ees and Charges . ' @aA :unicipalities shall have the exclusive authority to grant fishery privileges in the municipal (aters and impose rentals, fees or charges therefor in accordance (ith the provisions of this #ection. @bA The sangguniang bayan may; @<A Grant fishery privileges to erect fish corrals, oyster, mussels or other a"uatic beds or bangus fry areas, (ithin a definite !one of the municipal (aters, as determined by it; rovided, ho(ever, That duly registered organi!ations and cooperatives of marginal fishermen shall have the preferential right to such fishery privileges; rovided, further, That the sangguniang bayan may re"uire a public bidding in conformity (ith and pursuant to an ordinance for the grant of such privileges; rovided, finally, That in the absence of such organi!ations and cooperatives or their failure to exercise their preferential right, other parties may participate in the public bidding in conformity (ith the above cited procedure. @$A Grant the privilege to gather, take or catch bangus fry, pra(n fry or ka(ag'ka(ag or fry of other species and fish from the municipal (aters by nets, traps or other fishing gears to marginal fishermen free of any rental, fee, charge or any other imposition (hatsoever. @=A Issue licenses for the operation of fishing vessels of three @=A tons or less for (hich purpose the sangguniang bayan shall promulgate rules and regulations regarding the issuances of such licenses to "ualified applicants under existing la(s.

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rovided, ho(ever, That the sanggunian concerned shall, by appropriate ordinance, penali!e the use of explosives, noxious or poisonous substances, electricity, muro'ami, and other deleterious methods of fishing and prescribe a criminal penalty therefor in accordance (ith the provisions of this Code; rovided, finally, That the sanggunian concerned shall have the authority to prosecute any violation of the provisions of applicable fishery la(s. These are exclusive authorities granted such as isher& %rivileges to make ish corals, etc.., grant the %rivilege to gather, take and catch ishes and issue licenses or the o%eration o small ishing vessels o 3 tons or less.

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.. Tax on Business 6)ec. 1.37 o o $ocal business tax 6$BT7 0 this is the ma4or source o revenues or ever& cit& or munici%alit&. But not im%osable b& the %rovince or the baranga&. *hat is the $BT+ $BT is a tax based on gross recei%ts 6not on %ro its7. It is a tax on the o%eration o the business under the %olice %ower o $;<s in regulating the business. It,s a %rere:uisite or the issuance o ma&or,s %ermit. But %redominantl&, it,s still an exercise o the %ower o taxation because it,s a collection o tax. Is it a tax on income+ 2". The reason wh& it,s not a tax on income since it is not based on the income o the business or the cor%oration or entit&. It is based rather on gross sales or gross recei%ts.

Is it a %ercentage tax+ =3), to a certain %oint. I &ou look into the com%utation o $BT im%osed on the di erent entities covered b& )ec. 1.3, the basis o taxation is the gross sales or recei%ts regardless o whether the entit& is generating income or not. Right ull&, this is used as a measure to regulate businesses. 2on-%a&ment o $BT based on the %receding calendar &ear,s gross sales or recei%ts shall not allow &ou to validl& o%erate during the &ear. o )o last (anuar& !@, !@11 when all $BT were su%%osedl& due, ever& business should %a& the $BT based on !@1@ gross sales or recei%ts.

1nd i the basis o the $BT is on the gross recei%ts o the %receding calendar &ear, does it matter i the business is o%erating on iscal &ear basis+ 'ba, cor%orations have the o%tion to o%erate on a iscal &ear or a calendar &ear. #an the com%an& o%t instead to %a& $BT based on the %receding iscal &ear,s gross recei%ts+ o o 2", because under the $;#, the collection o local taxes is on a calendar &ear basis. The basis o com%utation o the $BT remains ixed at gross sales or recei%ts o the %receding calendar. There could be no other basis 0 not the income, not the %roduction, not the out%ut, and not the iscal &ear. )o it,s gross sales or recei%ts o the %receding calendar &ear. I a cor%oration is o%erating on a iscal &ear basis, the records that will be re%orted to the $;< would be the gross sales or recei%ts starting rom (an. until 'ec. o the %receding calendar &ear. It cannot be changed. )o the easiest wa& to mani%ulate the %a&ment o taxes is to o%erate on a iscal &ear basis. 'ba, because i &ou,re o%erating on a calendar &ear basis, it,s eas& or the $;< to trace how much reall& &our sales or recei%ts are because the& can com%are the books rom (an. to 'ec. according to what &ou will re%ort to the BIR. But i what &ou re%ort to the BIR is iscal &ear basis and to the $;< is calendar &ear basis, it,s di icult to com%are unless the& look into the monthl& re%orts.

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*hat businesses are sub4ect to $BT+ a. ?anu acturers, assemblers, re%ackers, %rocessors, brewers, distillers, recti iers, and com%ounders o li:uors, distilled s%irits, and wines or manu acturers o an& article o commerce o whatever kind or nature

-age 4 o 186

I &ou look into the table o taxes, or ever& bracket o sales or recei%ts that these manu acturers derive, there,s a ixed tax u% to the %oint or the highest bracket wherein it becomes alread& a %ercentage tax o 3H V A o 1A.

b. *holesalers, distributors, or dealers in an& article o commerce o whatever kind or nature These are businessmen who do not have an&thing to do with the manu acturing or %roduction or %rocesses o the %roducts that the& are dealing, distribute, or deliver wholesale. The& shall be taxed at ixed amount o taxes de%ending on its bracket o sales or recei%ts but the highest bracket is not exceeding /@A o 1A. 8owever, such rate ma& be raised b& the cities to more than the limit %rovided so long as it,s not more than /@A higher. I$$<)TR1TI"2: I &ou,re a manu acturer and &ou do the wholesaling or the distribution, will &ou be covered b& both categories and %a& the ! taxes as manu acturer and as distributor+ o o o 2". =ou will %a& onl& as manu acturer because the distribution is onl& incidental o being a manu acturer. There are manu acturers who make their own distribution and there are manu acturers who hire a distribution com%an& to make deliveries or distribution. )o i &ou all under this categor& wherein &ou can be both a manu acturer and a distributor o the same %roducts that &ou have manu actured, then &ou can onl& be sub4ect to tax as manu acturer. But i &ou,re a manu acturer and a distributor o another %roduct that &ou have not manu actured, then &ou will still be liable or both 0 manu acturer o &our own %roduct and distributor o someone else,s %roduct.

c. 3x%orters, and on manu acturers, millers, %roducers, wholesalers, distributors, dealers or retailers o essential commodities enumerated hereunder: 1. Rice and corn !. *heat or cassava lour, meat, dair& %roducts, locall& manu actured, %rocessed or %reserved ood, sugar, salt and other agricultural, marine, and resh water %roducts, whether in their original state or not 3. #ooking oil and cooking gas .. $aundr& soa%, detergents, and medicine /. 1gricultural im%lements, e:ui%ment and %ost- harvest acilities, ertiliDers, %esticides, insecticides, herbicides and other arm in%uts L. -oultr& eeds and other animal eeds H. )chool su%%liesC and B. #ement o 1t what rate will the& be sub4ected to+ o o 2ot exceeding V o the rates %rescribed under manu acturers, wholesalers, and retailers.

This categor& Y3 sim%l& gives a reduction or a concession in the %a&ment o taxes. I &ou are a manu acturer, wholesaler, distributor, or retailer o an essential commodit&, &ou need to %a& onl& V o what is due to other manu acturers, wholesalers, distributors, or retailers. 3>1?-$3: I &ou,re a wholesaler o rice. *holesalers generall& are sub4ect to $BT at a maximum rate o V o 1A. 1s a wholesaler o an essential commodit&, &ou will onl& be sub4ect to Z o 1A.

This %rovision does not %rovide or an& rate. It sim%l& sa&s that &ou onl& have to %a& /@A o what is due rom &ou. )o i &ou,re a manu acturer o an essential commodit&, instead o 3H V A o 1A, then, hal o such rate onl&.

-age 5 o 186

I &ou,re a wholesaler, hal o the /@A o 1A. I &ou,re a retailer, hal o the !A or 1A.

3x%orter 0 should &ou be an ex%orter o an essential commodit& to en4o& the /@A discount or can &ou be an ex%orter o an& article+ 'oes it include indirect ex%orters+ I &ou,re an indirect ex%orter, do &ou en4o& the /@A discount lower than the ordinar& businesses+ The ex%orter can be an ex%orter o an& article o commerce. 2o re:uirement that it must be engaged in essential commodities.

d. Retailers *ho are retailers+ o o The& are those who are engaged in the sale where the %urchaser bu&s the commodit& or his own consum%tion, irres%ective o the :uantit& o the commodit& sold. Those who sell %roducts to end-users.

1t what rate+ o I gross sales or recei%ts or the %receding calendar &ear is: .@@k or less 0 !A ?ore than .@@k 0 1A 8owever, baranga&s shall have the exclusive %ower to lev& taxes on gross sales or recei%ts o the %receding calendar &ear o /@k or less, in the case o cities, and 3@k or less, in the case o munici%alities.

This is one area wherein the baranga&s can %re-em%t both the munici%alities and the cities in im%osing $BT to retailers. 'ba, the baranga& has the least %ower to im%ose local taxes. 1nd it cannot im%ose taxes which are alread& im%osed b& the cities or munici%alities. But inso ar as im%osing $BT on retailers, general rule, cities and munici%alities can im%ose !A on retailers with gross recei%ts o .@@k or less and an&thing in excess o .@@k is 1A. 8owever, it has a %re-em%tion wherein the baranga&s have the exclusive taxing %ower i the retailers would onl& have gross recei%ts or sales not more than /@k in cities and not more than 3@k in munici%alities.

I$$<)TR1TI"2: I &ou,re both a wholesaler and a retailer, to which tax will &ou be liable+ o o B"T8. It,s di erent this time. *hen we said that the businessman is both a manu acturer and a distributor o his own %roduct, he would onl& be liable as manu acturer because he would have no income or the distribution, there ore, onl& as a manu acturer. But i &ou,re both a wholesaler and a retailer, &ou would have di erent sales or wholesaling and di erent sales or retailing. )o that means to sa& that &our taxes would be di erent or wholesale sales and retail sales.

o o

I$$<)TR1TI"2: I &ou,re a retailer o both essential commodities and non-essential commodities, how will &ou be taxed+ o o There would be a se%arate com%utation or essential commodities and or non-essential commodities. There are 3 categories covered b& the tax reduction o /@A: 1. The manu acturer categor& !. The wholesaler categor& 3. The retailer categor&

-age 6 o 186

I an& o these categories would engage in essential commodities, the& all under letter c o )ec. 1.3. Their tax liabilit& is onl& V as should be.

e. #ontractors and other inde%endent contractors *hat is the de inition o contractors under the $;#+ o It includes %ersons, natural or 4uridical, not sub4ect to %ro essional tax under )ection 13I o this #ode, whose activit& consists essentiall& o the sale o all kinds o services or a ee, regardless o whether or not the %er ormance o the service calls or the exercise or use o the %h&sical or mental aculties o such contractor or his em%lo&ees. The term McontractorM shall include general engineering, general building and s%ecialt& contractors as de ined under a%%licable lawsC illing, demolition and salvage works contractorsC %ro%rietors or o%erators o mine drilling a%%aratusC %ro%rietors or o%erators o dock&ardsC %ersons engaged in the installation o water s&stem, and gas or electric light, heat, or %owerC %ro%rietors or o%erators o smelting %lantsC engraving, %lating, and %lastic lamination establishmentsC %ro%rietors or o%erators o establishments or re%airing, re%ainting, u%holstering, washing or greasing o vehicles, heav& e:ui%ment, vulcaniDing, reca%%ing and batter& chargingC %ro%rietors or o%erators o urniture sho%s and establishments or %laning or sur acing and recutting o lumber, and sawmills under contract to saw or cut logs belonging to othersC %ro%rietors or o%erators o dr&- cleaning or d&eing establishments, steam laundries, and laundries using washing machinesC %ro%rietors or owners o sho%s or the re%air o an& kind o mechanical and electrical devices, instruments, a%%aratus, or urniture and shoe re%airing b& machine or an& mechanical contrivanceC %ro%rietors or o%erators o establishments or lots or %arking %ur%osesC %ro%rietors or o%erators o tailor sho%s, dress sho%s, milliners and hatters, beaut& %arlors, barbersho%s, massage clinics, sauna, Turkish and )wedish baths, slenderiDing and building saloons and similar establishmentsC %hotogra%hic studiosC uneral %arlorsC %ro%rietors or o%erators o hotels, motels, and lodging housesC %ro%rietors or o%erators o arrastre and stevedoring, warehousing, or orwarding establishmentsC master %lumbers, smiths, and house or sign %aintersC %rinters, bookbinders, lithogra%hersC %ublishers exce%t those engaged in the %ublication or %rinting o an& news%a%er, magaDine, review or bulletin which a%%ears at regular intervals with ixed %rices or subscri%tion and sale and which is not devoted %rinci%all& to the %ublication o advertisementsC business agents, %rivate detective or watchman agencies, commercial and immigration brokers, and cinematogra%hic ilm owners, lessors and distributors. I &ou establish a ;--, can &ou be considered as an inde%endent contractor+ o =3). ;--s are covered under this categor& as contractors or inde%endent contractors and their gross recei%ts shall be sub4ect to not more than /@A o 1A.

3>1?-$3 o inde%endent contractors: -rimar& )tructures, 'aka& #onstruction, etc.

. Banks and other inancial institutions 1t what rate+ o o 2ot exceeding /@A o 1A on the gross recei%ts o the %receding calendar &ear *hat shall com%rise the gross recei%ts o banks and inancial institutions+ It is derived rom interest, commissions and discounts rom lending activities, income rom inancial leasing, dividends, rentals on %ro%ert& and %ro it rom exchange or sale o %ro%ert&, insurance %remium. It a%%ears that this is an exclusive list o what will com%rise the gross recei%ts o banks and other inancial institutions. )o i ees or charges are not among the gross recei%ts, then, it will not be covered b& the $BT on banks and inancial institutions, such as iling ees, service ees, administrative charges im%osed b& banks. The& will not be covered b& this %rovision.

Remember )ec. 133 6a7 which sa&s that income taxes cannot be im%osed b& the $;<s exce%t on banks and inancial institutions. o It would a%%ear that there are ! taxes to which the bank will be liable or under the $;#: 1. Income tax

-age 7 o 186

!. $BT

*hat,s the di erence+ Income tax is based on income. $BT is based on gross recei%ts. But there is no law &et which clari ies what is the basis o income tax on banks. 2ot even the $;# %rovides or it. In act, the IRR %roscribe $;<s rom im%osing taxes against the income o banks. 2onetheless, it would a%%ear there the ! taxes against banks.

*hat inancial institutions are covered b& this %rovision+ *hat do &ou mean b& Eother inancial institutionsF+ o MBanks and other inancial institutionsM include non-bank inancial intermediaries, lending investors, inance and investment com%anies, %awnsho%s, mone& sho%s, insurance com%anies, stock markets, stock brokers and dealers in securities and oreign exchange, as de ined under a%%licable laws, or rules and regulations thereunder. 'oes it include %awnsho%s+ o =3).

?one& changers+ =3)

Insurance com%anies+ =3) Insurance com%anies are liable or $BT. I &ou recall what is %roscribed b& the law or $;<s to im%ose on %remiums in insurance is onl& the reinsurance and retrocession. It means to sa& that the $;# is granting $;<s to im%ose local taxes on insurance %remiums. That,s wh& gross recei%ts o insurance com%anies or the %receding calendar &ear will be sub4ect to the same rate as the banks o not exceeding /@A o 1A. *hat is included in gross recei%ts o insurance com%anies+ o The %remiums collected, interest earnings, i it owns %ro%ert& and rentals coming rom such %ro%ert& is also included, income rom ac:uired assets, cash dividends, etc.

g. -eddlers engaged in the sale o an& merchandise or article o commerce *ho is a %eddler+ o It means an& %erson who, either or himsel or on commission, travels rom %lace to %lace and sells his goods or o ers to sell and deliver the same.

The& will be liable or an annual tax o not exceeding /@. It is a ixed tax o being a %eddler. Is the list exclusive+ The list o businesses that is sub4ect to $BT+ o 2". There,s a catch-all %rovision.

h. 1n& business not otherwise s%eci ied *hat is the s%ecial re:uirement or this catch-all %rovision to a%%l&+ o There must be a s%ecial ordinance or this %ur%ose.

Tax rates within the ?etro ?anila 1rea 6)ec. 1..7

-age 8 o 186

o o

#9C. <CC. Rates of Tax (ithin the :etropolitan :anila *rea. ' The municipalities (ithin the :etropolitan :anila *rea may levy taxes at rates (hich shall not exceed by fifty percent @F?NA the maximum rates prescribed in the preceding #ection. The tax rates within the ?etro ?anila 1rea ma& be /@A more than what the munici%alities can im%ose. )o the&,re actuall& treating ?etro ?anila 1rea as a cit&.

Tax %eriod 6)ec. 1L/7 o o #9C. <GF. Tax eriod and :anner of ayment. ' >nless other(ise provided in this Code, the tax period of all local taxes, fees and charges shall be the calendar year. #uch taxes, fees and charges may be paid in "uarterly installments. Tax %eriod 0 it is calendar &ear.

1ccrual o tax 6)ec. 1LL7 o #9C. <GG. *ccrual of Tax. ' >nless other(ise provided in this Code, all local taxes, fees, and charges shall accrue on the first @<stA day of /anuary of each year. Ho(ever, ne( taxes, fees or charges, or changes in the rates thereof, shall accrue on the first @<stA day of the "uarter next follo(ing the effectivity of the ordinance imposing such ne( levies or rates. *hen does the $BT accrue+ o It shall accrue on the 1st da& o (anuar& o each &ear.

*hat is the basis o &our (anuar& 1 tax liabilit& that has accrued+ *hat,s the tax basis+ ;ross sales or recei%ts excluding returns, discounts and allowances

Time and manner o %a&ment 6)ec. 1LH7 o #9C. <GJ. Time of ayment. ' >nless other(ise provided in this Code, all local taxes, fees, and charges shall be paid (ithin the first t(enty @$?A days of /anuary or of each subse"uent "uarter, as the case may be. The sanggunian concerned may, for a .ustifiable reason or cause, extend the time for payment of such taxes, fees, or charges (ithout surcharges or penalties, but only for a period not exceeding six @GA months. *hen are &ou liable to %a& the tax i it accrues ever& (an. 1+ "n or be ore (anuar& !@ I &ou ailed to %a& (an. !@, what ha%%ens+ o There ma& be surcharges and %enalties and the sanggunian concerned ma& extend the time not exceeding L months

*ill &ou be issued a ma&or,s %ermit i &ou don,t settle &our obligations+ 2"

#an &ou o%t to %a& other than on (an. !@+ #an &ou have it %aid on installment+ =3). It can be %aid :uarterl&. 1nd when is it due i &ou %a& it :uarterl&+ *ithin !@ da&s o each :uarter I &ou o%t to %a& :uarterl&, sim%l& divide &our $BT into . and &our liable to %a& on or be ore the !@ th da& o the irst month o ever& :uarter. But &ou cannot divide the other ees and charges. =ou cannot %a& in installments the other ees and charges o the government. )o what is onl& %a&able :uarterl& is the $BT.

TAX Feb. 17, 2011 Thursday ?unici%alities and cities as $;<s have a right to im%ose the tax on business which %a&ment o such is a %rere:uisite be ore the business is granted the right or %ermit to o%erate or the current &ear that the tax is due. 1s %rovided under $;#, the basis or com%uting the $BT is the gross recei%ts o the %receding calendar &ear or gross sales. o In the !@@H case o 3ricson, as a telecommunications com%an&, an assessment was made b& the $;< assessing 3ricson or the di erence o the basis o its $BT %a&ment.

-age

o 186

o o o

*hat reall& ha%%ened was that 3ricson %aid the $BT based on the gross recei%ts or the %receding calendar &ear. The $;< used as com%arison against the gross recei%ts used b& 3ricson the gross revenues ound under the audited inancial statements o 3ricson which were submitted to the BIR. )o which would reall& %revail i there,s a di erence between the gross recei%ts and gross revenues declared or income tax %ur%oses+ The )# said that gross recei%ts or gross sales include mone& or its e:uivalent, actuall& or constructivel& received, in consideration or the services rendered or the articles sold, exchanged, or leased, whether actual or constructive. ;ross revenues or income tax %ur%oses cover mone& or its e:uivalent, actuall& or constructivel& received, including the value o services rendered or articles sold, exchanged, or leased, the %a&ment o which is &et to be received. )o it a%%ear that the gross revenues declared or income tax %ur%oses was higher than the gross recei%ts which became the basis or the de icienc& $BT assessments made b& the $;<. )o who is correct+ *as it the T- or the $;< concerned+ The )# said that &ou cannot change the basis or com%utation o the $BT. 9or service com%anies, it should be gross recei%ts o the %receding calendar &ear. Recei%ts, actuall& and constructivel& received. 2aturall&, or income tax %ur%oses, the basis is the income that,s received, actuall& or constructivel&, and income which is realiDed. )o the basis reall& o the gross revenues include not onl& the recei%ts but income that is &et to be collected or the value o services rendered or articles sold, exchanged or leased that has not been collected, actuall& nor constructivel&. )o that was wa& higher than the gross recei%ts. But the correct com%utation would onl& be gross recei%ts. )o the )# dismissed the case against 3ricson T-.

Tax %eriod or the $BT %a&ment is the calendar &ear, regardless o whether the cor%oration sub4ect to the $BT is o%erating on a calendar or iscal &ear basis. o *hen would the tax accrue+ o It would accrue on the 1st da& o (an.

1nd i there,s a new im%osition under )ec. 1.3 6h7, under the catch-all %rovision, su%%osing that the $;< identi ied a new activit&, such as the o%eration o a sho%%ing mall. 1s %art o its coverage o the $BT, when would the $BT accrue+ 'ba remember, under )ec. 1.3, there,s a catch-all %rovision that the $;< ma& identi & an activit& that is %er ormed b& an entit& or a T- that ma& be sub4ect to the $BT so long as it com%lies with the re:uirements o : 1. 8aving a s%ecial ordinance or that or ordinance !. *ith a %rior %ublic hearing 3. It must not be excessive, un4ust, con iscator& or ollowing the undamental %rinci%les o taxation and .. It must not be among the common limitations ound under )ec. 133. *hen would the $BT accrue or new im%ositions o taxes+ o 2ew taxes, ees or charges, or changes in the rates thereo , shall accrue on the 1 st da& o the :uarter next ollowing the e ectivit& o the ordinance im%osing such new levies or rates.

*hen should the $BT be %aid o "n or be ore (an. !@ with the o%tion o %a&ing b& :uarterl& installments, in which case, it shall be %aid on or be ore the !@th da& o the irst month o each :uarter.

?"BI$ -8I$). vs #IT= TR31)<R3R "9 ?1P1TI o +usiness taxes imposed in the exercise of police po(er for regulatory purposes are paid for the privilege of carrying on a business in the year the tax (as paid. It is paid at the beginning of the year as a fee to allo( the business to operate for the rest of the year. It is deemed a prere"uisite to the conduct of business.

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Income tax, on the other hand, is a tax on all yearly profits arising from property, professions, trades or offices, or as a tax on a person2s income, emoluments, profits and the like. It is tax on income, (hether net or gross reali!ed in one taxable year.7<F8 It is due on or before the <Fth day of the Cth month follo(ing the close of the taxpayer2s taxable year and is generally regarded as an excise tax, levied upon the right of a person or entity to receive income or profits. o The business tax, like income tax, is computed based on the previous year2s figures. This is the reason for the confusion. * ne(ly'started business is already liable for business taxes @i.e. license feesA at the start of the "uarter (hen it commences operations. In computing the amount of tax due for the first "uarter of operations, the business2 capital investment is used as the basis. 3or the subse"uent "uarters of the first year, the tax is based on the gross salesDreceipts for the previous "uarter. In the follo(ing year@sA, the business is then taxed based on the gross sales or receipts of the previous year. The business taxes paid in the year <BB% is for the privilege of engaging in business for the same year, and not for having engaged in business for <BBJ.

Tiu: *hen &ou sa& that business taxes accrue on (an. 1 o each &ear, it does not mean that it is a tax o the %revious &ear. It accrues (an. 1 o each &ear %a&able on or be ore (an. !@ and %a&ment o which gives &ou the right to carr&-on legall& &our business. The business taxes that were %aid in 1IIB were reall& the taxes due or 1IIB. <nlike income tax and other taxes which crosses a %articular taxable &ear. )a& or exam%le an income tax that is due 1%ril 1/, !@11, it is an income tax or the %revious &ear !@1@ because it is a tax on the income o !@1@ o%erations. But not or $BT because $BT are somewhat im%osed in the exercise o the regulator& %ower o the state in order to regulate businesses and is a %rere:uisite be ore a %ermit can be given. 1n& tax that accrues on (an. 1 as a $BT is a tax reall& or that current &ear. )o i it has a tax %aid on (an. !@, 1IIB, it,s a tax or the entire o%erations o 1IIB. =ou can,t sa& that it is or 1IIH such that the government can collect, i &ou retire in 1IIB, another set o taxes, because what &ou,ve %aid is alread& a tax or 1IIB.

o o o

o o

)o the )# said that $BT is %aid at the beginning o the &ear as a ee to allow the business to o%erate or the rest o the &ear. But it,s a di erent stor& that i &ou retire &our business and &ou have not ull& settled on (an. !@ o that &ear o retirement. 3>1?-$3: =ou o%ted to %a& on a :uarterl& basis and &ou retire on the ! nd :uarter. =ou have to settle the entire . :uarters irst be ore &ou,re considered retired rom that $;<.

-a&ment o business taxes, multi%le business establishmentJlines 6)ec. 1.L7 o #9C. <CG. ayment of +usiness Taxes. ' @aA The taxes imposed under #ection <C= shall be payable for every separate or distinct establishment or place (here business sub.ect to the tax is conducted and one line of business does not become exempt by being conducted (ith some other business for (hich such tax has been paid. The tax on a business must be paid by the person conducting the same. @bA In cases (here a person conducts or operates t(o @$A or more of the businesses mentioned in #ection <C= of this Code (hich are sub.ect to the same rate of tax, the tax shall be computed on the combined total gross sales or receipts of the said t(o @$A or more related businesses. @cA In cases (here a person conducts or operates t(o @$A or more businesses mentioned in #ection <C= of this Code (hich are sub.ect to different rates of tax, the gross sales or receipts of each business shall be separately reported for the purpose of computing the tax due from each business. *hat are the rules or %a&ment o business taxes or business establishments that have multi%le lines o o%erations or lines o businesses, meaning, the&,re covered b& di erent categories o business taxes under )ec. 1.3+ I a %erson o%erates ! or more businesses mentioned in )ec. 1.3 which are taxedC com%utation shall be based on: 1. #ombined total gross salesJrecei%ts i sub4ect to the same tax rate !. )e%arate re%orts on gross salesJrecei%ts i sub4ect to di erent tax rates

I an entit& carries more than 1 line o business and both are sub4ect to the same rate o tax, exam%le, &ou,re covered under categor& 1 o )ec. 1.3, &ou,re a manu acturer as well as a brewer o an article o commerce, then both are sub4ect to 3H VA o 1A. =ou need not se%arate the gross recei%ts. )im%l& combine it or the reason that once &ou combine the gross recei%ts covered b& the same rate o tax, the higher &our gross recei%ts, the higher bracket &ou belong, the higher tax that will be due rom &ou, exce%t i &ou reach nah the 3H./A o 1A. I &ou look into the table, the higher &our gross recei%ts, the higher tax that is due rom &ou. That,s the reason wh& it is to be combined.

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1nd or %ractical %ur%oses as well.

But i &our lines o business are covered b& di erent rates o tax, sa& or exam%le, it,s covered b& letter a or letter b o )ec. 1.3 or as an ex%orter, which is hal o the tax that is due, there,s no need to combine. #om%ute it se%aratel&. 3>1?-$3: I &ou,re both a wholesaler and retailer, then &ou need to se%arate the gross recei%ts. #om%ute according to the individual rates.

)itus o the tax 6)ec. 1/@7 o #9C. <F?. #itus of the Tax. ' @aA 3or purposes of collection of the taxes under #ection <C= of this Code, manufacturers, assemblers, repackers, bre(ers, distillers, rectifiers and compounders of li"uor, distilled spirits and (ines, millers, producers, exporters, (holesalers, distributors, dealers, contractors, banks and other financial institutions, and other businesses, maintaining or operating branch or sales outlet else(here shall record the sale in the branch or sales outlet making the sale or transaction, and the tax thereon shall accrue and shall be paid to the municipality (here such branch or sales outlet is located. In cases (here there is no such branch or sales outlet in the city or municipality (here the sale or transaction is made, the sale shall be duly recorded in the principal office and the taxes due shall accrue and shall be paid to such city or municipality. @bA The follo(ing sales allocation shall apply to manufacturers, assemblers, contractors, producers, and exporters (ith factories, pro.ect offices, plants, and plantations in the pursuit of their business; o @<A Thirty percent @=?NA of all sales recorded in the principal office shall be taxable by the city or municipality (here the principal office is located0 and @$A #eventy percent @J?NA of all sales recorded in the principal office shall be taxable by the city or municipality (here the factory, pro.ect, office, plant or plantation is located0 and

@cA In case of a plantation located at a place other than the place (here the factory is located, said J?N mentioned in subparagraph @bA of subsection @$A above shall be divided as follo(s; @<A G?N to the city or municipality @$A C?N to the city or municipality (here the plantation is located

@dA In cases (here a manufacturer, assembler, producer, exporter or contractor has t(o @$A or more factories, pro.ect offices, plants, or plantations located in different localities, the seventy percent @J?NA sales allocation mentioned in subparagraph @bA of subsection @$A above shall be prorated among the localities (here the factories, pro.ect offices, plants, and plantations are located in proportion to their respective volumes of production during the period for (hich the tax is due. @eA The foregoing sales allocation shall be applied irrespective of (hether or not sales are made in the locality (here the factory, pro.ect office, plant, or plan is located. *hat is situs or $BT+ It,s the %lace where the sale is consummated associated with the deliver& o the articles o commerce, which are the sub4ect matter o the contract. )o i a sale is consummated in a %articular area cou%led with deliver&, then that $;< having 4urisdiction over where the sale was consummated will have 4urisdiction over that. 1nd it,s another matter i there is a branch in that %articular $;<. *hat i there,s no branch or no sales outlet, where do &ou record &our sales+ *ho has the right to collect the $BT+

o o

*hat is a branch or $BT %ur%oses+ It,s an extension o the %rinci%al o ice o the business.

*ould an o ice dis%la&ing %roducts but does not maintain stocks o it and there are no items or sale be considered a sales outletJo ice or branch+ 2". =ou will notice that the di erence between a branch and a dis%la& o ice is that in a branch, there,s reall& a business o%eration that is conducted being an extension o the %rinci%al o ice o the business. )ome entities would have dis%la& stores and dis%la& stores do not e:uate to maintaining a branch. In dis%la& stores, onl& s%eci ic goods are dis%la&ed but no stocks are stored or sale. 2o business o%erations. It is not considered as a branch. There ore, $;< having 4urisdiction over the dis%la& area would not have a right to share in the taxes o the gross recei%ts or the entire o%eration.

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*hat are the rules+ 1mong the $;<s, who has the right to collect the $BT+ Rule 1: In case o %ersons maintainingJo%erating a branch or sales outlet making the sale or transaction, the sale shall be recorded in said branch or sales outlet and the tax shall be %aid to the munici%alit&Jcit& where the branch or sales outlet is located. Rule !: *here there is no branch or sales outlet in the cit&Jmunici%alit& where the sale is made, sale shall be recorded in the %rinci%al o ice and the tax shall be %aid to the cit&Jmunici%alit& where such %rinci%al o ice is located. I$$<)TR1TI"2: $ets sa& or exam%le, in #ebu #it&, there,s a %rinci%al o ice. In ?andaue #it&, there,s a branch. There were sales made in Talisa& #it&, no sales o ice, no branch, no dis%la& area, but %robabl& mobile car selling stock. I ?andaue #it& generated 1@@m recei%ts, #ebu #it& generated 1@m recei%ts, and Talisa& #it& generated 1@m recei%ts, which $;< has the right to collect taxes on the 1!@m+ o )ince a branch is %resumed to conduct its own o%erations as an extension o the %rinci%al o ice, it would maintain its own sets o books and issues recei%ts and invoices or its sales. 1n& sales generated b& the branch or sales outlet, such as in ?andaue #it&, the taxes due rom it would be ull& %a&able, 1@@A, to the $;< having 4urisdiction over the branch. o ?andaue #it& 0 1@@A o 1@@m recei%ts

I at all a sale is made as well b& the %rinci%al o ice, the entire o it would be collected b& the $;< having 4urisdiction over the %rinci%al %lace o business in the absence o actories, %ro4ect o ices, %lants, and %lantations 69-"-7. )o 1@@A o whatever is recorded in the %rinci%al o ice would be collected b& the $;< having 4urisdiction over the %rinci%al o ice. 9or mobile sales in Talisa& #it&, nobod& reall& owns it. There,s no branch o%erating, there ore, automaticall&, it has to be recorded in the %rinci%al o ice. )o the 1@m recei%ts will be recorded to the %rinci%al o ice in #ebu #it& 1@@A in the absence 9-"-. Talisa& #it& 0 @ #ebu #it& 0 1@@A o !@m recei%ts

Rule 3: In the case o manu acturers, contractors, %roducers, and ex%orters having 9-"-, %roceeds shall be allocated as ollows: 3@A o sales recorded in the %rinci%al o ice shall be made taxable b& the cit&Jmunici%alit& where the %rinci%al o ice is located H@A shall be taxable b& the cit&Jmunici%alit& where the 9-"- is located

Rule .: In case the %lantation is located in a %lace other than the %lace where the actor& is located, the H@A in Rule 3 will be divided as ollows: L@A to the cit&Jmunici%alit& where the actor& is located .@A to the cit&Jmunici%alit& where the %lantation is located o o *henever there,s a actor& andJor %lantation o%erated b& the %rinci%al o ice, it will automaticall& share in whatever is re lected or recorded as sales b& the %rinci%al o ice. I$$<)TR1TI"2: In #ebu #it&, there,s a %rinci%al o ice. There were sales made in Talisa& #it&, no sales o ice, no branch, no dis%la& area, but %robabl& mobile car selling stock. #ebu #it& generated 1@m recei%ts, and Talisa& #it& generated 1@m recei%ts. There,s a actor& in $a%u! #it& with @ sales. There,s a %lantation in Bogo #it& with @ sales. *hich $;< has the right to collect taxes on the 1!@m+ #ebu #it& 0 3@A o !@m $a%u! and Bogo #it& 0 H@A o !@m subdivided into: $a%u! #it& 0 L@A o H@A X .!A o !@m Bogo #it& 0 .@A o H@A X !BA o !@m

Is there a di erence between %lant and %lantation+ o =3).

-age 1!3 o 186

*hat,s a %lant+ -lant is similar to a actor&.

-ro4ect o ice+ #onstruction %ro4ects, etcQ

)ame acts in the %receding illustration but 1 additional act: I in Bogo #it&, there,s a %lantation and there,s also a branch, which generated 3@m sales, how much o the gross recei%ts will have to be declared be ore Bogo #it&+ o Bogo #it& 0 1@@A o 3@m 1lwa&s the actor& and the %lantation will share in the records o the %rinci%al o ice but i at all, it will be o%erating its own branch in the same localit& where the 9-"- is located, the entire %roceeds o the branch will be re%orted to the $;< where that 9-"- is located.

Rule /: In case o ! or more 9-"- in di erent localities, the H@A shall be %rorated among the localities where the 9-"- are located in %ro%ortion to their res%ective volume o %roduction.

#ollecting authorit& 6)ec. 1H@7 o #9C. <J?. Collection of Local Revenues by Treasurer. ' *ll local taxes, fees, and charges shall be collected by the provincial, city, municipal, or barangay treasurer, or their duly authori!ed deputies. The provincial, city or municipal treasurer may designate the barangay treasurer as his deputy to collect local taxes, fees, or charges. In case a bond is re"uired for the purpose, the provincial, city or municipal government shall pay the premiums thereon in addition to the premiums of bond that may be re"uired under this Code. The collection o taxes B= the $;<s shall be under the local treasurers or ever& $;<.

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3xamination o books o accounts 6)ec. 1H17 o #9C. <J<. 9xamination of +ooks of *ccounts and ertinent Records of +usinessmen by Local Treasurer. ' The provincial, city, municipal or barangay treasurer may, by himself or through any of his deputies duly authori!ed in (riting, examine the books, accounts, and other pertinent records of any person, partnership, corporation, or association sub.ect to local taxes, fees and charges in order to ascertain, assess, and collect the correct amount of the tax, fee, or charge. #uch examination shall be made during regular business hours, only once for every tax period, and shall be certified to by the examining official. #uch certificate shall be made of record in the books of accounts of the taxpayer examined. In case the examination herein authori!ed is made by a duly authori!ed deputy of the local treasurer, the (ritten authority of the deputy concerned shall specifically state the name, address, and business of the taxpayer (hose books, accounts, and pertinent records are to be examined, the date and place of such examination, and the procedure to be follo(ed in conducting the same. 3or this purpose, the records of the revenue district office of the +ureau of Internal Revenue shall be made available to the local treasurer, his deputy or duly authori!ed representative. $;<s have the right to examine the books o accounts o ever& entit& covered b& it. *hat are the rules in the examination o the books o accounts and how long would T-s be re:uired to kee% their books o accounts+ / &ears. 1lthough the law does not sa& that &ou have to kee% &our books o accounts or / &ears, since the assessment %eriod is / &ears, it,s im%liedl& re:uired that &ou kee% &our books o account or / &ears.

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3xamination o the books o accounts can be %er ormed how man& times during the &ear+ "nce ever& tax %eriod

)urcharges and %enalties on un%aid taxes 6)ec. 1LB7 o #9C. <G%. #urcharges and enalties on >npaid Taxes, 3ees, or Charges. ' The sanggunian may impose a surcharge not exceeding t(enty'five percent @$FNA of the amount of taxes, fees or charges not paid on time and an interest at the rate not exceeding t(o percent @$NA per month of the unpaid taxes, fees or charges including surcharges, until such amount is fully paid but in no case shall the total interest on the unpaid amount or portion thereof exceed thirty'six @=GA months. *ould the local treasurer be allowed to im%ose surcharges and %enalties and on what instances+ =3), i the taxes are not %aid on time. )urcharge o +

-age 1!4 o 186

!/A o the taxes not %aid on time and an interest rate not exceeding !A %er month o the un%aid taxes including surcharges I &ou,ve been ound de icient in %a&ing &our taxes or the %ast / &ears, can the government collect interest o !A %er month dating back / &ears rom toda&+ o o 2", because the total interest on the un%aid amount should not exceed 3L months. 1lthough the $;<s are allowed to assess within / &ears, so that means to sa& that &our books o accounts and &our tax liabilities would remain o%en or tax examination or as long as / &ears, the im%osition o interest could onl& be u% to 3L months o de icienc&. *hat is %eculiar is that surcharges are actuall& com%uted o interest also. The basis o interest is not onl& the tax de icienc& but also the surcharges as well.

o Retirement o business 6)ec. 1./7 o

#9C. <CF. C Retirement of +usiness. ' * business sub.ect to tax pursuant to the preceding sections shall, upon termination thereof, submit a s(orn statement of its gross sales or receipts for the current year. If the tax paid during the year be less than the tax due on said gross sales or receipts of the current year, the difference shall be paid before the business is considered officially retired. I$$<)TR1TI"2: I &ou retire &our business toda& 9eb. 1H, !@11 and &ou,ve alread& %aid &our $BT last (an. !@, !@11 or the gross recei%ts o !@1@, will &ou still be re:uired to %a& $BT u%on retirement+ IT '3-32'). I the tax %aid during the &ear be less than the tax due on the gross sales or recei%ts o the current &ear, the di erence shall be %aid be ore the business is considered o iciall& retired. I the tax %aid during the &ear be more than the tax due on the gross sales or recei%ts o the current &ear, not liable or the di erence.

3>1?-$3: (an. 1, !@11 until 9eb. 1H, !@11, &ou have sales and such sales could be sub4ect to tax o Lm and &ou alread& %aid Bm on (an. !@, !@11 or &our gross recei%ts in !@1@, will &ou be liable or $BT be ore &ou retire+ 2".

12"T83R 3>1?-$3: I on (an. 1, !@11 until 9eb. 1H, !@11, &ou have sales and such sales could be sub4ect to tax o 1!@k and &ou alread& %aid 1@@k on (an. !@, !@11 or &our gross recei%ts in !@1@, will &ou be liable or $BT be ore &ou retire+ =3), o the di erence o !@k.

I the taxes that could have been due rom the current &ear,s sales is higher than what &ou have %aid in the current &ear or the last &ear,s gross recei%ts, &ou will be liable to %a& the tax on the di erence. But i the taxes that is due or this current &ear,s sales, on the &ear o retirement, is lesser than the tax that &ou have %aid in the current &ear or the %rior &ear,s gross recei%ts, &ou do not need to %a& the di erence.

*hen &ou sa& terminate &our business, what do &ou mean b& terminate+ Termination o business or retirement o business under the $;# sim%l& means that &ou terminate &our business o%erations in a certain $;<. 6?"BI$ -8I$). #1)37 =ou need not entirel& dissolve &our business or cor%oration. I &ou trans er to another $;<, &ou,re considered as retired in the old $;< that &ou belong to.

TAX Feb. 22, 2011 Tuesday Retirement o business o *hen a business retires, or local taxation %ur%oses, it means that the business o%eration is entirel& terminated but not necessaril& the entire o%eration within the -hils. i it,s o%erating nationwide. *hat it sim%l& means is that the business is terminated in that $;< who has a right to im%ose the taxes. ?ere change o name o &our business or assum%tion o a new owner in &our business does not e:uate to retirement o business or %a&ment o local taxes.

-age 1!5 o 186

*h&+ #hange o name or assum%tion b& another owner sim%l& changes the records existing with the $;<. It does not mean that &our o%erations, &our gross sales, &our gross recei%ts or the &ear has changed. =ou,re continuall& o%erational.

I$$<)TR1TI"2: $ets assume that &our business retired toda& 9eb. !!, !@11. In !@1@, &our gross recei%ts is 1@@m. 1ssuming &ou,re a wholesaler, &our tax will be /@@k 6/@A o 1A7 and &ou alread& %aid the /@@k tax or gross recei%ts o !@1@ on (an. !@, !@11. I &ou decide to retire &our business toda& 9eb. !!, !@11 and &our sales is alread& around /@m or ! months 6 rom (an. 1, !@11 to 9eb. !!, !@117. )o &our tax due as o 9eb. !!, !@11 is !/@k. 1re &ou liable or $BT be ore &ou will be considered as o iciall& retired b& the $;< in !@11+ 2", because under the $;#, it %rovides that i the tax due %aid during the current &ear is greater than the tax due or the current &ear,s gross recei%ts, no need to %a&. Reverse, i the tax due %aid during the current &ear is less than the tax due or the current &ear,s gross recei%ts, the di erence will have to be %aid.

12"T83R I$$<)TR1TI"2: /@@k is the tax due or the %receding calendar &ear,s gross recei%ts. !/@k is the tax due or the current &ear,s gross recei%ts. "n (an. 1, !@11, &ou o%ted to %a& the tax due or gross recei%ts o !@1@ in installments and &ou retired &our business toda& 9eb. !!, !@11. *ill &ou be retired without %a&ing $BT+ 'ba, ever& (an. 1, the tax would accrue. "n or be ore (an. !@, &ou have to %a& the $BT or the %receding &ear,s gross recei%ts but &ou have the o%tion to %a& it in installments. =ou decided to %a& onl& the 1 st installment o 1!/k on (an. !@ and the succeeding installments would be on the res%ective due dates. But &ou did not reach the ! nd :uarter installment. =ou retired &our business. *ill &ou be retired without %a&ing additional $BT+ 2", because the law %rovides that what &ou have to com%are is the tax %aid during the current &ear. 8ave &ou %aid the /@@k+ 2ot &et. =ou onl& %aid 1!/k. )o &ou still have to %a& the remaining 3H/k.

2ot all businesses, which retire, will have additional %a&ment o taxes. I &ou retire earl&, there,s a big chance that &ou are not going to %a& additional taxes assuming that the growth o &our sales or recei%ts would be the same as that o the %receding &ear. I &ou retire in 2ovember, %robabl&, &ou will be %a&ing additional taxes i &our sales (an. to 2ov. is higher than &our (an. to 'ec. last &ear. ?"BI$ #1)3: 4n the year an establishment retires or terminates its business (ithin the municipality, it (ould be re"uired to pay the difference in the amount if the tax collected, based on the previous year2s gross sales or receipts, is less than the actual tax due based on the current year2s gross sales or receipts. 3or the year <BB%, petitioner paid a total of $,$G$,<$$.C% to the City Treasurer of :akati as business taxes for the year <BB%. The amount of tax as computed based on petitioner2s gross sales for <BB% is only <,==<,G=%.%C. #ince the amount paid is more than the amount computed based on petitioner2s actual gross sales for <BB%, petitioner upon its retirement is not liable for additional taxes to the City of :akati. Thus, (e find that the respondent erroneously treated the assessment and collection of business tax as if it (ere income tax, by rendering an additional assessment of <,==<,G=%.%C for the revenue generated for the year <BB%.

#. #it& 6)ec. 1/17 #9C. <F<. #cope of Taxing o(ers. ' 9xcept as other(ise provided in this Code, the city, may levy the taxes, fees, and charges (hich the province or municipality may impose; rovided, ho(ever, That the taxes, fees and charges levied and collected by highly urbani!ed and independent component cities shall accrue to them and distributed in accordance (ith the provisions of this Code. The rates of taxes that the city may levy may exceed the maximum rates allo(ed for the province or municipality by not more than fifty percent @F?NA except the rates of professional and amusement taxes. The cities have the right to im%ose taxes /@A higher than what the munici%alities and %rovinces can im%ose exce%t or: o o 1. -ro essional tax !. 1musement tax -T and 1T remains ixed at what the $;# %rovides. The cit& cannot im%ose higher than what the munici%alities and %rovinces can im%ose.

-age 1!6 o 186

'. Baranga&s 6)ec. 1/!7 *hat is the sco%e o the taxing %ower o the baranga&s+ o 1. Taxes on )tores or Retailers Taxes ' 4n stores or retailers (ith fixed business establishments (ith gross sales or receipts of the preceding calendar year of 3ifty thousand pesos @ RF?,???.??A or less, in the case of cities and Thirty thousand pesos @ R=?,???.??A or less, in the case of municipalities, at a rate not exceeding one percent @<NA on such gross sales or receipts. *hat kind o tax is this+ Is this a tax on the business+ =3).

*hat is the %ower o the baranga& to im%ose taxes on business retailers+ Is that not covered alread& b& the munici%alities and cities+ 2"T #"K3R3' In this instance, the baranga& %re-em%ts the cities and munici%alities rom taxing retailers whose gross recei%ts do not exceed /@k or 3@k in cities or munici%alities res%ectivel&. This is exactl& the same tax that are im%osed b& cities and munici%alities exce%t that i the %roceeds o or gross recei%ts o the retailers is /@k or less located within the cit& or 3@k or less located within the munici%alit&, the exclusive right to tax belongs to the baranga&. o I more than /@k or more than 3@k, exclusive right alls to the munici%alities and the cities.

*hen &ou sa& retailers, it has a ixed %lace o business unlike %eddlers. 1nd i &ou notice as well, the rate im%osed is 1A.

!. )ervice 9ees or #harges #ervice 3ees or Charges ' barangays may collect reasonable fees or charges for services rendered in connection (ith the regulation or the use of barangay'o(ned properties or service facilities such as palay, copra, or tobacco dryers. 1n& service that ma& be rendered b& the baranga& itsel , it can collect charges and ees.

3. Baranga& #learance +arangay Clearance ' &o city or municipality may issue any license or permit for any business or activity unless a clearance is first obtained from the barangay (here such business or activity is located or conducted. 3or such clearance, the sangguniang barangay may impose a reasonable fee. The application for clearance shall be acted upon (ithin seven @JA (orking days from the filing thereof. In the event that the clearance is not issued (ithin the said period, the city or municipality may issue the said license or permit. I there,s inaction b& the baranga& to issue the clearance a ter valid a%%lication b& the T-, the cit& ma&or,s o ice or the munici%al ma&or,s o ice can %roceed to issue the ma&or,s %ermit. The ee or baranga& clearance is not ixed. It varies rom baranga& to baranga&.

.. "ther 9ees and #harges 4ther 3ees and Charges ' The barangay may levy reasonable fees and charges; @<A 4n commercial breeding of fighting cocks, cockfights and cockpits0 @$A 4n places of recreation (hich charge admission fees0 and o 3>1?-$3: 'iscoral

@=A 4n billboards, signboards, neon signs, and outdoor advertisements.

XI# A&-=%$0-7 %* LGU) -% A(C&)- R,-.) %* T,> O$(0','1.) :S.1# 1 1<

-age 1!7 o 186

#9C. <B<. *uthority of Local Government >nits to *d.ust Rates of Tax ordinances. ' Local government units shall have the authority to ad.ust the tax rates as prescribed herein not oftener than once every five @FA years, but in no case shall such ad.ustment exceed ten percent @<?NA of the rates fixed under this Code. 2ot o tener than once ever& / &ears, the rates ma& be increased but such ad4ustments or increase shall not exceed 1@A o the rates ixed. The increase in the rates o not more than 1@A can onl& ha%%en once in ever& / &ears.

XII# C%//&'0-7 T,> :S.1)# 156;164< *hich o the . $;<s can collect or im%ose the communit& tax 6#T7+ o o "nl& cities or munici%alities 9or baranga&s, the& can collect but the& can,t im%ose #T.

"nl& cities and munici%alities have the right to im%ose #T on individual T-s or 4uridical T-s but the& can de%utiDe the baranga& treasurer in the collection o taxes. o I the baranga& is de%utiDed to collect the #T, there will be /@-/@ sharing o the %roceeds.

#overed T-s: o 1. Individual *ould all o &our classmates in Room .@3 be liable or #T+ 2". *h&+ *hat are the re:uirements to be liable or #T+ o o o 1. 1n inhabitant o the -hils. !. 1B &ears o age or over 3. 9alling under an& o the ollowing . categories: i. *ho has been regularl& em%lo&ed on a wage or salar& basis or at least 3@ consecutive working da&s during an& calendar &ear, or ii. *ho is engaged in business or occu%ation, or iii. *ho owns real %ro%ert& with an aggregate assessed value o 1k or more, or iv. *ho is re:uired b& law to ile an income tax return

I$$<)TR1TI"2: I &ou,re a minor earning income rom commercial modeling, will &ou be liable to %a& the #T+ o 2", because &ou,re not 1B &ears o age or over.

TR<3 "R 91$)3: 2R1s-23TB are not liable or #T. o o 91$)3, because he ma& be liable or #T under transient visitors whose sta& in the -hils. exceeds 3 months. 2R1s-23TB ma& or ma& not be liable because the exem%tion granted under the $;# extends onl& to transient visitors whose sta& in the -hils. does not exceed 3 months while the de inition o 2R1-23TB is one whose sta& in the -hils. does not exceed 1B@ da&s. )o there,s no wa& reall& o sa&ing that he,s absolutel& exem%t or absolutel& not exem%t.

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!. (uridical %ersons

3xem%tions granted: o o 1. 1bsolute exem%tion 0 'i%lomatic and consular re%resentatives !. Relative exem%tion 0 Transient visitors when their sta& in the -hili%%ines does not exceed 3 months I the transient visitor exceeds the 3 months maximum %eriod %rovided b& law, then, the exem%tion is lost.

-age 1!8 o 186

)imilar to other exem%tions, which are %artial exem%tions lang, i &ou,re still 1H &ears o age, &ou,re exem%t. But i &ou turn 1B an& time during the &ear, because #T is taken on a &ear-to-&ear basis, i &ou,re 1H in (anuar&, it does not mean that or the entire &ear &ou will be exem%t. *hat i &ou turn 1B in 9ebruar&, &ou will be sub4ect to #T nah, assuming &ou all under the . categories abovementioned.

8ow much do &ou have to %a& as an individual T- or #T+ o o 1n annual #T o / and an annual additional tax o 1 or ever& 1k o income regardless o whether rom business, exercise o %ro ession or rom %ro%ert& which in no case shall exceed /k. I$$<)TR1TI"2: =ou have a 1@m real %ro%ert&. =ou have no other income. 8ow much #T will &ou %a&+ /,@@/. It could have been 1@k but since the maximum is /k, %lus the / ixed amount, then the total #T is /,@@/.

*ould all cor%orations, both domestic and oreign cor%orations, be liable or #T+ o o o 2". "nl& '# and R9# are liable or #T. 2"T3: 2o cor%oration shall be issued a ma&or,s %ermit i no %roo o #T %a&ment is given to the local treasurer. 'oes it mean to sa& that aside rom 2R9#s, all cor%orations, '#s and R9#s, are liable or #T+ "r do &ou know o an& existing exem%tion granted to %articular cor%orations rom %a&ment o #T+ There are exem%tions: 1. #oo%eratives dul& registered under the #'1 o $;# %rovides or absolute exem%tion rom all local taxes to such coo%eratives.

!. #or%orations located within the economic Dones o The&,re granted exem%tion rom all local and national taxes in lieu o %a&ing the /A income tax on their gross income.

8ow do &ou com%ute the #T o 4uridical T-s+ 1n annual #T o /@@ and an annual additional tax, which, in no case, shall exceed 1@k in accordance with the ollowing schedule: 617 9or ever& /k worth o real %ro%ert& in the -hili%%ines owned b& it during the %receding &ear based on the valuation used or the %a&ment o the real %ro%ert& tax under existing laws, ound in the assessment rolls o the cit& or munici%alit& where the real %ro%ert& is situated 0 !C and 6!7 9or ever& /k o gross recei%ts or earnings derived b& it rom its business in the -hili%%ines during the %receding &ear - !. The dividends received b& a cor%oration rom another cor%oration however shall, or the %ur%ose o the additional tax, be considered as %art o the gross recei%ts or earnings o said cor%oration.

(uridical T-s o #T shall be liable or a basic annual tax o /@@ %lus or an& income, or an& real %ro%ert& owned, or or an& dividends received, will be liable or ! %esos or ever& raction o /k. )o or ever& raction o /k income, /k 9?K o real %ro%ert&, or /k dividend, there will be ! %eso additional #T. But not exceeding 1@k. )o multinational cor%orations are liable onl& to the extent o 1@,/@@ as #T.

*here do &ou %a& &our #T+ o The communit& tax shall be %aid in the %lace o residence o the individual, or in the %lace where the %rinci%al o ice o the 4uridical entit& is located.

*hen are &ou liable to %a& the #T+ o The community tax shall accrue on the first @<stA day of /anuary of each year (hich shall be paid not later than the last day of 3ebruary of each year. If a person reaches the age of eighteen @<%A years or other(ise loses the benefit of exemption on or before the last day of /une, he shall be liable for the community tax on the day he reaches such age or upon the day the exemption ends. Ho(ever, if a person reaches the age of eighteen @<%A years or loses the benefit of exemption on or before the last day of :arch, he shall have t(enty @$?A days to pay the community tax (ithout becoming delin"uent. ersons (ho come to reside in the hilippines or reach the age of eighteen @<%A years on or after the first @<stA day of /uly of any year, or (ho cease to belong to an exempt class on or after the same date, shall not be sub.ect to the community tax for that year.

-age 1! o 186

Corporations established and organi!ed on or before the last day of /une shall be liable for the community tax for that year. +ut corporations established and organi!ed on or before the last day of :arch shall have t(enty @$?A days (ithin (hich to pay the community tax (ithout becoming delin"uent. Corporations established and organi!ed on or after the first day of /uly shall not be sub.ect to the community tax for that year. If the tax is not paid (ithin the time prescribed above, there shall be added to the unpaid amount an interest of t(enty'four percent @$CNA per annum from the due date until it is paid. It accrues (an. 1 but is %a&able on or be ore the last da& o 9eb. *hat ha%%ens i &ou turn 1B with an income a ter 9eb. !B nah or &ou organiDed a business a ter 9eb. !B, when are &ou liable to %a& the #T+ IT '3-32'): I it ha%%ens within ?arch 1 until ?arch 31, then he shall have !@ da&s rom the da& he reaches the age o 1B or otherwise loses the bene it o exem%tion to %a& the #T without becoming delin:uent. I it ha%%ens within 1%ril 1 until (une 3@, then he shall %a& the #T on the da& he reaches the age o 1B or otherwise loses the bene it o exem%tion. I it ha%%ens on or a ter (ul& 1 6within (ul& 1 until 'ec. 317, he shall not be sub4ect to #T or that &ear.

o o

9or delin:uenc& or late %a&ment, how much will the $;< collect+ The #T due %lus an additional interest o !.A %er annum rom the due date until it is %aid

TAX Feb. 23, 2011 Wednesday XII# G%4.$'/.'- R./.(0.) *%$ C%55.1-0%' %* T,> D.50'D&.'10.)9 F..)9 C=,$A.) ,'( O-=.$ R.4.'&.) :S.1)# 172;185< *hat is the government,s remed& o lien inso ar as local taxes are concerned and how is it en orced+ o #9C. <J=. Local Government6s Lien. ' Local taxes, fees, charges and other revenues constitute a lien, superior to all liens, charges or encumbrances in favor of any person, enforceable by appropriate administrative or .udicial action, not only upon any property or rights therein (hich may be sub.ect to the lien but also upon property used in business, occupation, practice of profession or calling, or exercise of privilege (ith respect to (hich the lien is imposed. The lien may only be extinguished upon full payment of the delin"uent local taxes fees and charges including related surcharges and interest. *hen does the lien o the government begin to attach+ o 9rom the time the %a&ment o the local tax is due and there,s non-%a&ment.

The $;<s, through its local treasurer, can en orce the remed& o lien b& instituting a 4udicial action or an administrative action.

To what kind o %ro%ert& would the lien be attached+ o o 2ot onl& u%on an& %ro%ert& or rights therein which ma& be sub4ect to the lien but also u%on %ro%ert& used in business, occu%ation, %ractice o %ro ession or calling, or exercise o %rivilege The law sa&s that the lien shall not onl& attach u%on an& %ro%ert& or rights, which the sub4ect lien ma& attach, but also all other %ro%erties o the T- that is used in business, occu%ation or %ractice o %ro ession. )o long as it,s insu icient to answer the taxes, charges and ees that are due, it would extend to an& other %ro%erties regardless o the ownershi% so long as that %ro%ert& is used in trade, business, occu%ation or %ractice o %ro ession.

1dministrative action, how+

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1. B& distraint #9C. <JF. )istraint of ersonal roperty. ' The remedy by distraint shall proceed as follo(s; @aA #ei!ure ' >pon failure of the person o(ing any local tax, fee, or charge to pay the same at the time re"uired, the local treasurer or his deputy may, upon (ritten notice, sei!e or confiscate any personal property belonging to that person or any personal property sub.ect to the lien in sufficient "uantity to satisfy the tax, fee, or charge in "uestion, together (ith any increment thereto incident to delin"uency and the expenses of sei!ure. In such case, the local treasurer or his deputy shall issue a duly authenticated certificate based upon the records of his office sho(ing the fact of delin"uency and the amounts of the tax, fee, or charge and penalty due. #uch certificate shall serve as sufficient (arrant for the distraint of personal property aforementioned, sub.ect to the taxpayer6s right to claim exemption under the provisions of existing la(s. )istrained personal property shall be sold at public auction in the manner herein provided for. @bA *ccounting of distrained goods ' The officer executing the distraint shall make or cause to be made an account of the goods, chattels or effects distrained, a copy of (hich signed by himself shall be left either (ith the o(ner or person from (hose possession the goods, chattels or effects are taken, or at the d(elling or place of business of that person and (ith someone of suitable age and discretion, to (hich list shall be added a statement of the sum demanded and a note of the time and place of sale. @cA ublication ' The officer shall forth(ith cause a notification to be exhibited in not less than three @=A public and conspicuous places in the territory of the local government unit (here the distraint is made, specifying the time and place of sale, and the articles distrained. The time of sale shall not be less than t(enty @$?A days after notice to the o(ner or possessor of the property as above specified and the publication or posting of the notice. 4ne place for the posting of the notice shall be at the office of the chief executive of the local government unit in (hich the property is distrained. 2"T3: 'istraint does not re:uire %ublication in a news%a%er.

@dA Release of distrained property upon payment prior to sale ' If at any time prior to the consummation of the sale, all the proper charges are paid to the officer conducting the sale, the goods or effects distrained shall be restored to the o(ner. @eA rocedure of sale ' *t the time and place fixed in the notice, the officer conducting the sale shall sell the goods or effects so distrained at public auction to the highest bidder for cash. 1ithin five @FA days after the sale, the local treasurer shall make a report of the proceedings in (riting to the local chief executive concerned. #hould the property distrained be not disposed of (ithin one hundred and t(enty @<$?A days from the date of distraint, the same shall be considered as sold to the local government unit concerned for the amount of the assessment made thereon by the Committee on *ppraisal and to the extent of the same amount, the tax delin"uencies shall be cancelled. #aid Committee on *ppraisal shall be composed of the city or municipal treasurer as chairman, (ith a representative of the Commission on *udit and the city or municipal assessor as members. @fA )isposition of proceeds ' The proceeds of the sale shall be applied to satisfy the tax, including the surcharges, interest, and other penalties incident to delin"uency, and the expenses of the distraint and sale. The balance over and above (hat is re"uired to pay the entire claim shall be returned to the o(ner of the property sold. The expenses chargeable upon the sei!ure and sale shall embrace only the actual expenses of sei!ure and preservation of the property pending the sale, and no charge shall be imposed for the services of the local officer or his deputy. 1here the proceeds of the sale are insufficient to satisfy the claim, other property may, in like manner, be distrained until the full amount due, including all expenses, is collected. ?a& the %ro%erties sub4ect o the distraint be sold or other than cash %a&ment+ ?a& it be sold on credit, on exchange, or other modes o transaction+ 2". It must be sold on cash. The %ublic auction sale must result to selling it to the highest bidder or cash and not in an& other mode o %a&ment. o o o But not in all cases that it is sold to the highest bidder because there ma& be no bidder or the highest bid ma& be insu icient to %a& the taxes, charges and ees due. 1ssuming that there is a bidder, then, it will be used to %a&-o the taxes, ees, and charges. 1n& excess will be returned back to the T-. I there,s no bidder, it shall be considered as sold to the $;< concerned.

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I$$<)TR1TI"2: I &ou,re the T-. =ou,re the owner o the business. =ou were issued an assessment notice or /m. &our %ro%erties were distrained. There was no bidder during the %ublic auction. 8ere, the %ro%erties will be considered as sold to the $;<. 9or how much+ Is it /m and then case closed+ 2", not /m but or the amount o the assessment made b& the #ommittee on 1%%raisal. o o 2"T3: The term EassessmentF does not re er to the assessment notice that was issued to the T-. It is a subse:uent assessment a ter the %ublic auction where there was no bidder. -<R-")3 o the assessment: To a%%raise the value o the %ro%ert& that will be considered as sold. I the value o the %ersonal %ro%ert& as assessed b& the #ommittee on 1%%raisal is onl& .m and &our outstanding liabilit& is /m in taxes %lus charges, the government would still have the right to en orce another administrative action or %roceed with 4udicial action. I the value o the %ersonal %ro%ert& as assessed b& the #ommittee on 1%%raisal considered as sold to the $;< is more than the tax liabilit&, then the $;< has to return the excess.

!. B& lev& #9C. <JG. Levy on Real roperty . ' *fter the expiration of the time re"uired to pay the delin"uent tax, fee, or charge, real property may be levied on before, simultaneously, or after the distraint of personal property belonging to the delin"uent taxpayer. To this end, the provincial, city or municipal treasurer, as the case may be, shall prepare a duly authenticated certificate sho(ing the name of the taxpayer and the amount of the tax, fee, or charge, and penalty due from him. #aid certificate shall operate (ith the force of a legal execution throughout the hilippines. Levy shall be effected by (riting upon said certificate the description of the property upon (hich levy is made. *t the same time, (ritten notice of the levy shall be mailed to or served upon the assessor and the Registrar of )eeds of the province or city (here the property is located (ho shall annotate the levy on the tax declaration and certificate of title of the property, respectively, and the delin"uent taxpayer or, if he be absent from the hilippines, to his agent or the manager of the business in respect to (hich the liability arose, or if there be none, to the occupant of the property in "uestion. In case the levy on real property is not issued before or simultaneously (ith the (arrant of distraint on personal property, and the personal property of the taxpayer is not sufficient to satisfy his delin"uency, the provincial, city or municipal treasurer, as the case may be, shall (ithin thirty @=?A days after execution of the distraint, proceed (ith the levy on the taxpayer6s real property. * report on any levy shall, (ithin ten @<?A days after receipt of the (arrant, be submitted by the levying officer to the sanggunian concerned. 1 ter the execution o the dul& authenticated certi icate showing the name o the T- and the amount o liabilit&, what must the $;< do be ore the %ublic advertisement o the auction sale+ There,s a need to serve the notice o the warrant o lev&. The 3 %ersons who must be noti ied o the issuance o lev& are the ollowing: o o o 1. $ocal assessor 0 or the %ur%ose o annotating the lev& on the tax declaration o the R!. R' 0 or the %ur%ose o annotating the lev& on the certi icate o title o the R3. "wner o the %ro%ert& himsel , or in the absence o the owner, his dul& authoriDed re%resentative or agent

#9C. <J%. *dvertisement and #ale. ' 1ithin thirty @=?A days after levy, the local treasurer shall proceed to publicly advertise for sale or auction the property or a usable portion thereof as may be necessary to satisfy the claim and cost of sale0 and such advertisement shall cover a period of at least thirty @=?A days. It shall be effected by posting a notice at the main entrance of the municipal building or city hall, and in a public and conspicuous place in the barangay (here the real property is located, and by publication once a (eek for three @=A (eeks in a ne(spaper of general circulation in the province, city or municipality (here the property is located. The advertisement shall contain the amount of taxes, fees or charges, and penalties due thereon, and the time and place of sale, the name of the taxpayer against (hom the taxes, fees, or charges are levied, and a short description of the property to be sold. *t any time before the date fixed for the sale, the taxpayer may stay the proceedings by paying the taxes, fees, charges, penalties and interests. If he fails to do so, the sale shall proceed and shall be held either at the main entrance of the provincial, city or municipal building, or on the property to be sold, or at any other place as determined by the local treasurer conducting the sale and specified in the notice of sale. 1ithin thirty @=?A days after the sale, the local treasurer or his deputy shall make a report of the sale to the sanggunian concerned, and (hich shall form part of his records. *fter consultation (ith the sanggunian, the local treasurer shall make and deliver to the purchaser a certificate of sale, sho(ing the proceedings of the sale, describing the property sold, stating the name of the purchaser and setting out the exact

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amount of all taxes, fees, charges, and related surcharges, interests, or penalties; rovided, ho(ever, That any excess in the proceeds of the sale over the claim and cost of sales shall be turned over to the o(ner of the property. The local treasurer may, by ordinance duly approved, advance an amount sufficient to defray the costs of collection by means of the remedies provided for in this Title, including the preservation or transportation in case of personal property, and the advertisement and subse"uent sale, in cases of personal and real property including improvements thereon. 2"T3: There must be %ublication in case o lev&. In cases o lev&, since it involves real %ro%ert&, it re:uires not onl& %osting o the notice o sale in cons%icuous %ublic %laces but it also re:uires the %ublication o such notice once a week or 3 consecutive weeks. In both cases o lev& and distraint, the T- ma& alwa&s %a& or sto% the auction sale b& settling his obligations, tax liabilities, ees and charges. 1ssuming that the T- is unable to %a& his obligation, %ublic auction will %roceed.

#9C. <JB. Redemption of roperty #old. ' 1ithin one @<A year from the date of sale, the delin"uent taxpayer or his representative shall have the right to redeem the property upon payment to the local treasurer of the total amount of taxes, fees, or charges, and related surcharges, interests or penalties from the date of delin"uency to the date of sale, plus interest of not more than t(o percent @$NA per month on the purchase price from the date of purchase to the date of redemption. #uch payment shall invalidate the certificate of sale issued to the purchaser and the o(ner shall be entitled to a certificate of redemption from the provincial, city or municipal treasurer or his deputy. The provincial, city or municipal treasurer or his deputy, upon surrender by the purchaser of the certificate of sale previously issued to him, shall forth(ith return to the latter the entire purchase price paid by him plus the interest of not more than t(o percent @$NA per month herein provided for, the portion of the cost of sale and other legitimate expenses incurred by him, and said property thereafter shall be free from the lien of such taxes, fees, or charges, related surcharges, interests, and penalties. The o(ner shall not, ho(ever, be deprived of the possession of said property and shall be entitled to the rentals and other income thereof until the expiration of the time allo(ed for its redemption. #9C. <%?. 3inal )eed to urchaser. ' In case the taxpayer fails to redeem the property as provided herein, the local treasurer shall execute a deed conveying to the purchaser so much of the property as has been sold, free from liens of any taxes, fees, charges, related surcharges, interests, and penalties. The deed shall succintly recite all the proceedings upon (hich the validity of the sale depends. #9C. <%<. urchase of roperty +y the Local Government >nits for 1ant of +idder. ' In case there is no bidder for the real property advertised for sale as provided herein, or if the highest bid is for an amount insufficient to pay the taxes, fees, or charges, related surcharges, interests, penalties and costs, the local treasurer conducting the sale shall purchase the property in behalf of the local government unit concerned to satisfy the claim and (ithin t(o @$A days thereafter shall make a report of his proceedings (hich shall be reflected upon the records of his office. It shall be the duty of the Registrar of )eeds concerned upon registration (ith his office of any such declaration of forfeiture to transfer the title of the forfeited property to the local government unit concerned (ithout the necessity of an order from a competent court. 1ithin one @<A year from the date of such forfeiture, the taxpayer or any of his representative, may redeem the property by paying to the local treasurer the full amount of the taxes, fees, charges, and related surcharges, interests, or penalties, and the costs of sale. If the property is not redeemed as provided herein, the o(nership thereof shall be fully vested on the local government unit concerned. #9C. <%$. Resale of Real 9state Taken for Taxes, 3ees, or Charges. ' The sanggunian concerned may, by ordinance duly approved, and upon notice of not less than t(enty @$?A days, sell and dispose of the real property ac"uired under the preceding section at public auction. The proceeds of the sale shall accrue to the general fund. In case there,s a bidder or whatever %rice it is, whether it,s ver& low than the 9?K, it would not reall& invalidate the sale because the T- is given the o%tion to redeem the %ro%ert& within 1 &ear. But in case there,s no bidder or the highest bid %rice is insu icient to %a& the taxes, ees and charges, the local treasurer will %urchase it in avor o the $;< and a subse:uent resale ma& ha%%en within !@ da&s.

-ro%erties exem%t rom distraint or lev& o #9C. <%F. ersonal roperty 9xempt from )istraint or Levy. ' The follo(ing property shall be exempt from distraint and the levy, attachment or execution thereof for delin"uency in the payment of any local tax, fee or charge, including the related surcharge and interest; @aA Tools and the implements necessarily used by the delin"uent taxpayer in his trade or employment0

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(udicial 1ction o

@bA 4ne @<A horse, co(, carabao, or other beast of burden, such as the delin"uent taxpayer may select, and necessarily used by him in his ordinary occupation0 @cA His necessary clothing, and that of all his family0 @dA Household furniture and utensils necessary for housekeeping and used for that purpose by the delin"uent taxpayer, such as he may select, of a value not exceeding Ten thousand pesos @ R<?,???.??A0 @eA rovisions, including crops, actually provided for individual or family use sufficient for four @CA months0 @fA The professional libraries of doctors, engineers, la(yers and .udges0 @gA 4ne fishing boat and net, not exceeding the total value of Ten thousand pesos @ R<?,???.??A, by the la(ful use of (hich a fisherman earns his livelihood0 and @hA *ny material or article forming part of a house or improvement of any real property.

#9C. <%=. Collection of )elin"uent Taxes, 3ees, Charges or other Revenues through /udicial *ction. ' The local government unit concerned may enforce the collection of delin"uent taxes, fees, charges or other revenues by civil action in any court of competent .urisdiction. The civil action shall be filed by the local treasurer (ithin the period prescribed in #ection <BC of this Code. *hat court, usuall&, has the 4urisdiction on local tax collection %roceedings+ The regular courts de%ending on the amount: o o I more than 3@@k 0 RT# I 3@@k or less 0 ?T#

1ssessment and #ollection -eriod o $ocal Taxes o #9C. <BC. eriods of *ssessment and Collection. ' @aA Local taxes, fees, or charges shall be assessed (ithin five @FA years from the date they became due 6and %a&able, regardless o when &ou actuall& %aid the tax or when &ou actuall& iled or the renewal o &our business %ermit7 . &o action for the collection of such taxes, fees, or charges, (hether administrative or .udicial, shall be instituted after the expiration of such period; rovided, That, taxes, fees or charges (hich have accrued before the effectivity of this Code may be assessed (ithin a period of three @=A years from the date they became due. @bA In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may be assessed (ithin ten @<?A years from discovery of the fraud or intent to evade payment. @cA Local taxes, fees, or charges may be collected (ithin five @FA years from the date of assessment by administrative or .udicial action. &o such action shall be instituted after the expiration of said period; rovided, ho(ever, That, taxes, fees or charges assessed before the effectivity of this Code may be collected (ithin a period of three @=A years from the date of assessment. *ithin how man& &ears ma& the $;< assess local taxes+ *ithin / &ears rom the date the& become due and %a&able. o 3>1?-$3: 9or $BT, when do the& become due+ o (anuar& !@ o ever& &ear. "r i it,s %a&able in installment basis, then the !@th da& o the 1st month o ever& :uarter.

o o

9or #T#, on 9eb. !B.

8owever, in case o raud or intent to evade the %a&ment o taxes, within 1@ &ears rom discover& o the raud or intent to evade %a&ment.

8ow about collection+ *hen should the government institute collection %roceedings, whether administrativel& or 4udiciall&+ *ithin / &ears rom the date o assessment. I$$<)TR1TI"2: 1ssuming there,s no assessment made. The local government %roceeded to collect the taxes via distraint or 4udicial %roceedings, without assessment. *hat is the %rescri%tive %eriod or collection+

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I no assessment is made 6in which case the $;< directl& %roceeded with the collection %roceedings, whether administrativel& or 4udiciall&7 0 the collection o taxes must be collected within / &ears rom the date the& became due and %a&able. But i there,s raud or intent to evade %a&ment o taxes, collection wJo assessment shall be made within 1@ &ears rom the discover& o such raud or intent to evade %a&ment o taxes.

o o

@dA The running of the periods of prescription provided in the preceding paragraphs shall be suspended for the time during (hich; @<A The treasurer is legally prevented from making the assessment of collection0 @$A The taxpayer re"uests for a reinvestigation and executes a (aiver in (riting before expiration of the period (ithin (hich to assess or collect0 and Is the re:uest or reinvestigation su icient to sus%end the running o the %rescri%tive %eriod+ o o 2". There must be a se%arate execution o waiver in writing as to the %rescri%tive %eriod. )o, the re:uest or reinvestigation must be accom%anied b& a written waiver to the right o the T- as to the %rescri%tive %eriod and it must be executed be ore the %eriod o the right to assess and collect %rescribes.

@=A The taxpayer is out of the country or other(ise cannot be located.

XIV# T,>3,7.$E) R./.(0.) :S.1)# 1 4;1 6< -rotest b& means o 1%%eal to the )"( o #9C. <%J. rocedure for *pproval and 9ffectivity of Tax ordinances and Revenue :easures0 :andatory ublic Hearings. ' The procedure for approval of local tax ordinances and revenue measures shall be in accordance (ith the provisions of this Code; rovided, That public hearings shall be conducted for the purpose prior to the enactment thereof; rovided, further, That any "uestion on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal (ithin thirty @=?A days from the effectivity thereof to the #ecretary of /ustice (ho shall render a decision (ithin sixty @G?A days from the date of receipt of the appeal; rovided, ho(ever, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein; rovided, finally, That (ithin thirty @=?A days after receipt of the decision or the lapse of the sixty'day period (ithout the #ecretary of /ustice acting upon the appeal, the aggrieved party may file appropriate proceedings (ith a court of competent .urisdiction. In cases where the T- :uestions the constitutionalit& or legalit& o a tax ordinance, his remed& is to ile an a%%eal be ore the )"( within 3@ da&s rom the e ectivit& o the ordinance without sus%ending the e ects or the mandates o the ordinance unless subse:uentl& declared unconstitutional or illegal. The )"( is given L@ da&s to decide &our a%%eal. I a decision comes out within L@ da&s, the T- is given 3@ da&s to a%%eal be ore the court o com%etent 4urisdiction, which is the RT#. I no decision comes out within L@ da&s, it,s considered as a denial o the a%%eal or %ur%oses onl& o iling an a%%eal be ore the court o com%etent 4urisdiction, RT#, within 3@ da&s a ter the ex%iration o the L@-da& %eriod.

-rotest 1gainst 1ssessment o #9C. <BF. rotest of *ssessment. ' 1hen the local treasurer or his duly authori!ed representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee or charge, the amount of deficiency, the surcharges, interests and penalties. 1ithin sixty @G?A days from the receipt of the notice of assessment, the taxpayer may file a (ritten protest (ith the local treasurer contesting the assessment0 other(ise, the assessment shall become final and executory. The local treasurer shall decide the protest (ithin sixty @G?A days from the time of its filing. If the local treasurer finds the protest to be (holly or partly meritorious, he shall issue a notice canceling (holly or partially the assessment. Ho(ever, if the local treasurer finds the assessment to be (holly or partly correct, he shall deny the protest (holly or partly (ith notice to the taxpayer. The taxpayer shall have thirty @=?A days from the receipt of the denial of the protest or from the lapse of the sixty @G?A day period prescribed herein (ithin (hich to appeal (ith the court of competent .urisdiction other(ise the assessment becomes conclusive and unappealable. $ooking at R1 I!B! on the 4urisdiction o the #T1, we cannot ind there the decision o the local treasurer being a%%ealable directl& to the #T1. This means that the decision or inaction o the local treasurer is a%%ealable be ore the regular courts, and not the #T1.

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*hat is the remed& o the T- i the decision, either o the RT# or ?T# or other lower courts, is still a denial o his a%%eal+ 9ile an a%%eal be ore the: o o #T1 en banc 0 i it,s a denial o RT# in the exercise o its a%%ellate 4urisdiction 6originates rom the ?T#, ?eT#, or ?#T#7 #T1 in division 0 i it,s a denial o RT# in the exercise o its original 4urisdiction

#laim or Re und and Tax #redit o #9C. <BG. Claim for Refund of Tax Credit. ' &o case or proceeding shall be maintained in any court for the recovery of any tax, fee, or charge erroneously or illegally collected until a (ritten claim for refund or credit has been filed (ith the local treasurer. &o case or proceeding shall be entertained in any court after the expiration of t(o @$A years from the date of the payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or credit. *hat are the re:uirements in iling a claim or re und and tax credit+ 1. There must be an administrative written claim or re und or credit be ore the local treasurer. !. The written claim or re und or credit must state that there was an illegal collection or erroneous %a&ment o local taxes 3. The written claim must state the acts and the law su%%orting the claim .. The written claim must have a categorical demand or reimbursement or credit /. The written claim must include attachments o su%%orting documents, such as %resenting o icial recei%ts evidencing the %a&ment o taxes, etcQ. L. The written claim must be iled within ! &ears rom the date o %a&ment o the taxes or rom the date the T- is entitled to a re und or credit o Both administrative claim be ore the local treasurer and the 4udicial claim be ore the regular courts must be iled within ! &ears rom the date o erroneous %a&ment o taxes or rom the date the T- is entitled to such re und or credit. *hat do &ou mean b& E rom the date the T- is entitled to a re und or creditF+ This means that the su%ervening event a%%lies in claims or re und in local taxes, unlike claims or re und in national taxes. )o, local taxation, inso ar as claims or re und and credit, admits o su%ervening event, meaning, sometime within the !-&ear %eriod, such %eriod ma& be sus%ended. 3>1?-$3: I there,s a di icult inter%retation o the law inso ar as whether the T- is exem%t or not in a %ending case, such %eriod when the case is still %ending sus%ends the running o the !-&ear %rescri%tive %eriod and the !&ear %rescri%tive %eriod will resume again a ter the inal decision comes out sa&ing that the T- is exem%t. 3>1?-$3: T- %aid the claim or re und sub4ect T-. 'uring the %eriod o and resumes again a ter tax but he ound out that he is exem%t. 8e iled a to the debate between the local treasurer and the debate, it sus%ended the !-&ear %rescri%tive %eriod inal decision.

REAL PROPERTY TAX :RPT< I# L%1,5 G%4.$'/.'- U'0-) #9C. $=$. o(er to Levy Real roperty Tax. ' * province or city or a municipality (ithin the :etropolitan :anila *rea may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement not hereinafter specifically exempted. " the . $;<s, which o them has a right to im%ose R-T+ o o 1. -rovinces !. #ities

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o -

3. ?unici%alities within the ?? area

)o baranga&s and munici%alities outside the ?? area have no right to im%ose R-T. 8owever, munici%alities outside the ?? area have the right to im%ose s%ecial lev&.

II# D.*0'0-0%' %* T.$/) 8ow do &ou de ine R- or %ur%oses o R-T+ o o o The $;# does not %rovide or an exact de inition o what com%rises R- or R-T %ur%oses. )# decision directs us to look at the de inition o 1rt. .1/ under the 2## o what R- com%rises. 8owever, we don,t take 1rt. .1/ as it is because second R- under .1/ is trees and we don,t sub4ect trees to R-T. *hat com%rises R- or R-T %ur%oses is: 1. $and !. Building 3. ?achineries .. 1nd other im%rovements

*hat is an im%rovement+ o 5Improvement5 is a valuable addition made to a property or an amelioration in its condition, amounting to more than a mere repair or replacement of parts involving capital expenditures and labor, (hich is intended to enhance its value, beauty or utility or to adapt it for ne( or further purposes. 3>1?-$3: =ou can,t consider a house to a land as an im%rovement because house is alread& a structure. =ou can im%rove the house b& %roviding additions or im%rovements which increase the value, lengthen its li e, etcQ usuall& involving ca%ital ex%enditures or outla&s.

Re:uisites: 1. ?ust enhance the value o the %ro%ert& !. ?ust be %ermanentl& assessable 3. #an be treated inde%endentl& rom the main %ro%ert&

*hat is machiner&+ o 5:achinery5 embraces machines, e"uipment, mechanical contrivances, instruments, appliances or apparatus (hich may or may not be attached, permanently or temporarily, to the real property. It includes the physical facilities for production, the installations and appurtenant service facilities, those (hich are mobile, self'po(ered or self'propelled, and those not permanently attached to the real property (hich are actually, directly, and exclusively used to meet the needs of the particular industry, business or activity and (hich by their very nature and purpose are designed for, or necessary to its manufacturing, mining, logging, commercial, industrial or agricultural purposes. ?achiner& or R-T tax %ur%oses does not onl& include machiner& %ermanentl& attached to the R- but it also includes machiner& tem%oraril& attached to the R- and those not %ermanentl& attached to the R-, however, those not %ermanentl& attached to the R- becomes R- or R-T %ur%oses i it,s actuall&, directl&, and exclusivel& used to meet the needs o the %articular industr& to which the T- belongs. 3>1?-$3: Bank 0 bank voltsC ;as station 0 gas tanks, underground tanks, gas %um%s, com%uting %um%s, water %um%s, carwasher %um%s, etcQ

III# C=,$,1-.$0)-01) %* RPT 'e ine R-T and what are its characteristics o It,s a direct tax on ownershi%. 8owever, such de inition is no longer an accurate de inition o what R-T is because regardless o who the owner is, so long as it,s actuall& used or a s%eci ic %ur%ose b& a certain %erson or T-, he ma& be im%osed o a R-T or the usage or bene icial use o such R-. )ometimes it,s based on ownershi% but it,s usuall& more on the actual use o the R-.

#haracteristics: 1. 'irect tax on the ownershi% o R-

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!. 1n ad valorem tax 0 because the tax base is the assessed value o the %ro%ert&, so it ma& luctuate 3. -ro%ortionate 0 the tax is calculated on the basis o a certain %ercentage o the value assessed .. Indivisible single obligation /. $ocal tax

IV# P%2.$ -% L.47 RPT +7 LGU) The %ower to lev& R-T b& $;<s includes onl& the %rovinces, cities, and munici%alities within the ?? area im%osing R-T to lands, buildings, machineries and other im%rovements.

V# L%1,5 T,>0'A A&-=%$0-7 #9C. $JF. General *ssessment Revision0 9xpenses Incident Thereto. ' The sanggunian of provinces, cities and municipalities (ithin the :etropolitan :anila *rea shall provide the necessary appropriations to defray the expenses incident to the general revision of real property assessment. *ll expenses incident to a general revision of real property assessments shall, by ordinance of the sangguniang panlala(igan, be apportioned bet(een the province and the municipality on the basis of the taxable area of the municipality concerned. $ocal taxing authorit& would still belong to the sanggunian. Is %ublic hearing necessar& be ore an ordinance im%osing R-T+ o 2". There,s no mandator& %ublic hearing that is re:uired or enactment o ordinances im%osing R-T, unlike local taxes, 3>#3-T or the im%osition o a s%ecial lev&. *hat is onl& re:uired is the %ublication o the ordinance.

$;<s, which have the %ower to im%ose R-T, through the sanggunian, ma& also %rescribe %enalties or R-T violations similar to the %enalties or violations o local taxes. o -321$T=: )hall not be less than 1k nor more than /k o im%risonment ine or not less than 1 month nor more than L months o

VI# E>./3-0%') *$%/ RPT #9C. $=C. 9xemptions from Real roperty Tax. ' The follo(ing are exempted from payment of the real property tax;

@aA Real property o(ned by the Republic of the hilippines or any of its political subdivisions except (hen the beneficial use thereof has been granted, for consideration or other(ise, to a taxable person0

@bA Charitable institutions, churches, parsonages or convents appurtenant thereto, mos"ues, nonprofit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes0

@cA *ll machineries and e"uipment that are actually, directly and exclusively used by local (ater districts and government'o(ned or 'controlled corporations engaged in the supply and distribution of (ater andDor generation and transmission of electric po(er0

@dA *ll real property o(ned by duly registered cooperatives as provided for under R. *. &o. GB=%0 and

@eA :achinery and e"uipment used for pollution control and environmental protection. 9xcept as provided herein, any exemption from payment of real property tax previously granted to, or presently en.oyed by, all persons, (hether natural or .uridical, including all government'o(ned or 'controlled corporations are hereby (ithdra(n upon the effectivity of this Code.

#9C. $JG. Condonation or Reduction of Real roperty Tax and Interest. ' In case of a general failure of crops or substantial decrease in the price of agricultural or agribased products, or calamity in any province, city, or municipality, the sanggunian concerned, by ordinance passed prior to the first @<stA day of /anuary of any year and upon recommendation of the Local )isaster Coordinating Council, may condone or reduce, (holly or partially, the taxes and interest thereon for the succeeding year or years in the city or municipality affected by the calamity.

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#9C. $JJ. Condonation or Reduction of Tax by the resident of the hilippines. ' The resident of the hilippines may, (hen public interest so re"uires, condone or reduce the real property tax and interest for any year in any province or city or a municipality (ithin the :etropolitan :anila *rea.

2"T3: ;eneral rule, the $;# does not ex%ressl& em%ower the $;<s to exem%t R-s rom taxation. 1lthough, as an exce%tion, the $;# itsel %rovides or a list o what R-s are not covered b& R-T. 8owever, the $;<s can grant condonation, which is not exactl& exem%tion but has the same e ect as giving the T- a re%rieve rom the %a&ment o R-T or a certain &ear, under what conditions+ o 1. In the ollowing instances: a. There is general ailure o cro%sC or b. There is substantial decrease in the %rice o agricultural or agri-based %roductsC or c. There is natural calamit& o o It,s more based on circumstances which a ect the R-.

!. B& an ordinance %assed %rior to the 1st da& o (anuar&, meaning it becomes e ective onl& the ollowing &ear. 3. 1nd u%on recommendation o the $ocal 'isaster #oordinating #ouncil

In exem%tion, &ou,re not reall& liable or tax, while in condonation, &ou are liable but &ou,re condoned or orgiven or re%rieved o %a&ment or that %articular &ear or there ma& be no condonation o taxes but onl& reduction o taxes. The -resident ma& also condone or reduce the R-T liabilit& when %ublic interest so re:uires. *hat is &our %roo o exem%tion+ o #9C. $?G. roof of 9xemption of Real roperty from Taxation. ' 9very person by or for (hom real property is declared, (ho shall claim tax exemption for such property under this Title shall file (ith the provincial, city or municipal assessor (ithin thirty @=?A days from the date of the declaration of real property sufficient documentary evidence in support of such claim including corporate charters, title of o(nership, articles of incorporation, byla(s, contracts, affidavits, certifications and mortgage deeds, and similar documents. If the re"uired evidence is not submitted (ithin the period herein prescribed, the property shall be listed as taxable in the assessment roll. Ho(ever, if the property shall be proven to be tax exempt, the same shall be dropped from the assessment roll. 'ocumentar& evidence to su%%ort the claim o exem%tion, such as: o 1rticles o Incor%oration, i &ou,re a coo%erative #harter, i &ou,re a ;"##

This sim%l& means to sa& that i &ou believe &our R- is exem%t rom R-T under the enumeration o the law, it is not automatic that &ou will be exem%t rom %a&ment, because at the time that &ou need to declare &our %ro%ert& or %ur%oses o securing a tax declaration, within 3@ da&s, &ou must %rovide the cit& assessor or %rovincial assessor a co%& o the documentar& evidence o &our exem%tion. It ma& be the 1rticles o Incor%oration, the #harter, or an a idavit that &ou have executed the title to the %ro%ert&. This is or %ur%oses o delisting &ou or taking out &our %ro%ert& rom the list o assessment rolls that are taxable. "nce &ou ailed to submit the documentar& evidence within 3@ da&s rom declaring &our %ro%ert& as %art o the R- &ou own, it,s automatic that it becomes a taxable R-.

o -

*hat %ro%erties are exem%t rom R-T+ o 1. Real %ro%ert& owned b& the Re%ublic o the -hili%%ines or an& o its %olitical subdivisions exce%t when the bene icial use thereo has been granted, or consideration or otherwise, to a taxable %erson 8ow about those R-s held b& the government in its %ro%rietar& ca%acit&, such as those ac:uired b& the government in execution sales, tax delin:uenc& sales, escheat %roceedings, does that all within the exem%tion+ =3). 1n& R- so long as it is owned b& the Re%ublic o the -hils., its %olitical subdivision, or its instrumentalities is exem%t. R31)"2: 3xem%tion is the rule or R-T and taxation is the exem%tion inso ar as the government is concerned.

The onl& 3>#3-TI"2 is:

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3ven i it,s owned b& the government, the R- is sub4ect to R-T i the bene icial use is granted to a taxable %erson, whether it,s or a consideration or or no consideration, whether it,s or a ee or or ree. *hat do &ou mean b& Ebene icial useF+ o Bene icial use means actual use, which re ers to the %ur%ose or which the %ro%ert& is %rinci%all& or %redominantl& utiliDed b& the %erson in %ossession thereo , as to the taxable %erson.

1ssuming that the government leases out a R- to a taxable entit&, who is obligated to %a& the R-T+ o The lessee 0 the taxable entit&

$ets assume that the -rovince o #ebu leases out its land in avor o a religious institution or a ee, sub4ect to R-T+ o 2", because the bene icial use o the land is granted to a non-taxable %erson 0 the religious institution and a religious institution actuall&, directl&, and exclusivel& using land or religious %ur%oses is still exem%t.

1ssuming that the -rovince o #ebu leases out its machiner& to the religious institution, sub4ect to R-T+ o =3), because we also have to consider the nature o the R- that is being sub4ect to R-T. 2ote that the exem%tion onl& a%%lies to lands, buildings and im%rovements. ?achineries are not included. In short, the exem%tion o im%rovements. the bene icial user extends onl& to land, buildings and

8ow about ;"##s+ 1re the& exem%t rom R-T+ o 2". ;eneral rule, ;"##s are taxable unless the& all under the exem%tions in letter c and in their s%ecial charters.

-8I$I--I23 9I)83RI3) '3K,T 1<T8"RIT= K) #B11 The Court rules that the *uthority 7 3)*8 is not a G4CC but an instrumentality of the national government (hich is generally exempt from payment of real property tax. Ho(ever, said exemption does not apply to the portions of the I3 C (hich the *uthority leased to private entities. 1ith respect to these properties, the *uthority is liable to pay property tax. &onetheless, the I3 C, being a property of public dominion cannot be sold at public auction to satisfy the tax delin"uency. Indeed, the *uthority is not a G4CC but an instrumentality of the government. The *uthority has a capital stock but it is not divided into shares of stocks. *lso, it has no stockholders or voting shares. Hence it is not a stock corporation. &either is it a non'stock corporation because it has no members. The *uthority is actually a national government instrumentality (hich is defined as an agency of the national government, not integrated (ithin the department frame(ork, vested (ith special functions or .urisdiction by la(, endo(ed (ith some if not all corporate po(ers, administering special funds, and en.oying operational autonomy, usually through a charter. 1hen the la( vests in a government instrumentality corporate po(ers, the instrumentality does not become a corporation. >nless the government instrumentality is organi!ed as a stock or non'stock corporation, it remains a government instrumentality exercising not only governmental but also corporate po(ers. The Lucena 3ishing ort Complex is a property of public dominion intended for public use, and is therefore exempt from real property tax under #ection $=C@aA<< of the Local Government Code. roperties of public dominion are o(ned by the #tate or the Republic of the hilippines.

?12I$1 I2T3R21TI"21$ 1RI-"RT 1<T8"RIT= K) #1 :I** is &ot a Government'4(ned or Controlled Corporation. o * government'o(ned or controlled corporation must be ,organi!ed as a stock or non'stock corporation.- :I** is not organi!ed as a stock or non'stock corporation. :I** is not a stock corporation because it has no capital stock divided into shares. :I** has no stockholders or voting shares. :I** is also not a non'stock corporation because it has no members. #ection %J of the Corporation Code defines a non'stock corporation as ,one (here no part of its income is distributable as dividends to its members, trustees or officers.- * non'stock corporation must

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have members. 9ven if (e assume that the Government is considered as the sole member of :I**, this (ill not make :I** a non'stock corporation. &on'stock corporations cannot distribute any part of their income to their members. #ection << of the :I** Charter mandates :I** to remit $?N of its annual gross operating income to the &ational Treasury. This prevents :I** from "ualifying as a non'stock corporation. o #ince :I** is neither a stock nor a non'stock corporation, :I** does not "ualify as a government'o(ned or controlled corporation. 1hat then is the legal status of :I** (ithin the &ational GovernmentK :I** is a government instrumentality vested (ith corporate po(ers to perform efficiently its governmental functions. :I** is like any other government instrumentality, the only difference is that :I** is vested (ith corporate po(ers. #ection $@<?A of the Introductory rovisions of the *dministrative Code defines a government ,instrumentality- as follo(s; #9C. $. General Terms )efined. PP x x x x @<?A Instrumentality refers to any agency of the &ational Government, not integrated (ithin the department frame(ork, vested (ith special functions or .urisdiction by la(, endo(ed (ith some if not all corporate po(ers, administering special funds, and en.oying operational autonomy, usually through a charter. x x x 1hen the la( vests in a government instrumentality corporate po(ers, the instrumentality does not become a corporation. >nless the government instrumentality is organi!ed as a stock or non'stock corporation, it remains a government instrumentality exercising not only governmental but also corporate po(ers.

o o

*irport Lands and +uildings of :I** are 4(ned by the Republic. *irport Lands and +uildings are of ublic )ominion. o o The *irport Lands and +uildings of :I** are property of public dominion and therefore o(ned by the #tate or the Republic of the hilippines. &o one can dispute that properties of public dominion mentioned in *rticle C$? of the Civil Code, like ,roads, canals, rivers, torrents, ports and bridges constructed by the #tate,- are o(ned by the #tate. The term ,ports- includes seaports and airports. The :I** *irport Lands and +uildings constitute a ,port- constructed by the #tate. >nder *rticle C$? of the Civil Code, the :I** *irport Lands and +uildings are properties of public dominion and thus o(ned by the #tate or the Republic of the hilippines. The *irport Lands and +uildings are devoted to public use because they are used by the public for international and domestic travel and transportation. *s properties of public dominion, they indisputably belong to the #tate or the Republic of the hilippines.

o o

:I** is a :ere Trustee of the Republic o :I** is merely holding title to the *irport Lands and +uildings in trust for the Republic.

Real roperty 4(ned by the Republic is &ot Taxable o o o #ection $=C@aA of the Local Government Code exempts from real estate tax any ,7r8eal property o(ned by the Republic of the hilippines.- #ection $=C@aA provides; #9C. $=C. 9xemptions from Real roperty Tax. M The follo(ing are exempted from payment of the real property tax; @aA Real property o(ned by the Republic of the hilippines or any of its political subdivisions except (hen the beneficial use thereof has been granted, for consideration or other(ise, to a taxable person0 This exemption should be read in relation (ith #ection <==@oA of the same Code, (hich prohibits local governments from imposing ,7t8axes, fees or charges of any kind on the &ational Government, its agencies and instrumentalities x x x.- The real properties o(ned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the &ational Government. The *dministrative Code allo(s real property o(ned by the Republic to be titled in the name of agencies or instrumentalities of the national government. #uch real properties remain o(ned by the Republic and continue to be exempt from real estate tax.

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The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens (hen title of the real property is transferred to an agency or instrumentality even as the Republic remains the o(ner of the real property. #uch arrangement does not result in the loss of the tax exemption. #ection $=C@aA of the Local Government Code states that real property o(ned by the Republic loses its tax exemption only if the ,beneficial use thereof has been granted, for consideration or other(ise, to a taxable person.- :I**, as a government instrumentality, is not a taxable person under #ection <==@oA of the Local Government Code. Thus, even if (e assume that the Republic has granted to :I** the beneficial use of the *irport Lands and +uildings, such fact does not make these real properties sub.ect to real estate tax. Ho(ever, portions of the *irport Lands and +uildings that :I** leases to private entities are not exempt from real estate tax. 3or example, the land area occupied by hangars that :I** leases to private corporations is sub.ect to real estate tax. In such a case, :I** has granted the beneficial use of such land area for a consideration to a taxable person and therefore such land area is sub.ect to real estate tax.

!. #haritable institutions, churches, %arsonages or convents a%%urtenant thereto, mos:ues, non%ro it or religious cemeteries and all lands, buildings, and im%rovements actuall&, directl&, and exclusivel& used or religious, charitable or educational %ur%oses $<2; #32T3R "9 T83 -8I$). K) O<3S"2 #IT= etitioner averred that a minimum of G?N of its hospital beds are exclusively used for charity patients and that the ma.or thrust of its hospital operation is to serve charity patients. The petitioner contends that it is a charitable institution and, as such, is exempt from real property taxes. *s a general principle, a charitable institution does not lose its character as such and its exemption from taxes simply because it derives income from paying patients, (hether out'patient, or confined in the hospital, or receives subsidies from the government, so long as the money received is devoted or used altogether to the charitable ob.ect (hich it is intended to achieve0 and no money inures to the private benefit of the persons managing or operating the institution. #ection $%@=A, *rticle HI of the <B%J hilippine Constitution provides, thus; @=A Charitable institutions, churches and parsonages or convents appurtenant thereto, mos"ues, non' profit cemeteries, and all lands, buildings, and improvements, actually, directly and exclusively used for religious, charitable or educational purposes shall be exempt from taxation. The tax exemption under this constitutional provision covers property taxes only. *s Chief /ustice Hilario G. )avide, /r., then a member of the <B%G Constitutional Commission, explained; ,. . . (hat is exempted is not the institution itself . . .0 those exempted from real estate taxes are lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes. Conse"uently, the constitutional provision is implemented by #ection $=C@bA of Republic *ct &o. J<G? @other(ise kno(n as the Local Government Code of <BB<A as follo(s; #9CTI4& $=C. 9xemptions from Real roperty Tax. P The follo(ing are exempted from payment of the real property tax; ...@bA Charitable institutions, churches, parsonages or convents appurtenant thereto, mos"ues, non' profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes. 1e note that under the <B=F Constitution, ,... all lands, buildings, and improvements used Uexclusively2 for V charitable V purposes shall be exempt from taxation.- Ho(ever, under the <BJ= and the present Constitutions, for ,lands, buildings, and improvements- of the charitable institution to be considered exempt, the same should not only be ,exclusively- used for charitable purposes0 it is re"uired that such property be used ,actually- and ,directly- for such purposes. >nder the <BJ= and <B%J Constitutions and Rep. *ct &o. J<G? in order to be entitled to the exemption, the petitioner is burdened to prove, by clear and une"uivocal proof, that @aA it is a charitable institution0 and @bA its real properties are *CT>*LLI, )IR9CTLI and 9ECL>#IH9LI used for charitable purposes. ,9xclusive- is defined as possessed and en.oyed to the exclusion of others0 debarred from participation or en.oyment0 and ,exclusively- is defined, ,in a manner to exclude0 as en.oying a privilege exclusively.- If real property is used for one or more commercial purposes, it is not exclusively used for the exempted purposes but is sub.ect to taxation. The (ords ,dominant use- or ,principal use-

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cannot be substituted for the (ords ,used exclusively- (ithout doing violence to the Constitutions and the la(. #olely is synonymous (ith exclusively. 1hat is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and immediate and actual application of the property itself to the purposes for (hich the charitable institution is organi!ed. It is not the use of the income from the real property that is determinative of (hether the property is used for tax'exempt purposes. The petitioner failed to discharge its burden to prove that the entirety of its real property is actually, directly and exclusively used for charitable purposes. 1hile portions of the hospital are used for the treatment of patients and the dispensation of medical services to them, (hether paying or non'paying, other portions thereof are being leased to private individuals for their clinics and a canteen. 3urther, a portion of the land is being leased to a private individual for her business enterprise under the business name ,9lliptical 4rchids and Garden Center.- Indeed, the petitioner2s evidence sho(s that it collected <,<=G,C%=.CF as rentals in <BB< and <,GJB,BBB.$% for <BB$ from the said lessees. *ccordingly, (e hold that the portions of the land leased to private entities as (ell as those parts of the hospital leased to private individuals are not exempt from such taxes. 4n the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, (hether paying or non'paying, are exempt from real property taxes.

TAX Mar. 2, 2011 Wednesday 2"T3: The basis or the exem%tion is the use and not the ownershi%. )o regardless o who owns the %ro%ert& so long as it,s used b& either o these institutions or religious, charitable, or educational %ur%oses, it,s exem%t. o 3>1?-$3: I the government or even a taxable %erson leases out to such institutions, it,s exem%t, so long as it,s actuall&, directl& and exclusivel& 61'37 used.

2"T3: 2ot all R-s are covered b& the exem%tion. "nl& lands, buildings and im%rovements.

3. 1ll machineries and e:ui%ment that are actuall&, directl& and exclusivel& used b& local water districts and governmentowned or -controlled cor%orations engaged in the su%%l& and distribution o water andJor generation and transmission o electric %ower The entities involved are: 1. $ocal water districts !. ;"##s engaged in the su%%l& 12' distribution o water 3. ;"##s engaged in the generation 12' transmission o electric %ower

2"T3: 3xem%t onl& on machineries and e:ui%ments that are 1'3 used. It does not include the land, buildings and im%rovements. 2-# K) #B11 8ere, 2-# is a ;"## but the machineries and e:ui%ments were not 1'3 used b& 2-# but the& were 1'3 used b& the %rivate cor%oration under the B"T# 6Build-"%erate-Trans er #ontract7. *ould 2-# all under the exem%tion+ o 2", because the user o the machineries and e:ui%ments is the %rivate cor%oration and moreover, such machineries and e:ui%ments were used in the generation alone o electric %ower, not in the generation 12' transmission o electric %ower.

#an tax exem%tion be sub4ect to a contract between the %arties+ o o 2". )o, in this case, 2-# assumed the liabilit& o the %a&ment o the R-T under the B"T# and since it,s exem%t, it will not %a&. 8owever, the court said that such agreement is invalid as against the $;< because it would be circumventing the law b& de%riving the $;<s, right to collect R-T.

2-# K) -R"KI2#3 "9 O<3S"2 The entity liable for tax has the right to protest the assessment

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+y our above conclusion, (e do not thereby pass upon the validity of the contractual stipulation bet(een the & C and :irant on the assumption of liability that the & C undertook. *ll (e declare is that the stipulation is entirely bet(een the & C and :irant, and does not bind third persons (ho are not privy to the contract bet(een these parties. 1e say this pursuant to the principle of relativity of contracts under *rticle <=<< of the Civil Code (hich postulates that contracts take effect only bet(een the parties, their assigns and heirs. Tuite obviously, there is no privity bet(een the respondent local government units and the & C, even though both are public corporations. The tax due (ill not come from one pocket and go to another pocket of the same governmental entity. *n LG> is independent and autonomous in its taxing po(ers and this is clearly reflected in #ection <=? of the LGC (hich states; #9CTI4& <=?. 3undamental rinciples. ' The follo(ing fundamental principles shall govern the exercise of the taxing and other revenue'raising po(ers of local government units; Exx @dA The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be sub.ect to disposition by, the local government unit levying the tax, fee, charge or other imposition unless other(ise specifically provided herein0 xxx.

*n exception to the rule on relativity of contracts is provided under the same *rticle <=<< as follo(s; If the contract should contain some stipulation in favor of a third person, he may demand its fulfilment provided he communicated his acceptance to the obligor before its revocation. * mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.

The & C2s assumption of tax liability under *rticle <<.< of the 9C* does not appear, ho(ever, to be in any (ay for the benefit of the :unicipality of agbilao and the rovince of Tue!on. In fact, if the & C theory of the case (ere to be follo(ed, the & C2s assumption of tax liability (ill (ork against the interests of these LG>s. +esides, based on the ob.ectives of the +4T La( that underlie the parties2 +4T agreement, the assumption of taxes clause is an incentive for private corporations to take part and invest in hilippine industries. Thus, the principle of relativity of contracts applies (ith full force in the relationship bet(een :irant and & C, on the one hand, and the respondent LG>s, on the other. To reiterate, only the parties to the 9C* agreement can exact and demand the enforcement of the rights and obligations it established P only :irant can demand compliance from the & C for the payment of the real property tax the & C assumed to pay. The local government units @the :unicipality of agbilao and the rovince of Tue!onA, as third parties to the 9C*, cannot demand payment from the & C on the basis of *rticle <<.< of the 9C* alone. Corollarily, the local government units can neither be compelled to recogni!e the protest of a tax assessment from the & C, an entity against (hom it cannot enforce the tax liability.

The test of exemption is the nature of the use, not o(nership, of the sub.ect machineries 6the user is the owner7 o *t any rate, the & C2s claim of tax exemptions is completely (ithout merit. To successfully claim exemption under #ection $=C@cA of the LGC, the claimant must prove t(o elements; a. the machineries and e"uipment are actually, directly, and exclusively used by local (ater districts and government'o(ned or controlled corporations0 and b. the local (ater districts and government'o(ned and controlled corporations claiming exemption must be engaged in the supply and distribution of (ater andDor the generation and transmission of electric po(er.

*s applied to the present case, the government'o(ned or controlled corporation claiming exemption must be the entity actually, directly, and exclusively using the real properties, and the use must be devoted to the generation and transmission of electric po(er. &either the & C nor :irant satisfies both re"uirements. *lthough the plant2s machineries are devoted to the generation of electric po(er, by the & C2s o(n admission and as previously pointed out, :irant P a private corporation P uses and operates them. That :irant operates the machineries solely in compliance (ith the (ill of the & C only underscores the fact that & C does not actually, directly, and exclusively use them. The machineries must be actually, directly, and exclusively used by the government'o(ned or controlled corporation for the exemption under #ection $=C@cA to apply.

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&or (ill & C find solace in its claim that it utili!es all the po(er plant2s generated electricity in supplying the po(er needs of its customers. +ased on the clear (ording of the la(, it is the machineries that are exempted from the payment of real property tax, not the (ater or electricity that these machineries generate and distribute. 9ven the & C2s claim of beneficial o(nership is unavailing. The test of exemption is the use, not the o(nership of the machineries devoted to generation and transmission of electric po(er. The nature of the & C2s o(nership of these machineries only finds materiality in resolving the & C2s claim of legal interest in protesting the tax assessment on :irant. *s (e discussed above, this claim is inexistent for tax protest purposes. Lastly, from the points of vie( of essential fairness and the integrity of our tax system, (e find it essentially (rong to allo( the & C to assume in its +4T contracts the liability of the other contracting party for taxes that the government can impose on that other party, and at the same time allo( & C to turn around and say that no taxes should be collected because the & C is tax'exempt as a government'o(ned and controlled corporation. 1e cannot be a party to this kind of arrangement0 for us to allo( it (ithout congressional authority is to intrude into the realm of policy and to debase the tax system that the Legislature established. 1e (ill then also be grossly unfair to the people of the rovince of Tue!on and the :unicipality of agbilao (ho, by la(, stand to benefit from the tax provisions of the LGC.

.. 1ll real %ro%ert& owned b& dul& registered coo%eratives as %rovided or under R. 1. 2o. LI3B 6#oo%erative #ode o the -hils.7 2"T3: The exem%tion extends to all R-s 0 land, buildings, im%rovements, and machineries, so long as the&,re dul& registered under R1 LI3B.

/. ?achiner& and e:ui%ment used or %ollution control and environmental %rotection. 2"T3: The&,re exem%t rom R-T as well as K1T.

VII# F&'(,/.'-,5 P$0'1035.) #9C. <B%. 3undamental rinciples. ' The appraisal, assessment, levy and collection of real property tax shall be guided by the follo(ing fundamental principles;

@aA Real property shall be appraised at its current and fair market value0

@bA Real property shall be classified for assessment purposes on the basis of its actual use0

@cA Real property shall be assessed on the basis of a uniform classification (ithin each local government unit0

@dA The appraisal, assessment, levy and collection of real property tax shall not be let to any private person0 and

@eA The appraisal and assessment of real property shall be e"uitable. 1. Real %ro%ert& shall be a%%raised at its current and air market value o *hat do &ou mean b& Ea%%raisalF+ o o 5*ppraisal5 is the act or process of determining the value of property as of a specific date for a specific purpose.

53air :arket Halue5 is the price at (hich a property may be sold by a seller (ho is not compelled to sell and bought by a buyer (ho is not compelled to buy. 2"T3: 1bsolute rule is that all R-s declared to the $;< and those ound out b& the $;< to be undeclared shall be a%%raised at its current and 9?K, regardless o whether it has a status o being taxable or an exem%t R-.

!. Real %ro%ert& shall be classi ied or assessment %ur%oses on the basis o its actual use o *hat do &ou mean b& Eactual useF+

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5*ctual >se5 refers to the purpose for (hich the property is principally or predominantly utili!ed by the person in possession thereof. 6But not necessaril& that it should be directl& and exclusivel& used7

3. Real %ro%ert& shall be assessed on the basis o a uni orm classi ication within each local government unit o ?eaning, it does not have to be com%arative to what the other $;<s are basing on the assessment so long as it,s in com%liance with the %rovisions o the $;#.

.. The a%%raisal, assessment, lev& and collection o real %ro%ert& tax shall not be let to an& %rivate %erson /. The a%%raisal and assessment o real %ro%ert& shall be e:uitable o 8ow can it be Ee:uitableF in R-T+ R-T is e:uitable in a sense that the assessment level o the di erent classi ications o R-s di er rom one t&%e to the other. 3>1?-$3: Residential %ro%erties are given a lower assessment level than those that are used or commercial %ur%oses, which are %ro itable activities.

)o, it,s not reall& on the tax rate inso ar as e:uit& is concerned but rather on how it is assessed.

VIII# B,)0) *%$ A)).))/.'- %* RPT The basis or assessment o R-T is based on the actual use o the %ro%ert&. #9C. $<J. *ctual >se of Real roperty as +asis for *ssessment. ' Real property shall be classified, valued and assessed on the basis of its actual use regardless of (here located, (hoever o(ns it, and (hoever uses it.

IX# T73.) ,'( R,-.) %* RPT Basic R-T o *hat is the basic R-T+ #9C. $==. Rates of Levy. ' * province or city or a municipality (ithin the :etropolitan :anila *rea shall fix a uniform rate of basic real property tax applicable to their respective localities as follo(s; @aA In the case of a province, at the rate not exceeding one percent @<NA of the assessed value of real property0 and @bA In the case of a city or a municipality (ithin the :etropolitan :anila *rea, at the rate not exceeding t(o percent @$NA of the assessed value of real property. The most basic o all R-T is that ever& R-, i it,s not exem%t rom R-T, is sub4ect to the basic R-T. 1nd at what rate+ )%ecial $evies o These are the additional taxes im%osed in addition to the basic R-T. *hat are the&+ 1. )%ecial 3ducational 9und 6)397 0 1A additional R-T to inance the )39 but within the ?? area onl&. #9C. $=F. *dditional Levy on Real roperty for the #pecial 9ducation 3und. ' * province or city, or a municipality (ithin the :etropolitan :anila *rea, may levy and collect an annual tax of one percent @<NA on the assessed value of real property (hich shall be in addition to the basic real property tax. The proceeds thereof shall exclusively accrue to the #pecial 9ducation 3und @#93A. 2"T3: The additional lev& or the )39 would be indiscriminatel& a%%lied to all %ro%erties so long as that R- is sub4ect to the basic R-T. o )o i the collecting $;< is a %rovince, automaticall& what &ou will %a& as R-T is not onl& the 1A basic R-T but %lus 1A or )39, so &ou get to %a& !A total R-T, regardless o what kind or what classi ication o %ro%ert& is being sub4ect to R-T. I the collecting $;< is a cit& or a munici%alit& within the ?? area, automaticall& what &ou will %a& as R-T is not onl& the !A basic R-T but %lus 1A or )3#, so &ou get to %a& 3A total R-T, regardless o what kind o %ro%ert& is being sub4ect to R-T. -rovince 0 not exceeding 1A o the assessed value o the R#it& or munici%alit& within the ?? area 0 not exceeding !A o the assessed value o the R-

!. 1d Kalorem Tax on Idle $ands

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#9C. $=G. *dditional *d Halorem Tax on Idle Lands. ' * province or city, or a municipality (ithin the :etropolitan :anila *rea, may levy an annual tax on idle lands at the rate not exceeding five percent @FNA of the assessed value of the property (hich shall be in addition to the basic real property tax. *h& ad valorem+ o o o 5*d Halorem Tax5 is a levy on real property determined on the basis of a fixed proportion of the value of the property. Because it,s based on the value o the R- that is not utiliDed )o i the %ro%ert& is classi ied as agricultural, and i &ou don,t utiliDe it or agricultural %ur%oses, &ou ma& be added-on with an additional R-T called the 1d Kalorem Tax on Idle $ands 61KTI$7. But at what rate+ 2ot exceeding /A o the assessed value o the %ro%ert& 2"T3: Tax on idle $12'), not idle buildings.

*hen can &ou consider a %articular %arcel o land as idle land that will be sub4ect to the 1KTI$+ o o #9C. $=J. Idle Lands, Coverage. ' 3or purposes of real property taxation, idle lands shall include the follo(ing; @aA 5*gricultural lands, more than one @<A hectare in area, suitable for cultivation, dairying, inland fishery, and other agricultural uses, one'half @<D$A of (hich remain uncultivated or unimproved by the o(ner of the property or person having legal interest therein.5 *gricultural lands planted to permanent or perennial crops (ith at least fifty @F?A trees to a hectare shall not be considered idle lands. Lands actually used for gra!ing purposes shall like(ise not be considered idle lands. @bA Lands, other than agricultural, located in a city or municipality, more than one thousand @<,???A s"uare meters in area one'half @<D$A of (hich remain unutili!ed or unimproved by the o(ner of the property or person having legal interest therein. Regardless of land area, this #ection shall like(ise apply to residential lots in subdivisions duly approved by proper authorities, the o(nership of (hich has been transferred to individual o(ners, (ho shall be liable for the additional tax; rovided, ho(ever, That individual lots of such subdivisions, the o(nership of (hich has not been transferred to the buyer shall be considered as part of the subdivision, and shall be sub.ect to the additional tax payable by subdivision o(ner or operator. 1. 9or agricultural lands 0 more than 1 hectare in area, or which at least V o it remains uncultivated or unim%roved or agricultural %ur%oses, 3>#3-T: o o a. 1gricultural lands %lanted to %ermanent or %erennial cro%s with at least /@ trees to a hectare b. $ands actuall& used or graDing %ur%oses

!. 9or lands o whatever classi ication, other than agricultural, located in a cit& or munici%alit& 0 more than 1k s:uare meters in area, or which at least V o it remains unutiliDed or unim%roved 3. Residential lots in subdivisions, regardless o land area, dul& a%%roved b& %ro%er authorities, the ownershi% o which has been trans erred to individual owners 8owever, individual lots o subdivisions, regardless o land area, the ownershi% o which has not been trans erred to the bu&er shall be considered as %art o the subdivision, and shall be sub4ect to additional tax %a&able b& the subdivision owner or o%erator. 2"T3: To be covered b& this 3 rd categor& o idle lands, the land must be a residential lot I2 )<B'IKI)I"2), not outside subdivisions. I residential lots outside subdivisions, to be considered idle lands, it must com%l& with the re:uisites o the ! nd categor& o idle lands, which are that the land is more than 1k s:uare meters in area, or which at least V o it remains unutiliDed or unim%roved.

3xem%t idle lands o #9C. $=%. Idle Lands 9xempt from Tax. ' * province or city or a municipality (ithin the :etropolitan :anila *rea may exempt idle lands from the additional levy by reason of force ma.eure, civil disturbance, natural calamity or any cause or circumstance (hich physically or

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legally prevents the o(ner of the property or person having legal interest therein from improving, utili!ing or cultivating the same. o Idle lands exem%t rom tax b& reason o : 1. 9orce ma4eure !. #ivil disturbance 3. 2atural calamit& .. 1n& cause or circumstance which %h&sicall& or legall& %revents the owner o the %ro%ert& or %erson having legal interest therein rom im%roving, utiliDing, or cultivating the same

3. )%ecial $ev& on lands s%eci icall& bene ited b& %ublic works, %ro4ect, or im%rovements unded b& the $;< #9C. $C?. #pecial Levy by Local Government >nits. ' * province, city or municipality may impose a special levy on the lands comprised (ithin its territorial .urisdiction specially benefited by public (orks pro.ects or improvements funded by the local government unit concerned; rovided, ho(ever, That the special levy shall not exceed sixty percent @G?NA of the actual cost of such pro.ects and improvements, including the costs of ac"uiring land and such other real property in connection there(ith; rovided, further, That the special levy shall not apply to lands exempt from basic real property tax and the remainder of the land portions of (hich have been donated to the local government unit concerned for the construction of such pro.ects or improvements. 1t what rate+ o 2ot exceeding L@A o the actual cost o the %ro4ects and im%rovements, including the costs o ac:uiring land and such other R- in connection therewith

*hat,s the %rocedure in validl& im%osing a s%ecial lev& or %ublic works or im%rovements+ o Through an ordinance and its %ublication #9C. $C<. 4rdinance Imposing a #pecial Levy. ' * tax ordinance imposing a special levy shall describe (ith reasonable accuracy the nature, extent, and location of the public (orks pro.ects or improvements to be undertaken, state the estimated cost thereof, specify the metes and bounds by monuments and lines and the number of annual installments for the payment of the special levy (hich in no case shall be less than five @FA nor more than ten @<?A years. The sanggunian concerned shall not be obliged, in the apportionment and computation of the special levy, to establish a uniform percentage of all lands sub.ect to the payment of the tax for the entire district, but it may fix different rates for different parts or sections thereof, depending on (hether such land is more or less benefited by the proposed (ork. #9C. $C$. ublication of roposed 4rdinance Imposing a #pecial Levy. ' +efore the enactment of an ordinance imposing a special levy, the sanggunian concerned shall conduct a public hearing thereon0 notify in (riting the o(ners of the real property to be affected or the persons having legal interest therein as to the date and place thereof and afford the latter the opportunity to express their positions or ob.ections relative to the proposed ordinance. 2"T3: -ublic hearing is re:uired. 1 %ublic hearing shall be conducted to a ord the a ected owners the o%%ortunit& to ob4ect or to raise their %ositions. 2o %ublic hearing, no s%ecial lev& can be validl& im%osed through an ordinance. This is the exce%tion to the rule that R-T ordinances would not re:uire a %ublic hearing. 3>1?-$3: I a %ro4ect work or im%rovement is undertaken in $iloan, exam%le a tunnel. 1nd it will increase the value o the land. ?a& the sanggunian o $iloan invite the owners or a %ublic hearing through a notice in writing or the im%osition o the s%ecial lev&+ =3), even munici%alities, ordinar& ones, outside ?? area can im%ose s%ecial lev& so long as it ollows the %rocedure o due %rocess o notice in writing, %ublic hearing be ore an ordinance is enacted and %ublished, %rovided that the s%ecial lev& among all the owners s%eci icall& bene ited 6not onl& to a %articular owner7 shall not exceed L@A o the actual cost o

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such %ro4ects and im%rovements, including the costs o ac:uiring land and such other real %ro%ert& in connection therewith. )o i total cost is 1B, then, the ?unici%alit& o $iloan can collect u% to L@@m as s%ecial lev& distributed among all the owners a ected b& the im%rovements or %ublic works. I the %ublic works or im%rovements do not increase the valuation o the land, then there,s no sense o im%osing the s%ecial lev&.

3>1?-$3: The government undertook a %ro4ect which resulted to s%ecial bene its to the owners surrounding the areas o the im%rovement. I there are . owners a ected b& the im%rovement 0 a school, a sho%%ing mall, a religious institution, and a subdivision. *ill these . owners a ected b& the government %ro4ect share to the cost o L@A s%ecial lev&+ 2". "nl& the subdivision and the sho%%ing mall share to the cost o L@A s%ecial lev& since the school and the religious institution are exem%t rom the basic R-T, %rovided or on a condition that the land is 1'3 used or educational or religious %ur%oses. 2"T3: )%ecial levies cannot be im%osed on lands exem%t rom the basic R-T. )o, i it turns out that although the land is owned b& the school but it,s leased out to another taxable %erson, who,s the one using it, or the school used it or another %ur%ose other than or an educational %ur%ose, then, the land will not be exem%t rom the basic R-T and will not be exem%t as well rom the s%ecial lev&. Is there an& wa& that the subdivision can be exem%t rom the s%ecial lev&+ o =3), i %ortions o the land owned b& the subdivision are donated to the $;< concerned or the construction o the %ro4ect or im%rovements, then, the remainder o the land %ortions donated shall be exem%t rom the s%ecial lev&.

X# C5,)).) %* RP #9C. $<F. Classes of Real roperty for *ssessment urposes. ' 3or purposes of assessment, real property shall be classified as residential, agricultural, commercial, industrial, mineral, timberland or special. The city or municipality (ithin the :etropolitan :anila *rea, through their respective sanggunian, shall have the po(er to classify lands as residential, agricultural, commercial, industrial, mineral, timberland, or special in accordance (ith their !oning ordinances. 8ow are R-s classi ied+ o "n the basis o its actual use. *hat are the&+ 1. #ommercial land 5Commercial Land5 is land devoted principally for the ob.ect of profit and is not classified as agricultural, industrial, mineral, timber, or residential land.

!. 1gricultural land 5*gricultural Land5 is land devoted principally to the planting of trees, raising of crops, livestock and poultry, dairying, salt making, inland fishing and similar a"uacultural activities, and other agricultural activities, and is not classified as mineral, timber, residential, commercial or industrial land.

3. Residential land 5Residential Land5 is land principally devoted to habitation.

.. ?ineral land 5:ineral Lands5 are lands in (hich minerals, metallic or non'metallic, exist in sufficient "uantity or grade to .ustify the necessary expenditures to extract and utili!e such materials.

/. Industrial land

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5Industrial Land5 is land devoted principally to industrial activity as capital investment and is not classified as agricultural, commercial, timber, mineral or residential land

L. Timberland H. )%ecial class 6lands, buildings, and other im%rovements7

2"T3: #lassi ication o lands is made b& the res%ective sanggunian in accordance with Doning ordinances. *ould the $;<, i it decides to reclassi & a %ro%ert&, sa& rom agricultural land to commercial land, would it re:uire a%%roval rom the '1R+ o In the case o 9"RTI#8 K) #"R"21, the )# said that $;<s need not obtain the necessar& a%%roval o the '1R to convert or reclassi & %arcels o land rom agricultural to non-agricultural. The %ower to classi & or reclassi & or convert is authoriDed under )ec. !@ o the $;#. #9C. $?. Reclassification of Lands. ' @aA * city or municipality may, through an ordinance passed by the sanggunian after conducting public hearings for the purpose, authori!e the reclassification of agricultural lands and provide for the manner of their utili!ation or disposition in the follo(ing cases; @<A (hen the land ceases to be economically feasible and sound for agricultural purposes as determined by the )epartment of *griculture or @$A (here the land shall have substantially greater economic value for residential, commercial, or industrial purposes, as determined by the sanggunian concerned; rovided, That such reclassification shall be limited to the follo(ing percentage of the total agricultural land area at the time of the passage of the ordinance; @<A 3or highly urbani!ed and independent component cities, fifteen percent @<FNA0 @$A 3or component cities and first to third class municipalities, ten percent @<?NA0 and @=A 3or fourth to sixth class municipalities, five percent @FNA; rovided, further, That agricultural lands distributed to agrarian reform beneficiaries pursuant to Republic *ct &umbered #ixty'six hundred fifty'seven @R.*. &o. GGFJA, other(ise kno(n as 5The Comprehensive *grarian Reform La(5, shall not be affected by the said reclassification and the conversion of such lands into other purposes shall be governed by #ection GF of said *ct. @bA The resident may, (hen public interest so re"uires and upon recommendation of the &ational 9conomic and )evelopment *uthority, authori!e a city or municipality to reclassify lands in excess of the limits set in the next preceding paragraph. @cA The local government units shall, in conformity (ith existing la(s, continue to prepare their respective comprehensive land use plans enacted through !oning ordinances (hich shall be the primary and dominant bases for the future use of land resources; rovided, That the re"uirements for food production, human settlements, and industrial expansion shall be taken into consideration in the preparation of such plans. @dA 1here approval by a national agency is re"uired for reclassification, such approval shall not be unreasonably (ithheld. 3ailure to act on a proper and complete application for reclassification (ithin three @=A months from receipt of the same shall be deemed as approval thereof. @eA &othing in this #ection shall be construed as repealing, amending, or modifying in any manner the provisions of R.*. &o. GGFJ.

o o o

o -

I$$<)TR1TI"2: In a certain area, once a residential district, there,s a residential building. Through the &ears, commercial establishments have s%routed in such area. I the $;<s would reclassi & the Doning o that area into commercial, would the %a&ment o R-T o that owner o the residential building in such area be converted to as commercial as well or R-T %ur%oses or would it remain as residential and %a& the lower R-T+ o It would be converted to commercial, even i its actual use is residential, because the Doning is an exercise o %olice %ower, which is su%erior to taxation. 3ven i the building was declared or tax %ur%oses as residential, once a $;< has reclassi ied the total area as commercial, the classi ication or Doning %ur%oses must %revail as an exercise o %olice %ower.

)%ecial classes o Ro #9C. $<G. #pecial Classes of Real roperty. ' *ll lands, buildings, and other improvements thereon actually, directly and exclusively used for hospitals, cultural, or scientific purposes, and those o(ned and used by local (ater districts, and government'o(ned or 'controlled corporations rendering essential public services in the supply and distribution of (ater andDor generation and transmission of electric po(er shall be classified as special. 2"T3: ?achineries and e:ui%ments used b& the local water districts, ;"##s engaged in the su%%l& and distribution o water andJor generation and transmission o electric %ower are exem%t rom R-T. But the lands, buildings and other im%rovements used b& such entities are sub4ect to R-T. 8owever, the s%ecial classes o R- are given %re erential assessment level, meaning, the lands, buildings and im%rovements o these entities are still %artiall& exem%t because the&

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will be given a lower assessment level or the %a&ment o R-T so long as it,s 1'3 or such %ur%ose together with the hos%itals, cultural or scienti ic %ur%oses. XI# P$%1.(&$. 0' -=. A(/0'0)-$,-0%' %* RPT 1. 'eclaration o Ro 1. B& the owner, duties #9C. $?$. )eclaration of Real roperty by the 4(ner or *dministrator. ' It shall be the duty of all persons, natural or .uridical, o(ning or administering real property, including the improvements therein, (ithin a city or municipality, or their duly authori!ed representative, to prepare, or cause to be prepared, and file (ith the provincial, city or municipal assessor, a s(orn statement declaring the true value of their property, (hether previously declared or undeclared, taxable or exempt, (hich shall be the current and fair market value of the property, as determined by the declarant. #uch declaration shall contain a description of the property sufficient in detail to enable the assessor or his deputy to identify the same for assessment purposes. The s(orn declaration of real property herein referred to shall be filed (ith the assessor concerned once every three @=A years during the period from /anuary first @<stA to /une thirtieth @=?thA commencing (ith the calendar year <BB$. #9C. $?=. )uty of erson *c"uiring Real roperty or :aking Improvement Thereon. ' It shall also be the duty of any person, or his authori!ed representative, ac"uiring at any time real property in any municipality or city or making any improvement on real property, to prepare, or cause to be prepared, and file (ith the provincial, city or municipal assessor, a s(orn statement declaring the true value of sub.ect property, (ithin sixty @G?A days after the ac"uisition of such property or upon completion or occupancy of the improvement, (hichever comes earlier. 9irst ste% is to in orm the $;< that &ou have a real %ro%ert&. 8ow+ ;R: 9ile a sworn declaration o R-, whether %reviousl& declared or undeclared, stating the 9?K and the descri%tion o such R- with the assessor concerned once ever& 3 &ears. *h& once ever& 3 &ears+ )ince during this %eriod, there could be revisions in the assessment o the R-. o 3>#3-T: I newl& ac:uired %ro%ert& 6including machineries7 0 ile a sworn statement declaring the 9?K and descri%tion o the R- within L@ da&s a ter the ac:uisition o such %ro%ert&, and therea ter, ever& 3 &ears, &ou have to declare again the %ro%ert& I making new im%rovement on R- 6e.g. newl& constructed7 0 ile a sworn statement declaring the 9?K and the descri%tion o the %ro%ert& within L@ da&s u%on com%letion or occu%anc& o the im%rovement, whichever comes earlier, and therea ter, ever& 3 &ears, &ou have to declare again the %ro%ert&

2"T3: 3ver& real %ro%ert& that &ou own, whether &ou believe it to be exem%t or not, &ou have to declare. I there,s no declaration made b& the R- owner, what,s the e ect+ The R- owner will be liable or back taxes. )o what,s the recourse o the local assessor aside rom the im%osition o back taxes+ Be ore it can even im%ose back taxes, what shall the local assessor do+ o The local assessor shall be the one to make the declaration o the R-.

!. B& the assessor #9C. $?C. )eclaration of Real roperty by the *ssessor. ' 1hen any person, natural or .uridical, by (hom real property is re"uired to be declared under #ection $?$ hereof, refuses or fails for any reason to make such declaration (ithin the time prescribed, the provincial, city or municipal assessor shall himself declare the property in the name of the defaulting o(ner, if kno(n, or against an unkno(n o(ner, as the case may be, and shall assess the property for taxation in accordance (ith the provision of this Title. &o oath shall be re"uired of a declaration thus made by the provincial, city or municipal assessor. I it,s discovered that there,s an undeclared R-, it will be declared b& the assessor himsel , regardless o *"2 there,s a known owner. Inso ar as liabilities or taxes are concerned, what is the extent o the R-T liabilit& or undeclared and discovered R-+ $iable or back taxes as %ro%erties declared or the irst time

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#9C. $$$. *ssessment of roperty #ub.ect to +ack Taxes. ' Real property declared for the first time shall be assessed for taxes for the period during (hich it (ould have been liable but in no case for more than ten @<?A years prior to the date of initial assessment; rovided, ho(ever, That such taxes shall be computed on the basis of the applicable schedule of values in force during the corresponding period. If such taxes are paid on or before the end of the "uarter follo(ing the date the notice of assessment (as received by the o(ner or his representative, no interest for delin"uency shall be imposed thereon0 other(ise, such taxes shall be sub.ect to an interest at the rate of t(o percent @$NA per month or a fraction thereof from the date of the receipt of the assessment until such taxes are fully paid.

TAX Mar. 3, 2011 Thursday <ndeclared %ro%ert& i the owner is unknown will still have to be declared b& the local assessor. I such %ro%ert& is declared, it would have the e ect o being listed in the assessment rolls. 1nd i it turns out later on that the owner is known, he will be assessed o back taxes or the %receding 1@ &ears. o 8ow will the back taxes be com%uted+ o It shall be com%uted on the basis o the a%%licable schedule o values in orce during the corres%onding 1@-&ear %eriod.

*hen are back taxes due or %a&ment+ It shall be due on or be ore the end o the :uarter ollowing the date the notice o assessment was received b& the owner or his re%resentative. #9C. $$$. *ssessment of roperty #ub.ect to +ack Taxes. ' Real property declared for the first time shall be assessed for taxes for the period during (hich it (ould have been liable but in no case for more than ten @<?A years prior to the date of initial assessment; rovided, ho(ever, That such taxes shall be computed on the basis of the applicable schedule of values in force during the corresponding period. If such taxes are paid on or before the end of the "uarter follo(ing the date the notice of assessment (as received by the o(ner or his representative, no interest for delin"uency shall be imposed thereon0 other(ise, such taxes shall be sub.ect to an interest at the rate of t(o percent @$NA per month or a fraction thereof from the date of the receipt of the assessment until such taxes are fully paid.

Is the R- owner in this case liable or interest+ IT '3-32'). I the back taxes are %aid on or be ore the end o the :uarter ollowing the date the notice o assessment was received b& the owner or his re%resentative, then no interest or delin:uenc& shall be im%osed, otherwise, such taxes shall be sub4ect at the rate o two %ercent 6!A7 %er month or a raction thereo rom the date o the recei%t o the assessment until such taxes are ull& %aid %rovided however that in no case shall the total interest on the un%aid tax or %ortion thereo exceed 3L months. #9C. $FF. Interests on >npaid Real roperty Tax. ' In case of failure to pay the basic real property tax or any other tax levied under this Title upon the expiration of the periods as provided in #ection $F?, or (hen due, as the case may be, shall sub.ect the taxpayer to the payment of interest at the rate of t(o percent @$NA per month on the unpaid amount or a fraction thereof, until the delin"uent tax shall have been fully paid; rovided, ho(ever, That in no case shall the total interest on the unpaid tax or portion thereof exceed thirty'six @=GA months. In non-declaration o R- resulting to non-%a&ment o R-T, would interest due to the de icienc& o R-T be condoned+ =3), %rovided that the R- owner %aid the back taxes on or be ore the end o the :uarter ollowing the date the notice o assessment was received.

3>1?-$3: =ou received the assessment or 1@-&ear back taxes toda&, ?ar. 3, !@11. <% to when are &ou allowed to %a& these taxes without interest+ <% to (une 3@, !@11, which is the end o the :uarter ollowing the date the notice o assessment was received. But i &ou,re not able to settle it within the %eriod wherein interest ma& be condoned, how much interest would &ou be liable or+ o !A %er month or a raction thereo but not exceeding 3L months

B. $isting o R- in the 1ssessment Rolls

#9C. $?F. Listing of Real roperty in the *ssessment Rolls. ' @aA In every province and city, including the municipalities (ithin the :etropolitan :anila *rea, there shall be prepared and maintained by the provincial, city or municipal assessor an assessment roll (herein shall be listed all real property, (hether taxable or exempt, located (ithin the territorial .urisdiction of the local government unit

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concerned. Real property shall be listed, valued and assessed in the name of the o(ner or administrator, or anyone having legal interest in the property.

@bA The undivided real property of a deceased person may be listed, valued and assessed in the name of the estate or of the heirs and devisees (ithout designating them individually0 and undivided real property other than that o(ned by a deceased may be listed, valued and assessed in the name of one or more co'o(ners; rovided, ho(ever, That such heir, devisee, or co'o(ner shall be liable severally and proportionately for all obligations imposed by this Title and the payment of the real property tax (ith respect to the undivided property.

@cA The real property of a corporation, partnership, or association shall be listed, valued and assessed in the same manner as that of an individual.

@dA Real property o(ned by the Republic of the hilippines, its instrumentalities and political subdivisions, the beneficial use of (hich has been granted, for consideration or other(ise, to a taxable person, shall be listed, valued and assessed in the name of the possessor, grantee or of the public entity if such property has been ac"uired or held for resale or lease. #9C. $?J. Real roperty Identification #ystem. ' *ll declarations of real property made under the provisions of this Title shall be kept and filed under a uniform classification system to be established by the provincial, city or municipal assessor. 2"T3: 3xem%t R-s would orm %art in the assessment rolls. "nce all R-s have been declared, the assessor will list all these taxable and exem%t R-s in the assessment rolls. "nce it,s listed in the assessment rolls, the ;R is that all o these %ro%erties, whether taxable or exem%t, will be included in the list. "nce &ou are able to %rove that it,s an exem%t %ro%ert&, then, u%on %roving that the R- is exem%t rom R-T, the R- will be dro%%ed rom the assessment roll. )o what will %roceed on to be sub4ected to R-T and assessed o R-T would onl& be those taxable R-s. 1re there individuals who are re:uired to aid and noti & the assessor in determining R-s or declaration %ur%oses+ o =3). 1. 'ut& o an& %erson trans erring R #9C. $?%. &otification of Transfer of Real roperty 4(nership. ' *ny person (ho shall transfer real property o(nership to another shall notify the provincial, city or municipal assessor concerned (ithin sixty @G?A days from the date of such transfer. The notification shall include the mode of transfer, the description of the property alienated, the name and address of the transferee.

!. 'ut& o R' to a%%rise assessor #9C. $?B. )uty of Registrar of )eeds to *pprise *ssessor of Real roperty Listed in Registry. ' @aA To ascertain (hether or not any real property entered in the Registry of roperty has escaped discovery and listing for the purpose of taxation, the Registrar of )eeds shall prepare and submit to the provincial, city or municipal assessor, (ithin six @GA months from the date of effectivity of this Code and every year thereafter, an abstract of his registry, (hich shall include brief but sufficient description of the real properties entered therein, their present o(ners, and the dates of their most recent transfer or alienation accompanied by copies of corresponding deeds of sale, donation, or partition or other forms of alienation. @bA It shall also be the duty of the Registrar of )eeds to re"uire every person (ho shall present for registration a document of transfer, alienation, or encumbrance of real property to accompany the same (ith a certificate to the effect that the real property sub.ect of the transfer, alienation, or encumbrance, as the case may be, has been fully paid of all real property taxes due thereon. 3ailure to provide such certificate shall be a valid cause for the Registrar of )eeds to refuse the registration of the document.

3. 'ut& o " icial issuing building %ermit or certi icate o registration o machiner& #9C. $<?. )uty of 4fficial Issuing +uilding ermit or Certificate of Registration of :achinery to Transmit Copy to *ssessor. ' *ny public official or employee (ho may no( or hereafter be re"uired by la( or regulation to issue to any person a permit for the construction, addition, repair, or renovation of a building, or permanent improvement on land, or a certificate of registration for any machinery, including machines, mechanical contrivances, and apparatus attached or affixed on land or to another real

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property, shall transmit a copy of such permit or certificate (ithin thirty @=?A days of its issuance, to the assessor of the province, city or municipality (here the property is situated. .. 'ut& o ;eodetic 3ngineers #9C. $<<. )uty of Geodetic 9ngineers to 3urnish Copy of lans to *ssessor. ' It shall be the duty of all geodetic engineers, public or private, to furnish free of charge to the assessor of the province, city or municipality (here the land is located (ith a (hite or blue print copy of each of all approved original or subdivision plans or maps of surveys executed by them (ithin thirty @=?A days from receipt of such plans from the Lands :anagement +ureau, the Land Registration *uthority, or the Housing and Land >se Regulatory +oard, as the case may be. 2"T3: 3ven law&ers are re:uired to ile with the local assessors once the& notariDe R-.

#. 1%%raisal and Kaluation o Ro o 1%%raisal is or the %ur%ose o determining the assessed value o the R-. 8ow would a%%raisal o %ro%erties be made+ 1. 9or %arcel o land i. 1ssessor o the %rovince, cit&Jmunici%alit& ma& summon the owners o the %ro%erties to be a ected and ma& take de%ositions concerning the %ro%ert&, its ownershi%, amount, nature and value o #9C. $<=. *uthority of *ssessor to Take 9vidence. ' 3or the purpose of obtaining information on (hich to base the market value of any real property, the assessor of the province, city or municipality or his deputy may summon the o(ners of the properties to be affected or persons having legal interest therein and (itnesses, administer oaths, and take deposition concerning the property, its o(nership, amount, nature, and value.

ii. 1ssessor %re%ares a schedule o 9?K or di erent classes o %ro%erties iii. )anggunian enacts and ordinance iv. The schedule o 9?K is %ublished in a news%a%er o general circulation in the %rovince, cit& or munici%alit& concerned or in the absence thereo , it shall be %osted in the %rovincial ca%itol, cit& or munici%al hall %laces therein. o #9C. $<$. reparation of #chedule of 3air :arket Halues. ' +efore any general revision of property assessment is made pursuant to the provisions of this Title, there shall be prepared a schedule of fair market values by the provincial, city and the municipal assessors of the municipalities (ithin the :etropolitan :anila *rea for the different classes of real property situated in their respective local government units for enactment by ordinance of the sanggunian concerned. The schedule of fair market values shall be published in a ne(spaper of general circulation in the province, city or municipality concerned, or in the absence thereof, shall be posted in the provincial capitol, city or municipal hall and in t(o other conspicuous public places therein.

!. 9or building and im%rovement 3. 9or machiner& #9C. $$C. *ppraisal and *ssessment of :achinery. ' @aA The fair market value of a brand'ne( machinery shall be the ac"uisition cost. In all other cases, the fair market value shall be determined by dividing the remaining economic life of the machinery by its estimated economic life and multiplied by the replacement or reproduction cost. @bA If the machinery is imported, the ac"uisition cost includes freight, insurance, bank and other charges, brokerage, arrastre and handling, duties and taxes, plus cost of inland transportation, handling, and installation charges at the present site. The cost in foreign currency of imported machinery shall be converted to peso cost on the basis of foreign currency exchange rates as fixed by the Central +ank. #9C. $$F. )epreciation *llo(ance for :achinery. ' 3or purposes of assessment, a depreciation allo(ance shall be made for machinery at a rate not exceeding five percent @FNA of its original cost or its replacement or reproduction cost, as the case may be, for each year of use; rovided, ho(ever, That the remaining value for all kinds of machinery shall be fixed at not less than t(enty percent @$?NA of such original, replacement, or reproduction cost for so long as the machinery is useful and in operation.

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i. 9or brand new machiner& 0 9?K is ac:uisition cost o 5*c"uisition Cost5 for ne(ly'ac"uired machinery not yet depreciated and appraised (ithin the year of its purchase, refers to the actual cost of the machinery to its present o(ner, plus the cost of transportation, handling, and installation at the present site

ii. In all other cases 0 Tremaining economic li e o the machiner&Jb& its estimated economic li eU > re%lacement or re%roduction cost o o o 59conomic Life5 is the estimated period over (hich it is anticipated that a machinery or e"uipment may be profitably utili!ed 5Remaining 9conomic Life5 is the period of time expressed in years from the date of appraisal to the date (hen the machinery becomes valueless 5Replacement or Reproduction Cost5 is the cost that (ould be incurred on the basis of current prices, in ac"uiring an e"ually desirable substitute property, or the cost of reproducing a ne( replica of the property on the basis of current prices (ith the same or closely similar material 5Remaining Halue5 is the value corresponding to the remaining useful life of the machinery 5)epreciated Halue5 is the value remaining after deducting depreciation from the ac"uisition cost

o o

iii. 9or im%orted machiner& 0 9?K is ac:uisition cost, but ac:uisition cost includes reight, insurance, bank and other charges, brokerage, arrastre and handling, duties and taxes, %lus cost o inland trans%ortation, handling, and installation charges at the %resent site. 2"T3: ?achineries would de%reciate in value. To what extent would the owner o machiner& be allowed to reduce the value o its machiner& ever& time it is re:uired to %a& R-T+ o 1t a rate not exceeding ive %ercent 6/A7 o its original cost or its re%lacement or re%roduction cost, as the case ma& be, or each &ear o use: -rovided, however, That the remaining value or all kinds o machiner& shall be ixed at not less than twent& %ercent 6!@A7 o such original, re%lacement, or re%roduction cost or so long as the machiner& is use ul and in o%eration 3>1?-$3: =ou have a machiner& and %urchased it brand new. It,s valued at 1m. 3stimated li e is onl& 1@ &ears. 1 st &ear, it was a%%raised at 1m, which is the ac:uisition cost. ! nd &ear, how much would the assessor ex%ect o &ou to declare as 9?K o the machiner&+ I/@k, because it should be at a rate not exceeding /A o its original cost. 8ow about on the 1@th &ear+ /@@k. 3ver& machiner&, although it has di erent economic li e or use ul li e, but or R-T %ur%oses, we stick to the /A de%reciation ever& &ear u% to the extent that it,s use ul. o )o, even i it has onl& an estimated li e o 1@ &ears, which has 1@A de%reciation ever& &ear, or i it has an estimated li e o / &ears, which has !@A de%reciation ever& &ear, it will onl& reduce the machiner&, or R-T %ur%oses, b& /A u% to the extent that it,s use ul.

*hat i it,s no longer use ul or it has ull& retired or &ou,re no longer using it+ It,s no longer declared or R-T %ur%oses. But even i &ou have consumed all the values, like ever& &ear, &ou de%reciate it b& /A, and it,s still use ul, meaning, &ou can use it or something else, &ou alwa&s sto% at !@A o its value. =ou can never declare a machiner& less than !@A o its ac:uisition cost or re%lacement cost.

'. 'etermine the 1ssessed Kalue o Kaluation o R #9C. $$?. Haluation of Real roperty. ' In cases (here @aA real property is declared and listed for taxation purposes for the first time0 @bA there is an ongoing general revision of property classification and assessment0 or

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@cA a re"uest is made by the person in (hose name the property is declared, the provincial, city or municipal assessor or his duly authori!ed deputy shall, in accordance (ith the provisions of this Chapter, make a classification, appraisal and assessment of the real property listed and described in the declaration irrespective of any previous assessment or taxpayer6s valuation thereon; rovided, ho(ever, That the assessment of real property shall not be increased oftener than once every three @=A years except in case of ne( improvements substantially increasing the value of said property or of any change in its actual use. 5*ssessment5 is the act or process of determining the value of a property, or proportion thereof sub.ect to tax, including the discovery, listing, classification, and appraisal of properties 5*ssessment Level5 is the percentage applied to the fair market value to determine the taxable value of the property 5*ssessed Halue5 is the fair market value of the real property multiplied by the assessment level. It is synonymous to taxable value 1$$I3' B12PI2; K) O<3S"2 #IT= The factual issues (hich petitioner inter.ected in its petition aside, the only crucial legal "uery in this case is the validity of the proviso fixing the appraised value of property at the stated consideration at (hich the property (as last sold. This Court holds that the proviso in "uestion is invalid as it adopts a method of assessment or appraisal of real property contrary to the Local Government Code, its Implementing Rules and Regulations and the Local *ssessment Regulations &o. <'B$ issued by the )epartment of 3inance. >nder these immediately stated authorities, real properties shall be appraised at the current and fair market value prevailing in the locality (here the property is situated and classified for assessment purposes on the basis of its actual use. ,3air market value- is the price at (hich a property may be sold by a seller (ho is not compelled to sell and bought by a buyer (ho is not compelled to buy, taking into consideration all uses to (hich the property is adapted and might in reason be applied. The criterion established by the statute contemplates a hypothetical sale. Hence, the buyers need not be actual and existing purchasers. *ssessors, in fixing the value of real property, have to consider all the circumstances and elements of value, and must exercise prudent discretion in reaching conclusions. In this regard, Local *ssessment Regulations &o. <'B$ establishes the guidelines to assist assessors in classifying, appraising and assessing real property. *ccordingly, this Court holds that the proviso directing that the real property tax be based on the actual amount reflected in the deed of conveyance or the prevailing +IR !onal value is invalid not only because it mandates an exclusive rule in determining the fair market value but more so because it departs from the established procedures stated in the Local *ssessment Regulations &o. <'B$ and unduly interferes (ith the duties statutorily placed upon the local assessor by completely dispensing (ith his analysis and discretion (hich the Code and the regulations re"uire to be exercised. *n ordinance that contravenes any statute is ultra vires and void. 3urther, it is noted that there is nothing in the Charter of Tue!on City and the Tue!on City Revenue Code of <BB= that authori!e public respondents to appraise property at the consideration stated in the deed of conveyance. >sing the consideration appearing in the deed of conveyance to assess or appraise real properties is not only illegal since ,the appraisal, assessment, levy and collection of real property tax shall not be let to any private person,- but it (ill completely destroy the fundamental principle in real property taxation P that real property shall be classified, valued and assessed on the basis of its actual use regardless of (here located, (hoever o(ns it, and (hoever uses it. &ecessarily, allo(ing the parties to a private sale to dictate the fair market value of the property (ill dispense (ith the distinctions of actual use stated in the Code and in the regulations. The invalidity of the assessment or appraisal system adopted by the proviso is not cured even if the proviso mandates the comparison of the stated consideration as against the prevailing +IR !onal value, (hichever is higher, because an integral part of that system still permits valuing real property in disregard of its ,actual use.In the same vein, there is also nothing in the Code or the regulations sho(ing the congressional intent to re"uire an immediate ad.ustment of taxes on the basis of the latest market developments as, in fact, real property assessments may be revised andDor increased only once every three @=A years.

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Conse"uently, the real property tax burden should not be interpreted to include those beyond (hat the Code or the regulations expressly and clearly state. #till another conse"uence of the proviso is to provide a chilling effect on real property o(ners or administrators to enter freely into contracts reflecting the increasing value of real properties in accordance (ith prevailing market conditions. 1hile the Local Government Code provides that the assessment of real property shall not be increased oftener than once every three @=A years, the "uestioned part of the proviso sub.ects the real property to a tax based on the actual amount appearing on the deed of conveyance or the current approved !onal valuation of the +ureau of Internal Revenue prevailing at the time of sale, cession, transfer and conveyance, (hichever is higher. *s such, any subse"uent sale during the three'year period (ill result in a real property tax higher than the tax assessed at the last prior conveyance (ithin the same period. To save on taxes, real property o(ners or administrators are forced to hold on to the property until after the said three'year period has lapsed. #hould they nonetheless decide to sell (ithin the said three'year period, they are compelled to dispose the property at a price not exceeding that obtained from the last prior conveyance in order to avoid a higher tax assessment. In these t(o scenarios, real property o(ners are effectively prevented from obtaining the best price possible for their properties and unduly hampers the e"uitable distribution of (ealth. 1hile the state may legitimately decide to structure its tax system to discourage rapid turnover in o(nership of real properties, such state interest must be expressly stated in the executing statute or it can at least be gleaned from its provisions. In the case at bar, there is nothing in the Local Government Code, the implementing rules and regulations, the local assessment regulations, the Tue!on City Charter, the Tue!on City Revenue Code of <BB= and the ,1hereas- clauses of the <BBF 4rdinance from (hich this Court can dra(, at the very least, an intimation of this state interest. *s such, the proviso must be stricken do(n for being contrary to public policy and for restraining trade. In fine, public respondent Tue!on City Government exceeded its statutory authority (hen it enacted the proviso in "uestion. The provision is thus null and void ab initio for being ultra vires and for contravening the provisions of the Local Government Code, its implementing regulations and the Local *ssessment Regulations &o. <'B$. *s such, it ac"uired no legal effect and conferred no rights from its inception.

It is the local assessor who is the one to %re%are the schedule o 9?Ks and submit it to the sanggunian. The sanggunian will enact an ordinance and this ordinance will be %ublished in a news%a%er o general circulation or %ur%oses o noti &ing R- owners, and such schedule o 9?Ks shall be valid or at least 3 &ears. But i ever there is a mistake in the 9?K, what shall the assessor do+ The assessor ma& recommend or amendments or correction o errors o the ordinance to the sanggunian concerned. #9C. $<C. *mendment of #chedule of 3air :arket Halues. ' The provincial, city or municipal assessor may recommend to the sanggunian concerned amendments to correct errors in valuation in the schedule of fair market values. The sanggunian concerned shall, by ordinance, act upon the recommendation (ithin ninety @B?A days from receipt thereof. 1ssuming there,s nothing wrong with the ordinance, how o ten will the schedule o 9?Ks be revised+ o 3ver& 3 &ears. )o ever& tax declaration o &our R- concerning land, buildings and im%rovements would be valid or 3 &ears but or machineries, &ou ma& de%reciate it ever& &ear b& /A.

#9C. $<B. General Revision of assessments and roperty Classification. ' The provincial, city or municipal assessor shall undertake a general revision of real property assessments (ithin t(o @$A years after the effectivity of this Code and every three @=A years thereafter. #9C. $$=. &otification of &e( or Revised *ssessment. ' 1hen real property is assessed for the first time or (hen an existing assessment is increased or decreased, the provincial, city or municipal assessor shall (ithin thirty @=?A days give (ritten notice of such ne( or revised assessment to the person in (hose name the property is declared. The notice may be delivered personally or by registered mail or through the assistance of the punong barangay to the last kno(n address of the person to be served. *hat are the exce%tions under the rule on 3-&ear revision+

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Reassessment o R- due to: 1. Its %artial or total destructionC or !. 1 ma4or change in its actual useC or 3. 1n& great and sudden in lation or de lation o R- valuesC or .. The gross illegalit& o the assessment when madeC or /. 2ew im%rovements substantiall& increasing the value o said %ro%ert& L. 1n& other abnormal cause o In these instances, revision shall be made within I@ da&s rom the date an& such cause or causes occurred.

#9C. $$<. )ate of 9ffectivity of *ssessment or Reassessment. ' *ll assessments or reassessments made after the first @<stA day of /anuary of any year shall take effect on the first @<stA day of /anuary of the succeeding year; rovided, ho(ever, That the reassessment of real property due to its partial or total destruction, or to a ma.or change in its actual use, or to any great and sudden inflation or deflation of real property values, or to the gross illegality of the assessment (hen made or to any other abnormal cause, shall be made (ithin ninety @B?A days from the date any such cause or causes occurred, and shall take effect at the beginning of the "uarter next follo(ing the reassessment.

TAX Mar. 8, 2011 Tuesday Reassessment or rea%%raisal can be general, s%ecial, or individual. *hen can there be reassessment o R- values during a 3-&ear %eriod 6exce%tions to the general rule on 3-&ear revision7+ o o o o 1. 'ue to %artial or total destruction !. To a ma4or change in its actual use 3. To an& great and sudden in lation or de lation o R- values .. To the gross illegalit& o the assessment when made or to an& other abnormal cause )o, even i the 3-&ear %eriod has not la%sed rom the %ublication o the new schedule o 9?Ks, a reassessment ma& be made assigning newl&-assigned values to the %ro%ert&, es%eciall& real estate, as a result o the a orementioned instances. ;eneral rea%%raisal 0 means all %ro%erties within the $;<s o its class, meaning %arcels o land, have been generall& a ected b& a %articular cause. 3>1?-$3: 1n& great and sudden abru%t in lation or de lation o R- values, it can cause a reassessment o generall& all the R-s within the $;<.

-artial rea%%raisal 0 it de%ends. 3>1?-$3: I %robabl&, a %articular Done o the $;< has been changed rom residential to commercial, it can ha%%en that there will be %artial reassessment o those %ro%erties a ected.

Individual rea%%raisal 3>1?-$3: 1 R- o an individual that was %artiall& or totall& destro&ed and a %ro%ert& that has been a ected due to ma4or change in its actual use or gross illegalit& o the assessment or to an& other abnormal cause.

Reassessment shall be made within I@ da&s rom the time that the cause occurred and it shall be made e ective onl& the :uarter next ollowing the reassessment. In case there is a revised assessment, whether general, %artial or individual rea%%raisal o %ro%erties, notice shall be given b& the assessor %ersonall& or b& registered mail or through the assistance o the %unong baranga& within 3@ da&s to the %ro%ert& owners.

3. -a&ment and #ollection o Tax

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*hen do R-T accrue+ ;323R1$ R<$3: "n the 1st da& o (anuar& #9C. $CG. )ate of *ccrual of Tax.' The real property tax for any year shall accrue on the first day of /anuary and from that date it shall constitute a lien on the property (hich shall be superior to any other lien, mortgage, or encumbrance of any kind (hatsoever, and shall be extinguished only upon the payment of the delin"uent tax. 3>#3-TI"2: 1. Reassessment o R- 0 the new R-T shall accrue the :uarter next ollowing the rea%%raisal or reassessment !. )%ecial lev& 0 on the :uarter next ollowing the e ectivit& o the ordinance im%osing the s%ecial lev& o #9C. $CF. *ccrual of #pecial Levy. 'The special levy shall accrue on the first day of the "uarter next follo(ing the effectivity of the ordinance imposing such levy.

*hat is re:uired or the local assessor to do in the collection o R-T+ #9C. $C%. *ssessor to 3urnish Local Treasurer (ith *ssessment Roll. ' The provincial, city or municipal assessor shall prepare and submit to the treasurer of the local government unit, on or before the thirty'first @=<stA day of )ecember each year, an assessment roll containing a list of all persons (hose real properties have been ne(ly assessed or reassessed and the values of such properties.

'ut& o the collection o R-T )uch dut& alls to the local treasurer, and not the local assessor since assessor is onl& in charge o a%%raisal and assessment, but such dut& o the local treasurer ma& be de%utiDed to the baranga& treasurer so long as there is an ade:uate bond %ut u% or such %ur%ose. #9C. $CJ. Collection of Tax. ' The collection of the real property tax (ith interest thereon and related expenses, and the enforcement of the remedies provided for in this Title or any applicable la(s, shall be the responsibility of the city or municipal treasurer concerned. The city or municipal treasurer may deputi!e the barangay treasurer to collect all taxes on real property located in the barangay; rovided, That the barangay treasurer is properly bonded for the purpose; rovided, further, That the premium on the bond shall be paid by the city or municipal government concerned.

2"T3: =ou cannot ind under the $;# o a s%eci ic date or the %a&ment o the annual R-T, unlike local taxes wherein %a&ment must be made on or be ore (an. !@ unless the T- o%ts to %a& in installment basis. 8owever, what &ou will ind in R-T is the %rovision on %a&ment b& the T- in installment basis, which must be made on or be ore the last da& o ever& :uarter: #9C. $F?. ayment of Real roperty Taxes in Installments. ' The o(ner of the real property or the person having legal interest therein may pay the basic real property tax and the additional tax for #pecial 9ducation 3und @#93A due thereon (ithout interest in four @CA e"ual installments0 the first installment to be due and payable on or before :arch Thirty'first @=<stA0 the second installment, on or before /une Thirty @=?A0 the third installment, on or before #eptember Thirty @=?A0 and the last installment on or before )ecember Thirty'first @=<stA, except the special levy the payment of (hich shall be governed by ordinance of the sanggunian concerned. The date for the payment of any other tax imposed under this Title (ithout interest shall be prescribed by the sanggunian concerned. ayments of real property taxes shall first be applied to prior years delin"uencies, interests, and penalties, if any, and only after said delin"uencies are settled may tax payments be credited for the current period. But what about i the T- wants to %a& R-T in ull+ That,s wh& the local treasurer is re:uired to %ost a notice and %ublish as well when the tax ma& be %aid without an& interest. )o, meaning to sa&, on or be ore (an. 31, the %osting and %ublication shall be made b& the local treasurer as to the tax liabilities and its due date. I &ou,re able to %a& it in ull according to the schedule o due dates given b& the local treasurer, &ou call it an advance %a&ment or the entire &ear, but &ou have the o%tion to %a& it in :uarterl& installment basis. #9C. $CB. &otice of Time for Collection of Tax. ' The city or municipal treasurer shall, on or before the thirty'first @=<stA day of /anuary each year, in the case of the basic real property tax and the additional tax for the #pecial 9ducation 3und @#93A or on any other date to be prescribed by the sanggunian concerned in the case of any other tax levied under this Title, post the notice of the dates (hen the tax may be paid (ithout interest at a conspicuous and publicly accessible place at the city or municipal hall.

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#aid notice shall like(ise be published in a ne(spaper of general circulation in the locality once a (eek for t(o @$A consecutive (eeks. o Tax discounts #9C. $F<. Tax )iscount for *dvanced rompt ayment. ' If the basic real property tax and the additional tax accruing to the #pecial 9ducation 3und @#93A are paid in advance in accordance (ith the prescribed schedule of payment as provided under #ection $F?, the sanggunian concerned may grant a discount not exceeding t(enty percent @$?NA of the annual tax due. 'iscounts ma& be availed o b& the T-, whether it %a&s in ull as advance %a&ment or the entire &ear or %a&s in :uarterl& installment basis. 2"T3: 9ormula o R-T due 0 9?K x 1))3))?32T $3K3$) 6 ixed in the $;#7 X 1))3))3' K1$<3 1))3))3' K1$<3 x A R-T rate X R-T due )o, the R-T due is based on the assessed value, not on the 9?K. The R-T due can be sub4ect to discount.

'iscount can either be or: i. 1dvance %a&ment 0 when %a&ment was made in ull as advance %a&ment or the entire &ear on or be ore due date %rescribed b& the treasurer, the discount is at a rate not exceeding !@A o the R-T due ii. -rom%t %a&ment 0 when %a&ment was made in :uarterl& installment basis on or be ore the last da& o ever& :uarter, the discount is at a rate not exceeding 1@A o the R-T due

*hat ha%%ens i &ou %a& be&ond the due date+ T- will be liable or interest. #9C. $FF. Interests on >npaid Real roperty Tax. ' In case of failure to pay the basic real property tax or any other tax levied under this Title upon the expiration of the periods as provided in #ection $F?, or (hen due, as the case may be, shall sub.ect the taxpayer to the payment of interest at the rate of t(o percent @$NA per month on the unpaid amount or a fraction thereof, until the delin"uent tax shall have been fully paid; rovided, ho(ever, That in no case shall the total interest on the unpaid tax or portion thereof exceed thirty'six @=GA months.

'o we have a @A assessment level+ =3), or residential buildings onl& whose 9?K is not over 1H/k 61H/k or less7, meaning, it has @ liabilit& or R-T.

TAX Mar. 9, 2011 Wednesday XII# G%4.$'/.'- R./.(0.) *%$ C%55.1-0%' %* T,> D.50'D&.'10.)9 F..)9 C=,$A.) ,'( O-=.$ R.4.'&.) $ocal ;overnment,s $ien o o 9rom the time that the R-T is due and un%aid, the lien attaches automaticall& against the R-. #9C. $FJ. Local Governments Lien. ' The basic real property tax and any other tax levied under this Title constitutes a lien on the property sub.ect to tax, superior to all liens, charges or encumbrances in favor of any person, irrespective of the o(ner or possessor thereof, enforceable by administrative or .udicial action, and may only be extinguished upon payment of the tax and the related interests and expenses.

1ssessment %eriod o In cases o de icienc& o R-T, within what %eriod can the $;< assess and collect the R-T due+ *ithin / &ears rom the date the& become due or within 1@ &ears, in case o raud or intent to evade %a&ment, rom the discover& o the raud or intent to evade %a&ment 9or back taxes 0 within 1@ &ears rom the date the& become due even in the absence o raud

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1ssuming the $;< is not interested in making an assessment o de icienc& o R-T but would go directl& to the iling o a collection suit be ore the regular courts, within what %eriod ma& the civil action be instituted+ *ithin / &ears rom the date the become due or within 1@ &ears rom the discover& o raud or intent to evade %a&ment according to )ec. !LL in relation to )ec. !H@. 9or back taxes 0 within 1@ &ears rom the date the& become due even in the absence o raud #9C. $GG. Collection of Real roperty Tax Through the Courts. ' The local government unit concerned may enforce the collection of the basic real property tax or any other tax levied under this Title by civil action in any court of competent .urisdiction. The civil action shall be filed by the local treasurer (ithin the period prescribed in #ection $J? of this Code. #9C. $J?. eriods 1ithin 1hich To Collect Real roperty Taxes. ' The basic real property tax and any other tax levied under this Title shall be collected (ithin five @FA years from the date they become due. &o action for the collection of the tax, (hether administrative or .udicial, shall be instituted after the expiration of such period. In case of fraud or intent to evade payment of the tax, such action may be instituted for the collection of the same (ithin ten @<?A years from the discovery of such fraud or intent to evade payment. The period of prescription (ithin (hich to collect shall be suspended for the time during (hich; o o @<A The local treasurer is legally prevented from collecting the tax0 @$A The o(ner of the property or the person having legal interest therein re"uests for reinvestigation and executes a (aiver in (riting before the expiration of the period (ithin (hich to collect0 and @=A The o(ner of the property or the person having legal interest therein is out of the country or other(ise cannot be located.

*hen would collection %eriod be sus%ended+ 1. The local treasurer is legall& %revented rom collecting the taxC !. The owner o the %ro%ert& or the %erson having legal interest therein re:uests or reinvestigation and executes a waiver in writing be ore the ex%iration o the %eriod within which to collectC and 3. The owner o the %ro%ert& or the %erson having legal interest therein is out o the countr& or otherwise cannot be located.

#ivil Remedies o 1. 1dministrative action a. 'istraint #9C. $FC. &otice of )elin"uency in the ayment of the Real roperty Tax. ' @aA 1hen the real property tax or any other tax imposed under this Title becomes delin"uent, the provincial, city or municipal treasurer shall immediately cause a notice of the delin"uency to be posted at the main entrance of the provincial capitol, or city or municipal hall and in a publicly accessible and conspicuous place in each barangay of the local government unit concerned. The notice of delin"uency shall also be published once a (eek for t(o @$A consecutive (eeks, in a ne(spaper of general circulation in the province, city, or municipality. @bA #uch notice shall specify the date upon (hich the tax became delin"uent and shall state that personal property may be distrained to effect payment. It shall like(ise state that at any time before the distraint of personal property, payment of the tax (ith surcharges, interests and penalties may be made in accordance (ith the next follo(ing #ection, and unless the tax, surcharges and penalties are paid before the expiration of the year for (hich the tax is due except (hen the notice of assessment or special levy is contested administratively or .udicially pursuant to the provisions of Chapter =, Title II, +ook II of this Code, the delin"uent real property (ill be sold at public auction, and the title to the property (ill be vested in the purchaser, sub.ect, ho(ever, to the right of the delin"uent o(ner of the property or any person having legal interest therein to redeem the property (ithin one @<A year from the date of sale.

b. $ev& #9C. $F%. Levy on Real roperty. ' *fter the expiration of the time re"uired to pay the basic real property tax or any other tax levied under this Title, real property sub.ect to such tax may be levied upon through the issuance of a (arrant on or before, or simultaneously (ith, the institution of the civil

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action for the collection of the delin"uent tax. The provincial or city treasurer, or a treasurer of a municipality (ithin the :etropolitan :anila *rea, as the case may be, (hen issuing a (arrant of levy shall prepare a duly authenticated certificate sho(ing the name of the delin"uent o(ner of the property or person having legal interest therein, the description of the property, the amount of the tax due and the interest thereon. The (arrant shall operate (ith the force of a legal execution throughout the province, city or a municipality (ithin the :etropolitan :anila *rea. The (arrant shall be mailed to or served upon the delin"uent o(ner of the real property or person having legal interest therein, or in case he is out of the country or cannot be located, to the administrator or occupant of the property. *t the same time, (ritten notice of the levy (ith the attached (arrant shall be mailed to or served upon the assessor and the Registrar of )eeds of the province, city or a municipality (ithin the :etropolitan :anila *rea (here the property is located, (ho shall annotate the levy on the tax declaration and certificate of title of the property, respectively. The levying officer shall submit a report on the levy to the sanggunian concerned (ithin ten @<?A days after receipt of the (arrant by the o(ner of the property or person having legal interest therein. #9C. $FB. enalty for 3ailure to Issue and 9xecute 1arrant. ' 1ithout pre.udice to criminal prosecution under the Revised enal Code and other applicable la(s, any local treasurer or his deputy (ho fails to issue or execute the (arrant of levy (ithin one @<A year from the time the tax becomes delin"uent or (ithin thirty @=?A days from the date of the issuance thereof, or (ho is found guilty of abusing the exercise thereof in an administrative or .udicial proceeding shall be dismissed from the service. #9C. $G?. *dvertisement and #ale. ' 1ithin thirty @=?A days after service of the (arrant of levy, the local treasurer shall proceed to publicly advertise for sale or auction the property or a usable portion thereof as may be necessary to satisfy the tax delin"uency and expenses of sale. The advertisement shall be effected by posting a notice at the main entrance of the provincial, city or municipal building, and in a publicly accessible and conspicuous place in the barangay (here the real property is located, and by publication once a (eek for t(o @$A (eeks in a ne(spaper of general circulation in the province, city or municipality (here the property is located. The advertisement shall specify the amount of the delin"uent tax, the interest due thereon and expenses of sale, the date and place of sale, the name of the o(ner of the real property or person having legal interest therein, and a description of the property to be sold. *t any time before the date fixed for the sale, the o(ner of the real property or person having legal interest therein may stay the proceedings by paying the delin"uent tax, the interest due thereon and the expenses of sale. The sale shall be held either at the main entrance of the provincial, city or municipal building, or on the property to be sold, or at any other place as specified in the notice of the sale. 1ithin thirty @=?A days after the sale, the local treasurer or his deputy shall make a report of the sale to the sanggunian concerned, and (hich shall form part of his records. The local treasurer shall like(ise prepare and deliver to the purchaser a certificate of sale (hich shall contain the name of the purchaser, a description of the property sold, the amount of the delin"uent tax, the interest due thereon, the expenses of sale and a brief description of the proceedings; rovided, ho(ever, That proceeds of the sale in excess of the delin"uent tax, the interest due thereon, and the expenses of sale shall be remitted to the o(ner of the real property or person having legal interest therein. The local treasurer may, by ordinance duly approved, advance an amount sufficient to defray the costs of collection thru the remedies provided for in this Title, including the expenses of advertisement and sale. #9C. $G<. Redemption of roperty #old. ' 1ithin one @<A year from the date of sale, the o(ner of the delin"uent real property or person having legal interest therein, or his representative, shall have the right to redeem the property upon payment to the local treasurer of the amount of the delin"uent tax, including the interest due thereon, and the expenses of sale from the date of delin"uency to the date of sale, plus interest of not more than t(o percent @$NA per month on the purchase price from the date of sale to the date of redemption. #uch payment shall invalidate the certificate of sale issued to the purchaser and the o(ner of the delin"uent real property or person having legal interest therein shall be entitled to a certificate of redemption (hich shall be issued by the local treasurer or his deputy. 3rom the date of sale until the expiration of the period of redemption, the delin"uent real property shall remain in the possession of the o(ner or person having legal interest therein (ho shall be entitled to the income and other fruits thereof. The local treasurer or his deputy, upon receipt from the purchaser of the certificate of sale, shall forth(ith return to the latter the entire amount paid by him plus interest of not more than t(o percent @$NA per month. Thereafter, the property shall be free from the lien of such delin"uent tax, interest due thereon and expenses of sale. #9C. $G$. 3inal )eed to urchaser. ' In case the o(ner or person having legal interest therein fails to redeem the delin"uent property as provided herein, the local treasurer shall execute a deed conveying to the purchaser said property, free from lien of the delin"uent tax, interest due thereon and expenses of sale. The deed shall briefly state the proceedings upon (hich the validity of the sale rests. #9C. $G=. urchase of roperty +y the Local Government >nits for 1ant of +idder. ' In case there is no bidder for the real property advertised for sale as provided herein, or if the highest bid is for an

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amount insufficient to pay the real property tax and the related interest and costs of sale the local treasurer conducting the sale shall purchase the property in behalf of the local government unit concerned to satisfy the claim and (ithin t(o @$A days thereafter shall make a report of his proceedings (hich shall be reflected upon the records of his office. It shall be the duty of the Registrar of )eeds concerned upon registration (ith his office of any such declaration of forfeiture to transfer the title of the forfeited property to the local government unit concerned (ithout the necessity of an order from a competent court. 1ithin one @<A year from the date of such forfeiture, the taxpayer or any of his representative, may redeem the property by paying to the local treasurer the full amount of the real property tax and the related interest and the costs of sale. If the property is not redeemed as provided herein, the o(nership thereof shall be fully vested on the local government unit concerned. #9C. $GC. Resale of Real 9state Taken for Taxes, 3ees, or Charges. ' The sanggunian concerned may, by ordinance duly approved, and upon notice of not less than t(enty @$?A days, sell and dispose of the real property ac"uired under the preceding section at public auction. The proceeds of the sale shall accrue to the general fund of the local government unit concerned. #9C. $GF. 3urther )istraint or Levy. ' Levy may be repeated if necessary until the full amount due, including all expenses, is collected. 2"T3: -ublication and %osting is not ade:uate. There must be %ersonal notice to the T- owner. 1ssuming that a %ublic auction o a R- shall be made, and the notice was given to the name a%%earing in the tax declaration but it turned out that the %ro%ert& has alread& been validl& sold and the T#T was trans erred to the bu&er+ Is it a 4urisdictional de ect that will invalidate the sale i %ersonal notice was given b& the assessor to the name re lected in the tax declaration, not to the name re lected in the T#T+ o o o =3). It does not ree the local assessor rom the re:uirement o giving the notice to the right %erson. 2otice to the correct owner or the right owner o the %ro%ert& is an essential and indis%ensable re:uirement o law. 2on-com%liance o which renders the auction sale as invalid and void. 9ailure to correct the name in the name a%%earing in the tax declaration b& the current owner is not a de ense that can be raised b& the local assessor.

O# ?1="R K) R#B# o Inasmuch as the crafter of the Local Government Code clearly (orded the above'cited #ection to repeal .). &o. CGC, it is a clear sho(ing of their legislative intent that R.*. &o. J<G? (as to supersede .). &o. CGC. *s such, it is apparent that in case of sale of tax delin"uent properties, R.*. &o. J<G? is the general la( applicable. 3rom the foregoing, the o(ner of the delin"uent real property or person having legal interest therein, or his representative, has the right to redeem the property (ithin one @<A year from the date of sale upon payment of the delin"uent tax and other fees. Herily, the period of redemption of tax delin"uent properties should be counted not from the date of registration of the certificate of sale, as previously provided by #ection J% of .). &o. CGC, but rather on the date of sale of the tax delin"uent property, as explicitly provided by #ection $G< of R.*. &o. J<G?. &onetheless, the government of Tue!on City, pursuant to the taxing po(er vested on local government units by #ection F, *rticle E of the <B%J Constitutionand R.*. &o. J<G?, enacted City 4rdinance &o. # 'B<, #'B=, other(ise kno(n as the Tue!on City Revenue Code of <BB=, providing, among other things, the procedure in the collection of delin"uent taxes on real properties (ithin the territorial .urisdiction of Tue!on City. The ordinance is explicit that the one'year redemption period should be counted from the date of the annotation of the sale of the property at the proper registry. *t first glance, this provision runs counter to that of #ection $G< of R.*. &o. J<G? (hich provides that the one year redemption period shall be counted from the date of sale of the tax delin"uent property. There is, therefore, a need to reconcile these seemingly conflicting provisions of a general la( and a special la(. * general statute is one (hich embraces a class of sub.ects or places and does not omit any sub.ect or place naturally belonging to such class. * special statute, as the term is generally understood, is one (hich relates to particular persons or things of a class or to a particular portion or section of the state only. In the present case, R.*. &o. J<G? is to be construed as a general la(, (hile City 4rdinance &o. # 'B<, #'B= is a special la(, having emanated only from R.*. &o. J<G? and (ith limited territorial application in Tue!on City only.

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* general la( and a special la( on the same sub.ect should be accordingly read together and harmoni!ed, if possible, (ith a vie( to giving effect to both. 1here there are t(o acts, one of (hich is special and particular and the other general (hich, if standing alone, (ould include the same matter and thus conflict (ith the special act, the special must prevail, since it evinces the legislative intent more clearly than that of the general statute and must be taken as intended to constitute an exception to the rule. :ore so, (hen the validity of the la( is not in "uestion. In giving effect to these la(s, it is also (orthy to note that in cases involving redemption, the la( protects the original o(ner. It is the policy of the la( to aid rather than to defeat the o(ner2s right. Therefore, redemption should be looked upon (ith favor and (here no in.ury (ill follo(, a liberal construction (ill be given to our redemption la(s, specifically on the exercise of the right to redeem. To harmoni!e the provisions of the t(o la(s and to maintain the policy of the la( to aid rather than to defeat the o(ner2s right to redeem his property, #ection <C @aA, aragraph J of City 4rdinance &o. # 'B<, #'B= should be construed as to define the phrase ,one @<A year from the date of sale- as appearing in #ection $G< of R.*. &o. J<G?, to mean ,one @<A year from the date of the annotation of the sale of the property at the proper registry.Conse"uently, the counting of the one @<A year redemption period of property sold at public auction for its tax delin"uency should be counted from the date of annotation of the certificate of sale in the proper Register of )eeds. *pplying the foregoing to the case at bar, from the date of registration of the Certificate of #ale of )elin"uent roperty on 3ebruary <?, $??C, respondent had until 3ebruary <?, $??F to redeem the sub.ect properties. Hence, its tender of payment of the sub.ect properties2 tax delin"uencies and other fees on /une <?, $??C, (as (ell (ithin the redemption period, and it (as manifest error on the part of petitioners to have refused such tender of payment.

!. (udicial 1ction #9C. $GG. Collection of Real roperty Tax Through the Courts. ' The local government unit concerned may enforce the collection of the basic real property tax or any other tax levied under this Title by civil action in any court of competent .urisdiction. The civil action shall be filed by the local treasurer (ithin the period prescribed in #ection $J? of this Code.

XIII# TPE) R./.(0.) -rotest b& means o 1%%eal to the )"( o #9C. <%J. rocedure for *pproval and 9ffectivity of Tax ordinances and Revenue :easures0 :andatory ublic Hearings. ' The procedure for approval of local tax ordinances and revenue measures shall be in accordance (ith the provisions of this Code; rovided, That public hearings shall be conducted for the purpose prior to the enactment thereof; rovided, further, That any "uestion on the constitutionality or legality of tax ordinances or revenue measures may be raised on appeal (ithin thirty @=?A days from the effectivity thereof to the #ecretary of /ustice (ho shall render a decision (ithin sixty @G?A days from the date of receipt of the appeal; rovided, ho(ever, That such appeal shall not have the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied therein; rovided, finally, That (ithin thirty @=?A days after receipt of the decision or the lapse of the sixty'day period (ithout the #ecretary of /ustice acting upon the appeal, the aggrieved party may file appropriate proceedings (ith a court of competent .urisdiction.

-rotest 1gainst R-T de icienc& o #9C. $F$. ayment >nder rotest. ' @aA &o protest shall be entertained unless the taxpayer first pays the tax. There shall be annotated on the tax receipts the (ords 5paid under protest5. The protest in (riting must be filed (ithin thirty @=?A days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the case of a municipality (ithin :etropolitan :anila *rea, (ho shall decide the protest (ithin sixty @G?A days from receipt. @bA The tax or a portion thereof paid under protest, shall be held in trust by the treasurer concerned. @cA In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the tax protested shall be refunded to the protestant, or applied as tax credit against his existing or future tax liability. @dA In the event that the protest is denied or upon the lapse of the sixty day period prescribed in subparagraph @aA, the taxpayer may avail of the remedies as provided for in Chapter =, Title II, +ook II of this Code. #9C. $$G. Local +oard of *ssessment *ppeals. ' *ny o(ner or person having legal interest in the property (ho is not satisfied (ith the action of the provincial, city or municipal assessor in the assessment of his property may, (ithin sixty @G?A days from the date of receipt of the (ritten notice of assessment, appeal to the +oard of *ssessment appeals of the

o o o o

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province or city by filing a petition under oath in the form prescribed for the purpose, together (ith copies of the tax declarations and such affidavits or documents submitted in support of the appeal. o #9C. $$J. 4rgani!ation, o(ers, )uties, and 3unctions of the Local +oard of *ssessment *ppeals. ' @aA The +oard of *ssessment appeals of the province or city shall be composed of the Registrar of )eeds, as Chairman, the provincial or city prosecutor and the provincial, or city engineer as members, (ho shall serve as such in an ex officio capacity (ithout additional compensation. @bA The chairman of the +oard shall have the po(er to designate any employee of the province or city to serve as secretary to the +oard also (ithout additional compensation. @cA The chairman and members of the +oard of *ssessment appeals of the province or city shall assume their respective positions (ithout need of further appointment or special designation immediately upon effectivity of this Code. They shall take an oath or affirmation of office in the prescribed form. @dA In provinces and cities (ithout a provincial or city engineer, the district engineer shall serve as member of the +oard. In the absence of the Registrar of )eeds, or the provincial or city prosecutor, or the provincial or city engineer, or the district engineer, the persons performing their duties, (hether in an acting capacity or as a duly designated officer'in' charge, shall automatically become the chairman or member, respectively, of the said +oard, as the case may be. #9C. $$%. :eetings and 9xpenses of the Local +oard of *ssessment *ppeals. ' @aA The +oard of *ssessment appeals of the province or city shall meet once a month and as often as may be necessary for the prompt disposition of appealed cases. &o member of the +oard shall be entitled to per diems or traveling expenses for his attendance in +oard meetings, except (hen conducting an ocular inspection in connection (ith a case under appeal. @bA *ll expenses of the +oard shall be charged against the general fund of the province or city, as the case may be. The sanggunian concerned shall appropriate the necessary funds to enable the +oard in their respective localities to operate effectively. #9C. $$B. *ction by the Local +oard of *ssessment appeals. ' @aA The +oard shall decide the appeal (ithin one hundred t(enty @<$?A days from the date of receipt of such appeal. The +oard, after hearing, shall render its decision based on substantial evidence or such relevant evidence on record as a reasonable mind might accept as ade"uate to support the conclusion. @bA In the exercise of its appellate .urisdiction, the +oard shall have the po(er to summon (itnesses, administer oaths, conduct ocular inspection, take depositions, and issue subpoena and subpoena duces tecum. The proceedings of the +oard shall be conducted solely for the purpose of ascertaining the facts (ithout necessarily adhering to technical rules applicable in .udicial proceedings. @cA The secretary of the +oard shall furnish the o(ner of the property or the person having legal interest therein and the provincial or city assessor (ith a copy of the decision of the +oard. In case the provincial or city assessor concurs in the revision or the assessment, it shall be his duty to notify the o(ner of the property or the person having legal interest therein of such fact using the form prescribed for the purpose. The o(ner of the property or the person having legal interest therein or the assessor (ho is not satisfied (ith the decision of the +oard, may, (ithin thirty @=?A days after receipt of the decision of said +oard, appeal to the Central +oard of *ssessment appeals, as herein provided. The decision of the Central +oard shall be final and executory. #9C. $=?. Central +oard of *ssessment appeals.' The Central +oard of *ssessment appeals shall be composed of a chairman and t(o @$A members to be appointed by the resident, (ho shall serve for a term of seven @JA years, (ithout reappointment. 4f those first appointed, the chairman shall hold office for seven @JA years, one member for five @FA years, and the other member for three @=A years. *ppointment to any vacancy shall be only for the unexpired portion of the term of the predecessor. In no case shall any member be appointed or designated in a temporary or acting capacity. The chairman and the members of the +oard shall be 3ilipino citi!ens, at least forty @C?A years old at the time of their appointment, and members of the +ar or Certified ublic *ccountants for at least ten @<?A years immediately preceding their appointment. The chairman of the +oard of *ssessment appeals shall have the salary grade e"uivalent to the rank of )irector III under the #alary #tandardi!ation La( exclusive of allo(ances and other emoluments. The members of the +oard shall have the salary grade e"uivalent to the rank of )irector II under the #alary #tandardi!ation La( exclusive of allo(ances and other emoluments. The +oard shall have appellate .urisdiction over all assessment cases decided by the Local +oard of *ssessment appeals. There shall be Hearing 4fficers to be appointed by the Central +oard of *ssessment appeals pursuant to civil service la(s, rules and regulations, one each for Lu!on, Hisayas and :indanao, (ho shall hold office in :anila, Cebu City and Cagayan de 4ro City, respectively, and (ho shall serve for a term of six @GA years, (ithout reappointment until their successors have been appointed and "ualified. The Hearing 4fficers shall have the same "ualifications as that of the /udges of the :unicipal Trial Courts.

o o

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The Hearing 4fficers shall each have the salary grade e"uivalent to the rank of )irector I under the #alary #tandardi!ation La( exclusive of allo(ances and other emoluments. The Hearing 4fficers shall try and receive evidences on the appealed assessment cases as may be directed by the +oard. The Central +oard *ssessment appeals, in the performance of its po(ers and duties, may establish and organi!e staffs, offices, units, prescribe the titles, functions and duties of their members and adopt its o(n rules and regulations. >nless other(ise provided by la(, the annual appropriations for the Central +oard of *ssessment appeals shall be included in the annual budget of the )epartment of 3inance in the corresponding General *ppropriations *ct. #9C. $=<. 9ffect of appeal on the ayment of Real roperty Tax. ' *ppeal on assessments of real property made under the provisions of this Code shall, in no case, suspend the collection of the corresponding realty taxes on the property involved as assessed by the provincial or city assessor, (ithout pre.udice to subse"uent ad.ustment depending upon the final outcome of the appeal. 1ssuming that &ou have received a notice or de icienc& o R-T within the %rescri%tive %eriod or &ou received the assessment. =ou did not agree with the com%utation and the correctness o the amount that has been assessed, what is &our remed&+ -a&ment under %rotest, then the T- will be given a tax recei%t with an annotation that &ou have E%aid under %rotestF 0 this becomes a condition %recedent be ore &ou ile &our written %rotest within 3@ da&s rom %a&ment under %rotest be ore the local treasurer. $ocal treasurer is re:uired to decide the %rotest within L@ da&s rom recei%t o %rotest. I local treasurer,s decision is avorable 0 81--= I local treasurer,s decision is un avorable 0 )1' I local treasurer makes no decision within the L@-da& %eriod 0 )1'

I )1', a%%eal to the $B11 within L@ da&s rom recei%t o local treasurer,s denial or rom the local treasurer,s L@da& inaction. $B11 is re:uired to decide the a%%eal within 1!@ da&s rom recei%t o the notice o a%%eal. I $B11,s decision is avorable 0 81--= I $B11,s decision i un avorable 0 )1' I $B11 makes no decision within the 1!@-da& %eriod 0 )1'

I )1', a%%eal to the #B11 within 3@ da&s rom recei%t o $B11,s denial or rom the $B11,s 1!@-da& inaction. In this case, the $;# does not %rovide within what %eriod is the #B11 mandated to decide the a%%eal. #B11 is not mandatoril& re:uired to make a decision within a s%eci ic number o da&s. )o, the #B11 can take more than 1!@ da&s to decide. 2onethelessQ. I #B11,s decision is avorable 0 81--= I #B11,s decision is un avorable 0 )1'

I )1', a%%eal to the #T1 en banc within 3@ da&s rom recei%t o #B11,s denial. I still )1', ile ?R. I still )1', ile a%%eal to the )#.

)o what,s good about this is that even i it takes 1@ &ears rom the assessment until the )# decision that is decided un avorabl&, &ou won,t be re:uired to %a& an& interest an&more because &ou have alread& %aid the taxes at the time re:uired, unlike national taxes.

)o, i an& o the decisions is avorable to &ou, what ha%%ens to &our %a&ment under %rotest+ o =ou can ile a claim or re und and tax credit within ! &ears rom the date the T- is entitled to such re und or credit, which is rom the recei%t o the avorable decision, be ore the local treasurer. o R31)"2: There is %a&ment under %rotest.

#9C. $F=. Repayment of 9xcessive Collections. ' 1hen an assessment of basic real property tax, or any other tax levied under this Title, is found to be illegal or erroneous and the tax is accordingly reduced or ad.usted, the taxpayer may file a (ritten claim for refund or credit for taxes and interests (ith the provincial or city treasurer (ithin t(o @$A years from the date the taxpayer is entitled to such reduction or ad.ustment. The provincial or city treasurer shall decide the claim for tax

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refund or credit (ithin sixty @G?A days from receipt thereof. In case the claim for tax refund or credit is denied, the taxpayer may avail of the remedies as provided in Chapter =, Title II, +ook II of this Code. o In case the claim or re und or credit is denied, remed& is the same as that o denial o %rotest made b& the local treasurer.

*ould all %rotest against R-T assessment be %receded b& a %a&ment under %rotest+ )a& or exam%le, &ou received an assessment or R-T that &ou believed to be residential %ro%ert& but the assessment was or commercial %ro%ert& and it,s wa& higher than what &ou have ex%ected. =our contention is that it must be reclassi ied as residential %ro%ert&, not commercial %ro%ert&. 'o &ou have to %a& under %rotest in that case+ o o 2". )o when is %a&ment under %rotest mandator&+ In :uestioning a R-T de icienc&+ In :uestioning a classi ication o %ro%ert& made b& the assessor+ In :uestioning a s%ecial lev& im%osition+ -a&ment under %rotest is necessar& i what is contested is that onl& in accordance with the amount that has been assessed, not with the legalit& o the assessment. )o it means to sa& that %a&ment under %rotest is necessar& when &ou %rotest the R-T de icienc& assessment. =ou contest the correctness o the amount. 1nd it is necessar& as well when &ou contest the amount im%osed as a s%ecial lev&.

"nl& when &our :uestioning classi ication o %ro%ert&, at that %oint, &ou don,t need to %a& R-T because it,s not as &et the amount that is assessed.

2-# K) -R"KI2#3 "9 O<3S"2 1ho may appeal a real property tax assessment Legal interest is defined as interest in property or a claim cogni!able at la(, e"uivalent to that of a legal o(ner (ho has legal title to the property. Given this definition, &apocor is clearly not vested (ith the re"uisite interest to protest the tax assessment, as it is not an entity having the legal title over the machineries. It has absolutely no solid claim of o(nership or even of use and possession of the machineries. >nder +4T agreements, the private corporationsDinvestors are the o(ners of the facility or machinery concerned. *pparently, even &apocor and :irant recogni!e this principle0 *rticle $.<$ of their +4T *greement provides that ,until the Transfer )ate, 7:irant8 shall, directly or indirectly, o(n the o(er #tation and all the fixtures, fitting, machinery and e"uipment on the #ite x x x. 7:irant8 shall operate, manage, and maintain the o(er #tation for the purpose of converting fuel of &apocor into electricity.:oreover, if &apocor truly believed that it (as the o(ner of the sub.ect machineries, it should have complied (ith #ections $?$ and $?G of the LGC (hich obligates o(ners of real property to; o o a. file a s(orn statement declaring the true value of the real property, (hether taxable or exempt0 and b. file sufficient documentary evidence supporting its claim for tax exemption.

1hile a real property o(ner2s failure to comply (ith #ections $?$ and $?G does not necessarily negate its tax obligation nor invalidate its legitimate claim for tax exemption, &apocor2s omission to do so in this case can be construed as contradictory to its claim of o(nership of the sub.ect machineries. That it assumed liability for the taxes that may be imposed on the sub.ect machineries similarly does not clothe it (ith legal title over the same. 1e do not believe that the phrase ,person having legal interest in the property- in #ection $$G of the LGC can include an entity that assumes another person2s tax liability by contract. 3or the Court to consider an entity assuming another person2s tax liability by contract as a person having legal interest in the real property (ould extend to it the privileges and responsibilities of a real property o(ner. The framers of the LGC certainly did not contemplate that the listing, valuation, and assessment of real property can be made in the name of such entity0 nor did they intend to make the (arrant of levy enforceable against it. Insofar as the provisions of the LGC are concerned, this entity is a party foreign to the operation of real property tax la(s and could not be clothed (ith any legal interest over the property apart from its assumed liability for tax. The rights and obligations arising from the +4T *greement bet(een &apocor and :irant (ere of no legal interest to the tax collector P the rovince of Tue!on P (hich is charged (ith the performance of independent duties under the LGC.

ayment under protest is re"uired before an appeal to the L+** can be made

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*part from &apocor2s failure to prove that it has sufficient legal interest, a further revie( of the records revealed another basis for disregarding &apocor2s protest against the assessment. The L+** dismissed &apocor2s petition for exemption for its failure to comply (ith #ection $F$ of the LGC re"uiring payment of the assailed tax before any protest can be made. *lthough the C+** ultimately dismissed &apocor2s appeal for failure to meet the re"uirements for tax exemption, it agreed (ith &apocor2s position that ,the protest contemplated in #ection $F$ @aA is applicable only (hen the taxpayer is "uestioning the reasonableness or excessiveness of an assessment. It presupposes that the taxpayer is sub.ect to the tax but is disputing the correctness of the amount assessed. It does not apply (here, as in this case, the legality of the assessment is put in issue on account of the taxpayer2s claim that it is exempt from tax.- The CT* en banc agreed (ith the C+**2s discussion, relying mainly on the cases of Ty v. Trampe and 4livare! v. :ar"ue!. 1e disagree. The cases of Ty and 4livare! must be placed in their proper perspective. The petitioner in Ty v. Trampe "uestioned before the trial court the increased real estate taxes imposed by and being collected in asig City effective from the year <BBC, premised on the legal "uestion of (hether or not residential )ecree &o. B$< @ ) B$<A (as repealed by the LGC. ) B$< re"uired that the schedule of values of real properties in the :etropolitan :anila area shall be prepared .ointly by the city assessors in the districts created therein0 (hile #ection $<$ of the LGC stated that the schedule shall be prepared by the provincial, city or municipal assessors of the municipalities (ithin the :etropolitan :anila *rea for the different classes of real property situated in their respective local government units for enactment by ordinance of the #anggunian concerned. The private respondents assailed Ty2s act of filing a prohibition petition before the trial court contending that Ty should have availed first the administrative remedies provided in the LGC, particularly #ections $F$ @on payment under protest before the local treasurerA and $$G @on appeals to the L+**A. The Court, through former Chief /ustice *rtemio anganiban, declared that Ty correctly filed a petition for prohibition before the trial court against the assailed act of the city assessor and treasurer. The administrative protest proceedings provided in #ection $F$ and $$G (ill not apply. The protest contemplated under #ection $F$ is re"uired (here there is a "uestion as to the reasonableness or correctness of the amount assessed. Hence, if a taxpayer disputes the reasonableness of an increase in a real property tax assessment, he is re"uired to 5first pay the tax5 under protest. 4ther(ise, the city or municipal treasurer (ill not act on his protest. Ty ho(ever (as "uestioning the very authority and po(er of the assessor, acting solely and independently, to impose the assessment and of the treasurer to collect the tax. These (ere not "uestions merely of amounts of the increase in the tax but attacks on the very validity of any increase. :oreover, Ty (as raising a legal "uestion that is properly cogni!able by the trial court0 no issues of fact (ere involved. In enumerating the po(er of the L+**, #ection $$B declares that ,the proceedings of the +oard shall be conducted solely for the purpose of ascertaining the facts x x x.- *ppeals to the L+** @under #ection $$GA are therefore fruitful only (here "uestions of fact are involved. 4livare! v. :ar"ue!, on the other hand, involved a petition for certiorari, mandamus, and prohibition "uestioning the assessment and levy made by the City of araWa"ue. 4livare! (as seeking the annulment of his realty tax delin"uency assessment. :ar"ue! assailed 4livare!2 failure to first exhaust administrative remedies, particularly the re"uirement of payment under protest. 4livare! replied that his petition (as filed to "uestion the assessor2s authority to assess and collect realty taxes and therefore, as held in Ty v. Trampe, the exhaustion of administrative remedies (as not re"uired. The Court ho(ever did not agree (ith 4livare!2s argument. It found that there (as nothing in his petition that supported his claim regarding the assessor2s alleged lack of authority. 1hat 4livare! raised (ere the follo(ing grounds; ,@<A some of the taxes being collected have already prescribed and may no longer be collected as provided in #ection <BC of the Local Government Code of <BB<0 @$A some properties have been doubly taxedDassessed0 @=A some properties being taxed are no longer existent0 @CA some properties are exempt from taxation as they are being used exclusively for educational purposes0 and @FA some errors are made in the assessment and collection of taxes due on petitioners2 properties, and that respondents committed grave abuse of discretion in making the improper, excessive and unla(ful the collection of taxes against the petitioner.- The 4livare! petition filed before the trial court primarily involved the correctness of the assessments, (hich is a "uestion of fact that is not allo(ed in a petition for certiorari, prohibition, and mandamus. Hence, (e declared that the petition should have been brought, at the very first instance, to the L+**, not the trial court. Like 4livare!, &apocor, by claiming exemption from realty taxation, is simply raising a "uestion of the correctness of the assessment. * claim for tax exemption, (hether full or partial, does not "uestion the authority of local assessor to assess real property tax as may be inferred from #ection $?G of the Local Government Code.

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+y providing that real property not declared and proved as tax'exempt shall be included in the assessment roll, the above'"uoted provision implies that the local assessor has the authority to assess the property for realty taxes, and any subse"uent claim for exemption shall be allo(ed only (hen sufficient proof has been adduced supporting the claim. #ince &apocor (as simply "uestioning the correctness of the assessment, it should have first complied (ith #ection $F$, particularly the re"uirement of payment under protest. &apocor2s failure to prove that this re"uirement has been complied (ith thus renders its administrative protest under #ection $$G of the LGC (ithout any effect. &o protest shall be entertained unless the taxpayer first pays the tax. It (as an ill'advised move for &apocor to directly file an appeal (ith the L+** under #ection $$G (ithout first paying the tax as re"uired under #ection $F$. #ections $F$ and $$G provide successive administrative remedies to a taxpayer (ho "uestions the correctness of an assessment. #ection $$G, in declaring that ,any o(ner or person having legal interest in the property (ho is not satisfied (ith the action of the provincial, city, or municipal assessor in the assessment of his property may x x x appeal to the +oard of *ssessment *ppeals x x x,- should be read in con.unction (ith #ection $F$ @dA, (hich states that ,in the event that the protest is denied x x x, the taxpayer may avail of the remedies as provided for in Chapter =, Title II, +ook II of the LGC 7Chapter = refers to *ssessment *ppeals, (hich includes #ections $$G to $=<8. The ,action- referred to in #ection $$G @in relation to a protest of real property tax assessmentA thus refers to the local assessor2s act of denying the protest filed pursuant to #ection $F$. 1ithout the action of the local assessor, the appellate authority of the L+** cannot be invoked. &apocor2s action before the L+** (as thus prematurely filed. 3or the foregoing reasons, (e )9&I the petitioner2s motion for reconsideration.

O# K) B1=12T3$ The issue (as (hether or not +ayantel is re"uired to exhaust administrative remedies before seeking .udicial relief (ith the trial court. etitioners argue that +ayantel had failed to avail itself of the administrative remedies provided for under the LGC, adding that the trial court erred in giving due course to +ayantel2s petition for prohibition. To petitioners, the appeal mechanics under the LGC constitute +ayantel2s plain and speedy remedy in this case. The Court does not agree. etitions for prohibition are governed by the follo(ing provision of Rule GF of the Rules of Court; #9C. $. etition for prohibition. P 1hen the proceedings of any tribunal, V are (ithout or in excess of its or his .urisdiction, or (ith grave abuse of discretion amounting to lack or excess of .urisdiction, and there is no appeal or any other plain, speedy, and ade"uate remedy in the ordinary course of la(, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts (ith certainty and praying that .udgment be rendered commanding the respondent to desist from further proceedings in the action or matter specified therein, or other(ise, granting such incidental reliefs as la( and .ustice may re"uire.

1ith the reality that +ayantel2s real properties (ere already levied upon on account of its nonpayment of real estate taxes thereon, the Court agrees (ith +ayantel that an appeal to the L+** is not a speedy and ade"uate remedy (ithin the context of the afore"uoted #ection $ of Rule GF. This is not to mention of the auction sale of said properties already scheduled on /uly =?, $??$. :oreover, one of the recogni!ed exceptions to the exhaustion' of'administrative remedies rule is (hen, as here, only legal issues are to be resolved. In fact, the Court, cogni!ant of the nature of the "uestions presently involved, gave due course to the instant petition. *s the Court has said in Ty vs. Trampe; xxx. *lthough as a rule, administrative remedies must first be exhausted before resort to .udicial action can prosper, there is a (ell'settled exception in cases (here the controversy does not involve "uestions of fact but only of la(. xxx.

Lest it be overlooked, an appeal to the L+**, to be properly considered, re"uired prior payment under protest of the amount of C=,%J%,$?%.<%, a figure (hich, in the light of the then prevailing *sian financial crisis, may have been difficult to raise up. Given this reality, an appeal to the L+** may not be considered as a plain, speedy and ade"uate remedy. It is thus understandable (hy +ayantel opted to (ithdra( its earlier appeal (ith the L+** and, instead, filed its petition for prohibition (ith urgent application for in.unctive relief in Civil Case &o. T'?$' CJ$B$. The remedy availed of by +ayantel under #ection $, Rule GF of the Rules of Court must be upheld.

I$$<)TR1TI"2: There,s a R- that &ou have declared. Sonal valuation given b& the local assessor was 1@k %er s:uare meter %arcel o land. =ou believed that the Donal valuation should be /k %er s:uare meter. =ou received a notice that &our

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R- is classi ied as this and &ou agreed to the classi ication but &ou did not agree with the current 9?K. There,s no demand or %a&ment &et, onl& notice. *hat,s &our remed&+ Be ore whom will &ou :uestion the a%%raisal itsel + 9ile an a%%eal be ore the $B11 It has been decided b& the )# in a 1IIB case that the issuance o a notice o assessment b& the local assessor shall be his last action on a %articular assessment. =ou can,t re:uest him to lower the assessment because his assessment is based alread& on the schedule o 9?Ks %ursuant to an ordinance, otherwise, i &ou give the local assessor the libert& to reduce the valuation o a R-, that would be an area o collusion or corru%tion b& the o icer and the T-. )o that ever& issuance o notice o assessment b& the local assessor shall be his last action on a %articular assessment and it shall be, as well, on the side o the %ro%ert& owner, it will be his last interaction with the local assessor. But he has the right to a%%eal be ore the $B11. )o i it,s a :uestion o assessment or classi ication, ile an a%%eal be ore the local assessor. 'on,t go through the local treasurer because it,s not a :uestion o the correctness o the amount assessed. 8e has nothing to do with the valuation, the reclassi ication, the a%%raisal, the 9?Ks.

(udicial Remed& 1ssailing the validit& o the sale o #9C. $GJ. *ction *ssailing Halidity of Tax #ale. ' &o court shall entertain any action assailing the validity of any sale at public auction of real property or rights therein under this Title until the taxpayer shall have deposited (ith the court the amount for (hich the real property (as sold, together (ith interest of t(o percent @$NA per month from the date of sale to the time of the institution of the action. The amount so deposited shall be paid to the purchaser at the auction sale if the deed is declared invalid but it shall be returned to the depositor if the action fails. &either shall any court declare a sale at public auction invalid by reason of irregularities or informalities in the proceedings unless the substantive rights of the delin"uent o(ner of the real property or the person having legal interest therein have been impaired. *hat is &our remed& i &ou :uestion the validit& o a %ublic auction sale and what are the re:uirements+ "n to% o :uestioning it, &ou have to de%osit the amount or which the %ro%ert& was sold together with interest o !A %er month rom the time o sale until &ou have instituted the action. )o it,s as i it,s a bond. In what cases can &ou :uestion the validit& o an auction sale+ 1lthough the law sa&s that the court cannot declare a %ublic auction invalid sim%l& b& reason o irregularities or in ormalities on the conduct o the sale, it re:uires or invalidit& when a substantive right o the R- owner has been im%aired. *hen &ou sa& substantive right, it includes there ailure to give a %ersonal notice o the %ublic auction to the R- owner.

TARIFF AND CUSTOMS DUTIES :TCD< I# S1%3. %* TCD L,2) The governing law is the Tari s and #ustoms #ode 6T##7 and it includes also all other laws and regulations which are sub4ect to en orcement b& the B"# or otherwise within its 4urisdiction. o )o all allied laws. It even extends to the #entral Bank circulars.

II# D040)0%' %* -=. TCC Book I 0 Tari $aws Book II 0 #ustoms $aws

III# A(/0'0)-$,-0%'9 2=% 0) 0';1=,$A.F 1. The Tari #ommission o o 9unctions o the Tari #ommission are more on administration and tari relations with oreign countries, while en orcement and collection alls under the B"#. T2ote: Bold ones are mentioned b& ?amU #ec. F?F. 3unctions of the Commission. M The Commission shall investigate M @aA the administration of and the fiscal and industrial effects of the tariff and customs la(s of this country no( in force or (hich may hereafter be enacted0 @bA the relations bet(een the rates of duty on ra( materials and the finished or partly finished products0

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@cA the effects of ad valorem and specific duties and of compound specific and ad valorem duties0 @dA all "uestions relative to the arrangement of schedules and classification of articles in the several schedules of the tariff la(0 (e) he ar!"" re#a !$ns be %een he &h!#!''!nes and "$re!(n )$un r!es, )$**er)!a# rea !es, 're"eren !a# 'r$+!s!$ns, e)$n$*!) a##!an)es, he e""e) $" e,'$r b$un !es and 're"eren !a# rans'$r a !$n ra es@fA the volume of importations compared (ith domestic production and consumption0 @gA conditions, causes, and effects relating to competition of foreign industries (ith those of the including dumping and cost of production0 and hilippines,

(h) !n (enera#, $ !n+es !(a e he $'era !$n $" )us $*s and ar!"" #a%s, !n)#ud!n( he!r re#a !$n $ he na !$na# re+enues, he!r e""e) u'$n he !ndus r!es and #ab$r $" he )$un ry, and $ sub*! re'$r s $" ! s !n+es !(a !$ns as here!na" er 'r$+!ded. resident and the Congress may secure

#ec. F?G. *ssistance to the resident and Congress. M In order that the information and assistance, it shall be the duty of the Commission to M

@aA *scertain conversion costs and costs of production in the principal gro(ing, producing or manufacturing centers of the hilippines, (henever practicable0 @bA *scertain conversion costs and costs of production in the principal gro(ing, producing or manufacturing centers of foreign countries of articles imported into the hilippines (henever such conversion costs or costs of production are necessary for comparison (ith those in the hilippines0 @cA #elect and describe representative articles imported into the hilippines similar to or comparable (ith those locally produced0 select and describe articles of the hilippines similar to or comparable (ith such imported articles0 and obtain and the samples of articles so selected, (henever advisable0 @dA *scertain import costs of such representative articles so selected0 @eA *scertain the gro(er6s, producer6s or manufacturer6s selling prices in the principal gro(ing, producing or manufacturing centers of the hilippines of the articles of the hilippines so selected0 and @fA *scertain all other facts (hich (ill sho( the differences in or (hich affect competition bet(een articles of the hilippines and those imported in the principal markets of the hilippines.

!. B"# o

#ec. G?$. 3unctions of the +ureau. M The general duties, po(ers and .urisdiction of the bureau shall include; a. The assess*en and )$##e) !$n $" he #a%"u# re+enues "r$* !*'$r ed ar !)#es and a## $ her dues, "ees, )har(es, "!nes and 'ena# !es a))ru!n( under he ar!"" and )us $*s #a%s. b. The 're+en !$n and su''ress!$n $" s*u((#!n( and $ her "rauds u'$n he )us $*s. ). The su'er+!s!$n and )$n r$# $+er he en ran)e and )#earan)e $" +esse#s and a!r)ra" en(a(ed !n "$re!(n )$**er)e. d. The general supervision, control and regulation of vessels engaged in the carrying of passengers and freight or in to(age in coast(ise trade and in the bays and rivers of the hilippines. e. The prohibition and suppression of unnecessary noises, such as explosion of gasoline engines, the excessive blo(ing of (histles or sirens, and other needless and disturbing sounds made by (ater craft in the ports of the hilippines or in parts of rivers included in such ports. f. The exclusion, if the conditions of traffic should at any time so re"uire, of vessels of more than one hundred and fifty tons from entering, berthing or mooring in the asig River. g. The admeasurement, registration, documenting and licensing of vessels built or o(ned in the hilippines, the recording of sales, transfers and encumbrances of such vessels, and the performance of all the duties pertaining to marine registry. h. The inspection of hilippine vessels, and supervision over the safety and sanitation of such vessels. i. The enforcement of the la(ful "uarantine regulations for vessels entering hilippine ports. .. The enforcement of the tariff and customs la(s and all other la(s, rules and regulations relating to the tariff and customs administration.

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k. The licensing of marine officers (ho have "ualified in the examination re"uired by la( to be carried on hilippine vessels, the determination of the "ualifications of pilots, the regulation of this service, and the fixing of the fees (hich they may charge. #. The su'er+!s!$n and )$n r$# $+er he hand#!n( $" "$re!(n *a!#s arr!+!n( !n he &h!#!''!nes, "$r he 'ur'$se $" he )$##e) !$n $" he #a%"u# du y $n du !ab#e ar !)#es hus !*'$r ed and he 're+en !$n $" s*u((#!n( hr$u(h he *ed!u* $" su)h *a!#s. *. .,er)!se e,)#us!+e /ur!sd!) !$n $+er se!0ure and "$r"e! ure )ases under he ar!"" and )us $*s #a%s.

#ec. <$?G. /urisdiction of Collector 4ver Importation of *rticles. M The Collector shall cause all articles entering the .urisdiction of his district and destined for importation through his port to be entered at the customhouse, shall cause all such articles to be appraised and classified, and shall assess and collect the duties, taxes and other charges thereon, and shall hold possession of all imported articles upon (hich duties, taxes, and other charges have not been paid or secured to be paid, disposing of the same according to la(. 1. #ause all articles entering in its 4urisdiction and destined or im%ortation through his %ort to be entered at the customhouseC !. Then cause such articles to be a%%raised and classi iedC 3. 9or the %ur%ose o assessing and collecting the duties and taxes and other charges thereonC .. Then, hold %ossession o all im%orted articles until the duties, taxes and other charges have been %aid or secured to be %aid 2"T3: 2o release can be made without %a&ment o tari s and customs duties.

#ec. G?=. Territorial /urisdiction. M 3or the due and effective exercise of the po(ers conferred by la( and to the extent re"uisite therefor, said bureau shall have the right of supervision and police authority over all seas (ithin the .urisdiction of the hilippines and over all coasts, ports, airports, harbors, bays, rivers and inland (aters navigable from the sea. #ec. G?C. /urisdiction over remises >sed for Customs urposes. M The +ureau of Customs shall, for customs purposes, have exclusive control, direction and management of custom'houses, (arehouses, offices, (harves, and other premises in the respective ports of entry, in all cases (ithout pre.udice to the general police po(ers of the city or municipality (herein such premises are situated. This means to sa& that i the B"# is given the direct and exclusive control in a warehouse, a custom-house or in a whar , exclusive, so the courts cannot touch it. 2o orders o re%levin o %ro%erties, no order or %rohibition, certiorari, can be made b& the courts, unless the $;< will be exercising it,s general %olice %owers.

'octrine o 8ot -ursuit 63xtraterritorial 4urisdiction7 0 " a vessel 1hen a vessel becomes sub.ect to sei!ure by reason of an act done in hilippine (aters in violation of the tariff and customs la(s, a pursuit of such vessel begun (ithin the .urisdictional (aters may continue beyond the maritime !one, and the vessel may be sei!ed on the high sea. I the vessel has %assed the high seas nah, it,s alread& in the territor& o the oreign state, meaning oreign waters, can &ou continue the hot %ursuit+ o 2". I the act is done on the high seas, we cannot do an&thing about it. 2o hot %ursuit. I the violation is done on -hili%%ine waters, then, the %ursuit ma& continue be&ond the maritime Done and ma& be seiDed on the high seas. "nce the vessel enters the oreign waters, hot %ursuit ceases. 8ot %ursuit does not extend on oreign waters. It extends onl& on high seas.

" all other im%orted articles Imported articles (hich may be sub.ect to sei!ure for violation of the tariff and customs la(s may be pursued in their transportation in the hilippines by land, (ater or air and such .urisdiction exerted over it at any place therein as may be necessary for the due enforcement of the la(. 2"T3: The onl& exce%tion wherein B"# cannot exercise the hot %ursuit is inside &our dwelling, without a search warrant.

*ho has %rimar& 4urisdiction over the customs laws+

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B"# RT# v. B"# The RT#s do not have 4urisdiction over seiDure and or eiture %roceedings conducted b& the B"# and to inter ere with its %roceedings because the #"# has exclusive 4urisdiction over all :uestions touching on the seiDure and or eiture o dutiable goods. 2o %etitions or certiorari, %rohibition or mandamus can be iled with the RT# because these are, in realit&, an attem%t to review the #ommissioner,s actuations. 2either re%levin be iled with the RT#. I$$<)TR1TI"2: 'octrine o -rimar& (urisdiction. 3ven i a #ustoms seiDure or or eiture is illegal, exclusive 4urisdiction still belongs to the Bureau o #ustoms to the exclusion o the regular courts. o 3>#3-TI"2: The onl& instance, %robabl&, that &ou can :uestion actuations o the B"# be ore the RT# is when it involves general %olice %owers o the state.

I &ou,re not agreeable with the B"#, can &ou :uestion their actions be ore the RT#+ 2".

IV# T,$0** ,'( C&)-%/) D&-0.) 2"T3: Tari and customs duties are generall& s&non&mous under the custom laws. ;oods or #ustoms 'ut& -ur%oses o The law im%oses dut& on both im%orted as well as ex%orted goods. *ll articles (hen imported from any foreign country into the hilippines shall be sub.ect to duty upon each importation even though previously exported from the hilippines, except as other(ise specifically provided for in the Code or other la(s. @#ec. <??, Title III, +ook I, TCCA 2"T3: E3xce%t as otherwise s%eci icall& %rovidedF re ers to those exem%ted rom customs duties. 2"T3: Right now, we concentrate im%osing customs duties on im%ortations. 3x%ortations, as a general rule, are tax- ree because we encourage ex%ortation in order to have in lux o oreign currencies, which actuall& su%%orts our local -hili%%ine currenc&.

;oods or customs dut& %ur%oses are an&thing that ma& be made the sub4ect o im%ortation or ex%ortation. *rticles, (hen used (ith reference to importation or exportation, includes goods, (ares and merchandise and, in general, anything that may be made the sub.ect of importation or exportation. @#ec. =F<C, TCCA )o, in addition, that %art o the de inition o merchandise which states that Ein general an&thing that ma& be made the sub4ect o im%ortation or ex%ortationF is su icientl& clear and com%rehensive to include checks and mone& orders. It even includes oreign currencies, mone&s and bills.

Pinds o ;oodsJ?erchandise or #lasses o Im%ortations o 1. 1rticles sub4ect to dut& #ection <?<. Imported *rticles #ub.ect to )uty. M *ll articles, (hen imported from any foreign country into the hilippines, shall be sub.ect to duty upon each importation, even though previously exported from the hilippines, except as other(ise specifically provided for in this Code or in other la(s.

!. -rohibited Im%ortations a. 1bsolutel& -rohibited #ec. <?$. rohibited Importations. M The importation into the prohibited; o o hilippines of the follo(ing articles is

a. )ynamite, gunpo(der, ammunitions and other explosives, firearm and (eapons of b. 1ritten or printed article in any form containing any matter advocating or inciting treason, rebellion, insurrection or sedition against the Government of the hilippines, of forcible resistance to any la( of the hilippines, or containing any threat to take the life of or inflict bodily harm upon any person in the hilippines. c. 1ritten or printed articles, photographs, engravings, lithographs, ob.ects, paintings, dra(ings or other representation of an obscene or immoral character.

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d. *rticles, instruments, drugs and substances designed, intended or adapted for preventing human conception or producing unla(ful abortion, or any printed matter (hich advertises or describes or gives directly or indirectly information (here, ho( or by (hom human conception is prevented or unla(ful abortion produced. e. Roulette (heels, gambling outfits, loaded dice, marked cards, machines, apparatus or mechanical devices used in gambling, or in the distribution of money, cigars, cigarettes or other articles (hen such distribution is dependent upon chance, including .ackpot and pinball machines or similar contrivances. 2"T3: But i it,s used or gambling that is sanctioned b& the -hili%%ine ;overnment, it can be covered b& the exem%tion but conditionall&- ree im%ortation. hilippine Government,

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f. Lottery and s(eepstakes tickets except those authori!ed by the advertisements thereof and lists of dra(ings therein.

g. *ny article manufactured in (hole or in part of gold silver or other precious metal, or alloys thereof, the stamps brands or marks of (hich do not indicate the actual fineness or "uality of said metals or alloys. h. *ny adulterated or misbranded article of food or any adulterated or misbranded drug in violation of the provisions of the 53ood and )rugs *ct.5 i. :arihuana, opium poppies, coca leaves, or any other narcotics or synthetic drugs (hich are or may hereafter be declared habit forming by the resident of the hilippines, any compound, manufactured salt, derivative, or preparation thereof, except (hen imported by the Government of the hilippines or any person duly authori!ed by the Collector of Internal Revenue, for medicinal purposes only. .. 4pium pipes and parts thereof, of (hatever material. k. *ll other articles the importation of (hich is prohibited by la(.

o o

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b. Ouali iedl& -rohibited *here such conditions as to warrant a law ul im%ortation do not exist, the legal e ects o the im%ortation o :uali iedl& %rohibited articles are the same as those o absolutel& %rohibited articles. 2"T3: This actuall& re ers to items that can actuall& be im%orted legall& but because o some conditions existing that cannot warrant the law ul im%ortation, and other circumstances surrounding it, it becomes :uali iedl& %rohibited and it would have the same e ects as i &ou,re actuall& im%orting an absolutel& %rohibited im%ortation.

3. #onditionall& ree im%ortations T2ote: Bold ones are mentioned b& ?amU 2"T3: "nce &ou im%ort a %roduct, even i it,s those listed among the conditionall& ree im%ortations, &ou can,t automaticall& withdraw such goods rom the %ort o the B"# without %resenting documents com%l&ing with the re:uirements but not necessaril& %a& the customs duties because &ou,re exem%t. There,s no absolutel&- ree im%ortations. #ec. <?F. Conditionally'3ree Importations. M The follo(ing articles shall be exempt from the payment of import duties upon compliance (ith the formalities prescribed in, or (ith, the regulations (hich shall be promulgated by the Commissioner of Customs (ith the approval of the #ecretary of 3inance0 rovided, That any article sold, bartered, hired or used for purposes other than that they (ere intended for (ithout prior payment of the duty, tax or other charges (hich (ould have been due and payable at the time of entry if the article had been entered (ithout the benefit of this section, shall be sub.ect to forfeiture and the importation shall constitute a fraudulent practice against customs revenue punishable under #ection Thirty'six hundred and t(o, as amended of this Code; rovided, further, That a sale pursuant to a .udicial order or in li"uidation of the estate of a deceased person shall be sub.ect to the preceding proviso, (ithout pre.udice to the payment of duties, taxes and other charges; rovided, finally, That the resident may upon recommendation of the #ecretary of 3inance, suspend, disallo( or completely (ithdra(, in (hole or in part, any of the conditionally'free importation under this section; a. *"uatic products @e.g., fishes, crustaceans, mollusks, marine animals, sea(eeds, fish oil, roeA, caught or gathered by fishing vessels of hilippine registry; rovided, That they are imported in such vessels or in crafts attached thereto; *nd provided, further, That they have not been landed in any foreign territory or, if so landed, they have been landed solely for transshipment (ithout having been advanced in condition0 b. 9"uipment for use in the salvage of vessels or aircrafts, not available locally, upon identification and the giving of a bond in an amount e"ual to one and one'half times the ascertained duties, taxes and other charges thereon, conditioned for the exportation thereof or payment of the corresponding duties, taxes and other charges (ithin

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six @GA months from the date of acceptance of the import entry; rovided, That the Collector of Customs may extend the time for exportation or payment of duties, taxes and other charges for a term not exceeding six @GA months from the expiration of the original period0 c. Cost of repairs, excluding the value of the article used, made in foreign countries upon vessels or aircraft documented, registered or licensed in the hilippines, upon proof satisfactory to the Collector of Customs @<A that ade"uate facilities for such repairs are not afforded in the hilippines, or @$A that such vessels or aircrafts, (hile in the regular course of her voyage or flight (as compelled by stress of (eather or other casualty to put into a foreign port to make such repairs in order to secure the safety, sea(orthiness or air(orthiness of the vessel or aircraft to enable her to reach her port of destination0 d. Ar !)#es br$u(h !n $ he &h!#!''!nes "$r re'a!r, 'r$)ess!n( $r re)$nd! !$n!n( $ be re1e,'$r ed u'$n )$*'#e !$n $" he re'a!r, 'r$)ess!n( $r re)$nd! !$n!n(2 &r$+!ded, Tha he 3$##e) $r $" 3us $*s sha## re4u!re he (!+!n( $" a b$nd !n an a*$un e4ua# $ $ne and $ne1ha#" !*es he as)er a!ned du !es, a,es and $ her )har(es here$n, )$nd! !$ned "$r he e,'$r a !$n here$" $r 'ay*en $" he )$rres'$nd!n( du !es, a,es and $ her )har(es %! h!n s!, (6) *$n hs "r$* he da e $" a))e' an)e $" he !*'$r en ry I$$<)TR1TI"2: I &ou have an article that &ou im%orted into the -hils., &ou im%orted articles o raw materials or %rocessing, manu acturing, and these will be re-ex%orted back as inished goods, can &ou ask or exem%tion rom customs duties+ o =3), %rovided that the #"# shall re:uire the giving o a bond in an amount e:ual to one and one-hal times the ascertained duties, taxes and other charges thereon, conditioned or the ex%ortation thereo or %a&ment o the corres%onding duties, taxes and other charges. )eeking or exem%tion rom customs duties on an im%ortation o %roducts or %rocessing, or re%air, or reconditioning, would reall& be conditional because &our exem%tion can onl& be ull& guaranteed once &ou,re able to re-ex%ort the %roducts within a %eriod o 1 &ear. 2"T3: Ingon si ?am, ex%ortation within 1 &ear, dili daw L months. 6?aimai: L months man ang naa sa law, which is which+ Basig gi-amend nah tngaiQ.. but mao man ingon ni mamQ. ?am %revailsQhehe7

e. :edals, badges, cups and other small articles besto(ed as trophies or pri!es, or those received or accepted as honorary distinction0 ". &ers$na# and h$useh$#d e""e) s be#$n(!n( $ res!den s $" he &h!#!''!nes re urn!n( "r$* abr$ad !n)#ud!n( /e%e#ry, 're)!$us s $nes and $ her ar !)#es $" #u,ury %h!)h %ere "$r*a##y de)#ared and #!s ed be"$re de'ar ure and !den !"!ed under $a h be"$re he 3$##e) $r $" 3us $*s %hen e,'$r ed "r$* he &h!#!''!nes by su)h re urn!n( res!den s u'$n he!r de'ar ure here"r$* and dur!n( he!r s ay abr$ad'ers$na# and h$useh$#d e""e) s !n)#ud!n( %ear!n( a''are#, ar !)#es $" 'ers$na# ad$rn*en (e,)e' #u,ury ! e*s), $!#e ar !)#es, '$r ab#e a''#!an)es and !ns ru*en s and s!*!#ar 'ers$na# e""e) s, e,)#ud!n( +eh!)#es, %a er)ra" s, a!r)ra" s, and an!*a#s 'ur)hased !n "$re!(n )$un r!es by res!den s $" he &h!#!''!nes %h!)h %ere ne)essary, a''r$'r!a e and n$r*a##y used "$r he )$*"$r and )$n+en!en)e !n he!r /$urney and dur!n( he!r s ay abr$ad u'$n 'r$$" sa !s"a) $ry $ he 3$##e) $r $" 3us $*s ha sa*e ha+e been !n he!r use abr$ad "$r *$re han s!, (6) *$n hs and a))$*'any!n( he* $n he!r re urn, $r arr!+!n( %! h!n a reas$nab#e !*e %h!)h, barr!n( un"$reseen )!r)u*s an)es, !n n$ )ase sha## e,)eed n!ne y (90) days be"$re $r a" er he $%ners5 re urn2 &r$+!ded, Tha he 'ers$na# and h$useh$#d e""e) s sha## ne! her be !n )$**er)!a# 4uan ! !es n$r !n ended "$r bar er, sa#e $r h!re and ha he $ a# du !ab#e +a#ue $" %h!)h sha## n$ e,)eed %$ h$usand 'es$s (&2,000.00)2 &r$+!ded "ur her, Tha he re urn!n( res!den s ha+e n$ 're+!$us#y re)e!+ed he bene"! under h!s se) !$n %! h!n $ne year "r$* and a" er he #as e,e*' !$n (ran ed2 &r$+!ded "ur her*$re, Tha a "!" y (50) 'er )en ad +a#$re* du y a)r$ss he b$ard sha## be #e+!ed and )$##e) ed $n he 'ers$na# and h$useh$#d e""e) s (e,)e' #u,ury ! e*s) !n e,)ess $" %$ h$usand 'es$s (&2,000.00)2 And 'r$+!ded, "!na##y, Tha he 'ers$na# and h$useh$#d e""e) s (e,)e' #u,ury ! e*s) $" a re urn!n( res!den %h$ has n$ s ayed abr$ad "$r s!, (6) *$n hs sha## be sub/e) $ "!" y (50)'er )en ad +a#$re* du y a)r$ss he b$ard, he $ a# du !ab#e +a#ue $" %h!)h d$es n$ e,)eed %$ h$usand 'es$s (&2,000.00)- any e,)ess sha## be sub/e) $ he )$rres'$nd!n( du y 'r$+!ded !n h!s 3$de 2"T3: Ingon si ?am, with a value that does not exceed 1@k or each item daw, dili daw !k. 6?aimai: !k man sad ang gibutang sa lawQ. Basig na-amend na %ud tngaiQQ wai klaro u&[Q.hehe7 *hen can &ou sa& that &ou,re a returning resident+ o Returning residents are those 9ili%ino nationals who have sta&ed in a oreign countr& or at least L months.

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g. 1earing apparel, articles of personal adornment, toilet articles, portable tools and instruments, theatrical costumes and similar effects accompanying travelers, or tourists. or arriving (ithin a reasonable time before and after their arrival in the hilippines, (hich are necessary and appropriate for the (ear and use of such persons according to the nature of the .ourney, their comfort and convenience; rovided, That this exemption shall not apply to articles intended for other persons or for barter, sale or hire; rovided, further, That the Collector of Customs may, in his discretion, re"uire either a (ritten commitment or a bond in an amount e"ual to one and one'half times the ascertained duties, taxes and other charges conditioned for the exportation thereof or payment of the corresponding duties, taxes and other charges (ithin three @=A months from the date of acceptance of the import entry; *nd rovided finally, That the Collector of Customs may extend the time for exportation or payment of duties, taxes and other charges for a term not exceeding three @=A months from the expiration of the original period0 (11. &ers$na# and h$useh$#d e""e) s and +eh!)#es be#$n(!n( $ "$re!(n )$nsu# an s and e,'er s h!red by, and6$r render!n( ser+!)e $, he ($+ern*en , and he!r s a"" $r 'ers$nne# and "a*!#!es, a))$*'any!n( he* $r arr!+!n( %! h!n a reas$nab#e !*e be"$re $r a" er he!r arr!+a# !n he &h!#!''!nes, !n 4uan ! !es and $" he 7!nd ne)essary and su! ab#e $ he 'r$"ess!$n, ran7 $r '$s! !$n $" he 'ers$n !*'$r !n( he*, "$r he!r $%n use and n$ "$r bar er, sa#e $r h!re 'r$+!ded ha , he 3$##e) $r $" 3us $*s *ay !n h!s d!s)re !$n re4u!re e! her a %r! en )$**! *en $r a b$nd !n an a*$un e4ua# $ $ne and $ne1ha#" !*es he as)er a!ned du !es, a,es and $ her )har(es u'$n he ar !)#es )#ass!"!ed under h!s subse) !$n)$nd! !$ned "$r he e,'$r a !$n here$" $r 'ay*en $" he )$rres'$nd!n( du !es, a,es and $ her )har(es %! h!n s!, (6) *$n hs a" er he e,'!ra !$n $" he!r er* $r )$n ra) - And &r$+!ded, "!na##y, Tha he 3$##e) $r $" 3us $*s *ay e, end he !*e "$r e,'$r a !$n $r 'ay*en $" du !es, a,es and $ her )har(es "$r er* n$ e,)eed!n( s!, (6) *$n hs "r$* he e,'!ra !$n $" he $r!(!na# 'er!$dh. rofessional instruments and implements, tools of trade, occupation or employment, (earing apparel, domestic animals, and personal and household effects belonging to persons coming to settle in the hilippines or 3ilipinos andDor their families and descendants (ho are no( residents or citi!ens of other countries, such parties hereinafter referred to as 4verseas 3ilipinos, in "uantities and of the class suitable to the profession, rank or position of the persons importing them, for their o(n use and not for barter or sale, accompanying such persons, or arriving (ithin a reasonable time, in the discretion of the Collector of Customs, before or after the arrival of their o(ners, (hich shall not be later than 3ebruary $%, <BJB upon the production of evidence satisfactory to the Collector of Customs that such persons are actually coming to settle in the hilippines, that change of residence (as bona fide and that the privilege of free entry (as never granted to them before or that such person "ualifies under the provisions of Letters of Instructions <?F, <G= and $<?, and that the articles are brought from their former place of abode, shall be exempt from the payment of customs duties and taxes; rovided, That vehicles, vessels, aircrafts, machineries and other similar articles for use in manufacture, shall not be classified hereunder0 i. *rticles used exclusively for public entertainment, and for display in public expositions, or for exhibition or competition for pri!es, and devices for pro.ecting pictures and parts and appurtenances thereof, upon identification, examination, and appraisal and the giving of a bond in an amount e"ual to one and one'half times the ascertained duties, taxes and other charges thereon, conditioned for exportation thereof or payment of the corresponding duties, taxes and other charges (ithin six @GA months from the date of acceptance of the import entry0 rovided, That the Collector of Customs may extend the time for exportation or payment of duties, taxes and other charges for a term not exceeding six @GA months from the expiration of the original period0 and technical and scientific films (hen imported by technical, cultural and scientific institutions, and not to be exhibited for profit; rovided, further, That if any of the said films is exhibited for profit, the proceeds therefrom shall be sub.ect to confiscation, in addition to the penalty provided under #ection Thirty'six hundred and ten as amended, of this Code0 .. *rticles brought by foreign film producers directly and exclusively used for making or recording motion picture films on location in the hilippines, upon their identification, examination and appraisal and the giving of a bond in an amount e"ual to one and one'half times the ascertained duties, taxes and other charges thereon, conditioned for exportation thereof or payment of the corresponding duties, taxes and other charges (ithin six @GA months from the date of acceptance of the import entry, unless extended by the Collector of Customs for another six @GA months0 photographic and cinematographic films, undeveloped, exposed outside the hilippines by resident 3ilipino citi!ens or by producing companies of hilippine registry (here the principal actors and artists employed for the production are 3ilipinos, upon affidavit by the importer and identification that such exposed films are the same films previously exported from the hilippines. *s used in this paragraph, the terms 5actors5 and 5artists5 include the persons operating the photographic cameras or other photographic and sound recording apparatus by (hich the film is made0 7. 8*'$r a !$ns "$r he $""!)!a# use $" "$re!(n e*bass!es, #e(a !$ns, and $ her a(en)!es $" "$re!(n ($+ern*en s2 &r$+!ded, Tha h$se "$re!(n )$un r!es a))$rd #!7e 'r!+!#e(es $ )$rres'$nd!n( a(en)!es $" he &h!#!''!nes-

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Ar !)#es !*'$r ed "$r he 'ers$na# $r "a*!#y use $" he *e*bers and a a)hes $" "$re!(n e*bass!es, #e(a !$ns, )$nsu#ar $""!)ers and $ her re'resen a !+es $" "$re!(n ($+ern*en s2 &r$+!ded, Tha su)h 'r!+!#e(e sha## be a))$rded under s'e)!a# a(ree*en s be %een he &h!#!''!nes and he )$un r!es %h!)h hey re'resen 2 And &r$+!ded, "ur her, Tha he 'r!+!#e(e *ay be (ran ed $n#y u'$n s'e)!"!) !ns ru) !$ns $" he 9e)re ary $" F!nan)e !n ea)h !ns an)e %h!)h %!## be !ssued $n#y u'$n re4ues $" he :e'ar *en $" F$re!(n A""a!rs#. 8*'$r ed ar !)#es d$na ed $, $r "$r he a))$un $", any du#y re(!s ered re#!e" $r(an!0a !$n, n$ $'era ed "$r 'r$"! , "$r "ree d!s r!bu !$n a*$n( he needy, u'$n )er !"!)a !$n by he :e'ar *en $" 9$)!a# 9er+!)es and :e+e#$'*en $r he :e'ar *en $" .du)a !$n, 3u# ure and 9'$r s, as he )ase *ay be 8ow about im%ortations o goods and items that will be delivered and distributed to the -hili%%ine 2ational Red #ross, to those in need, will it be sub4ect to im%ortation+ o o =3). Im%ortation o articles that are actuall& donations coming rom outside in avor o dul&registered relie organiDations, not o%erated or %ro it, are conditionall& ree im%ortations. *hat makes it conditional is that there,s a need or certi ication rom the ')*' or whatever agenc& is a%%licable.

m. Containers, holders and other similar receptacles of any material including kraft paper bags for locally manufactured cement for export, including corrugated boxes for bananas, mangoes, pineapples and other fresh fruits for export, except other containers made of paper, paperboard and textile fabrics, (hich are of such character as to be readily identifiable andDor reusable for shipment or transportation of goods shall be delivered to the importer thereof upon identification, examination and appraisal and the giving of a bond in an amount e"ual to one and one'half times the ascertained duties, taxes and other charges (ithin six @GA months from the date of acceptance of the import entry0 n. #upplies (hich are necessary for the reasonable re"uirements of the vessel or aircraft in hervoyage or flight outside the hilippines, including articles transferred from a bonded (arehouse in any collection district to any vessel or aircraft engaged in foreign trade, for use or consumption of the passengers or its cre( on board such vessel or aircrafts as sea or air stores0 or articles purchased abroad for sale on board a vessel or aircraft as saloon stores or air store supplies; rovided, That any surplus or excess of such vessel or aircraft supplies arriving from foreign ports or airports shall be dutiable0 o. *rticles and salvage from vessels recovered after a period of t(o @$A years from the date of filing the marine protest or the time (hen the vessel (as (recked or abandoned, or parts of a foreign vessel or her e"uipment, (recked, abandoned in hilippine (aters or else(here; rovided, That articles and salvage recovered (ithin the said period oft(o @$A years shall be dutiable0 p. Coffins or urns containing human remains, bones or ashes, used personal and household effects @not merchandiseA of the deceased person, except vehicles, the value of (hich does not exceed ten thousand pesos @ <?,???.??A, upon identification as such0 ". #amples of the kind, in such "uantity and of such dimension or construction as to render them unsalable or of no appreciable commercial value0 models not adapted for practical use0 and samples of medicines, properly marked 5sample'sale punishable by la(,5 for the purpose of introducing a ne( article in the hilippine market and imported only once in a "uantity sufficient for such purpose by a person duly registered and identified to be engaged in that trade; rovided, That importations under this subsection shall be previously authori!ed by the #ecretary of 3inance; rovided, ho(ever, That importation of sample medicine shall be previously authori!ed by the #ecretary of Health that such samples are ne( medicines not available in the hilippines; rovided, finally, That samples not previously authori!ed andDor properly marked in accordance (ith this section shall be levied the corresponding tariff duty. Commercial samples, except those that are not readily and easily identifiable @e.g., precious and semi'precious stones, cut or uncut, and .e(elry set (ith precious stonesA, the value of any single importation of (hich does not exceed ten thousand pesos @ <?,???.??A upon the giving of a bond in an amount e"ual to t(ice the ascertained duties, taxes and other charges thereon, conditioned for the exportation of said samples (ithin six @GA months from the date of the acceptance of the import entry or in default thereof, the payment of the corresponding duties, taxes and other charges. If the value of any single consignment of such commercial samples exceeds ten thousand pesos @ <?,???.??A,the importer thereof may select any portion of same not exceeding in value of ten thousand pesos @ <?,???.??A for entry under the provision of this subsection, and the excess of the consignment may be entered in bond, or for consumption, as the importer may elect0 r. *nimals @except race horsesA, and plants for scientific, experimental, propagation, botanical, breeding, !oological and national defense purposes; rovided, That no live trees, shoots, plants, moss, and bulbs, tubers and seeds for propagation purposes may be imported under this section, except by order of the Government or other duly authori!ed institutions; rovided, further, That the free entry of animals for breeding purposes shall be

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restricted to animals of recogni!ed breed, duly registered in the book of record established for that breed, certified as such by the +ureau of *nimal Industry; rovided, furthermore, That certificate of such record, and pedigree of such animal duly authenticated by the proper custodian of such book of record, shall be produced and submitted to the Collector of Customs, together (ith affidavit of the o(ner or importer, that such animal is the animal described in said certificate of record and pedigree; *nd rovided, finally, That the animals and plants are certified by the &ational 9conomic and )evelopment *uthority as necessary for economic development0 s. 9conomic, technical, vocational, scientific, philosophical, historical, and cultural books andDor publications; rovided, That those (hich may have already been imported but pending release by the +ureau of Customs at the effectivity of this )ecree may still en.oy the privilege herein provided upon certification by the )epartment of 9ducation, Culture and #ports that such imported books andDor publications are for economic, technical, vocational, scientific, philosophical, historical or cultural purposes or that the same are educational, scientific or cultural materials covered by the International *greement on Importation of 9ducational #cientific and Cultural :aterials signed by the resident of the hilippines on *ugust $, <BF$, or other agreements binding upon the hilippines. 9ducational, scientific and cultural materials covered by international agreements or commitments binding upon the hilippine Government so certified by the )epartment of 9ducation, Culture and #ports. +ibles, missals, prayer books, Xoran, *hadith and other religious books of similar nature and extracts therefrom, hymnal and hymns for religious uses0 t. hilippine articles previously exported from the hilippines and returned (ithout having been advanced in value or improved in condition by any process of manufacture or other means, and upon (hich no dra(back or bounty has been allo(ed, including instruments and implements, tools of trade, machinery and e"uipment, used abroad by 3ilipino citi!ens in the pursuit of their business, occupation or profession0 and foreign articles previously imported (hen returned after having been exported and loaned for use temporarily abroad solely for exhibition, testing and experimentation, for scientific or educational purposes0 and foreign containers previously imported (hich have been used in packing exported hilippine articles and returned empty if imported by or for the account of the person or institution (ho exported them from the hilippines and not for sale, barter or hire sub.ect to identification; rovided, That any hilippine article falling under this subsection upon (hich dra(back or bounty has been allo(ed shall, upon re'importation thereof, be sub.ect to a duty under this subsection e"ual to the amount of such dra(back or bounty. u. *ircraft, e"uipment and machinery, spare parts commissary and catering supplies, aviation gas, fuel and oil, (hether crude or refined, and such other articles or supplies imported by and for the use of scheduled airlines operating under Congressional franchise; rovided, That such articles or supplies are not locally available in reasonable "uantity, "uality and price and are necessary or incidental for the proper operation of the scheduled airline importing the same0 v. :achineries, e"uipment, tools for production, plants to convert mineral ores into saleable form, spare parts, supplies, materials, accessories, explosives, chemicals, and transportation and communication facilities imported by and for the use of ne( mines and old mines (hich resume operations, (hen certified to as such by the #ecretary of *griculture and &atural Resources upon the recommendation of the )irector of :ines, for a period ending five @FA years from the first date of actual commercial production of saleable mineral products; rovided, That such articles are not locally available in reasonable "uantity, "uality and price and are necessary or incidental in the proper operation of the mine0 and aircrafts imported by agro'industrial companies to be used by them in their agriculture and industrial operations or activities, spare parts and accessories thereof0 (. #pare parts of vessels or aircraft of foreign registry engaged in foreign trade (hen brought into the hilippine exclusively as replacements or for the emergency repair thereof, upon proof satisfactory to the Collector of Customs that such spare parts shall be utili!ed to secure the safety, sea(orthiness or air(orthiness of the vessel or aircraft, to enable it to continue its voyage or flight0 x. *rticles of easy identification exported from the hilippines for repair and subse"uently reimported upon proof satisfactory to the Collector of Customs that such articles are not capable of being repaired locally; rovided, That the cost of the repairs made to any such article shall pay a rate of duty of thirty per cent ad valorem0 y. Trailer chassis (hen imported by shipping companies for their exclusive use inhandling containeri!ed cargo, upon posting a bond in an amount e"ual to one and one'half times the ascertained duties, taxes and other charges due thereon to cover a period of one year from the date of acceptance of the entry, (hich period for meritorious reasons may be extended by the Commissioner of Customs from year to year, sub.ect to the follo(ing conditions; <. That they shall be properly identified and registered (ith the Land Transportation Commission0 $. That they shall be sub.ect to customs supervision fee to be fixed by the Collector of Customs and sub.ect to the approval of the Commissioner of Customs0

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=. That they shall be deposited in the Customs !one (hen not in use0 and C. That upon the expiration of the period prescribed above, duties and taxes shall be paid, unless other(ise re'exported.

The provisions of #ec. <?F of residential )ecree &o. =C, dated 4ctober $J, <BJ$, to the contrary not(ithstanding any officer or employee of the )epartment of 3oreign *ffairs, including any attache, civil or military, or member of his staff assigned to a hilippine diplomatic mission abroad by his )epartment or any similar officer or employee assigned to a hilippine consular office abroad, or any personnel of the Reparations :ission in Tokyo or *3 military personnel detailed (ith #9*T4 or any *3 military personnel accorded assimilated diplomatic rank on duty abroad (ho is returning from a regular assignment abroad, for reassignment to his Home office, or (ho dies, resigns, or is retired from the service, after the approval of this )ecree, shall be exempt from the payment of all duties and taxes on his personal and household effects, including one motor car (hich must have been ordered or purchased prior to the receipt by the mission or consulate of his order of recall, and (hich must be registered in his name; rovided, ho(ever, That this exemption shall apply only to the value of the motor car and to aggregate assessed value of said personal and household effects the latter not to exceed thirty per centum @=?NA of the total amount received by such officer or employee in salary and allo(ances during his latest assignment abroad but not to exceed four years0 *nd rovided, finally, That the officer or employee concerned must have served abroad for not less than t(o years. The provisions of general and special la(s, including those granting franchises, to the contrary not(ithstanding, there shall be no exemptions (hatsoever from the payment of customs duties except those provided for in this Code0 those granted to government agencies, instrumentalities or government'o(ned or controlled corporations (ith existing contracts, commitments, agreements, or obligations @re"uiring such exemptionA (ith foreign countries0 international institutions, associations or organi!ations entitled to exemption pursuant to agreements or special la(s0 and those that may be granted by the resident upon prior recommendation of the &ational 9conomic and )evelopment *uthority in the interest of national economic development. 1s a general rule, are government im%ortations sub4ect to customs duties+ =3). #ec. <$?F. Importations by the Government. M 9xcept as other(ise specifically provided, all importations by the government for its o(n use or that of its subordinate branches on instrumentalities, or corporations, agencies or instrumentalities o(ned or controlled by the government, shall be sub.ect to the duties, taxes, fees and other charges provided for in this Code; rovided, ho(ever, That upon certification of the head of the department or political subdivision concerned, (ith the approval of the *uditor General, that the imported article is actually being used by the government or any of its political subdivision concerned, the amount of duty, tax, fee or charge shall be refunded to the government or the political subdivision (hich paid it. 2"T3: But a re und can be made therea ter so long as there,s a certi ication rom the head o the de%artment that it,s actuall& use or the government.

V# I/3%$-,-0%' -

*hen are Tari and #ustoms 1%%lied+ o o o #ection <$?<. *rticles to +e Imported 4nly Through Customhouse. M *ll articles imported into the sub.ect to duty or not, shall be entered through a customhouse at a port of entry. It is a%%lied onl& a ter the im%ortation has begun and be ore im%ortation is terminated. )o the tari and customs laws would onl& a%%l& whenever there,s an im%ortation or ex%ortation that has begun but %rior to its termination. o 2"T3: Termination would actuall& mean %a&ment o taxes. hilippines, (hether

)o there can be no tari and customs a%%lied whenever it,s not an im%ortation or ex%ortation or there,s no im%ortation or ex%ortation that has begun &et.

*hen can &ou sa& that im%ortation has begun and when is it terminated+ o #ec. <$?$. 1hen Importation +egins and )eemed Terminated. M Importation begins (hen the carrying vessel or aircraft enters the .urisdiction of the hilippines (ith intention to unlade therein. Importation is deemed terminated upon payment of the duties, taxes and other charges due upon the articles, or secured to be paid, at a port of entry and the legal permit for (ithdra(al shall have been granted, or in case said articles are free of duties, taxes and other charges, until they have legally left the .urisdiction of the customs.

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)o, being an intent onl&, in the mind, how would the B"# %rove that im%ortation has begun because it must be with intention to unload the cargoes+ It does not re:uire actual unloading. The T## %rovides that even i there,s no actual unloading &et, but i there is, in the vessel, unmani ested cargoes, it becomes %roo alread& that there,s the intent to violate the customs laws because ever& vessel must list down, in its mani est, the cargoes. *hen there,s unmani ested cargoes, it will automaticall& be considered as im%ortation having begun.

Im%ortation is terminated: 1. <%on %a&ment o the duties and other charges and there,s alread& a legal %ermit or the withdrawalC or !. *hen such duties and other charges are secured to be %aid and there,s legal %ermit or withdrawalC or 3. In cases o those that are exem%t rom taxes, &ou don,t %a& the tax, but sim%l& get the legal %ermit or withdrawal and rom the time that these im%orted %roducts, which are ree o duties, have legall& le t the 4urisdiction o the customs, im%ortation is alread& terminated 2"T3: =ou can,t terminate the im%ortation o an exem%t article right then and there. It must have legall& le t the 4urisdiction o the customs because even i it,s exem%t, sometimes, it can ha%%en that it will be assessed o customs duties i it,s ound out that it did not satis & the conditions o conditionall& ree im%ortations.

*ho are the owners o im%orted articles+ o #ec. <$?=. 4(ner of Imported *rticles. M *ll articles imported into the hilippines shall be held to be the property of the person to (hom the same are consigned0 and the holder of a bill of lading duly indorsed by the consignee therein named, or, if consigned to order, by the consignor, shall be deemed the consignee thereof. The under(riters of abandoned articles and the salvors of articles saved from a (reck at sea, along a coast or in any area of the hilippine may be regarded as the consignees. The owners o im%orted articles are: o 1. To whom the same are consigned !. The holder o a bill o lading dul& indorsed b& the consignee therein named 3. I consigned to order, b& the consignor, shall be deemed the consignee thereo .. The underwriters abandoned articles and the salvors o articles saved rom a wreck at sea, along a coast or in an& area o the -hils. ma& be regarded as the consignees

*h& do we need to know who the owners o the im%orted articles are+ The& ma& be im%osed o criminal or civil liabilit& de%ending on what violations have been made.

*hat do &ou mean b& a %ort o entr&+ o -orts o entr& are domestic %orts o%en to both oreign and coastwise trade, including air%ort o entr&.

*hat is re:uired whenever im%ortation is entered through the customhouse+ o o #argo ?ani est *hat,s a cargo mani est+ It,s the mani est o the carr&ing vessel or aircra t o the correct items that are carried b& the vessel or aircra t. )o that all cargoes, whether it,s an im%ortation or ex%ortation, must be included in the cargo mani est. 3>#3-TI"2: The %roducts o the shi%,s stores, such as canteen.

1nd right a ter receiving the cargo mani est, the B"# will make a%%raisal and classi ication o the cargoes and it will tr& to assess and collect the taxes. *hat must be iled b& the im%orter-owner+ o Im%ort entr& declaration, which is a declaration to the B"# showing the descri%tion o the cargo, value, tari classi ication and their %articulars to allow the B"# to correctl& determine what are the duties and taxes that must be %aid.

*ho are authoriDed to make the im%ort entr& declaration+ o #ec. <=?<. ersons *uthori!ed to :ake Import 9ntry. M Imported articles must be entered in the customhouse at the port of entry (ithin thirty @=?A days, (hich shall not be extendible, from the date of discharge of the last package from the vessel or aircraft either @aA by the importer, being holder of the bill of lading, @bA by a duly licensed customs broker acting

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under authority from a holder of the bill or @cA by a person duly empo(ered to act as agent or attorney'in'fact for each holder; rovided, That (here the entry is filed by a party other than the importer, said importer shall himself be re"uired to declare under oath and under the penalties of falsification or per.ury that the declarations and statements contained in the entry are true and correct; rovided, further, That such statements under oath shall constitute prima facie evidence of kno(ledge and consent of the importer of violations against applicable provisions of this Code (hen the importation is found to be unla(ful. *ithin what %eriod must the im%ort entr& declaration be iled+ o *ithin 3@ da&s rom the date o discharge o the last %ackage rom the vessel or aircra t

*hat ha%%ens i there,s no iling o im%ort entr& declaration+ o The im%orted articles are deemed abandoned.

Pinds o abandonment o #ec. <%?<. *bandonment, Xinds and 9ffects of . M *n imported article is deemed abandoned under any of the follo(ing circumstances; @aA 1hen the o(ner, importer or consignee of the imported article expressly signifies in (riting to the Collector of Customs his intentions to abandon0 or @bA 1hen the o(ner, importer, consignee or interested party after due notice, fails to file an entry (ithin thirty @=?A days, (hich shall not be extendible, from the date of discharge of the last package from the vessel or aircraft, or having filed such entry, fails to claim his importation (ithin fifteen @<FA days (hich shall not like(ise be extendible, from the date of posting of the notice to claim such importation. *ny person (ho abandons an article or (ho fails to claim his importation as provided for in the preceding paragraph shall be deemed to have renounced all his interests and property rights therein.

Pinds o abandonment: 1. 3x%ress *hen the owner, im%orter or consignee o the im%orted article ex%ressl& signi ies in writing to the #ollector o #ustoms his intentions to abandon within 1@ da&s. I &ou want to ex%ressl& abandon &our im%orted goods, the owner, im%orter, or consignee must ex%ressl& signi & in writing and under oath his intention to abandon the shi%ment in avor o the government within 1@ da&s a ter iling o the im%ort entr& declaration. -ossible reason or abandonment: o !. Im%lied a. *hen the owner, im%orter, consignee or interested %art& a ter due notice, ails to ile an entr& within thirt& 63@7 da&s, which shall not be extendible, rom the date o discharge o the last %ackage rom the vessel or aircra t, or b. 8aving iled such entr&, ails to claim his im%ortation within i teen 61/7 da&s, which shall not likewise be extendible, rom the date o %osting o the notice to claim such im%ortation. The taxes are so high vis-G-vis the im%orted articles

3 ects o abandonment o o o

#ec. <%?$. *bandonment of Imported *rticles. M *n abandoned article shall ipso facto be deemed the property of the Government and shall be disposed of in accordance (ith the provisions of this Code. &othing in this section shall be construed as relieving the o(ner or importer from any criminal liability (hich may arise from any violation of la( committed in connection (ith the importation of the abandoned article. *ny official or employee of the +ureau of Customs or of other government agencies (ho, having kno(ledge of the existence of an abandoned article or having control or custody of such abandoned article, fails to report to the Collector (ithin t(enty'four @$CA hours from the time the article is deemed abandoned, shall be punished (ith the penalties prescribed in aragraph <, #ection =G?C of this Code. 3 ects o abandonment: 1. 1n& %erson, who abandons an article, shall be deemed to have renounced all his rights and interests therein !. 1n abandoned article shall i%so acto be deemed the %ro%ert& o the government

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3. The government has the ull right to dis%ose o the abandoned article. 3. It shall not be construed as relieving the owner or im%orter rom an& criminal liabilit& which ma& arise rom an& violation o law committed in connection with the im%ortation o the abandoned article.

TAX Mar. 10, 2011 Thursday In case the owner ex%ressl& abandons the im%orted articles, does it mean to sa& that he,s relieved rom %a&ing the civil obligations o customs duties+ o =3). Taxes and duties that corres%ond to the im%ortation o the abandoned articles are no longer re:uired to be %aid b& the owner, because the extent o ever& im%orter,s liabilit& extends onl& to the value o the merchandise. )o, taxes usuall& do not exceed 1@@A o the value o the merchandise, so there ore, a %erson who abandons his im%ortation is deemed to have been relieved rom %a&ment o customs duties. 2"T3: The maximum civil %enalt& under remedies o the government is or eiture o the articles.

VI# C5,))0*01,-0%' %* C&)-%/) D&-0.) 1. "rdinar& or Regular #ustoms 'uties 0 these are usuall& or generall& im%osed on all articles that are sub4ect to dut&. o 1. 1d valorem dut& 0 based on the value o the im%orted article. Basis o dutiable value #ec. $?<.+asis of )utiable Halue. ' @*A :ethod 4ne. Transaction Halue. ' The dutiable value of an imported article sub.ect to an ad valorem rate of duty shall be the transaction value, (hich shall be the price actually paid or payable for the goods (hen sold for export to the hilippines, ad.usted by adding; @<A The follo(ing to the extent that they are incurred by the buyer but are not included in the price actually paid or payable for the imported goods; o o o o @aA Commissions and brokerage fees @except buying commissionsA0 @bA Cost of containers0 @cA The cost of packing, (hether for labour or materials0 @dA The value, apportioned as appropriate, of the follo(ing goods and services; materials, components, parts and similar items incorporated in the imported goods0 tools0 dies0 moulds and similar items used in the production of imported goods0 materials consumed in the production of the imported goods0 and engineering, development, art(ork, design (ork and plans and sketches undertaken else(here than in the hilippines and necessary for the production of imported goods, (here such goods and services are supplied directly or indirectly by the buyer free of charge or at a reduced cost for use in connection (ith the production and sale for export of the imported goods0 @eA The amount of royalties and license fees related to the goods being valued that the buyer must pay, either directly or indirectly, as a condition of sale of the goods to the buyer0

@$A The value of any part of the proceeds of any subse"uent resale, disposal or use of the imported goods that accrues directly or indirectly to the seller0 @=A The cost of transport of the imported goods from the port of exportation to the port of entry in the hilippines0 @CA Loading, unloading and handling charges associated (ith the transport of the imported goods from the country of exportation to the port of entry in the hilippines0 and @FA The cost of insurance. *ll additions to the price actually paid or payable shall be made only on the basis of ob.ective and "uantifiable data. &o additions shall be made to the price actually paid or payable in determining the customs value except as provided in this #ec. ; rovided, That :ethod 4ne shall not be used in determining the dutiable value of imported goods if; @aA There are restrictions as to the disposition or use of the goods by the buyer other than restrictions (hich;

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@iA *re imposed or re"uired by la( or by hilippine authorities0 @iiA Limit the geographical area in (hich the goods may be resold0 or @iiiA )o not substantially affect the value of the goods.

@bA The sale or price is sub.ect to some condition or consideration for (hich a value cannot be determined (ith respect to the goods being valued0 @cA art of the proceeds of any subse"uent resale, disposal or use of the goods by the buyer (ill accrue directly or indirectly to the seller, unless an appropriate ad.ustment can be made in accordance (ith the provisions hereof0 or @dA The buyer and the seller are related to one another, and such relationship influenced the price of the goods. #uch persons shall be deemed related if; o o o o o o o o @iA They are officers or directors of one another6s businesses0 @iiA They are legally recogni!ed partners in business0 @iiiA There exists an employer'employee relationship bet(een them0 @ivA *ny person directly or indirectly o(ns, controls or holds five percent @FNA or more of the outstanding voting stock or shares of both seller and buyer0 @vA 4ne of them directly or indirectly controls the other0 @viA +oth of them are directly or indirectly controlled by a third person0 @viiA Together they directly or indirectly control a third person0 or @viiiA They are members of the same family, including those related by affinity or consanguinity up to the fourth civil degree.

ersons (ho are associated in business (ith one another in that one is the sole agent, sole distributor or sole concessionaire, ho(ever described, of the other shall be deemed to be related for the purposes of this *ct if they fall (ithin any of the eight @%A cases above. @+A :ethod T(o. Transaction Halue of Identical Goods. 1here the dutiable value cannot be determined under method one, the dutiable value shall be the transaction value of identical goods sold for export to the hilippines and exported at or about the same time as the goods being valued. 5Identical goods5 shall mean goods (hich are the same in all respects, including physical characteristics, "uality and reputation. :inor differences in appearances shall not preclude goods other(ise conforming to the definition from being regarded as identical. @CA :ethod Three. Transaction Halue of #imilar Goods. 1here the dutiable value cannot be determined under the preceding method, the dutiable value shall be the transaction value of similar goods sold for export to the hilippines and exported at or about the same time as the goods being valued. 5#imilar goods5 shall mean goods (hich, although not alike in all respects, have like characteristics and like component materials (hich enable them to perform the same functions and to be commercially interchangeable. The "uality of the goods, their reputation and the existence of a trademark shall be among the factors to be considered in determining (hether goods are similar. If the dutiable value still cannot be determined through the successive application of the t(o immediately preceding methods, the dutiable value shall be determined under method four or, (hen the dutiable value still cannot be determined under that method, under method five, except that, at the re"uest of the importer, the order of application of methods four and five shall be reversed; rovided, ho(ever, That if the Commissioner of Customs deems that he (ill experience real difficulties in determining the dutiable value using method five, the Commissioner of Customs may refuse such a re"uest in (hich event the dutiable value shall be determined under method four, if it can be so determined. @)A :ethod 3our. )eductive Halue. The dutiable value of the imported goods under this method shall be the deductive value (hich shall be based on the unit price at (hich the imported goods or identical or similar imported goods are sold in the hilippines, in the same condition as (hen imported, in the greatest aggregate "uantity, at or about the time of the importation of the goods being valued, to persons not related to the persons from (hom they buy such goods, sub.ect to deductions for the follo(ing;

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@<A 9ither the commissions usually paid or agreed to be paid or the additions usually made for profit and general expenses in connection (ith sales in such country of imported goods of the same class or kind0 @$A The usual costs of transport and insurance and associated costs incurred (ithin the hilippines0 and @=A 1here appropriate, the costs and charges referred to in subsection @*A @=A, @CA and @FA0 and @CA The customs duties and other national taxes payable in the hilippines by reason of the importation or sale of the goods. If neither the imported goods nor identical nor similar imported goods are sold at or about the time of importation of the goods being valued in the hilippines in the conditions as imported, the customs value shall, sub.ect to the conditions set forth in the preceding paragraph hereof, be based on the unit price at (hich the imported goods or identical or similar imported goods sold in the hilippines in the condition as imported at the earliest date after the importation of the goods being valued but before the expiration of ninety @B?A days after such importation. If neither the imported goods nor identical nor similar imported goods are sold in the hilippines in the condition as imported, then, if the importer so re"uests, the dutiable value shall be based on the unit price at (hich the imported goods, after further processing, are sold in the greatest aggregate "uantity to persons in the hilippines (ho are not related to the persons from (hom they buy such goods, sub.ect to allo(ance for the value added by such processing and deductions provided under #ubsections @)A@<A, @$A, @=A and @CA hereof. @9A :ethod 3ive. Computed Halue. The dutiable value under this method shall be the computed value (hich shall be the sum of; @<A The cost or the value of materials and fabrication or other processing employed in producing the imported goods0 @$A The amount for profit and general expenses e"ual to that usually reflected in the sale of goods of the same class or kind as the goods being valued (hich are made by producers in the country of exportation for export to the hilippines0 @=A The freight, insurance fees and other transportation expenses for the importation of the goods0 @CA *ny assist, if its value is not included under paragraph @<A hereof0 and @FA The cost of containers and packing, if their values are not included under paragraph @<A hereof. The +ureau of Customs shall not re"uire or compel any person not residing in the hilippines to produce for examination, or to allo( access to, any account or other record for the purpose of determining a computed value. Ho(ever, information supplied by the producer of the goods for the purposes of determining the customs value may be verified in another country (ith the agreement of the producer and provided they (ill give sufficient advance notice to the government of the country in "uestion and the latter does not ob.ect to the investigation. @3A :ethod #ix. 3allback Halue. If the dutiable value cannot be determined under the preceding methods described above, it shall be determined by using other reasonable means and on the basis of data available in the hilippines. If the importer so re"uests, the importer shall be informed in (riting of the dutiable value determined under :ethod #ix and the method used to determine such value. &o dutiable value shall be determined under :ethod #ix on the basis of; @<A The selling price in the hilippines of goods produced in the hilippines0 @$A * system that provides for the acceptance for customs purposes of the higher of t(o alternative values0 @=A The price of goods in the domestic market of the country of exportation0 @CA The cost of production, other than computed values, that have been determined for identical or similar goods in accordance (ith :ethod 3ive hereof0 @FA The price of goods for export to a country other than the hilippines0 @GA :inimum customs values0 or

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@JA *rbitrary or fictitious values. If in the course of determining the dutiable value of imported goods, it becomes necessary to delay the final determination of such dutiable value, the importer shall nevertheless be able to secure the release of the imported goods upon the filing of a sufficient guarantee in the form of a surety bond, a deposit, cash or some other appropriate instrument in an amount e"uivalent to the imposable duties and taxes on the imported goods in "uestion conditioned upon the payment of customs duties and taxes for (hich the imported goods may be liable; rovided, ho(ever, That goods, the importation of (hich is prohibited by la( shall not be released under any circumstance (hatsoever. &othing in this #ec. shall be construed as restricting or calling into "uestion the right of the Collector of Customs to satisfy himself as to the truth or accuracy of any statement, document or declaration presented for customs valuation purposes. 1hen a declaration has been presented and (here the customs administration has reason to doubt the truth or accuracy of the particulars or of documents produced in support of this declaration, the customs administration may ask the importer to provide further explanation, including documents or other evidence, that the declared value represents the total amount actually paid or payable for the imported goods, ad.usted in accordance (ith the provisions of #ubsection @*A hereof. If, after receiving further information, or in the absence of a response, the customs administration still has reasonable doubts about the truth or accuracy of the declared value, it may, (ithout pre.udice to an importer6s right to appeal pursuant to *rticle << of the 1orld Trade 4rgani!ation *greement on customs valuation, be deemed that the customs value of the imported goods cannot be determined under :ethod 4ne. +efore taking a final decision, the Collector of Customs shall communicate to the importer, in (riting if re"uested, his grounds for doubting the truth or accuracy of the particulars or documents produced and give the importer a reasonable opportunity to respond. 1hen a final decision is made, the customs administration shall communicate to the importer in (riting its decision and the grounds therefor.

The basis or ad valorem rate is the transaction value as ound on the im%ort entr& declaration and its attachments. But can the B"# ull& rel& on the im%ort entr& declaration o an im%orter to which there,s an attachment o sales invoice+ 2". I the B"# can,t rel& ull& on the invoice cost declared or i there,s a reasonable doubt, what are the other means and methods o determining the true value+ o 1. The basis will then be the transaction value o identical goods sold or ex%ort to the -hili%%ines at or about the date o ex%ortation o the goods being valued Identical goods 0 mean goods, which are the same in all res%ects, including %h&sical characteristics, :ualit& and re%utation. ?inor di erences in a%%earances shall not %reclude goods otherwise con orming to the de inition rom being regarded as identical.

!. I there are no identical goods, then the basis will then be the transaction value o similar goods sold or ex%ort to the -hili%%ines at or about the date o ex%ortation o the goods being valued )imilar goods 0 mean goods which, although not alike in all res%ects, have like characteristics and like com%onent materials which enable them to %er orm the same unctions and to be commerciall& interchangeable. The :ualit& o the goods, their re%utation and the existence o a trademark shall be among the actors to be considered in determining whether goods are similar.

3. I there are no similar goods, then the basis will then be the transaction value o the goods that are available in the -hils. and ver& identical, in great numbers. EIn great numbersF, meaning, that at a ver& discounted %rice, assuming that it would have been the cost had it been or ex%ort to the -hils.

!. )%eci ic dut& 0 based on the dutiable weight o goods, the weight thereo being either the gross weight, legal weight, or net weight. #ec. $?$. +ases of )utiable 1eight. M 4n articles that are sub.ect to the specific rate of duty, based on (eight, the duty shall be ascertained as follo(s;

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@aA 1hen articles are dutiable by the gross (eight, the dutiable (eight thereof shall be the (eight of same, together (ith the (eight of all containers, packages, holders and packing, of any kind, in (hich said articles are contained, held or packed at the time of importation. @bA 1hen articles are dutiable by the legal (eight thereof shall be the (eight of same, together (ith the (eight of the immediate containers, holders andDor packing in (hich such articles are usually contained, held or packed at the time of importation andDor, (hen imported in retail packages, at the time of their sale to the public in usual retail "uantities; rovided, That (hen articles are packed in single container, the (eight of the latter shall be included in the legal (eight. @cA 1hen articles are dutiable by the net (eight, the dutiable (eight thereof shall be only the actual (eight of the articles at the time of importation, excluding the (eight of the immediate and all other containers, holders or packing in (hich such articles are contained, held or packed. @dA *rticles affixed to cardboard, cards, paper, (ood or similar common material shall be dutiable together (ith the (eight of such holders. @eA 1hen a single package contains imported articles dutiable according to different (eights, or to (eight and value, the common exterior receptacles shall be prorated and the different proportions thereof treated in accordance (ith the provisions of this Code as to the dutiability or non'dutiability of such packing.

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3. 1lternating dut& 0 not ad valorem and not s%eci ic. It means the dut& which alternates rom being sub4ect to ad valorem to s%eci ic dut&. .. #om%ound dut& 0 when a s%eci ic im%orted article would be com%uted o customs duties using both ad valorem and s%eci ic duties.

B. )%ecial #ustoms 'uties 0 these are additional customs duties actuall& com%uted on to% o what &ou %a& as ordinar& or regular customs duties to %rotect the local industries against oreign com%etition 6dum%ing and countervailing duties7C in order to %rotect consumers rom %ossible dece%tions 6marking dut&7C and to %rotect the countr& and national interest 6retaliator& or discriminator& dut&7. o 1. 'um%ing 'ut& 6or 1nti-'um%ing 'ut&7 0 This is a dut& levied on im%orted goods where it a%%ears that a s%eci ic kind or class o oreign article is being im%orted into or sold or is likel& to be sold in the -hils. at a %rice less than its air value, the im%ortation and sale o which might in4ure, or retard the establishment o , or is likel& to in4ure, an industr& %roducing like goods in the -hili%%ines, to the extent o the under-%ricing o the value. *ho can im%ose dum%ing duties+ The )"TI or non-agricultural %roducts and )"1 or agricultural %roducts.

I &ou :uestion the im%osition made b& the )"1 and )"TI, with whom will &ou a%%eal the adverse decision+ The #T1

#ec. =?<. )umping )uty. M a. 1henever the #ecretary of 3inance @hereinafter called the 5#ecretary5A has reason to believe, from invoices or other documents or ne(spapers, maga!ines or information made available by any government agency or interested party, that a specific kind or class of foreign article, is being imported into, or sold or is likely to be sold in the hilippines, at a price less than its fair value, the importation and sale of (hich might in.ure, or retard the establishment of, or is likely to in.ure, an industry producing like goods in the hilippines, he shall so advise the Tariff Commission @hereinafter called the 5Commission5A, and shall instruct the Collector of Customs to re"uire an anti'dumping bond of t(ice the dutiable value of the imported article coming from the specific country. b. The Commission, upon receipt of the advice from the #ecretary shall conduct an investigation to; <. Herify if the kind or class of article in "uestion is being imported into, or sold or is likely to be sold in the hilippines at a price less than its fair value0 The fair value of an article shall be its home consumption price, excluding internal excise tax. If the fair value of an article cannot be determined, the follo(ing rules shall apply; o i. If the home consumption price is unreliable because of association or a compensatory arrangement bet(een the exporter and the importer or a third party, or if the "uality of like to similar articles sold by the producers for home consumption is negligible in relation to the "uality sold for exportation to countries other than the hilippines as to be an inade"uate basis

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for comparison, then the fair value of the articles shall be based from the export price of like articles sold to countries other than the hilippines, or o ii. If the country of export is a state'controlled economy, then the fair value of like articles shall be the home consumption price of like articles in a proxy country at the same stage of economic development (hich is a proven or established competitive producer of the article under consideration. iii. In the case (here products are not imported directly from the country of origin but are exported to the country of importation from an intermediate country, the fair value shall be the home consumption in the country of origin or the country of export (hichever is higher. iv. If the fair value of such or like articles cannot be determined in accordance (ith the preceding paragraphs then, the fair value of the article under consideration shall be its cost of production as determined of calculated from reasonably available data.

$. )etermine if, as a result thereof, an industry producing like goods in the hilippines, is being in.ured or is likely to be in.ured or is retarded from being established by reason of the importation or sale of that kind or class of article into the hilippines; rovided, That a finding that an article is being imported into the hilippines at a price less than its fair market value shall be deemed prima facie proof of in.ury, or retarding the establishment of an industry producing like goods in the hilippines; *nd provided, further, That in determining (hether the domestic industry has suffered is being threatened (ith in.ury, the Commission shall determine (hether the (holesale prices at (hich the domestic products are sold are reasonable, taking into account the cost of ra( materials, labor, overhead, a fair return on investment and the overall efficiency of the industry0 and =. *scertain the difference, if any, bet(een the purchase price and the fair market value of the article. The Commission shall submit its findings to the #ecretary (ithin sixty @G?A days after the submission of the memoranda of the parties (hich shall not be later than fifteen @<FA days after the termination of the public hearing.

c. The #ecretary shall, (ithin sixty @G?A days after receipt of the report of the Commission, decide (hether the article in "uestion is being imported in violation of this section and shall give due notice of such decision and shall direct the Commissioner of Customs to cause the dumping duty, to be levied, collected and paid, as prescribed in this section, in addition to any other duties, taxes and charges as prescribed in this section, addition to any other duties, taxes and charges imposed by la( on such article, and on the articles of the same specific kind or class subse"uently imported under similar circumstances coming from the specific country. d. The 5)umping )uty5 as provided for in sub'section 5c5 hereof shall be e"ual to the difference bet(een the actual purchase price and the fair value of the article as determined in the dumping decision. *ll importations of like articles (ithin sixty @G?Adays immediately preceding the filing of the protest are covered by the investigation. Ho(ever, in cases of subse"uent importations of the same kind or class of article from the specific country named in the protest, the dumping duty shall be e"ual to the difference bet(een the actual purchase price and the fair value actually existing at the time of importation as determined by the Tariff Commission from the supporting documents submitted or from other reliable sources. e. ending investigation and final decision of the case, the article in "uestion, and articles of the same specific kind or class subse"uently imported under similar circumstances, shall be released to the o(ner, importer, consignee or agent upon the giving of a bond in an amount e"ual to t(ice the estimated dutiable value thereof. f. *ny aggrieved party may appeal only the amount of the dumping duty to the Court of Tax *ppeals in the same manner and (ithin the same period provided for by la( in the case of appeal from decision of the Commissioner of Customs. g. @<A The article, if it has not been previously released under bond as provided for in subsection 5e5 hereof, shall be released after payment by the party concerned of the corresponding dumping duty in addition to any ordinary duties, taxes, and charges, if any, or re'exported by the o(ner, importer, consignee or agent, at his option and expense, upon the filing of a bond in an amount e"ual to t(ice the estimated dutiable value of the article, conditioned upon presentation of landing certificate issued by a consular officer of the hilippines at the country of destination0 or @$A If the article has been previously released under bond, as provided in subsection 5e5 hereof, the party concerned shall be re"uired to pay the corresponding dumping duty in addition to any ordinary duties, taxes and charges, if any. h. *ny investigation to be conducted by the Commission under this section shall include a public hearing or hearings (here the importer, consignee or agent, of the imported article, the local producers of a like article,

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other parties directly affected, and such other parties as in the .udgment of the Commission are entitled to appear, shall be given an opportunity to be heard and to present evidence bearing on the sub.ect matter. i. The established dumping duty shall be sub.ect to ad.ustment based on the prevailing home consumption price or the exporter6s sales price to third country or the home consumption price of a proxy country or in the absence thereof, the cost of production. The Commission shall conduct "uarterly examination andDor verification of the fair value to determine the necessity of ad.ustment. #hould the #ecretary, upon receipt of the report of the Commission, find that there is a need for an ad.ustment he shall direct the commissioner of Customs to effect the necessary ad.ustment in dumping duty. The hilippines 3inance *ttache or, in the absence thereof, the Commercial *ttache or, in the absence thereof, the diplomatic officer andDor consular officer abroad shall be advised by the #ecretary of any article covered by dumping decision. The concerned *ttache or the 4fficer shall submit "uarterly report on home consumption prices, or in the absence thereof, the cost of production, of said articles to the #ecretary and the Commission, thru the department head. .. 1henever the Commission, on its o(n motion or upon the application of any interested party, finds that any of the conditions (hich necessitated the imposition of the dumping duty has ceased to exist, it shall submit the necessary recommendation to the #ecretary for the discontinuance or modification of such dumping duty. *ny decision or order made under this section by the #ecretary shall be published in the 4fficial Ga!ette andDor in a ne(spaper of general circulation. k. *ny dumping decision promulgated by the #ecretary shall be effective for a period of five years from the time of its promulgation except upon the representation of the interested party of the necessity to continues the implementation of said decision, in (hich case the #ecretary shall advice the Commission to conduct an investigation to determine (hether the conditions in paragraphs b'< and b'$ still exist. The action for extension shall be brought before the #ecretary at least six @GA months before the expiration of the period. The findings of the Commission shall be submitted to the #ecretary at least three @=A months before the expiration of the period. 7*ll industries protected by any dumping decision for five years or more from the time of its promulgation may apply for extension to the #ecretary (ithin six @GA months from effectivity of this )ecree. The decision shall be deemed terminated upon failure to file the application (ithin the period so provided.8 l. The #ecretary and the Commission shall promulgate all rules and regulations necessary to carry out their respective functions under this #ection.

!. #ountervailing dut& #9C. =?$. Countervailing )uty. ' 1henever any product, commodity or article of commerce is granted directly or indirectly by the government in the country or origin or exportation, any kind or form of specific subsidy upon the production, manufacture or exportation of such product, commodity or article, and the importation of such subsidi!ed product, commodity or article has caused or threatens to cause material in.ury to a domestic industry or has materially retarded the gro(th or prevents the establishment of a domestic industry as determined by the Tariff Commission @hereinafter referred to as the 6Commission6A, the #ecretary of Trade and Industry, in the case of nonagricultural product, commodity or article, or the #ecretary of *griculture, in the case of agricultural product, commodity or article @both of (hom are hereinafter simply referred to as 6the #ecretary6, as the case may beA shall issue a department order imposing a countervailing duty e"ual to the ascertained amount of the subsidy. The same levy shall be imposed on the like product, commodity or article thereafter imported to the hilippines under similar circumstances. The countervailing duty shall be in addition to any ordinary duties, taxes and charges imposed by la( on such imported product, commodity or article. *hat is a subsid&+ 9iscal incentives, like granting o tax exem%tion in the countr& o origin, such that it can ex%ort %roduct to the -hils., which will result to im%ortation to us at a ver& low %rice because it was not sub4ect to tax in its countr& o origin.

To what amount+ The amount o the subsid& that has been granted b& the countr& o origin.

*ho can im%ose countervailing duties+ )"TI or non-agricultural %roducts and )"1 or agricultural %roducts #9C. =?$. Countervailing )uty. P

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1henever any product, commodity or article of commerce is granted directly or indirectly by the government in the country or origin or exportation, any kind or form of specific subsidy upon the production, manufacture or exportation of such product, commodity or article, and the importation of such subsidi!ed product, commodity or article has caused or threatens to cause material in.ury to a domestic industry or has materially retarded the gro(th or prevents the establishment of a domestic industry as determined by the Tariff Commission @hereinafter referred to as the 6Commission6A, the #ecretary of Trade and Industry, in the case of nonagricultural product, commodity or article, or the #ecretary of *griculture, in the case of agricultural product, commodity or article @both of (hom are hereinafter simply referred to as 6the #ecretary6, as the case may beA shall issue a department order imposing a countervailing duty e"ual to the ascertained amount of the subsidy. The same levy shall be imposed on the like product, commodity or article thereafter imported to the hilippines under similar circumstances. The countervailing duty shall be in addition to any ordinary duties, taxes and charges imposed by la( on such imported product, commodity or article. @*A Initiation of *ction. ' * countervailing action may be initiated by the follo(ing; @<A *ny person, (hether natural or .uridical, (ho has an interest to protect, by filing a verified petition for the imposition of a countervailing duty by or on behalf of the domestic industry0 @$A The #ecretary of Trade and Industry or the #ecretary of *griculture, as the case may be, in special circumstances (here there is sufficient evidence of an existence of a subsidy, in.ury and causal link. @+A Re"uirements. ' * petition shall be filed (ith the #ecretary and shall be accompanied by documents, if any, (hich are reasonably available to the petitioner and (hich contain information supporting the facts that are essential to establish the presence of the elements for the imposition of a countervailing duty, and shall further state, among others; @<A The domestic industry to (hich the petitioner belongs and the particular domestic product, commodity or article or class of domestic product, commodity or article being pre.udiced0 @$A The number of persons employed, the total capital invested, the production and sales volume, and the aggregate production capacity of the domestic industry that has been materially in.ured or is threatened to be materially in.ured or (hose gro(th or establishment has been materially retarded or prevented0 @=A The name and address of the kno(n importer, exporter, or foreign producer, the country of origin or export, the estimated aggregate or cumulative "uantity, the port and the date of arrival, the import entry declaration of the imported product, commodity or article, as (ell as the nature, the extent and the estimated amount of the subsidy thereon0 and @CA #uch other particulars, facts or allegations as are necessary to .ustify the imposition of countervailing duty on the imported product, commodity or article. * petition for the imposition of a countervailing duty shall be considered to have been made 6by or on behalf of the domestic industry6 if it is supported by those domestic producers (hose collective output constitutes more than fifty percent @F?NA of the total production of the like product produced by that portion of the domestic industry expressing either support for or opposition to the application. Ho(ever, an investigation shall be initiated only (hen domestic producers supporting the application account for at least t(enty'five percent @$FNA of the total production of the like product produced by the domestic industry. In cases involving an exceptionally large number of producers, degree of support or opposition may be determined by using statistically valid sampling techni"ues or by consulting their representative organi!ations. 1ithin ten @<?A days from his receipt of the petition or information, the #ecretary shall revie( the accuracy and ade"uacy of the information or evidence provided in the petition to determine (hether there is sufficient basis to .ustify the initiation of an investigation. If there is no sufficient basis to .ustify the initiation of an investigation, the #ecretary shall dismiss the petition and shall properly notify the #ecretary of 3inance, the Commissioner of Customs and other parties concerned regarding such dismissal. The #ecretary shall extend legal, technical and other assistance to the concerned domestic producers and their organi!ations at all stages of the countervailing action. @CA &otice to the #ecretary of 3inance. ' >pon his receipt of the petition, the #ecretary shall, (ithout delay, furnish the #ecretary of 3inance (ith a summary of the essential facts of the petition, and re"uest the latter to immediately inform the Commissioner of Customs regarding such petition and to instruct him to gather and secure all import entries covering such allegedly subsidi!ed product, commodity or article (ithout li"uidation. The Commissioner of Customs shall submit to the #ecretary a complete report on the number, volume, and value of the importation of the allegedly subsidi!ed

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product, commodity or article (ithin ten @<?A days from his receipt of the instruction from the #ecretary of 3inance, and to make similar additional reports every ten @<?A days thereafter. @)A &otice to and *ns(er of Interested arties. ' 1ithin five @FA days from finding of the basis to initiate an investigation, the #ecretary shall notify all interested parties, and shall furnish them (ith a copy of the petition and its annexes, if any. The interested parties shall, not later than thirty @=?A days from their receipt of the notice, submit their ans(er, including such relevant evidence or information as is reasonably available to them to controvert the allegations of the petition. If they fail to submit their ans(er, the #ecretary shall make such preliminary determination of the case on the basis of the facts andDor information available. The #ecretary shall avoid, unless a decision has been made to initiate an investigation, any publici!ing of the petition. Ho(ever, after receipt of a properly documented petition and before proceeding to initiate an investigation, he shall notify the government of the exporting country about the impending investigation. @9A reliminary )etermination. ' 1ithin t(enty @$?A days from his receipt of the ans(er of the interested parties, the #ecretary shall, on the basis of the petition of the aggrieved party and the ans(er of such interested parties and their respective supporting documents or information, make a preliminary determination on (hether or not a prima facie case exists for the imposition of a provisional countervailing duty in the form of a cash bond e"ual to the provisionally estimated amount of subsidy. >pon finding of a prima facie case, the #ecretary shall immediately issue, through the #ecretary of 3inance, a (ritten instruction to the Commissioner of Customs to collect the cash bond, in addition to the corresponding ordinary duties, taxes and other charges imposed by la( on such product, commodity or article. The posting of a cash bond shall be re"uired not earlier than sixty @G?A days from the date of initiation of the investigation. The cash bond shall be deposited (ith a government depository bank and shall be held in trust for the respondent importer. The application of the cash bond shall not exceed four @CA months. The #ecretary shall immediately transmit his preliminary findings together (ith the records of the case to the Commission for its formal investigation. @3A Termination of Investigation by the #ecretary or the Commission. ' The #ecretary or the Commission as the case may be, shall motu proprio terminate the investigation at any stage of the proceedings if the amount of subsidy is de minimis as defined in existing international trade agreements of (hich the Republic of the hilippines is a party0 or (here the volume of the subsidi!ed imported product, commodity or article, actual or potential, or the in.ury is negligible. @GA 3ormal Investigation by the Commission. ' Immediately upon its receipt of the records of the case from the #ecretary, the Commission shall commence the formal investigation and shall accordingly notify in (riting all interested parties and, in addition, give public notice of such investigation in t(o @$A ne(spapers of general circulation. In the formal investigation, the Commission shall essentially determine; @<A The nature and amount of the specific subsidy being en.oyed by the imported product, commodity or article in "uestion0 @$A The presence and extent of the material in.ury or the threat thereof to, or the material retardation of the gro(th, or the prevention of the establishment of, the affected domestic industry0 and @=A The existence of a causal relationship bet(een the allegedly subsidi!ed imported product, commodity or article and the material in.ury or threat thereof to, or the material retardation of the gro(th, or the prevention of the establishment of, the affected domestic industry. The Commission is hereby authori!ed to re"uire any interested party to allo( it access to, or other(ise provide, necessary information to enable the Commission to expedite the investigation. In case any interested party refuses access to, or other(ise does not provide, necessary information (ithin a reasonable period of time or significantly impedes the investigation, a final determination shall be made on the basis of the facts available. The formal investigation shall be conducted in a summary manner. &o dilatory tactics nor unnecessary or un.ustified delays shall be allo(ed, and the technical rules of evidence shall not be applied strictly. @HA )etermination of the 9xistence of #ubsidy. ' * subsidy is deemed to exist;

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@<A 1hen the government or any public body in the country or origin or export of the imported product, commodity or article extends financial contribution to the producer, manufacturer or exporter of such product, commodity or article in the form of; @aA )irect transfer of funds such as grants, loans or e"uity infusion0 or @bA otential direct transfer of funds or assumption of liabilities such as loan guarantees0 or @cA 3oregone or uncollected government revenue that is other(ise due from the producer, manufacturer or exporter of the product, commodity or article; rovided, That the exemption of any exported product, commodity or article from duty or tax imposed on like products, commodity or article (hen destined for consumption in the country of origin andD or export or the refunding of such duty or tax, shall not be deemed to constitute a grant of a subsidy; rovided, further, That should a product, commodity or article be allo(ed dra(back by the country of origin or export, only the ascertained or estimated amount by (hich the total amount of duties andDor internal revenue taxes (as discounted or reduced, if any, shall constitute a subsidy0 or @dA rovision of goods or services other than general infrastructure0 or @eA urchases of goods from the producer, manufacturer or exporter0 or @fA ayments to a funding mechanism0 or @gA 4ther financial contributions to a private body to carry out one or more of the activities mentioned in subparagraphs @aA to @fA above0 or @hA )irect or indirect income or price support0 and @$A 1hen there is a benefit conferred. @IA )etermination of #pecific #ubsidy. ' In the determination of (hether or not a subsidy is specific, the follo(ing principles shall apply; @<A 1here the government or any public body in the country of origin or export of the imported product, commodity or article explicitly limits access to a subsidy to certain enterprises, such subsidy shall be specific0 @$A 1here such government or public body through a la( or regulation establishes ob.ective criteria and conditions governing the eligibility for, and the amount of, a subsidy, specificity shall not exist; rovided, That the eligibility is automatic and that such criteria or conditions are strictly adhered to. 4b.ective criteria shall mean those (hich are neutral, do not favor certain enterprises over others, and are economic in nature and hori!ontal in application, such as number of employees or si!e of enterprise0 @=A In case a subsidy appears to be non'specific according to subparagraphs @<A and @$A above, but there are reasons to believe that the subsidy may in fact be specific, factors that may be considered are; use of a subsidy program by a limited number of certain enterprises for a relatively longer period0 granting of disproportionately large amounts of subsidy to certain enterprises0 and exercise of (ide and un(arranted discretion for granting a subsidy0 and @CA * subsidy (hich is limited to certain enterprises located (ithin a designated geographical region (ithin the territory of the government or public body in the country of origin or export shall be specific. @/A )etermination of In.ury. ' The presence and extent of material in.ury or threat thereof to a domestic industry, or the material retardation of the gro(th, or the prevention of the establishment of a nascent enterprise because of the subsidi!ed imports, shall be determined by the #ecretary or the Commission, as the case may be, on the basis of positive evidence and shall re"uire an ob.ective examination of; @<A The volume of the subsidi!ed imports, that is, (hether there has been a significant increase either absolute or relative to production or consumption in the domestic market0 @$A The effect of the subsidi!ed imports on prices in the domestic market for the like product, commodity or article, that is, (hether there has been a significant price undercutting, or (hether the effect of such imports is other(ise to depress prices to a significant degree or to prevent price increases, (hich other(ise (ould have occurred to a significant degree0 @=A The effect of the subsidi!ed imports on the domestic producers of the like product, commodity or article, including an evaluation of all relevant economic factors and indices having a bearing on the state of the domestic industry concerned, such as, but not limited to, actual and potential decline in output, sales, market share, profits, productivity, return on investments, or utili!ation of capacity0 factors

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affecting domestic prices0 actual or potential negative effects on the cash flo(, inventories, employment, (ages, gro(th, ability to raise capital or investments and, in the case of agriculture, (hether there has been an increased burden on the support programs of the national government0 and @CA 3actors other than the subsidi!ed imports (hich at the same time are in.uring the domestic industry, such as volumes and prices of non'subsidi!ed imports of the product, commodity or article in "uestion0 contraction in demand or changes in the patterns of consumption0 trade restrictive practices of and competition bet(een the foreign and domestic producers0 developments in technology and the export performance and productivity of the domestic industry. In determining threat of material in.ury, the #ecretary or the Commission, as the case may be, shall decide on the basis of facts and not merely allegation, con.ecture or remote possibility. The change in circumstances (hich (ould create a situation in (hich the subsidi!ed imports (ould cause in.ury should be clearly foreseen and imminent considering such relevant factors as; @<A &ature of the subsidy in "uestion and the trade effects likely to arise therefrom0 @$A #ignificant rate of increase of subsidi!ed imports into the domestic market indicating the likelihood of substantially increased importations0 @=A #ufficient freely disposable, or an imminent substantial increase in, capacity of the exporter of such subsidi!ed imported product, commodity or article indicating the likelihood of substantially increased subsidi!ed imports to the domestic market, taking into account the availability of other markets to absorb the additional exports0 @CA 1hether these subsidi!ed imports are entering at prices that (ill have a significant depressing or suppressing effect on domestic prices, and (ill likely increase demand for further imports0 and @FA Inventories of the product, commodity, or article being investigated. In the case (here the effect of the subsidi!ed import (ill materially retard the gro(th or prevent the establishment of a domestic industry, information on employment, capital investment, production and sales, and production capacity of said domestic industry can be augmented or substituted by sho(ing through a factual study, report or other data that an industry (hich has potential to gro( domestically is adversely affected by the subsidi!ed import. 3or this purpose, the )epartment of Trade and Industry for non'agricultural products, and the )epartment of *griculture for agricultural products, shall conduct continuing studies to identify and determine the specific industries, (hether locally existing or not, (hich have the potential to gro( or to be established domestically and (hose gro(th or establishment (ill be retarded or prevented by a subsidi!ed import. @XA Cumulation of Imports. ' 1hen imports of products, commodities or articles from more than one @<A country are simultaneously the sub.ect of an investigation for the imposition of a countervailing duty, the #ecretary or the Commission, as the case may be, may cumulatively assess the effects of such imports only if; @<A The amount of subsidi!ation established in relation to the imports from each country is more than de minimis as defined in existing international trade agreements of (hich the Republic of the hilippines is a party0 and @$A The volume of such imports from each country is not negligible0 and @=A * cumulative assessment of the effects of such imports is (arranted in the light of the conditions of competition bet(een the imported products, commodities or articles, and the conditions of competition bet(een the imported products, commodities or articles and the like domestic products, commodities or articles. @LA ublic &otices and Consultation roceedings.' The #ecretary or the Commission, as the case may be, shall make public notices and conduct consultation (ith the government of the exporting country (hen; @<A Initiating an investigation0 @$A Concluding or suspending an investigation0 @=A :aking a preliminary or final determination0 @CA :aking a decision to accept an undertaking or the termination of an undertaking0 and @FA Terminating a definitive countervailing duty.

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@:A Holuntary >ndertaking. ' 1hen there is an offer from any exporter of subsidi!ed imports to revise its price, or (here the government of the exporting country agrees to eliminate or limit the subsidy or take other measures to that effect, the Commission shall determine if the offer is acceptable and make the necessary recommendation to the #ecretary. If the undertaking is accepted, the #ecretary may advise the Commission to terminate, suspend or continue the investigation. The #ecretary may also advise the Commission to continue its investigation upon the re"uest of the government of the exporting country. The voluntary undertaking shall lapse if there is a negative finding of the presence of a subsidy or material in.ury. In the event of a positive finding of subsidi!ation and material in.ury, the undertaking (ill continue, consistent (ith its terms and the provisions of this section. @&A 3inal )etermination and #ubmission of Report by the Commission. ' The Commission shall complete the formal investigation and submit a report of its findings to the #ecretary (ithin one hundred t(enty @<$?A days from receipt of the records of the case; rovided, ho(ever, That it shall, before a final determination is made, inform all the interested parties of the essential facts under consideration (hich form the basis for the decision to impose a countervailing duty. #uch disclosure should take place in sufficient time for the parties to defend their interests. @4A Imposition of Countervailing )uty. ' The #ecretary shall, (ithin ten @<?A days from receipt of an affirmative final determination by the Commission, issue a department order imposing the countervailing duty on the subsidi!ed imported product, commodity or article. He shall furnish the #ecretary of 3inance (ith the copy of the order and re"uest the latter to direct the Commissioner of Customs to cause the countervailing duty to be levied, collected and paid, in addition to any other duties, taxes and charges imposed by la( on such product, commodity or article. In case of an affirmative final determination by the Commission, the cash bond shall be applied to the countervailing duty assessed. If the cash bond is in excess of the countervailing duty assessed, the remainder shall be returned to the importer immediately; rovided, That no interest shall be payable by the government on the amount to be returned. If the cash bond is less than the countervailing duty assessed, the difference shall not be collected. If the order of the #ecretary is unfavorable to the petitioner, the #ecretary shall, after the lapse of the period for appeal to the Court of Tax *ppeals, issue through the #ecretary of 3inance a department order for the immediate release of the cash bond to the importer. @ A )uration and Revie( of Countervailing )uty. ' *s a general rule, any imposition of countervailing duty shall remain in force only as long as and to the extent necessary to counteract a subsidi!ation (hich is causing or threatening to cause material in.ury. Ho(ever, the need for the continued imposition of the countervailing duty may be revie(ed by the Commission (hen (arranted, motu proprio or upon direction of the #ecretary. *ny interested party may also petition the #ecretary for a revie( of the continued imposition of the countervailing duty; rovided, That at least six @GA months have elapsed since the imposition of the countervailing duty, and upon submission of positive information substantiating the need for a revie(. Interested parties may re"uest the #ecretary to examine; @<A (hether the continued imposition of the countervailing duty is necessary to offset the subsidi!ation0 andDor @$A (hether the in.ury (ill likely continue or recur if the countervailing duty is removed or modified. If the Commission determines that the countervailing duty is no longer necessary or (arranted, the #ecretary shall, upon its recommendation, immediately issue a department order terminating the imposition of the countervailing duty and shall notify all parties concerned, including the Commissioner of Customs through the #ecretary of 3inance, of such termination. &ot(ithstanding the provisions of the preceding paragraphs of this subsection, any countervailing duty shall be terminated on a date not later than five @FA years from the date of its imposition @or from the date of the most recent revie( if that revie( has covered both subsidi!ation and material in.uryA, unless the Commission has determined, in a revie( initiated at least six @GA months prior to the termination date upon the direction of the #ecretary or upon a duly substantiated re"uest by or on behalf of the domestic industry, that the termination of the countervailing duty (ill likely lead to the continuation or recurrence of the subsidi!ation and material in.ury. The procedure and evidence governing the disposition of the petition for the imposition of countervailing duty shall e"ually apply to any revie( carried out under this subsection. #uch revie( shall be carried out expeditiously and shall be concluded not later than ninety @B?A days from the date of the initiation of such a revie(. @TA /udicial Revie(. ' *ny interested party (ho is adversely affected by the department order of the #ecretary on the imposition of the countervailing duty may file (ith the Court of Tax *ppeals a petition

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for revie( of such order (ithin thirty @=?A days from his receipt of notice thereof; rovided, ho(ever, That the filing of such petition for revie( shall not in any (ay stop, suspend or other(ise toll the imposition and collection of the countervailing duty on the imported product, commodity or article. The petition for revie( shall comply (ith the same re"uirements, follo( the same rules of procedure, and be sub.ect to the same disposition as in appeals in connection (ith adverse rulings on tax matters to the Court of Tax *ppeals. @RA )efinition of Terms. ' 3or purposes of this subsection, the term; @<A 6)omestic Industry6 shall refer to the domestic producers as a (hole of the like product, commodity or article or to those of them (hose collective output of the product, commodity or article constitutes a ma.or proportion of the total domestic production of those products, except that (hen producers are related to the exporters or importers or are themselves importers of the allegedly subsidi!ed product or a like product from other countries, the term 6domestic industry6 may be interpreted as referring to the rest of the producers. In case the market in the hilippines is divided into t(o or more competitive markets, the term 6domestic industry6 shall refer to the producers (ithin each market although their production does not constitute a significant portion of the total domestic industry; rovided, That there is a concentration of subsidi!ed imports into such a separate market; and rovided, further, That the subsidi!ed imports are causing in.ury to the producers of all or almost all of the production (ithin such market. @$A 6Interested parties6 shall include; @aA *n exporter or foreign producer or the importer of a product sub.ect to investigation, or the government of the exporting country or a trade or business association a ma.ority of the members of (hich are producers, exporters or importers of such product0 @bA * producer of the like product in the hilippines or a trade and business association a ma.ority of the members of (hich produce the like product in the hilippines0 and @cA Labor unions that are representative of the industry on coalitions of producers andDor labor unions,. @=A 6Like product6 shall mean a product commodity or article (hich is identical, i.e., alike in all respects to the product, commodity or article or in the absence of such product, commodity or article, another product, commodity or article (hich, although not alike in all respects, has characteristics closely resembling those of the imported product, commodity or article under consideration. @#A *n inter'agency committee composed of the #ecretaries of Trade and Industry, *griculture, and 3inance, the Chairman of the Tariff Commission, and the Commissioner of Customs shall promulgate all rules and regulations necessary for the effective implementation of this section.5

3. ?arking dut& 0 This is a dut& on an ad valorem basis im%osed or im%ro%erl& marked articles. The law re:uires that oreign im%ortations must be marked in an& o icial language o the -hils. with the name o the countr& o origin o the article. 2"T3: *hat it re:uires sim%l& is that the source or countr& o origin o the articles must be indicated in the o icial language o the -hils. To what amount+ /A ad valorem

3>#3-TI"2: =ou will not be re:uired to %a& the marking dut& or being unidenti iable or unmarked i the %roduct will be re-ex%orted back i it will be destro&ed under #ustoms su%ervision, &ou don,t need to %a& an& marking dut&. 2"T3: The article shall also be deemed abandoned u%on ailure to mark them within 3@ da&s rom notice. #ec. =?=. :arking of Imported *rticles and Containers. M a. :arking of *rticles. M 9xcept as hereinafter provided, every article of foreign origin @or its container, as provided in subsection 5b5 hereofA imported into the hilippines shall be marked in any official language of the hilippines and in a conspicuous place as legibly, indelibly and permanently as the nature of the article @or containerA (ill permit in such manner as to indicate to an ultimate purchaser in the hilippines the name of the country of origin of the article. The Commissioner of Customs shall, (ith the approval of the department head, issue rules and regulations to M <. )etermine the character of (ords and phrases or abbreviation thereof (hich shall be acceptable as indicating the country of origin and prescribe any reasonable method of marking, (hether by printing, stenciling, stamping,

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branding, labelling or by any other reasonable method, and a conspicuous place on the article or container (here the marking shall appear. $. Re"uire the addition of any other (ords or symbols (hich may be appropriate to prevent deception or mistake as to the origin of the article or as to the origin of any other article (ith (hich such imported article is usually combined subse"uent to importation but before delivery to an ultimate purchaser0 and =. *uthori!e the exception of any article from the re"uirements of marking if P a. #uch article is incapable of being marked0 b. #uch article cannot be marked prior to shipment to the hilippines (ithout in.ury0 c. #uch article cannot be marked prior to shipment to the prohibitive of its importation0 hilippines, except at an expense economically

d. The marking of a container of such article (ill reasonably indicate the origin of such article0 e. #uch article is a crude substance0 f. #uch article is imported for use by the importer and not intended for sale in its imported or any other form0 g. #uch article is to be processed in the hilippines by the importer or for his account other(ise than for the purpose of concealing the origin of such article and in such manner that any mark contemplated by this section (ould necessarily be obliterated, destroyed or permanently concealed0 h. *n ultimate purchaser, by reason of the character of such article or by reason of the circumstances of its importation must necessarily kno( the country of origin of such article even though it is not marked to indicate its origin0 i. #uch article (as produced more than t(enty years prior to its importation into the hilippines0 or .. #uch article cannot be marked after importation except at an expense (hich is economically prohibitive, and the failure to mark the article before importation (as not due to any purpose of the importer, producer, seller or shipper to avoid compliance (ith this section. b. :arking of Containers. M 1henever an article is excepted under subdivision @=A of subsection 5a5 of this section from the re"uirements of marking, the immediate container, if any, of such article, or such other container or containers of such article as may be prescribed by the Commissioner of Customs (ith the approval of the department head, shall be marked in such manner as to indicate to an ultimate purchaser in the hilippines the name of the country of origin of such article in any official language of the hilippines, sub.ect to all provisions of this section, including the same exceptions as are applicable to articles under subdivision @=A of subsection 5a5. c. :arking )uty for 3ailure to :ark. M If at the time of importation any article @or its container, as provided in subsection 5b5 hereofA, is not marked in accordance (ith the re"uirements of this section, there shall be levied, collected and paid upon such article a marking duty of F per cent ad valorem, (hich shall be deemed to have accrued at the time of importation, except (hen such article is exported or destroyed under customs supervision and prior to the final li"uidation of the corresponding entry. d. )elivery 1ithheld >ntil :arked. M &o imported article held in customs custody for inspection, examination or appraisement shall be delivered until such article andDor its containers, (hether released or not from customs custody, shall have been marked in accordance (ith the re"uirements of this section and until the amount of duty estimated to be payable under subsection 5c5 of this section shall have been deposited. &othing in this section shall be construed as excepting any article or its container from the particular re"uirements of marking provided for in any provision of la(. e. The failure or refusal of the o(ner or importer to mark the articles as herein re"uired (ithin a period of thirty days after due notice shall constitute as an act of abandonment of said articles and their disposition shall be governed by the provisions of this Code relative to abandonment of imported articles.

.. Retaliator& or 'iscriminator& 'ut& 0 This is a dut& im%osed on im%orted goods whenever it is ound as act that the countr& o origin discriminates against the commerce o the -hils. in such a manner as to %lace the commerce o the -hils. at a disadvantage com%ared with the commerce o an& oreign countr&. To what amount+ 2ot exceeding 1@@A ad valorem

*ho has the im%osing authorit&+

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The -resident as %rovided under the #onstitution and translated in the T##, which we call the 9$3>IB$3 T1RI99 #$1<)3 %roviding that the -resident has the right to increase, reduce, or remove an& existing %rotective rates o im%ort dut&.

*hat is the remed& o the government i the oreign countr& %ersists in im%orting discriminator& oreign articles+ The discriminator& oreign articles shall be or eited in avor o the government and shall be seiDed, %rosecuted and condemned. I still %ersistent, then banning o such discriminator& oreign articles.

#ec. =?C. )iscrimination by 3oreign Countries. M a. The resident, (hen he finds that the public interest (ill be serves thereby, shall by proclamation specify and declare ne( or additional duties in an amount not exceeding one hundred @<??A per cent ad valorem upon articles (holly or in part the gro(th or product of, or imported in a vessel of, any foreign country (henever he shall find as a fact that such country M <. Imposes, directly or indirectly, upon the disposition or transportation in transit through or re'exportation from such country of any article (holly or in part the gro(th or product of the hilippines, any unreasonable charge, exaction, regulation or limitation (hich is not e"ually enforced upon the like articles of every foreign country0 or $. )iscriminates in fact against the commerce of the hilippines, directly or indirectly, by la( or administrative regulation or practice, by or in respect to any customs, tonnage, or port duty, fee, charge, exaction, classification, regulation, condition, restriction or prohibition, in such manner as to place the commerce of the hilippines at a disadvantage compared (ith the commerce of any foreign country. b. If at any time the resident shall find it to be a fact that any foreign country has not only discriminated against the commerce of the hilippines, as aforesaid, but has, after the issuance of a proclamation as authori!ed in subsection 5a5 of this section, maintained or increased its said discrimination against the commerce of the hilippines, the resident is hereby authori!ed, if he deems it consistent (ith the interests of the hilippines, to issue a further proclamation directing that such product of said country or such article imported in its vessels as he shall deem consistent (ith the public interests, shall be excluded from importation into the hilippines. c. *ny proclamation issued by the resident under this section shall, if he deems it consistent (ith the interest of the hilippines, extend to the (hole of any foreign country or may be confined to any subdivision or subdivisions thereof0 and the resident shall, (henever he deems the public interests re"uire, suspend, revoke, supplement or amend any such proclamation. d. *ll articles imported contrary to the provisions of this section shall be forfeited to the Government of the hilippines and shall be liable to be sei!ed, prosecuted and condemned in like manner and under the same regulations, restrictions and provisions as may from time to time be established for the recovery, collection, distribution and remission or forfeiture to the government by the tariff and customs la(s. 1henever the provision of this section shall be applicable to importations into the hilippines of articles (holly or in part the gro(th or product of any foreign country, they shall be applicable thereto, (hether such articles are imported directly or indirectly. e. It shall be the duty of the Commission to ascertain and at all times to be informed (hether any of the discrimination against the commerce of the hilippines enumerated in subsections 5a5 and 5b5 of this section are practiced by any country0 and if and (hen such discriminatory acts are disclosed, it shall be the duty of the Commission to bring the matter to the attention of the resident, together (ith recommendations. f. The #ecretary of finance shall make such rules and regulations as are necessary for the execution of such proclamation as the resident may issue in accordance (ith the provisions of this section.

#. "ther #ustoms 9ees, 'ues or #harges -a&able o 1. 8arbor ees o #ection $J?<. )efinition. M Harbor fee is the amount (hich the o(ner, agent, operator or master of a vessel has to pay for each entrance into or departure from a port of entry in the hilippines.

!. *har age dues #ec. $%?<. )efinition. M 1harfage due is the amount assessed against the cargo of a vessel engaged in the foreign trade, based on the "uantity, (eight or measure received andDor discharged by such vessel. The o(ner, consignee, or agent of either, of the article is the person liable for such charge.

3. Berthing ees

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#ec. $B?<. )efinition. M +erthing charge is the amount assessed against a vessel for mooring or berthing at a pier, (harf, bulkhead'(harf, river or channel marginal (harf at any port in the hilippines0 or for mooring or making fast to a vessel so berthed0 or for berthing or mooring (ithin any slip, channel, basin river or canal under the .urisdiction of any port of the hilippines. The o(ner, agent, operator or master of the vessel is liable for this charge.

.. )torage ees #ec. =??<. )efinition. M #torage charge is the amount assessed on articles for storage in customs premises, cargo shed and (arehouses of the government. The o(ner, consignee or agent of either, of the articles, is liable for this charge.

/. 1rrastre #harges #ec. =<?<. )efinition. M *rrastre charge is the amount (hich the o(ner, consignee, or agent of either, of article or baggage has to pay for the handling, receiving and custody of the imported or exported article or the baggage of the passengers.

L. Tonnage dues #ec. =$?<. )efinition. M Tonnage due is the amount paid by the o(ner, agent, operator or master of a vessel engaged in foreign trade coming to the hilippines from a foreign port or going to a foreign port from the hilippines based on the net tonnage of the vessel or (eight of the articles discharged or laden.

H. "ther ees and charges #ec. ==?$. 4ther Charges. M 1hen any article is sold or any service rendered by the +ureau of Customs in any matter for (hich a charge may be collected legally, no fee therefor having been fixed by la(, such charge shall be on such amount as may from time to time be fixed by regulation or order of the Commissioner and approved by the department head0 and the payment of such charge may be made by affixing and cancelling the documentary customs stamps. *henever a vessel engaged in oreign trade dro%s anchor in the -hili%%ine waters, liable or anchorage ee. *henever a vessel engaged in domestic trade dro%s anchor at an& %ort in the -hils., liable or usage ee. *henever a vessel engaged in domestic trade tem%oraril& la&s u%, like %arking, liable or la&-u% ee.

VII# F5.>0+5. T,$0** C5,&). #ec. C?<. 3lexible Clause. M a. In the interest of national economy, general (elfare andDor national security, and sub.ect to the limitations herein prescribed, the resident, upon recommendation of the &ational 9conomic and )evelopment *uthority @hereinafter referred to as &9)*A, is hereby empo(ered; @<A to increase, reduce or remove existing protective rates of import duty @including any necessary change in classificationA. The existing rates may be increased or decreased to any level, in one or several stages but in no case shall the increased rate of import duty be higher than a maximum of one hundred @<??A per cent ad valorem :NOTE6 G1 0) *%$ 3$%-.1-04. $,-.) %'57<- @$A to establish import "uota or to ban imports of any commodity, as may be necessary0 and @=A to impose an additional duty on all imports not exceeding ten @<?NA per cent ad valorem (henever necessary0 rovided, That upon periodic investigations by the Tariff Commission and recommendation of the &9)*, the resident may cause a gradual reduction of protection levels granted in #ection 4ne Hundred and 3our of this Code, including those subse"uently granted pursuant to this section :NOTE6 G3 0) *%$ %$(0',$7 %$ $.A&5,$ 1&)-%/) (&-0.)<. b. +efore any recommendation is submitted to the resident by the &9)* pursuant to the provisions of this section, except in the imposition of an additional duty not exceeding ten @<?A per cent ad valorem, the Commission shall conduct an investigation in the course of (hich they shall hold public hearings (herein interested parties shall be afforded reasonable opportunity to be present, produce evidence and to be heard. The Commission shall also hear the vie(s and recommendations of any government office, agency or instrumentality concerned. The Commission shall submit their findings and recommendations to the &9)* (ithin thirty @=?A days after the termination of the public hearings. c. The po(er of the resident to increase or decrease rates of import duty (ithin the limits fixed in subsection 5a5 shall include the authority to modify the form of duty. In modifying the form of duty, the corresponding ad valorem or specific e"uivalents of the duty (ith respect to imports from the principal competing foreign country for the most recent representative period shall be used as bases. d. The Commissioner of Customs shall regularly furnish the Commission a copy of all customs import entries as filed in the +ureau of Customs. The Commission or its duly authori!ed representatives shall have access to, and the right to copy all li"uidated customs import entries and other documents appended thereto as finally filed in the Commission on *udit. e. The &9)* shall promulgate rules and regulations necessary to carry out the provisions of this section.

-age 177 o 186

f. *ny 4rder issued by the resident pursuant to the provisions of this section shall take effect thirty @=A days after promulgation, except in the imposition of additional duty not exceeding ten @<?A per cent ad valorem (hich shall take effect at the discretion of the resident. 2"T3: -rotective rate re ers to s%ecial customs duties. R31)"2: 9or the interest o the national econom&, national securit& and or general wel are. 9or the %rotection o the -hili%%ine econom&.

VIII# L0,+050-7 *%$ C&)-%/) D&-0.) 1. ;eneral Rule and 3xce%tions o ;R: 2o exem%tions rom customs duties. The %rovisions o general and s%ecial laws, including those granting ranchises, to the contrar& notwithstanding, there shall be no exem%tions whatsoever rom the %a&ment o the customs duties. 3>#: 1. I %rovided under the T## 6e.g. conditionall&- ree im%ortations7 !. 3xem%tions granted to ;"##s with existing contracts, commitment, agreements or obligations with oreign countries 3. 3xem%tions o international institutions, associations or organiDations %ursuant to agreements and s%ecial laws .. 3xem%tions granted b& the -resident o the -hils., u%on recommendation rom the 23'1 in the interest o national economic develo%ment

B. 3xtent o Im%orter,s $iabilit& o #ec. <$?C. Liability of Importer for )uties. M >nless relieved by la(s or regulations, the liability for duties, taxes, fees and other charges attaching on importation constitutes a personal debt due from the importer to the government (hich can be discharged only by payment in full of all duties, taxes, fees and other charges legally accruing. It also constitutes a lien upon the articles imported (hich may be enforced (hile such articles are in custody or sub.ect to the control of the government. 2"T3: "nce the im%orted article legall& leaves the %remises o the B"#, the lien no longer attaches to such im%orted article. R3?3?B3R: The extent o the im%orter,s liabilit& is limited onl& to the value o the im%orted articles. )o, i it cannot settle the taxes and duties, assuming it,s more than 1@@A o the value o the im%orted articles, &our remed& as an im%orter is sim%l& to abandon the im%orted articles. To that extent, &our abandoned articles will be considered as the ull %a&ment o whatever &our liabilit& is.

o o

#. 'rawbacks, when allowed o o 'rawback 0 is a device resorted to or enabling an im%orted commodit& a ected b& taxes to be ex%orted back and sold in oreign markets u%on the same terms as i it had not been taxed at all. #"2'ITI"2) 9"R ;R12T "9 'R1*B1#P: 1. Im%orted material 6now a com%onent o the inished good7 was actuall& used in the %roduction o the inished good to be re-ex%orted. !. Re und or credit shall not exceed 1@@A o duties %aid on the im%orted material 3. 'etermination b& 23'1 o the re:uirement or certi ication on non-availabilit& o locall& %roduced or manu actured com%etitive substitutes or the im%orted material 6no local substitute or the materials7 .. 3x%ortation must be made within 1 &ear rom the date o acce%tance o the im%ort entr& and claim or re und or credit must be made within L months rom ex%ortation /. *hen ! or more result rom the used o same im%orted material, a%%ortionment shall be made. 3ver& a%%lication or drawback must %a& -/@@ iling, %rocessing, and su%ervision ees #laims shall be %aid b& B"# within L@ da&s a ter recei%t o %ro%erl& accom%lished claims 2"T3: 1s an im%orter, either &ou don,t %a& the tax at the time o im%ortation or &ou %a& the tax but seek or re undJdrawback later on.

-age 178 o 186

o o

I &ou choose not to %a& the tax and the im%orted article is not re-ex%orted, the recourse o the government is against a bond that the im%orter would have to ile u%on im%ortation. I &ou choose to %a& the tax, no bond needed, and i the im%orted article is not re-ex%orted, the government will not give &ou re und or drawback.

R31)"2: To enable a local manu acturer to com%ete in oreign markets b& relieving them o the %a&ment o taxes that will surel& orm %art o the cost o the %roduct. #ommodities or which drawbacks are allowed: o o o 1. 1rticles made o im%orted materials or re-ex%ort !. 9uels used or %ro%ulsion o vessels 3. -etroleum oils eventuall& used or the generation o electric %ower and manu acture o cit& gas

TAX Mar. 15, 2011 Tuesday 3ver& im%ort entr& declaration that an im%orter iles must be li:uidated b& the #"#, the %ur%ose o which is to determine with exact inalit& how much is the customs dut& liabilit&. It can either be tentative or inal li:uidation. o #ec. <G?<. Li"uidation and Record of 9ntries. M If the Collector shall approve the returns of the appraiser and the report of the (eights, gauge or "uantity, the li"uidation shall be made on the face of the entry sho(ing the particulars thereof, initiated by the li"uidating clerk, approved by the chief li"uidator, and recorded in the record of li"uidations. * daily record of all entries li"uidated shall be posted in the public corridor of the customhouse, stating the name of the vessel or aircraft, the port from (hich she arrived, the date of her arrival, the name of the importer, and the serial number and date of the entry. * daily record must also be kept by the Collector of all additional duties, taxes and other charges found upon li"uidation, and notice shall promptly be sent to the interested parties. #ec. <G?$. Tentative Li"uidation. M If to determine the exact amount due under the la( in (hole or in part, some future action is re"uired, the li"uidation shall be deemed to be tentative as to the item or items affected and shall to that extent be sub.ect to future and final read.ustment and settlement. The entry in such case shall be stamped 5Tentative li"uidation5. #ec. <G?=. 3inality of Li"uidation. 1hen articles have been entered and passed free of duty or final ad.ustments of duties made, (ith subse"uent delivery, such entry and passage free of duty or settlements of duties (ill, after the expiration of three @=A years from the date of the final payment of duties, in the absence of fraud or protest or compliance audit pursuant to the provisions of this Code, be final and conclusive upon all parties, unless the li"uidation of the import entry (as merely tentative.

2"T3: 1 li:uidation, even i it,s inall& made, is still o%en or :uestions within 3 &ears rom the date o inal %a&ment o duties. 1 ter the 3 &ears, wala nah, it,s as i it,s closed. The right o either %arties 6im%orter and the government7 has alread& %rescribed, exce%t when there is raud or %rotest or tentative li:uidation, in which case, the 3-&ear %eriod will not a%%l&.

X# F,05&$. -% P,7 D&-0.) ,'( T,>.)? F$,&(&5.'- P$,1-01.) #ec. =G<<. 3ailure to ay correct )uties and Taxes on Imported Goods. ' *ny person (ho, after being sub.ected to post'entry audit and examination as provided in #ec. =F<F of art $, Title HII hereof, is found to have incurred deficiencies in duties and taxes paid for imported goods, shall be penali!ed according to three @=A degrees of culpability sub.ect to any mitigating, aggravating or extraordinary factors that are clearly established by the available evidence; o @aA &egligence ' 1hen the deficiency results from an offender6s failure, through an act or acts of omission or commission, to exercise reasonable care and competence to ensure that a statement made is correct, it shall be determined to be negligent and punishable by a fine e"uivalent to not less than one'half @<D$A but not more than t(o @$A times the revenue loss. @bA Gross &egligence ' 1hen a deficiency results from an act or acts of omission or commission done (ith actual kno(ledge or (anton disregard for the relevant facts and (ith indifference to or disregard for the offender6s obligation under the statute, it shall be determined to be grossly negligent and punishable by a fine e"uivalent to not less than t(o and a half @$A but not more than four@CA times the revenue loss.

-age 17 o 186

@cA 3raud ' 1hen the material false statement or act in connection (ith the transaction (as committed or omitted kno(ingly, voluntarily and intentionally, as established by clear and convincing evidence, it shall be determined to be fraudulent and be punishable by a fine e"uivalent to not less than five @FA times but not more than eight @%A times the revenue loss and imprisonment of not less than t(o @$A years but not more than eight @%A years. The decision of the Commissioner of Customs, upon proper hearing, to impose penalties as prescribed in this #ec. may be appealed in accordance (ith #ec. $C?$ hereof.

o -

9raudulent -ractices o 1. )muggling or unlaw ul im%ortation #ec. =G?<. >nla(ful Importation. M *ny person (ho shall fraudulently import or bring into the hilippines, or assist in so doing, any article, contrary to la(, or shall receive, conceal, buy, sell, or in any manner facilitate the transportation, concealment, or sale of such article after importation, kno(ing the same to have been imported contrary to la(, shall be punished by a fine of not less than six hundred pesos nor more than five thousand pesos and imprisonment for not less than six months nor more than t(o years and, if the offender is an alien, he shall be deported after serving the sentence. 1hen, upon trial for a violation of this section, the defendant is sho(n to have or to have had possession of the article in "uestion, such possession shall be deemed sufficient evidence to authori!e conviction, unless the defendant shall explain the possession to the satisfaction of the court.

!. ?akes or attem%ts to make entr& o im%orted article b& means o raudulent invoices #ec. =G?$. Harious 3raudulent ractices *gainst Customs Revenue. M *ny person (ho makes or attempts to make any entry of imported or exported article by means of any false or fraudulent invoice, declaration, affidavit, letter, paper, or by means of any false statement, (ritten or verbal, or by means of any false or fraudulent practice (hatsoever, or shall be guilty of any (illful act or omission by means of (hereof the Government might be deprived of the la(ful duties, taxes and other charges, or any portion thereof, accruing from the article or any portion thereof, embraced or referred to in such invoice, declaration, affidavit, letter, paper, or statement, or affected by such act or omission, shall, for each offense, be punished by a fine of not less than six hundred pesos nor more than five thousand pesos and by imprisonment for not less than six months nor more than t(o years and if the offender is an alien, he shall be deported after serving the sentence. 2"T3: 3vidence or conviction 0 *hen, u%on trial or a violation o this section, the de endant is shown to have or to have had %ossession o the article in :uestion, such %ossession shall be deemed su icient evidence to authoriDe conviction 6deemed to have knowledge that the article is im%orted contrar& to law7, unless the de endant shall ex%lain the %ossession to the satis action o the court.

o o o

3. 3ntr& o goods without the declaration o the correct or true weight or measures .. -a&ment o taxes less than the correct taxes /. 9alse entr& in iling or re unds or drawbacks

XII# T,> R./.(0.) 1. ;overnment o 1. 1dministrative a. Tax $ien o It attaches to the %ro%ert&, regardless o whoever owns it and regardless o whether the im%orter is known or unknown.

b. )eiDures and 9or eiture c. 1dministrative 9ines d. Reduction o #ustoms 'utiesJ#om%romise

!. (udicial a. #ivil 1ction b. #riminal 1ction 2"T3: #riminal action is against the %erson, not the %ro%ert&, or unlaw ul im%ortation.

-age 18! o 186

2"T3: The best remed&, i im%orted goods are still within the 4urisdiction or control o the B"#, is administrative 6seiDure and or eiture7. But once it leaves the 4urisdiction o the B"#, i law ul, the best remed& is 4udicial. 8owever, i it,s unlaw ul, the best remed& is administrative 6seiDure and or eiture7.

B. To 1. 1dministrative a. -rotest #ec. $=?%. rotest and ayment upon rotest in Civil :atters. M 1hen a ruling or decision of the Collector is made (hereby liability for duties, fees, or other money charge is determined, except the fixing of fines in sei!ure cases, the party adversely affected may protest such ruling or decision by presenting to the Collector at the time (hen payment of the amount claimed to be due the Government is made, or (ithin thirty days thereafter, a (ritten protest setting forth his ob.ections to the ruling or decision in "uestion, together (ith the reasons therefor. &o protest shall be considered unless payment of the amount due after final li"uidation has first been made. #ec. $=?B. rotest 9xclusive Remedy in rotestable Case. M In all cases sub.ect to protest, the interested party (ho desires to have the action of the Collector revie(ed, shall make a protest, other(ise, the action of the Collector shall be final and conclusive against him, except as to matters correctible for manifest error in the manner prescribed in section one thousand seven hundred and seven hereof. #ec. $=<$. )ecision or *ction by Collector in rotest and #ei!ure Cases. M 1hen a protest in proper form is presented in a case (here protest in re"uired, the Collector shall reexamine the matter thus presented, and if the protest is sustained, in (hole or in part, he shall enter the appropriate order, the entry reli"uidated if necessary. In sei!ure cases, the Collector, after a hearing, shall in (riting make a declaration of forfeiture or fix the amount of the fine or take such other action as may be proper.

b. Re und #ec. <J?J. Correction of 9rrors M Refund of 9xcess ayments. M :anifest clerical errors made in an invoice or entry, errors in return of (eight, measure and gauge, (hen duly certified to by the surveyor or examining official @(hen there are such officials at the portA, and errors in the distribution of charges on invoices not involving any "uestion of la( and certified to by the examining official, may be corrected in the computation of duties, if such errors be discovered before the payment of duties, or, if discovered (ithin one year after the final li"uidation, upon (ritten re"uest and notice of error from the importer, or upon statement of error certified by the Collector. 3or the purpose of correcting errors specified in the next preceding paragraph the Collector is authori!ed to reli"uidate entries and collect additional charges, or to make refunds on statement of error (ithin the statutory time limit. #ec. <J?%. Claim for Refund and :ode of ayment. M *ll claims for refund of duties shall be made in (riting, and for(arded to the Collector to (hom such duties are paid, (ho upon receipt of such claim shall verify the same by the records of his office, and if found to be correct and in accordance (ith la(, shall certify the same to the Commissioner (ith his recommendation together (ith all necessary papers and documents. >pon receipt by the Commissioner of such certified claim he shall cause the same to be paid if found correct.

c. )ettlement o an& seiDure b& %a&ment o ine or redem%tion d. 1%%eal

!. (udicial a. 1%%eal b. 1ction to :uestion the legalit& o the seiDure c. 1bandonment

XI# "0'() %* P$%1..(0'A) 0' C&)-%/) C,).) 1. #ustoms -rotest #ases o 1. 9ile #ustoms -rotest u%on %a&ment under %rotest or within 1/ da&s therea ter be ore the #ollector o #ustoms

-age 181 o 186

2"T3: -a&ment under -rotest 6-<-7 is necessar& be ore &ou can :uestion the assessment or &ou %rotest the assessment. I -<- is done, there is an annotation that &ou,ve %aid under %rotest. Re:uirements or %rotest to be valid, it must: 1. Be in writing !. -oint out the %articular decision or ruling o the #ollector o #ustoms to which exce%tion is taken or ob4ection made 3. )tate the grounds relied u%on or relie .. Be limited to the sub4ect matter o a single ad4ustment o 2"T3: )ingle ad4ustment re ers to the entire content o one li:uidation, including all duties, ees, surcharges or ines incident thereto.

/. Be iled when the amount claimed is %aid or within 1/ da&s a ter the %a&ment L. 9urnish sam%les o goods under %rotest when re:uired

o o

!. Then, hearing will be conducted b& the #ollector o #ustoms within 1/ da&s rom receiving the %rotest 3. #ollector o #ustoms, decision within 3@ da&s u%on termination o the hearing I avorable 0 automatic reviewJa%%eal b& the #ommissioner o #ustoms within / da&s rom %romulgation o decision R31)"2: 9or the %rotection o the government, li eblood doctrine, and the #ommissioner o #ustoms has direct su%ervision over the #ollector o #ustoms.

I un avorable 0 a%%eal within 1/ da&s rom noti ication in writing b& the #ollector o his decision be ore the #ommissioner

.. #ommissioner o #ustoms, decision within 3@ da&s rom recei%t o the records o the case I avorable or inaction 6a irmed #ollector,s decision7 0 automatic reviewJa%%eal b& the )"9 within / da&s rom %romulgation o decision I un avorable 0 a%%eal to the #T1 in division within 3@ da&s rom recei%t o decision

/. )"9,s decision within 3@ da&s rom recei%t o the records o the case I avorable or inaction 6a irmed #ollector,s decision7 0 decision shall become inal and executor&, then, &ou rest in %eace I un avorable 6reversed #ollector,s decision7 0 a%%eal to the #T1 in division within 3@ da&s rom recei%t o decision

L. #T1,s decision I avorable 0 &ou rest in %eace I un avorable 0 motion or recon within 1/ da&s rom recei%t o notice I still un avorable 0 #T1 en banc o I still un avorable 0 )#

B. )eiDure and 9or eiture #ases 6)9#7 o *ould automatic review o cases be also a%%licable to the second kind o %roceeding, which is )eiDure and 9or eiture cases+ o =3).

*ho has the authorit& to en orce )9#+ #ec. $$?=. ersons Having olice *uthority. M 3or the enforcement of the customs and tariff la(s, the follo(ing persons are authori!ed to effect searches, sei!ures and arrests conformably (ith the provisions of said la(s; a. 4fficials of the +ureau of Customs, collectors, assistant collectors, deputy collectors, surveyors, security and secret'service agents, inspectors, port patrol officers and guards of the +ureau of Customs.

-age 182 o 186

b. 4fficers of the hilippine &avy (hen authori!ed by the Commissioner. c. *ny person especially authori!ed in (riting by the Commissioner. d. 4fficers generally empo(ered by la( to effect arrests and execute processes of courts, (hen acting under direction of the Collector. e. *ny person especially authori!ed by a Collector, sub.ect to the restrictions stated in the next succeeding section. ersons exercising the po(ers hereinabove conferred shall, in the exercise thereof, have the same authority, be entitled to the proper protection, and shall be governed by the same la(, not inconsistent (ith the provisions of this section, as other officers exercising police authority in general. 2"T3: 3ven the BIR

*hat,s the nature o )9#+ )9# are actuall& actions in rem which are directed against the %ro%ert& itsel , and not directed against the owner. )o, i it,s ound out that the %ro%ert& im%orted is illegal or %rohibited, the %enalt& is directed against the %ro%ert& itsel . It,s civil in nature.

1rticles sub4ect to #on iscation I articles are unlaw ull& im%orted, would the ) and 9 be directed against the %ro%ert& onl& or would it include the carr&ing vessel, vehicle or aircra t+ ;R: 1n&thing that was used or smuggling or unlaw ul im%ortation is sub4ect to con iscation, regardless o whoever the owner is 3: #ommon #arriers with a #-# o R31)"2: Because common carriers are o%en to %ublic, thus, the& do no go into the legalit& o the articles that are loaded or unloaded on its vessel, vehicle, or aircra t, such that i the common carrier has no knowledge o the unlaw ul im%ortation, the vessel cannot be sub4ect to or eiture 3 to 3: #ommon carrier actuall& knows o the unlaw ul im%ortation or the vessel is %rivatel& chartered or hired, in which case, with or without knowledge, it,s sub4ect to or eiture

o o

-ro%erties not sub4ect to or eiture ;R: The or eiture o the vehicle, vessel or aircra t shall not be e ected i it is established that the owner thereo or his agent in charge o the means o the conve&ance used as a oresaid has no knowledge o or %artici%ation in the unlaw ul act 3: -rovided, however, that a %rima acie %resum%tion shall exist against the vessel, vehicle, or aircra t under an& o the ollowing circumstances: 1. I the conve&ance has been used or smuggling at least twice be ore !. I the owner is not in the business or which the conve&ance is generall& used 3. I the owner is inanciall& not in the %osition to own such conve&ance

-laces where search and seiDure ma& be conducted 1. 3nclosures, warehouse, buildings !. 'welling house 0 there must be search warrant issued b& a 4udge o a court a ter a sworn a%%lication has been iled detailing therein the descri%tion o the %lace to be searched and the things to be seiDed 3. Kessels or aircra ts or vehicles and %ersons or articles conve&ed therein .. -ersons arriving rom oreign countries /. *arehouse *ould a warehouse be considered a dwelling %lace i the em%lo&er sta&s therein as a watchman together with his amil&+

-age 183 o 186

o o

2", because to be considered as a dwelling %lace, such must be used exclusivel& onl& or residential %ur%oses.

L. Kehicles, beasts or %ersons

Burden o -roo The burden o %roo is on the im%orter-claimant so long as %robable cause has alread& been shown b& the B"#

#an im%orter-owner o a seiDed article o er to %a& in lieu o seiDure or or eiture+ ;R: =3). There can be settlement o )9# b& %a&ment o ine or redem%tion o or eited %ro%ert&. 3: 1. The im%ortation is absolutel& %rohibited !. The surrender o the %ro%ert& to the %erson o ering to redeem would be contrar& to law, or 3. *here there is raud

)o, i the im%orter is criminall& charged and subse:uentl& ac:uitted o the criminal charge, do the seiDed and or eited articles have to be released as well+ 2". #riminal charge is di erent rom )9#. The ac:uittal in the criminal charge is not res 4udicata in )9# because the criminal case is directed against the %erson himsel while )9# is directed against the %ro%ert& itsel . )o i the %ro%ert& would be answerable or having trans%orted illegal articles, then the %ro%ert& would have to be or eited or seiDed, unless it,s exem%t.

In )9#, it starts-o with the #ollector determining whether the %ro%ert& im%orted is illegal. I it,s illegal, the #ollector would have to in orm his #ommissioner and in that case, would %a&ment under %rotest be necessar& be ore &ou :uestion the seiDure+ 2", because there,s no assessment &et. )im%l&, it was a determination o the illegalit& o the im%orted articles. #an &ou ask or the release o the goods+ =3), but &ou have to ile a bond. I the decision o the #ollector is inall& adverse to &ou nah, totall& it will be seiDed and or eited and the remed& would have to be the same as in customs %rotest cases. The di erence lang is no %a&ment under %rotest unless &ou have to %a& a bond or %ut u% a bond or &ou settle na lang, at this stage, b& %a&ing the ees.

Is abatement allowed in )9#+ =3), in cases where: 1. The im%orted articles su ered an& damage !. $oss 3. In4ur& o animals .. 'e icienc& in the contents %ackage

2"T3: 1batement in T## is not the total waiver o collection but it,s either a reduction or the non-%a&ment o customs duties.

#an the T- ile a claim or re und+ =3), in cases o : 1. 'rawback !. *herein &ou have alread& %aid the customs duties and &ou ound out that goods have su ered damages or are alread& de icient 3. *herein &ou have actuall& %aid the customs duties and within the 3-&ear %eriod a ter inal li:uidation, &ou ound out that it was an excessive %a&ment

-age 184 o 186

-age 185 o 186

-age 186 o 186

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