DOMONDONs CUT AND PASTE

TAXATION
Ver. 2004

Analysis of re!io"s #ar $"es%ions s&o's %&a% %&ere are f"n(a)en%al (o*%rines %&a% are ri*& so"r*es of #ar $"es%ions. +% is for %&is reason '&y %&e a"%&or (e*i(e( %o *raf% so)e sen%en*es an( &rases '&i*& %&e #ar *an(i(a%e )ay *"% an( as%e %o &is ans'ers %o %&e #ar ,"es%ions. T&is 'o"l( also ser!e as a rea(y referen*e for o-.e*%i!e %y e of ,"es%ions s"*& as (efini%ions/ en")era%ions/ (is%in*%ions/ e%*. T&e )a%erials 'ere *"lle( fro) areas '&ere re!io"s #ar $"es%ions 'ere so"r*e( an( fro) sele*%e( ."ris r"(en*e " %o 0"ne 2001. T&e "ser of %&ese *"% an( as%e )a%erials s&o"l( -e 'arne( %&a% %&e sen%en*es s&o"l( -e a(."s%e( %o )ee% %&e a*%"al re,"ire)en%s of s e*ifi* #ar $"es%ions/ an( no% %o -e 'ri%%en !er-a%i) as %&e ans'ers. T&e "ser s&o"l( *on*en%ra%e on %&e i%e)s )ar2e( BAR -e*a"se %&ey are %&e (o*%rines fro) '&ere #ar ,"es%ions 'ere (eri!e( for %&e erio( 1331 %o 2001. WARNING: So)e of %&e *on*e %s in!ol!in4 %&e Co"r% of Ta5 A eals s&o"l( -e rea( in rela%ion %o %&e ro!isions of 6e "-li* A*% No. 3272 '&i*& %oo2 effe*% on A ril 21/ 2004.

GENERAL PRINCIPLES OF TAXATION

Ta5es are %&e life-loo( of %&e 4o!ern)en% for 'i%&o"% %a5es/ %&e 4o!ern)en% *an nei%&er e5is% nor en("re. A rin*i al a%%ri-"%e of so!erei4n%y/ %&e e5er*ise of %a5in4 o'er (eri!es i%s so"r*e fro) %&e !ery e5is%en*e of %&e s%a%e '&ose so*ial *on%ra*% 'i%& *i%i8ens o-li4es i% %o ro)o%e "-li* in%eres% an( *o))on 4oo(. (National Power Corporation v. City of Cabanatuan, G. R. No. 149110, April 9, 2003 fro) ne*essi%y/ 'i%&o"% %a5es/ 4o!ern)en% *anno% f"lfill i%s )an(a%e of ro)o%in4 %&e 4eneral 'elfare an( 'ell9-ein4 of %&e eo le. (National Power Corporation v. City of Cabanatuan, G. R. No. 149110, April 9, 2003

BAR: 1. T&e %&eory -e&in( %&e e5er*ise of %&e o'er %o %a5 e)ana%es

T&e o'er %o %a5 in*l"(es %&e o'er %o (es%roy/ '&ere %&e %a5 la' is !ali( -e*a"se a %a5 ayer *o"l( no% see2 %&e n"llifi*a%ion of a !ali( %a5 la' solely " on %&e re)ise %&a% %&e *olle*%ion of %&e %a5 'ill i) o!eris& &i). T&e e5er*ise of %&e o'er %o %a5 is no% (es%r"*%i!e of a %a5 ayers ro er%y '&ere %&e so"r*e is an in!ali( %a5 la'/ '&i*& !iola%es %&e in&eren% or *ons%i%"%ional li)i%a%ion -e*a"se %&ere is a sy) a%&e%i* *o"r% %&a% s&all *o)e %o
1

Co yri4&%e( -y Prof. A#E:A6DO T.DOMONDON

%&e s"**or of %&e %a5 ayer an( (e*lare s"*& %a5 la' as n"ll an( !oi(. +% 'o"l( no% %&"s -e %&e so"r*e of %&e o'er %o (es%roy. +n *ase of (o"-%/ %a5 la's )"s% -e *ons%r"e( s%ri*%ly a4ains% %&e S%a%e an( li-erally in fa!or of %&e %a5 ayer -e*a"se %a5es/ as -"r(ens '&i*& )"s% -e en("re( -y %&e %a5 ayer/ s&o"l( no% -e res")e( %o 4o -eyon( '&a% %&e la' e5 ressly an( *learly (e*lares. (!in"oln P#ilippine !ife $n%uran"e Co&pany, $n"., et"., v. Court of Appeal%, et al., 293 'CRA 92, 99 Ta5 e5e) %ions are s%ri*%ly *ons%r"e( a4ains% %&e %a5 ayer an( li-erally in fa!or of %&e S%a%e an( )"s% -e *learly s&o'n an( -ase( on lan4"a4e in %&e la' %oo lain %o -e )is%a2en ((avao Gulf !u&ber Corporation v. Co&&i%%ioner of $nternal Revenue, et al., 293 'CRA )*, ++ , -e*a"se %a5es are ne*essary for %&e *on%in"e( e5is%en*e of %&e S%a%e. A re!ersal of a #+6 r"lin4 fa!ora-le %o a %a5 ayer 'o"l( no% ne*essarily *rea%e a er e%"al e5e) %ion in &is fa!or/ for af%er all %&e 4o!ern)en% is ne!er es%o e( fro) *olle*%in4 %a5es -e*a"se of )is%a2es or errors on %&e ar% of i%s a4en%s. (!in"oln P#ilippine !ife $n%uran"e Co&pany, $n"., et"., v. Court of Appeal%, et al., 293 'CRA 92, 99 is i) res*ri %i-le -e*a"se %&e !ery e5is%en*e of %&e s%a%e (e en(s " on %&e e5er*ise of %&is o'er. ;o'e!er/ s%a%"%es )ay ro!i(e for res*ri %i!e erio(s for %&e *olle*%ion of ar%i*"lar 2in(s of %a5es.

BAR: 2. As a 4eneral r"le/ %&e ri4&% of %&e 4o!ern)en% %o *olle*% %a5es

BAR: 3. As a 4eneral r"le/ No *o"r% s&all &a!e %&e a"%&ori%y %o 4ran% an in."n*%ion %o res%rain %&e *olle*%ion of any na%ional in%ernal re!en"e %a5/ fee or *&ar4e. <Se*. 217/ N+6C= ;o'e!er/ %&e Co"r% of Ta5 A eals is e) o'ere( %o en.oin %&e *olle*%ion of %a5es %&ro"4& a()inis%ra%i!e re)e(ies '&en *olle*%ion *o"l( .eo ar(i8e %&e in%eres% of %&e 4o!ern)en% or %a5 ayer. <Se*. 11/ 6e . A*% No. 112>= BAR: 4. T&e o'er %o %a5 is an in&eren% o'er of %&e s%a%e e5er*ise( %&ro"4& %&e le4isla%"re i) osin4 -"r(ens " on s"-.e*%s an( o-.e*%s 'i%&in i%s ."ris(i*%ion %o raise re!en"es in or(er %o )ee% %&e le4i%i)a%e o-.e*%s of 4o!ern)en%. +%s na%"re is %&a% i% is -o%& an in&eren% o'er of 4o!ern)en% an( an e5er*ise of le4isla%i!e o'er.
T&e %&ree "r oses for %&e e5er*ise of %&e %a5in4 o'er are? <a= %&e re!en"e "r ose@ <-= %&e s") %"ary "r ose@ an( <1= %&e *o) ensa%ory "r ose. One of %&e "r oses of %a5a%ion is %o raise re!en"es %o )ee% %&e re*o4ni8e( o-.e*%s of "r oses of 4o!ern)en%. T&e s") %"ary "r ose of %a5a%ion is %o ro%e*% %&e &eal%&/ safe%y or )orals of %&e in&a-i%an%s. T&is is in .oin% e5er*ise of %&e o'er of %a5a%ion an( oli*e o'er '&ere re4"la%ory %a5es are *olle*%e(. T&e *o) ensa%ory "r ose of %a5a%ion is %o i) le)en% %&e so*ial ."s%i*e ro!isions of %&e *ons%i%"%ion %&ro"4& %&e ro4ressi!e sys%e) of %a5a%ion/ '&i*& 'o"l( res"l% %o e,"al (is%ri-"%ion of 'eal%&/ e%*. e5 an(e( %&e s*o e of s%a%e a*%i!i%y/ an( %a5a%ion &as -e*o)e a %ool %o reali8e so*ial ."s%i*e an( %&e e,"i%a-le (is%ri-"%ion of 'eal%&/ e*ono)i* ro4ress an( %&e

BAR: 5. +n re*en% years/ %&e in*reasin4 so*ial *&allen4es of %&e %i)es

ro%e*%ion of lo*al in("s%ries as 'ell as "-li* 'elfare an( si)ilar o-.e*%i!es. <Na%ional Po'er Cor ora%ion !. Ci%y of Ca-ana%"an/ A. 6. No. 143110/ A ril 3/ 2001= T&e follo'in4 are %&e (is%in*%ions -e%'een a %a5 an( a li*ense fee? a. PU6POSE? A %a5 is i) ose( for re!en"e "r oses B;+:E a li*ense fee is i) ose( for re4"la%ory "r oses. <Unless i% is a .oin% e5er*ise of -o%& %&e oli*e o'er an( %&e o'er of %a5a%ion= -. #AS+S? A %a5 is i) ose( "n(er %&e o'er of %a5a%ion B;+:E a li*ense fee is i) ose( "n(er oli*e o'er. *. AMOUNT? T&ere is no li)i% as %o %&e a)o"n% of a %a5 B;+:E %&e a)o"n% of li*ense fee %&a% *o"l( -e *olle*%e( is li)i%e( %o %&e *os% of %&e li*ense an( %&e e5 enses of oli*e s"r!eillan*e an( re4"la%ion. (. T+ME OC PADMENT? Ta5es are nor)ally ai( af%er %&e s%ar% of a -"siness B;+:E a li*ense fee -efore %&e *o))en*e)en% of -"siness. e. ECCECT OC NON9PADMENT? Cail"re %o ay a %a5 (oes no% )a2e %&e -"siness ille4al B;+:E fail"re %o ay a li*ense fee )a2es %&e -"siness ille4al. f. SU66ENDE6? Ta5es -ein4 %&e life-loo( of %&e s%a%e/ *anno% -e s"rren(ere( e5*e % for la'f"l *onsi(era%ion B;+:E a li*ense fee )ay -e s"rren(ere( 'i%& or 'i%&o"% *onsi(era%ion. T&e S"4ar A(."s%)en% A*% '&i*& in*rease( e5is%in4 %a5es on s"4ar 'as ena*%e( %o s%a-ili8e %&e s"4ar in("s%ry %o re are i% for %&e loss of i%s ,"o%a in %&e U.S. )ar2e% 'as le!ie( for a re4"la%ory "r ose %o ro%e*% an( ro)o%e %&e s"4ar in("s%ry '&i*& is also for a "-li* "r ose. (!ut, v. Araneta, 9+ P#il. 14+ T&e P&ils"4in f"n(/ an i) osi%ion on s"4ar/ %o raise f"n(s %o *on("*% resear*& for %&e i) ro!e)en% of %&e s"4ar in("s%ry/ is for %&e "r ose of s%a-ili8in4 %&e s"4ar in("s%ry '&i*& one of %&e illars of %&e P&ili ine e*ono)y '&i*& affe*%s %&e 'elfare of %&e S%a%e. T&e le!y is no% so )"*& an e5er*ise of %&e o'er of %a5a%ion/ nor %&e i) osi%ion of a s e*ial le!y/ -"% %&e e5er*ise of oli*e o'er '&i*& is for %&e 4eneral 'elfare of %&e en%ire *o"n%ry/ %&erefore for a "-li* "r ose. (Republi" v. -a"olo./0ur"ia Co., et al., G.R. No. !/19+24, 1uly 9, 19** Mo%or !e&i*le re4is%ra%ion fees are no' *onsi(ere( re!en"e or %a5 )eas"res. Conse,"en%ly/ en%i%ies en.oyin4 %a5 e5e) %ions are also e5e) % fro) ayin4 )o%or !e&i*le re4is%ra%ion fees. < PA! v. 2.u, G.R. No. !/413+3, Au3u%t 14, 19++ T&e %a5 i) os% on !i(eo4ra) es%a-lis&)en%s is no% only re4"la%ory -"% a re!en"e )eas"re -e*a"se %&e earnin4s of s"*& es%a-lis&)en%s &a!e no% -een s"-.e*% %o %a5 (e ri!in4 %&e 4o!ern)en% of an a((i%ional so"r*e of in*o)e. T&e is no o!er re4"la%ion as a res"l% of %&e i) osi%ion of %&e %a5 -e*a"se of %&e nee( for re4"la%in4 a ne' in("s%ry. (5io v. 6i.eo3ra& Re3ulatory -oar., 141 'CRA 20+ T&e OPSC (esi4ne( %o rei)-"rse 4asoline *o) anies for in*reases in %&e ri*e of *r"(e oil res"l%in4 fro) 'orl( ri*e )o!e)en%s an( e5*&an4e fl"*%"a%ions are %a5es *olle*%e( in %&e e5er*ise of %&e oli*e o'er in or(er %o s%a-ili8e ri*es of 4asoline an( o%&er e%role") ro("*%s. (7%&ena v. 7rbo%, G.R. No. 99++*, 0ar"# 31, 1993 T&e in&eren% an( *ons%i%"%ional li)i%a%ions %o %&e o'er of %a5a%ion are safe4"ar(s '&i*& 'o"l( re!en% a-"se in %&e e5er*ise of %&is o%&er'ise "nli)i%e( an( lenary o'er.

BAR: 6. T&e in&eren% li)i%a%ions are <a= "-li* "r ose@ <-= no i) ro er (ele4a%ion of le4isla%i!e a"%&ori%y %o %a5@ <*= %erri%oriali%y@ <(= re*o4ni%ion of 4o!ern)en% e5e) %ions@ an( <e= o-ser!an*e of %&e rin*i le of *o)i%y. So)e a"%&ori%ies in*l"(e no (o"-le %a5a%ion.
T&e %a5 re!en"es are for a "-li* "r ose if "%ili8e( for %&e -enefi% of %&e *o))"ni%y in 4eneral. An al%erna%i!e )eanin4 is %&a% %a5 ro*ee(s s&o"l( -e "%ili8e( only %o a%%ain %&e o-.e*%i!es of 4o!ern)en%. T&e o'er of %a5a%ion is e5er*ise( -y %&e le4isla%"re '&ose )e)-ers are %&e )ere (ele4a%es of %&e eo le &en*e %&e o'er *o"l( no% %&erefore -e (ele4a%e( -y %&e le4isla%"re %o o%&er (e ar%)en%s of 4o!ern)en%/ li2e %&e e5e*"%i!e. (ele3ata pote%ta% non pote%t .ele3ari. f"r%&er (ele4a%e(. A (ele4a%e( o'er *anno% -e

T&e o'er %o %a5 s&o"l( -e e5er*ise( only 'i%&in %&e %erri%orial -o"n(aries of %&e %a5in4 a"%&ori%y. +n %&eory/ i% is only 'i%&in a s%a%es %erri%orial -o"n(aries %&a% a s%a%e *o"l( 4i!e ro%e*%ion/ &en*e i% is only 'i%&in %&a% %erri%ory %&a% i% *o"l( (e)an( s" or% in %&e for) of %a5es. $n par pare&, non #abet i&periu&. As -e%'een e,"als %&ere is no so!erei4n/ &en*e forei4n so!erei4ns are no% %o -e s"-.e*% %o %&e so!erei4n o'er of %a5a%ion. Co)i%y is %&e res e*% a**or(e( %o o%&er so!erei4n na%ions. T&"s/ ro er%ies of o%&er so!erei4n na%ions 'i%&in %&e %erri%ory of %&e %a5in4 a"%&ori%y s&o"l( no% -e s"-.e*% %o %a5a%ion as a )eas"re of res e*% %o a *o9e,"al. Ao!ern)en% e5e) %ion s&o"l( -e re*o4ni8e( in or(er %o re("*e %&e a)o"n% of )oney %&e 4o!ern)en% is &an(lin4. T&ere is !eri%y in %&e )a5i)/ Cor %&e 4o!ern)en%/ e5e) %ion is %&e r"le an( %a5a%ion is %&e e5*e %ion.

BAR: 7. Si%"s of %a5a%ion is %&e la*e or %&e a"%&ori%y %&a% &as %&e o'er %o *olle*% %a5es. +% is re)ise( " on %&e sy)-io%i* rela%ion -e%'een %&e %a5 ayer an( %&e S%a%e.
T&e la*e %&a% 4i!es ro%e*%ion is %&e la*e %&a% &as %&e ri4&% %o (e)an( %&a% i% -e s" or%e( in %&e for) of %a5es so i% *o"l( *on%in"ally 4i!e ro%e*%ion. T&e si%"s of real ro er%y %a5es is %&e la*e '&ere %&e ro er%y is lo*a%e( -e*a"se i% is %&a% la*e %&a% 4i!es ro%e*%ion. T&e a li*a-le *on*e % is le8 %itu% or le8 rei %itae. T&e si%"s of %a5a%ion of %an4i-le ersonal ro er%y is %&e la*e '&ere %&e o'ner is lo*a%e( -e*a"se i% is %&a% la*e %&a% 4i!es ro%e*%ion %o %&e o'ner '&i*& ro%e*%ion e5%en(s %o %&e %an4i-le ersonal ro er%y. T&e a li*a-le *on*e % is &obilia %e9uuntur per%ona&. +n%an4i-le ersonal ro er%y )ay &a!e o-%aine( a -"siness si%"s in a ar%i*"lar la*e e!en if lo*a%e( else'&ere. T&"s/ %&e (i!i(en(s earne( fro) (o)es%i* *or ora%ions are *onsi(ere( as in*o)e fro) 'i%&in/ irres e*%i!e '&ere %&e s&ares of s%o*2 of s"*& (o)es%i* *or ora%ion is lo*a%e(. T&e si%"s of in*o)e %a5a%ion is (e%er)ine( -y %&e na%ionali%y/ resi(en*e of %&e %a5 ayer an( so"r*e of in*o)e. Please refer %o 4eneral rin*i les of in*o)e %a5a%ion "n(er in*o)e %a5a%ion.

T&e si%"s of e5*ise %a5es is %&e la*e '&ere %&e -e*a"se i% is %&a% la*e %&a% 4i!es ro%e*%ion.

ri!ile4e is e5er*ise(

T&e si%"s of %ransfer %a5es/ s"*& as es%a%e an( (onors %a5es/ is (e%er)ine( -y %&e na%ionali%y an( resi(en*e of %&e %a5 ayer an( %&e la*e '&ere %&e ro er%y is lo*a%e(. Please refer %o es%a%e an( (onors %a5es. T&e si%"s of %a5a%ion of a *on%ra*% for a ro.e*% '&i*& in*l"(e( %&e *ons%r"*%ion an( ins%alla%ion in %&e P&ili ines of e,"i )en% (esi4ne(/ fa-ri*a%e( an( )an"fa*%"re( in 0a an is %&e P&ili ine for %&e *ons%r"*%ion an( ins%alla%ion 'or2 an( for %&e ie*es of e,"i )en% an( 0a an for s" lies '&i*& 'ere *o) le%ely (esi4ne( an( en4ineere( in 0a an. (Co&&i%%ioner of $nternal Revenue v. 0arubeni Corporation, G.R. No. 13)3)), (e"e&ber 1+, 2001

T&e 4eneral or in(ire*% *ons%i%"%ional li)i%a%ions as 'ell as %&e s e*ifi* or (ire*% *ons%i%"%ional li)i%a%ions.

BAR: 8. T&e 4eneral or in(ire*% *ons%i%"%ional li)i%a%ions are %&e follo'in4? a. D"e ro*ess *la"se@ -. E,"al ro%e*%ion *la"se@ *. Cree(o) of %&e ress@ (. 6eli4io"s free(o)@ e. Non9i) air)en% *la"se@ f. :a'9)a2in4 ro*ess? 1= #ill s&o"l( e)-ra*e only one s"-.e*% e5 resse( in %&e %i%le %&ereof@ 2= T&ree <1= rea(in4s on %&ree se ara%e (ays@ 1= Prin%e( *o ies in final for) (is%ri-"%e( %&ree <1= (ays -efore assa4e. 4. Presi(en%ial o'er %o 4ran% re rie!es/ *o))"%a%ions an( ar(ons an( re)i%%al of fines an( forfei%"re af%er *on!i*%ion -y final ."(4)en%.
a. No i) rison)en% for non9 ay)en% of a oll %a5@ -. Ta5a%ion s&all -e "nifor) an( e,"i%a-le@ *. Con4ress s&all e!ol!e a ro4ressi!e sys%e) of %a5a%ion@ (. All a ro ria%ion/ re!en"e or %ariff -ills s&all ori4ina%e e5*l"si!ely in %&e ;o"se of 6e resen%a%i!es/ -"% %&e Sena%e )ay ro ose an( *on*"r 'i%& a)en()en%s@ e. T&e Presi(en% s&all &a!e %&e o'er %o !e%o any ar%i*"lar i%e) or i%e)s in an a ro ria%ion/ re!en"e/ or %ariff -ill/ -"% %&e !e%o s&all no% affe*% %&e i%e) or i%e)s %o '&i*& &e (oes no% o-.e*%@ f. Dele4a%e( o'er of %&e Presi(en% %o i) ose %ariff ra%es/ i) or% an( e5 or% ,"o%as/ %onna4e an( '&arfa4e ("es? 1= Dele4a%ion -y Con4ress 2= T&ro"4& a la' 1= S"-.e*% %o Con4ressional li)i%s an( res%ri*%ions 4= Bi%&in %&e fra)e'or2 of na%ional (e!elo )en% ro4ra). 4. Ta5 e5e) %ion of *&ari%a-le ins%i%"%ions/ *&"r*&es/ arsona4es an( *on!en%s a "r%enan% %&ere%o/ )os,"es/ an( all lan(s/ -"il(in4s an( i) ro!e)en%s of all 2in(s a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for reli4io"s/ *&ari%a-le or e("*a%ional "r oses@ &. No %a5 e5e) %ion 'i%&o"% %&e *on*"rren*e of )a.ori%y !o%e of all )e)-ers of Con4ress@ i. No "se of "-li* )oney or ro er%y for reli4io"s "r oses e5*e % if ries% is assi4ne( %o %&e ar)e( for*es/ enal ins%i%"%ions/ 4o!ern)en% or &ana4e or le rosari")@

BAR: 9. T&e s e*ifi* or (ire*% *ons%i%"%ional li)i%a%ions are %&e follo'in4?

.. Money *olle*%e( on %a5 le!ie( for a s e*ial "r ose %o -e "se( only for s"*& "r ose/ -alan*e if any/ %o 4eneral f"n(s@ 2. T&e S" re)e Co"r%Es o'er %o re!ie' ."(4)en%s or or(ers of lo'er *o"r%s in all *ases in!ol!in4 %&e le4ali%y of any %a5/ i) ose/ assess)en% or %oll or %&e le4ali%y of any enal%y i) ose( in rela%ion %o %&e a-o!e@ l. A"%&ori%y of lo*al 4o!ern)en% "ni%s %o *rea%e %&eir o'n so"r*es of re!en"e/ %o le!y %a5es/ fees an( o%&er *&ar4es s"-.e*% %o 4"i(elines an( li)i%a%ions i) ose( -y Con4ress *onsis%en% 'i%& %&e -asi* oli*y of lo*al a"%ono)y@ ). A"%o)a%i* release of lo*al 4o!ern)en%Es ."s% s&are in na%ional %a5es@ n. Ta5 e5e) %ion of all re!en"es an( asse%s of non9s%o*2/ non9 rofi% e("*a%ional ins%i%"%ions "se( a*%"ally/ (ire*%ly an( e5*l"si!ely for e("*a%ional "r oses@ o. Ta5 e5e) %ion of all re!en"es an( asse%s of ro rie%ary or *oo era%i!e e("*a%ional ins%i%"%ions s"-.e*% %o li)i%a%ions ro!i(e( -y la' in*l"(in4 res%ri*%ions on (i!i(en(s an( ro!isions for rein!es%)en% of rofi%s@ . Ta5 e5e) %ion of 4ran%s/ en(o')en%s/ (ona%ions or *on%ri-"%ions "se( a*%"ally/ (ire*%ly an( e5*l"si!ely for e("*a%ional "r oses s"-.e*% %o *on(i%ions res*ri-e( -y la'.

BAR: 10. E,"al ro%e*%ion of %&e la' *la"se is s"-.e*% %o reasona-le *lassifi*a%ion. +f %&e 4ro" in4s are *&ara*%eri8e( -y s"-s%an%ial (is%in*%ions %&a% )a2e real (ifferen*es/ one *lass )ay -e %rea%e( an( re4"la%e( (ifferen%ly fro) ano%&er. T&e *lassifi*a%ion )"s% also -e 4er)ane %o %&e "r ose of %&e la' an( )"s% a ly %o all %&ose -elon4in4 %o %&e sa)e *lass. (5iu, et al., v. Court of Appeal%, et al., G.R. No. 12)410, 1anuary 20, 1999 BAR: 11. Classifi*a%ion/ %o -e !ali(/ )"s% <a= res% on s"-s%an%ial (is%in*%ions/ <-= -e 4er)ane %o %&e "r ose of %&e la'/ <*= no% -e li)i%e( %o e5is%in4 *on(i%ions only/ an( <(= a ly e,"ally %o all )e)-ers of %&e sa)e *lass. (5iu, et al., v. Court of Appeal%, et al., G.R. No. 12)410, 1anuary 20, 1999
A le4isla%i!e r"le '&i*& is in %&e na%"re of s"-or(ina%e le4isla%ion/ (esi4ne( %o i) le)en% a ri)ary le4isla%ion -y ro!i(in4 %&e (e%ails %&ereof. +n %&e sa)e 'ay %&a% la's )"s% &a!e %&e -enefi% of "-li* &earin4/ i% is 4enerally re,"ire( %&a% -efore a le4isla%i!e r"le is a(o %e( %&ere )"s% -e a &earin4 an( "-li*a%ion as re,"ire( "n(er %&e A()inis%ra%i!e Co(e. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., 2*1 'CRA 23* +n *ase of an in%er re%a%i!e r"le no &earin4 or "-li*a%ion is re,"ire( sin*e an in%er re%a%i!e r"le is (esi4ne( )erely %o ro!i(e 4"i(elines of %&e la' '&i*& %&e a()inis%ra%i!e a4en*y is in *&ar4e of enfor*in4. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., 2*1 'CRA 23*

BAR: 12. E,"ali%y an( "nifor)i%y of %a5a%ion )ay )ean %&e sa)e as e,"al ro%e*%ion. +n s"*& a *ase/ %&e %er)s 'o"l( )ean %&a% all s"-.e*%s an( o-.e*%s of %a5a%ion '&i*& are si)ilarly si%"a%e( s&all -e s"-.e*% %o %&e sa)e -"r(ens an( 4ran%e( %&e sa)e ri!ile4es 'i%&o"% any (is*ri)ina%ion '&a%soe!er.
Unifor)i%y )ay &a!e a res%ri*%i!e )eanin4 (ifferen% fro) e,"ali%y an( e,"al ro%e*%ion. +% 'o"l( )ean %&en %&a% %&e sa)e ra%e s&all -e i) ose( for %&e sa)e s"-.e*%s an( o-.e*%s 'i%&in %&e %erri%orial -o"n(aries of a %a5in4 a"%&ori%y. A %rial *o"r% is no% %&e ro er for") for %&e !en%ila%ion of %&e iss"es '&ere i% is %&e le4isla%"re %o '&i*& relief )"s% -e so"4&%/ -e*a"se 'i%& %&e le4isla%"re ri)arily lies %&e (is*re%ion %o (e%er)ine <a= %&e na%"re <2in(=/ <-= o-.e*% < "r ose=/ <*= e5%en% <ra%e=/ <(= *o!era4e <s"-.e*%s= an( <e= %itu% < la*e= of %a5a%ion. <Co&&i%%ioner of $nternal Revenue, et al., v. 'anto%, et al., 2)) 'CRA *1)

+% is in&eren% in %&e o'er %o %a5 %&a% %&e S%a%e -e free %o sele*% %&e s"-.e*%s of %a5a%ion/ an( i% &as -een re ea%e(ly &el( %&a%/ Fine,"ali%ies '&i*& res"l% fro) a sin4lin4 o"% of one ar%i*"lar *lass of %a5a%ion/ or e5e) %ion/ infrin4e no *ons%i%"%ional li)i%a%ion.F (Co&&i%%ioner of $nternal Revenue, et al., v. 'anto%, et al., 2)) 'CRA *1)

BAR: 13. A fi5e( ann"al li*ense fee on %&ose en4a4e( in %&e -"siness of 4eneral en%er rise '&i*& also i) ose( on %&e sale of -i-les -y a reli4io"s se*%. is %&is !ali( !iola%es %&e *ons%i%"%ionally 4"aran%ee( free(o) of %&e ress/ an( of reli4ion.. As a li*ense fee is fi5e( in a)o"n% an( "nrela%e( %o %&e re*ei %s of %&e %a5 ayer/ s"*& a li*ense fee/ '&en a lie( %o a reli4io"s se*% is a*%"ally i) ose( as a *on(i%ion for %&e free e5er*ise of reli4ion. A li*ense fee res%rains in a(!an*e %&ose *ons%i%"%ional li-er%ies of ress an( reli4ion an( ine!i%a-ly %en(s %o s" ress %&eir e5er*ise.
T&e P1/000.00 VAT re4is%ra%ion fee i) ose( on non9VAT en%er rises '&i*& in*l"(es a)on4 o%&ers/ reli4io"s se*%s '&i*& sells an( (is%ri-"%es reli4io"s li%era%"re is no% !iola%i!e of reli4io"s free(o)/ al%&o"4& a fi5e( a)o"n% is no% i) ose( for %&e e5er*ise of a ri!ile4e -"% only for %&e "r ose of (efrayin4 ar% of %&e *os% of re4is%ra%ion. T&e re4is%ra%ion fee is %&"s )ore of an a()inis%ra%i!e fee/ one no% i) ose( on %&e e5er*ise of a ri!ile4e/ )"*& less a *ons%i%"%ional ri4&%. (5olentino v. 'e"retary of :inan"e, et al., an. "o&panion "a%e%, 234 'CRA *30 Ar%i*le G++/ Se*. 11 of %&e Cons%i%"%ion ro!i(es %&a% %&e 4ran% of a fran*&ise for %&e o era%ion of a "-li* "%ili%y is s"-.e*% %o a)en()en%. al%era%ion or re eal -y Con4ress '&en %&e *o))on 4oo( re,"ires@ one/ (oes no% in%erfere 'i%& a *on%ra*% or i) airs i%s o-li4a%ion/ 'i%&in %&e )eanin4 of %&e *ons%i%"%ion. E!en %&o"4& s"*& %a5a%ion )ay affe*% ar%i*"lar *on%ra*%s/ as i% )ay in*rease %&e (e-% of one erson an( lessen %&e se*"ri%y of ano%&er/ or )ay i) ose a((i%ional -"r(ens " on one *lass an( release %&e -"r(ens of ano%&er/ s%ill %&e %a5 )"s% -e ai( "nless ro&i-i%e( -y %&e *ons%i%"%ion/ nor *an i% -e sai( %&a% i% i) airs %&e o-li4a%ions of any e5is%in4 *on%ra*% in i%s %r"e an( le4al sense. (5olentino v. 'e"retary of :inan"e, et al., an. "o&panion "a%e%, 234 'CRA *30

BAR: 14. A la'f"l %a5 on a ne' s"-.e*%/ or an in*rease( %a5 on an ol(

BAR: 15. B&ile %&e S" re)e Co"r% &as/ no% %oo infre,"en%ly/ referre( %o %a5 e5e) %ions *on%aine( in s e*ial fran*&ises as -ein4 in %&e na%"re of *on%ra*%s an( a ar% of %&e in("*e)en% for *arryin4 o"% %&e fran*&ise/ %&ese e5e) %ions/ ne!er%&eless are far fro) -ein4 s%ri*%ly *on%ra*%"al in na%"re. Cons%i%"%ional %a5 e5e) %ions/ in %&e real sense of %&e %er) an( '&ere %&e non9i) air)en% *la"se of %&e Cons%i%"%ion *an ri4&%ly -e in!o2e(/ are %&ose a4ree( %o -y %&e %a5in4 a"%&ori%y in *on%ra*%s/ s"*& as %&ose *on%aine( in 4o!ern)en% -on(s or (e-en%"res/ la'f"lly en%ere( in%o -y %&e) "n(er ena-lin4 la's in '&i*& %&e 4o!ern)en%/ a*%in4 in i%s ri!a%e *a a*i%y s&e(s i%s *loa2 of a"%&ori%y an( 'ai!es i%s 4o!ern)en% i))"ni%y. (0anila 2le"tri" Co&pany v. Provin"e of !a3una, et al., G.R. No. 131349, 0ay 4, 1999
Do"-le %a5a%ion in i%s 4eneri* sense/ %&is )eans %a5in4 %&e sa)e s"-.e*% or o-.e*% %'i*e ("rin4 %&e sa)e %a5a-le erio(. +n i%s ar%i*"lar sense/ i% )ay )ean (ire*% (" li*a%e %a5a%ion/ '&i*& is ro&i-i%e( "n(er %&e *ons%i%"%ion -e*a"se i% !iola%es %&e *on*e % of e,"al ro%e*%ion/ "nifor)i%y an( e,"i%a-leness of %a5a%ion. +n(ire*% (" li*a%e %a5a%ion is no% ana%&e)a%i8e( -y %&e a-o!e *ons%i%"%ional li)i%a%ions.

a. Sa)e 1= S"-.e*% or o-.e*% is %a5e( %'i*e 2= Ta5in4 a"%&ori%y 1= Ta5in4 "r ose 4= Ta5in4 erio( -. Ta5in4 all of %&e s"-.e*%s or o-.e*%s for %&e firs% %i)e 'i%&o"% %a5in4 all of %&e) for %&e se*on( %i)e. +f any of %&e ele)en%s are a-sen% %&en %&ere is in(ire*% (" li*a%e %a5a%ion '&i*& is no% ro&i-i%e( -y %&e *ons%i%"%ion. )eas"re if %&e (o"-le %a5a%ion is (ire*% (" li*a%e %a5a%ion/ -e*a"se i% 'o"l( !iola%e %&e e,"al ro%e*%ion *la"se of %&e *ons%i%"%ion.

BAR: 16. T&e ele)en%s of (ire*% (" li*a%e %a5a%ion are?

BAR: 17. Do"-le %a5a%ion a !ali( (efense a4ains% %&e le4ali%y of a %a5

B&en an i%e) of in*o)e is %a5e( in %&e P&ili ines an( %&e sa)e in*o)e is %a5e( in ano%&er *o"n%ry/ %&is 'o"l( -e 2no'n as in%erna%ional ."ri(i*al (o"-le %a5a%ion '&i*& is %&e i) osi%ion of *o) ara-le %a5es in %'o or )ore s%a%es on %&e sa)e %a5 ayer in res e*% of %&e sa)e s"-.e*% )a%%er an( for i(en%i*al 4ro"n(s. (Co&&i%%ioner of $nternal Revenue v. '.C. 1o#n%on an. 'on, $n"., et al., G.R. No. 12)104, 1une 24, 1999 Do"-le %a5a%ion "s"ally %a2es la*e '&en a erson is a resi(en% of a *on%ra*%in4 s%a%e an( (eri!es in*o)e fro) or o'ns *a i%al in/ %&e o%&er *on%ra*%in4 s%a%e an( -o%& s%a%es i) ose %a5 on %&a% in*o)e or *a i%al. (Co&&i%%ioner of $nternal Revenue v. '.C. 1o#n%on an. 'on, $n"., et al., G.R. No. 12)104, 1une 24, 1999 a. Ta5 %rea%ies '&i*& e5e) %s forei4n na%ionals fro) lo*al %a5a%ion an( lo*al na%ionals fro) forei4n %a5a%ion "n(er %&e rin*i le of re*i ro*i%y. -. Ta5 *re(i%s '&ere forei4n %a5es are allo'e( as (e("*%ions fro) lo*al %a5es %&a% are ("e %o -e ai(. *. Allo'in4 forei4n %a5es as a (e("*%ion fro) 4ross in*o)e. P"r ose of %a5 %rea%ies. To re*on*ile %&e na%ional fis*al le4isla%ion of %&e *on%ra*%in4 ar%ies in or(er %o &el %&e %a5 ayer a!oi( si)"l%aneo"s %a5a%ion in %'o (ifferen% ."ris(i*%ions. More re*isely/ %&e %a5 *on!en%ions are (raf%e( 'i%& a !ie' %o'ar(s %&e eli)ina%ion of in%erna%ional ."ri(i*al (o"-le %a5a%ion. (Co&&i%%ioner of $nternal Revenue v. '.C. 1o#n%on an. 'on, $n"., et al., G.R. No. 12)104, 1une 24, 1999 6a%ionale for a!oi(in4 in%erna%ional ."ri(i*al (o"-le %a5a%ion. To en*o"ra4e %&e free flo' of 4oo(s an( ser!i*es an( %&e )o!e)en% of *a i%al/ %e*&nolo4y an( ersons -e%'een *o"n%ries/ *on(i%ions (ee)e( !i%al in *rea%in4 ro-"s% an( (yna)i* e*ono)ies. Corei4n in!es%)en%s 'ill only %&ri!e in a fairly re(i*%a-le an( reasona-le in%erna%ional in!es%)en% *li)a%e an( %&e ro%e*%ion a4ains% (o"-le %a5a%ion is *r"*ial in *rea%in4 s"*& a *li)a%e. (Co&&i%%ioner of $nternal Revenue v. '.C. 1o#n%on an. 'on, $n"., et al., G.R. No. 12)104, 1une 24, 1999 T&e )an(a%e %o Con4ress is no% %o res*ri-e -"% %o e!ol!e a ro4ressi!e sys%e) of %a5a%ion. O%&er'ise/ sales %a5es '&i*& er&a s are %&e ol(es% for) of in(ire*% %a5es/ 'o"l( &a!e -een ro&i-i%e( 'i%& %&e ro*la)a%ion of %&e *ons%i%"%ional ro!ision. Sales %a5es are also re4ressi!e. (5olentino v. 'e"retary of :inan"e an. "o&panion "a%e%, 249 'CRA *2+

BAR: 18. T&e follo'in4 are %&e )e%&o(s of a!oi(in4 (o"-le %a5a%ion?

T&e Cons%i%"%ion (oes no% really ro&i-i% %&e i) osi%ion of in(ire*% %a5es '&i*&/ li2e %&e VAT/ are re4ressi!e. T&e *ons%i%"%ional ro!ision )eans si) ly %&a% in(ire*% %a5es s&o"l( -e )ini)i8e(. 6esor% %o in(ire*% %a5es s&o"l( -e )ini)i8e( -"% no% a!oi(e( en%irely -e*a"se i% is (iffi*"l%/ if no% i) ossi-le/ %o a!oi( i) osin4 s"*& %a5es a**or(in4 %o %&e %a5 ayers a-ili%y %o ay. (5olentino v. 'e"retary of :inan"e an. "o&panion "a%e%, 249 'CRA *2+ +n %&e *ase of VAT/ %&e la' )ini)i8es %&e re4ressi!e effe*%s of %&is i) osi%ion -y ro!i(in4 for 8ero ra%in4 of *er%ain %ransa*%ions '&ile 4ran%in4 e5e) %ions %o o%&er %ransa*%ions. T&e %ransa*%ions '&i*& are s"-.e*% %o VAT are %&ose '&i*& in!ol!e 4oo(s an( ser!i*es '&i*& are "se( or a!aile( of )ainly -y &i4&er in*o)e 4ro" s. (5olentino v. 'e"retary of :inan"e an. "o&panion "a%e%, 249 'CRA *2+ T&e Cons%i%"%ion re,"ires %&a% all re!en"e -ills s&all ori4ina%e e5*l"si!ely fro) %&e ;o"se of 6e resen%a%i!es. T&e Cons%i%"%ion si) ly )eans %&a% %&e ini%ia%i!e for filin4 re!en"e/ %ariff or %a5 -ills )"s% *o)e fro) %&e ;o"se of 6e resen%a%i!es on %&e %&eory %&a%/ ele*%e( as %&ey are fro) %&e (is%ri*%s/ %&e Me)-ers of %&e ;o"se *an -e e5 e*%e( %o -e )ore sensi%i!e %o %&e lo*al nee(s an( ro-le)s. (5olentino v. 'e"retary of :inan"e an. "o&panion "a%e%, 249 'CRA *2+ +% is no% %&e la' 9 -"% %&e re!en"e -ill 9 '&i*& is re,"ire( -y %&e Cons%i%"%ion %o ori4ina%e e5*l"si!ely in %&e ;o"se of 6e resen%a%i!es -e*a"se a -ill ori4ina%in4 in %&e ;o"se )ay "n(er4o s"*& e5%ensi!e *&an4es in %&e Sena%e %&a% %&e res"l% )ay -e a re'ri%in4 of %&e '&ole/ an( a (is%in*% -ill )ay -e ro("*e(. (5olentino v. 'e"retary of :inan"e an. "o&panion "a%e%, 234 'CRA *30 To insis% %&a% a re!en"e s%a%"%e 9 no% only %&e -ill '&i*& ini%ia%e( %&e le4isla%i!e ro*ess *"l)ina%in4 in %&e ena*%)en% of %&e la' 9 )"s% s"-s%an%ially -e %&e sa)e as %&e ;o"se -ill 'o"l( -e %o (eny %&e Sena%es o'er no% only %o *on*"r 'i%& a)en()en%s -"% also %o ro ose a)en()en%s. +% 'o"l( -e %o !iola%e %&e *oe,"ali%y of le4isla%i!e o'er of %&e %'o &o"ses of Con4ress an( in fa*% )a2e %&e ;o"se s" erior %o %&e Sena%e. Ai!en %&e o'er of %&e Sena%e %o ro ose a)en()en%s/ i% *an ro ose i%s o'n !ersion e!en 'i%& res e*% %o -ills '&i*& are re,"ire( -y %&e Cons%i%"%ion %o ori4ina%e in %&e ;o"se. (5olentino v. 'e"retary of :inan"e an. "o&panion "a%e%, 249 'CRA *2+ Nor (oes %&e Cons%i%"%ion ro&i-i% %&e filin4 in %&e Sena%e of a s"-s%i%"%e -ill in an%i*i a%ion of i%s re*ei % of %&e -ill fro) %&e ;o"se/ so lon4 as a*%ion -y %&e Sena%e as a -o(y is 'i%&&el( en(in4 re*ei % of %&e ;o"se -ill. <Tolen%ino !. Se*re%ary of Cinan*e an( *o) anion *ases/ 21> SC6A H10= %&e Presi(en% s&all &a!e %&e o'er %o !e%o any ar%i*"lar i%e) or i%e)s in an a ro ria%ion/ re!en"e/ or %ariff -ill/ -"% %&e !e%o s&all no% affe*% %&e i%e) or i%e)s %o '&i*& &e (oes no% o-.e*%. An i%e) in a re!en"e -ill (oes no% refer %o an en%ire se*%ion i) osin4 a ar%i*"lar 2in( of %a5/ -"% ra%&er %o %&e s"-.e*% of %&e %a5 an( %&e %a5 ra%e. +n %&e or%ion of a re!en"e -ill '&i*& a*%"ally i) oses a %a5/ a se*%ion i(en%ifies %&e %a5 an( en")era%es %&e ersons lia-le %&erefore 'i%& %&e *orres on(in4 %a5 ra%e. To *ons%r"e %&e 'or( i%e) as referrin4 %o %&e '&ole se*%ion 'o"l( %ie %&e Presi(en%s &an( in *&oosin4 ei%&er %o a ro!e %&e '&ole se*%ion a% %&e e5 ense of also a ro!in4 a ro!ision %&erein '&i*& &e (ee)s "na**e %a-le or !e%o %&e en%ire se*%ion a% %&e e5 ense of fore4oin4 %&e *olle*%ion of %&e 2in( of %a5 al%o4e%&er.

10

BAR: 19. Ta5 e5e) %ions s&all -e 4ran%e( only " on )a.ori%y !o%e of all %&e )e)-ers of Con4ress. EGCEPT+ONS? a. B&ere %&e %a5 e5e) %ion is 4ran%e( %&ro"4& a %rea%y@ -. Ta5 e5e) %ions 4ran%e( -y lo*al 4o!ern)en% "ni%s@ *. Ta5 e5e) %ions 4ran%e( '&en %&e Presi(en% e5er*ises &is o'ers "n(er %&e fle5i-le %ariff *la"se '&en ro%e*%i!e %ariffs are re)o!e(.
a "r%enan% %&ere%o/ )os,"es/ non9 rofi% *e)e%eries/ an( all an(s/ -"il(in4s an( i) ro!e)en%s %&a% are a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for reli4io"s/ *&ari%a-le or e("*a%ional "r oses are e5e) % fro) %a5a%ion. ISe*.27 <1= Ar%i*le V+/ 137J Cons%i%"%ion= T&e *ons%i%"%ional %a5 e5e) %ions refer only %o real ro er%y %&a% are a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for reli4io"s/ *&ari%a-le or e("*a%ional "r oses/ an( %&a% %&e only *ons%i%"%ionally re*o4ni8e( e5e) %ion fro) %a5a%ion of re!en"es are %&ose earne( -y non9 rofi%/ non9s%o*2 e("*a%ional ins%i%"%ions '&i*& are a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for e("*a%ional "r oses. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., 29+ 'CRA +3 ins%i%"%ions %&a% are a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for e("*a%ional "r oses s&all -e e5e) % fro) %a5a%ion.

BAR: 20. C&ari%a-le ins%i%"%ions/ *&"r*&es an( arsona4es or *on!en%s

BAR: 21. All re!en"es an( asse%s of non9s%o*2/ non9 rofi% e("*a%ional

6e!en"es an( asse%s of ro rie%ary e("*a%ional ins%i%"%ions/ in*l"(in4 %&ose '&i*& are *oo era%i!ely o'ne(/ )ay -e en%i%le( %o e5e) %ions s"-.e*% %o li)i%a%ions ro!i(e( -y la' in*l"(in4 res%ri*%ions on (i!i(en(s an( ro!isions for rein!es%)en%s. T&e N+6C re*o4ni8es %&e e5e) %ion fro) %a5 of %&e in*o)es of *i!i* lea4"es or or4ani8a%ions no% or4ani8e( for rofi% -"% o era%e( e5*l"si!ely for %&e ro)o%ion of so*ial 'elfare/ as 'ell as *l"-s or4ani8e( an( o era%e( e5*l"si!ely for leas"re/ re*rea%ion/ an( o%&er non9 rofi%a-le "r oses '&ere no ar% of %&e ne% in*o)e in"res %o %&e -enefi% of any ri!a%e s%o*2&ol(er or )e)-er. T&e %a5 e5e) %ion so re*o4ni8e( (oes no% flo' %o in*o)e of '&a%e!er 2in( an( *&ara*%er of %&e fore4oin4 or4ani8a%ions fro) any of %&eir ro er%ies/ real or ersonal/ or fro) any of %&eir a*%i!i%ies *on("*%e( for rofi%/ re4ar(less of %&e (is osi%ion )a(e of s"*& in*o)e/ '&i*& s&all -e s"-.e*% %o in*o)e %a5es. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., 29+ 'CRA +3 Ta5 a)nes%y (is%in4"is&e( fro) %a5 e5e) %ion? a. Ta5 a)nes%y is an i))"ni%y fro) all *ri)inal/ *i!il an( a()inis%ra%i!e lia-ili%ies arisin4 fro) non ay)en% of %a5es < People v. Ca%tane.a, G.R. No. !/ 4*++1, 'epte&ber 14, 19++ B;+:E a %a5 e5e) %ion is an i))"ni%y fro) *i!il lia-ili%y only. +% is an i))"ni%y or ri!ile4e/ a free(o) fro) a *&ar4e or -"r(en %o '&i*& o%&ers are s"-.e*%e(. (:lorer v. '#eri.an, 13) $n.. 2+, 3* N2 3*4 -. Ta5 a)nes%y a lies only %o as% %a5 erio(s/ &en*e of re%roa*%i!e a li*a%ion (Ca%tane.a, %upra= B;+:E %a5 e5e) %ion &as ros e*%i!e a li*a%ion. A %a5 a)nes%y is a 4eneral ar(on or in%en%ional o!erloo2in4 -y %&e S%a%e of i%s a"%&ori%y %o i) ose enal%ies on ersons o%&er'ise 4"il%y of e!asion or !iola%ion of a re!en"e or a %a5 la'. (Co&&i%%ioner of $nternal Revenue v. 0arubeni Corporation, G.R. No. 13)3)), (e"e&ber 1+, 2001 = T&e "r ose of %a5 a)nes%y is %o <a= 4i!e %a5 e!a(ers '&o 'is& %o relen% a *&an*e %o s%ar% a *lean sla%e/ an( %o <-= 4i!e %&e 4o!ern)en% a *&an*e %o

11

*olle*% "n*olle*%e( %a5 fro) %a5 e!a(ers 'i%&o"% &a!in4 %o 4o %&ro"4& %&e %e(io"s ro*ess of a %a5 *ase. (-ana%, 1r. v. Court of Appeal%, et al., G.R. No. 1029*), :ebruary 10, 2000 re("*e %&e %a5 '&ile %a5 e!asion is %&e "se of ille4al )eans %o es*a e %&e ay)en% of %a5es.

BAR: 22. Ta5 a!oi(an*e is %&e "se of le4ally er)issi-le )eans %o

BAR: 23. T&e (ifferen*es -e%'een %&e %a5 a!oi(an*e an( %a5 e!asion are %&e follo'in4? a. Ta5 a!oi(an*e is le4al '&ile %a5 e!asion is ille4al. -. T&e o-.e*%i!e of %a5 a!oi(an*e in )os% ins%an*es is )erely %o re("*e %&e %a5 %&a% is ("e '&ile is %a5 e!asion %&e o-.e*% is %o en%irely es*a e %&e ay)en% of %a5es. BAR: 24. 6easons '&y na%ional %a5es *anno% -e %&e s"-.e*% of *o) ensa%ion an( se%9off 'i%& (e-%s? a. T&e life-loo( %&eory@ -. Ta5es are no% *on%ra*%"al o-li4a%ions -"% arise o"% of a ("%y %o/ an( are %&e osi%i!e a*%s of 4o!ern)en%/ %o %&e )a2in4 an( enfor*in4 of '&i*& %&e ersonal *onsen% of %&e in(i!i("al %a5 ayer is no% re,"ire(. (Republi" v. 0a&bulao !u&ber Co., 4'CRA *22 *. T&e 4o!ern)en% an( %&e %a5 ayer are no% )"%"ally *re(i%ors an( (e-%ors of ea*& o%&er an( a *lai) for %a5es is no s"*& (e-%/ (e)an(/ *on%ra*% or ."(4)en% as is allo'e( %o -e se%9off. (Calte8 P#ilippine%, $n". v. Co&&i%%ion on Au.it, 20+ 'CRA )2*, )4*
Co) ensa%ion %a2es la*e -y o era%ion of la'/ '&ere %&e lo*al 4o!ern)en% an( %&e %a5 ayer are in %&eir o'n ri4&% re*i ro*ally (e-%ors an( *re(i%ors of ea*& o%&er/ an( %&a% %&e (e-%s are -o%& ("e an( (e)an(a-le/ in *onse,"en*e of Ar%i*les 12J7 an( 12J3 of %&e Ci!il Co(e. ((o&in3o v. Garlito%, + 'CRA 443 +n *ase of a %a5 o!er ay)en%/ '&ere %&e #+6s o-li4a%ion %o ref"n( or se%9 off arises fro) %&e )o)en% %&e %a5 'as ai( "n(er %&e rin*i le of %olutio in.ebeti. (Co&&i%%ioner of $nternal Revenue v. 2%%o 'tan.ar. 2a%tern, $n", 1)2 'RCA 3*4 #"% no%e Ne%tle P#il. v. Court of Appeal%, et al., G.R. No. 134114, 1uly *, 2001 '&i*& &el( %&a% in or(er for %&e r"le on %olutio in.ebeti %o a ly i% is an essen%ial *on(i%ion %&a% %&e e%i%ioner )"s% firs% s&o' %&a% i%s ay)en% of %&e *"s%o)s ("%ies 'as in e5*ess of '&a% 'as re,"ire( -y %&e la' a% %&e %i)e %&e s"-.e*% 1H i) or%a%ions of )il2 an( )il2 ro("*%s 'ere )a(e. Unless s&o'n o%&er'ise/ %&e (is "%a-le res") %ion of re4"lari%y of erfor)an*e of ("%y lies in fa!or of %&e Colle*%or of C"s%o)s.

BAR: 25. +n*o)e %a5/ es%a%e an( (onors %a5es are (ire*% %a5es B;+:E !al"e9a((e( %a5/ e5*ise %a5/ o%&er er*en%a4e %a5es an( (o*")en%ary s%a) %a5 are in(ire*% %a5es. T&e )ain (ifferen*e -e%'een (ire*% %a5es an( in(ire*% %a5es is %&a% %&e -"r(en of (ire*% %a5es *o"l( no% -e s&if%e( -y %&e %a5 ayer %o ano%&er '&ile %&e -"r(en of in(ire*% %a5es *o"l( -e s&if%e( %o ano%&er erson/ s"*& %&e -"r(en !al"e9a((e( %a5es -ein4 s&if%e( or %ransferre( -y %&e %a5 ayer/ %&e seller/ %o %&e -"yer.

THE COURT OF TAX APPEALS AND TAX REMEDIES

12

T&e Co"r% of Ta5 A eals is %&e s e*ial %a5 *o"r% *rea%e( "n(er 6e "-li* A*% No. 112>/ as a)en(e( -y 6. A. No. 3272/ an( is *o) ose( of a Presi(in4 0"s%i*e an( fi!e Asso*ia%e 0"s%i*es/ or4ani8e( in%o %'o (i!isions. T&e Co"r% of Ta5 A eals 'as *rea%e(? a. To re!en% (elay in %&e (is osi%ion of %a5 *ases -y %&e %&en Co"r%s of Cirs% +ns%an*e <no' 6TCs=/ in !ie' of %&e -a*2lo4 of *i!il/ *ri)inal/ an( *a(as%ral *ases a**")"la%in4 in %&e (o*2e%s of s"*& *o"r%s@ an( -. To &a!e a -o(y 'i%& s e*ial 2no'le(4e '&i*& or(inary 0"(4es of %&e %&en Co"r%s of Cirs% +ns%an*e <no' 6TCs=/ are no% li2ely %o ossess/ %&"s ro!i(in4 for an a(e,"a%e re)e(y for a s ee(y (e%er)ina%ion of %a5 *ases. T&e fa*%"al (e%er)ina%ion of %&e Co"r% of Ta5 A eals/ '&en s" or%e( -y s"-s%an%ial e!i(en*e/ 'ill no% -e re!erse( on a eal "nless i% is *lear %&a% sai( *o"r% &as *o))i%%e( 4ross error in %&e ro*ess. < Republi" of t#e P#ilippine% repre%ente. by t#e Co&&i%%ioner of Cu%to&% v. 5#e Court of 5a8 Appeal%, et al., G.R. No. 139040, 7"tober 2, 2001 T&e le4al re)e(ies "n(er %&e N+6C of 133J an( o%&er la's a!aila-le %o an a44rie!e( %a5 ayer )ay -e *lassifie( in%o %&e %a5 re)e(ies 'i%& res e*% %o assess)en% an( *olle*%ion/ an( %&ose 'i%& res e*% %o ref"n( of in%ernal re!en"e %a5es. T&e re)e(ies )ay also -e *lassifie( in%o %&e a()inis%ra%i!e or %&e ."(i*ial re)e(ies. a44rie!e( %a5 ayer a% %&e a()inis%ra%i!e an( ."(i*ial le!els 'i%& res e*% %o assess)en% an( *olle*%ion of in%ernal re!en"e %a5es are %&e follo'in4? a. U on re*ei % of a re9assess)en% no%i*e/ %&e %a5 ayer s&all res on( %o %&e sa)e 'i%&in fif%een <1>= (ays fro) re*ei % '&i*& is %&e erio( ro!i(e( for -y i) le)en%in4 r"les an( re4"la%ions. I1 r( ar./ Se*. 227 <e=/ N+6C of 133JK -. U on %&e iss"an*e of an assess)en% no%i*e/ %&e %a5 ayer s&all ro%es% a()inis%ra%i!ely -y filin4 a re,"es% for re*onsi(era%ion or rein!es%i4a%ion 'i%&in %&ir%y <10= (ays fro) re*ei % of %&e assess)en% in s"*& for) an( )anner as )ay -e res*ri-e( -y i) le)en%in4 r"les an( re4"la%ions. *. Bi%&in si5%y <H0= (ays fro) %&e filin4 of %&e ro%es%/ all rele!an% s" or%in4 (o*")en%s s&all -e s"-)i%%e(@ o%&er'ise %&e assess)en% s&all -e*o)e final. <4%& ar./ $bi..= (. +f %&e ro%es% is (enie( in '&ole or in ar%/ or e. is no% a*%e( " on 'i%&in one &"n(re( ei4&%y <170= (ays fro) s"-)ission of (o*")en%s/ f. %&e %a5 ayer a(!ersely affe*%e( -y %&e (e*ision or ina*%ion )ay a eal %o %&e Co"r% of Ta5 A eals 'i%&in %&ir%y <10= (ays fro) re*ei % of %&e sai( (e*ision/ or fro) %&e la se of %&e one &"n(re( ei4&%y <170= L (ay erio(@ o%&er'ise/ %&e (e*ision s&all -e*o)e final/ e5e*"%ory an( (e)an(a-le. Ilas% ar./ Se*. 227 <e=/ N+6C of 133JK 4. On a eal/ %&e %a5 ayer s&o"l( a ly for %&e iss"an*e of a 'ri% of reli)inary in."n*%ion %o en.oin %&e #+6 fro) *olle*%in4 %&e %a5 s"-.e*% of %&e a eal. &. A (e*ision of a (i!ision of %&e Co"r% of Ta5 A eals a(!erse %o %&e %a5 ayer or %&e 4o!ern)en% )ay -e %&e s"-.e*% of a )o%ion for re*onsi(era%ion or ne' %rial/ a (enial of '&i*& is a eala-le %o %&e Co"r% of Ta5 A eals en ban" -y )eans of a e%i%ion for re!ie'. . i. A (e*ision of %&e Co"r% of Ta5 A eals en ban" a(!erse %o %&e %a5 ayer or %&e 4o!ern)en% )ay -e a eale( %o %&e S" re)e Co"r% %&ro"4& a e%i%ion for re!ie' on *er%iorari file( 'i%& fif%een <1>= (ays fro) no%i*e/ an( e5%en(i-le for ."s%ifia-le reasons for %&ir%y <10= (ays only.

BAR: 26. T&e le4al re)e(ies "n(er %&e N+6C of 133J a!aila-le %o an

13

BAR: 27. T&e le4al re)e(ies "n(er %&e N+6C of 133J a!aila-le %o an a44rie!e( %a5 ayer a% %&e a()inis%ra%i!e an( ."(i*ial le!els 'i%& res e*% %o ref"n( or re*o!ery of %a5 erroneo"sly or ille4ally *olle*%e(/ is %o a. file a *lai) for ref"n( or *re(i% 'i%& %&e Co))issioner of +n%ernal 6e!en"e. <1s% ar./ Se*. 223/ N+6C of 133J= -. filin4 of a s"i% or ro*ee(in4 'i%& %&e Co"r% of Ta5 A eals 1= -efore %&e e5 ira%ion of %'o <2= years fro) %&e (a%e of ay)en% of %&e %a5 re4ar(less of any s" er!enin4 *a"se %&a% )ay arise af%er ay)en% <2n( ar./ Se*. 223/ N+6C of 133J@=/ or 2= 'i%&in %&ir%y <10= (ays fro) re*ei % of %&e (enial -y %&e Co))issioner of %&e a li*a%ion for ref"n( or *re(i%. <Se*. 11/ 6.A. No. 112>=
T&e %'o <2= year erio( an( %&e %&ir%y <10= (ay erio( s&o"l( -e a lie( on a '&i*&e!er *o)es firs% -asis. T&"s/ if %&e 10 (ays is 'i%&in %&e 2 years/ %&e 10 (ays a lies/ if %&e 2 year erio( is a-o"% %o la se -"% %&ere is no (e*ision ye% -y %&e Co))issioner '&i*& 'o"l( %ri44er %&e 109(ay erio(/ %&e %a5 ayer s&o"l( file an a eal/ (es i%e %&e a-sen*e of a (e*ision. (Co&&i%%ioner%, et". v. Court of 5a8 Appeal%, et al., G.R.No. +2*1+, 0ar"# 1*, 19+9, unrep. *. A (e*ision of a (i!ision of %&e Co"r% of Ta5 A eals a(!erse %o %&e %a5 ayer or %&e 4o!ern)en% )ay -e %&e s"-.e*% of a )o%ion for re*onsi(era%ion or ne' %rial/ a (enial of '&i*& is a eala-le %o %&e Co"r% of Ta5 A eals en ban" -y )eans of a e%i%ion for re!ie'. . (. A (e*ision of %&e Co"r% of Ta5 A eals en ban" a(!erse %o %&e %a5 ayer or %&e 4o!ern)en% )ay -e a eale( %o %&e S" re)e Co"r% %&ro"4& a e%i%ion for re!ie' on *er%iorari file( 'i%& fif%een <1>= (ays fro) no%i*e/ an( e5%en(i-le for ."s%ifia-le reasons for %&ir%y <10= (ays only. B&ere %&e %a5 ayer is a *or ora%ion %&e %'o year res*ri %i!e erio( fro) (a%e of ay)en% for ref"n( of in*o)e %a5es s&o"l( -e %&e (a%e '&en %&e *or ora%ion file( i%s final a(."s%)en% re%"rn no% on %&e (a%e '&en %&e %a5es 'ere ai( on a ,"ar%erly -asis. (P#ilippine -an; of Co&&uni"ation% v. Co&&i%%ioner of $nternal Revenue, et al., G.R. No. 112024, 1anuary 2+, 1999 Aenerally s ea2in4 i% is %&e Cinal A(."s%)en% 6e%"rn/ in '&i*& a)o"n%s of %&e 4ross re*ei %s an( (e("*%ions &a!e -een a"(i%e( an( a(."s%e(/ '&i*& is refle*%i!e of %&e res"l%s of %&e o era%ions of a -"siness en%er rise. +% is only '&en %&e re%"rn/ *o!erin4 %&e '&ole year/ is file( %&a% %&e %a5 ayer 'ill -e a-le %o as*er%ain '&e%&er a %a5 is s%ill ("e or ref"n( *an -e *lai)e( -ase( on %&e a(."s%e( an( a"(i%e( fi4"res. (-an; of t#e P#ilippine $%lan.% v. Co&&i%%ioner of $nternal Revenue, G.R. No. 144*43, Au3u%t 2+, 2001 = O"%line of %a5 re)e(ies of a %a5 ayer an( %&e 4o!ern)en% rela%i!e %o ASSESSMENT of in%ernal re!en"e %a5es. a. T&e %a5 ayer files &is %a5 re%"rn. -. A :e%%er of A"%&ori%y is iss"e( a"%&ori8in4 #+6 e5a)iner %o a"(i% or e5a)ine %&e %a5 re%"rn an( (e%er)ines '&e%&er %&e f"ll an( *o) le%e %a5es &a!e -een ai(. *. +f %&e e5a)iner is sa%isfie( %&a% %&e %a5 re%"rn is %r"ly refle*%i!e of %&e %a5a-le %ransa*%ion an( all %a5es &a!e -een ai(/ %&e ro*ess en(s. ;o'e!er/ if %&e e5a)iner is no% sa%isfie( %&a% %&e %a5 re%"rn is %r"ly refle*%i!e of %&e %a5a-le %ransa*%ion an( %&a% %&e %a5es &a!e no% -een f"lly ai(/ a No%i*e of +nfor)al Conferen*e is iss"e( in!i%in4 %&e %a5 ayer %o e5 lain '&y &e s&o"l( no% -e s"-.e*% %o a((i%ional %a5es. (. +f %&e %a5 ayer a%%en(s %&e infor)al *onferen*e an( %&e e5a)iner is sa%isfie( 'i%& %&e e5 lana%ion of %&e %a5 ayer/ %&e ro*ess is a4ain en(e(. +f %&e %a5 ayer i4nores %&e in!i%a%ion %o %&e infor)al *onferen*e/ or if %&e e5a)iner is no% sa%isfie( 'i%& %a5 ayers e5 lana%ion// an( &e -elie!es %&a% ro er %a5es s&o"l( -e assesse(/ %&e Co))issioner of +n%ernal 6e!en"e or &is

14

("ly a"%&ori8e( re resen%a%i!e s&all %&en no%ify %&e %a5 ayer of %&e fin(in4s in %&e for) of a re9assess)en% no%i*e. T&e re9assess)en% no%i*e re,"ires %&e %a5 ayer %o e5 lain 'i%&in fif%een <1>= (ays fro) re*ei % '&y no no%i*e of assess)en% an( le%%er of (e)an( for a((i%ional %a5es s&o"l( -e (ire*%e( %o &i). e. +f %&e Co))issioner is sa%isfie( 'i%& %&e e5 lana%ion of %&e %a5 ayer/ %&en %&e ro*ess is a4ain en(e(. +f %&e %a5 ayer i4nores %&e re9assess)en% no%i*e -y no% res on(in4 or &is e5 lana%ions are no% a**e %e( -y %&e Co))issioner/ %&en a no%i*e of assess)en% an( a le%%er of (e)an( is iss"e(. T&e no%i*e of assess)en% )"s% -e iss"e( -y %&e Co))issioner %o %&e %a5 ayer 'i%&in a erio( of %&ree <1= years fro) %&e %i)e %&e %a5 re%"rn 'as file( or s&o"l( &a!e -een file( '&i*&e!er is %&e la%er of %&e %'o e!en%s. B&ere %&e %a5 ayer (i( no% file a %a5 re%"rn or '&ere %&e %a5 re%"rn file( is false or fra"("len%/ %&en %&e Co))issioner &as a erio( of %en <10= years fro) (is*o!ery of %&e fail"re %o file a %a5 re%"rn or fro) (is*o!ery of %&e fra"( 'i%&in '&i*& %o iss"e an assess)en% no%i*e. T&e r"nnin4 of %&e a-o!e res*ri %i!e erio(s )ay &o'e!er -e s"s en(e( "n(er *er%ain ins%an*es. T&e no%i*e of assess)en% )"s% -e iss"e( 'i%&in %&e res*ri %i!e erio( an( )"s% *on%ain %&e fa*%s/ la' an( ."ris r"(en*e relie( " on -y %&e Co))issioner. O%&er'ise i% 'o"l( no% -e !ali(. f. T&e %a5 ayer s&o"l( %&en file an a()inis%ra%i!e ro%es% -y filin4 a re,"es% for re*onsi(era%ion or rein!es%i4a%ion 'i%&in %&ir%y <10= (ays fro) re*ei % of %&e assess)en% no%i*e. T&e %a5 ayer *o"l( no% i))e(ia%ely in%er ose an a eal %o %&e Co"r% of Ta5 A eals -e*a"se %&ere is no (e*ision ye% of %&e Co))issioner %&a% *o"l( -e %&e s"-.e*% of a re!ie'. To -e !ali( %&e a()inis%ra%i!e ro%es% )"s% -e file( 'i%&in %&e res*ri %i!e erio(/ )"s% s&o' %&e error of %&e #"rea" of +n%ernal 6e!en"e an( %&e *orre*% *o) "%a%ions s" or%e( -y a s%a%e)en% of fa*%s/ an( %&e la' an( ."ris r"(en*e relie( " on -y %&e %a5 ayer. T&ere is no nee( %o ay "n(er ro%es%. +f %&e ro%es% 'as no% seasona-ly file( %&e assess)en% -e*o)es final an( *olle*%i-le an( %&e #"rea" of +n%ernal 6e!en"e *o"l( "se i%s a()inis%ra%i!e an( ."(i*ial re)e(ies in *olle*%in4 %&e %a5. 4. Bi%&in si5%y <H0= (ays fro) filin4 of %&e ro%es%/ all rele!an% s" or%in4 (o*")en%s s&all -e s"-)i%%e(/ o%&er'ise %&e assess)en% s&all -e*o)e final an( *olle*%i-le an( %&e #+6 *o"l( "se i%s a()inis%ra%i!e an( ."(i*ial re)e(ies %o *olle*% %&e %a5. On*e an assess)en% &as -e*o)e final an( *olle*%i-le/ no% e!en %&e #+6 Co))issioner *o"l( *&an4e %&e sa)e. T&"s/ %&e %a5 ayer *o"l( no% ay %&e %a5/ %&en a ly for a ref"n(/ an( if (enie( a eal %&e sa)e %o %&e Co"r% of Ta5 A eals. &. +f %&e ro%es% is (enie( in '&ole or in ar%/ or is no% a*%e( " on 'i%&in one &"n(re( ei4&%y <170= (ays fro) %&e s"-)ission of (o*")en%s/ %&e %a5 ayer a(!ersely affe*%e( -y %&e (e*ision or ina*%ion )ay a eal %o %&e Co"r% of Ta5 A eals 'i%&in %&ir%y <10= (ays fro) re*ei % of %&e a(!erse (e*ision/ or fro) %&e la se of %&e one &"n(re( ei4&%y <1709= (ay erio(/ 'i%& an a li*a%ion for %&e iss"an*e of a 'ri% of reli)inary in."n*%ion %o en.oin %&e #+6 fro) *olle*%in4 %&e %a5 s"-.e*% of %&e a eal. +f %&e %a5 ayer fails %o so a eal/ %&e (enial of %&e Co))issioner or %&e ina*%ion of %&e Co))issioner 'o"l( res"l% %o %&e no%i*e of assess)en% -e*o)in4 final an( *olle*%i-le an( %&e #+6 *o"l( %&en "%ili8e i%s a()inis%ra%i!e an( ."(i*ial re)e(ies %o *olle*% %&e %a5. i. A (e*ision of a (i!ision of %&e Co"r% of Ta5 A eals a(!erse %o %&e %a5 ayer or %&e 4o!ern)en% )ay -e %&e s"-.e*% of a )o%ion for re*onsi(era%ion or ne' %rial/ a (enial of '&i*& is a eala-le %o %&e Co"r% of Ta5 A eals en ban" -y )eans of a e%i%ion for re!ie'. . T&e Co"r% of Ta5 A eals/ &as a erio( of %'el!e <12= )on%&s fro) s"-)ission of %&e *ase for (e*ision 'i%&in '&i*& %o (e*i(e.

15

.. +f %&e (e*ision of %&e Co"r% of Ta5 A eals en ban" affir)s %&e (enial of %&e ro%es% -y %&e Co))issioner or %&e assess)en% in *ase of fail"re -y %&e Co))issioner %o (e*i(e %&e %a5 ayer )"s% file a e%i%ion for re!ie' on *er%iorari 'i%& %&e S" re)e Co"r% 'i%&in fif%een <1>= (ays fro) no%i*e of %&e ."(4)en% on ,"es%ions of la'. An e5%ension of %&ir%y <10= (ays )ay for ."s%ifia-le reasons -e 4ran%e(. +f %&e %a5 ayer (oes no% so a eal/ %&e (e*ision of %&e Co"r% of Ta5 A eals 'o"l( -e*o)e final an( %&is &as %&e effe*% of )a2in4 %&e assess)en% also final an( *olle*%i-le. T&e #+6 *o"l( %&en "se i%s a()inis%ra%i!e an( ."(i*ial re)e(ies %o *olle*% %&e %a5 0"ris(i*%ion of %&e Co"r% of Ta5 A a. -. E5*l"si!e a 1= 2= *. 1= 2= E5*l"si!e a a. -. *. (. e. f. eals? eal

ella%e ."ris(i*%ion %o re!ie' -y a

0"ris(i*%ion o!er *ri)inal offenses E5*l"si!e ori4inal ."ris(i*%ion E5*l"si!e a ella%e ."ris(i*%ion

0"ris(i*%ion o!er %a5 *olle*%ion *ases E5*l"si!e ori4inal ."ris(i*%ion E5*l"si!e a ella%e ."ris(i*%ion eal

ella%e ."ris(i*%ion of CTA %o re!ie' -y a

De*isions of %&e Co))issioner of +n%ernal 6e!en"e +na*%ion -y %&e Co))issioner of +n%ernal 6e!en"e De*isions/ or resol"%ions of %&e 6e4ional Trial Co"r%s De*isions of %&e Co))issioner of C"s%o)s De*isions of %&e Cen%ral #oar( of Assess)en% A De*isions of %&e Se*re%ary of Cinan*e eals

4. De*isions of %&e Se*re%ary of Tra(e an( +n("s%ry an( %&e Se*re%ary of A4ri*"l%"re. <Se*. J/ 6. A. No. 112>/ as a)en(e( -y 6. A. No. 3272=

BAR: 28. T&e ."ris(i*%ion of %&e Co"r% of Ta5 A eals?

a. ro!i(e(? E5*l"si!e a ella%e ."ris(i*%ion %o re!ie' -y a eal/ as &erein

1. De*isions of %&e Co))issioner of +n%ernal 6e!en"e in *ases in!ol!in4 (is "%e( assess)en%s/ ref"n(s of in%ernal re!en"e %a5es/ fees or o%&er *&ar4es/ enal%ies/ in rela%ion %&ere%o/ or o%&er )a%%ers arisin4 "n(er %&e Na%ional +n%ernal 6e!en"e Co(e or o%&er la's a()inis%ere( -y %&e #"rea" of +n%ernal 6e!en"e@ 2. +na*%ion -y %&e Co))issioner of +n%ernal 6e!en"e in *ases in!ol!in4 (is "%e( assess)en%s/ ref"n(s or in%ernal re!en"e %a5es/ fees or o%&er *&ar4es/ enal%ies in rela%ion %&ere%o/ or o%&er )a%%er arisin4 "n(er %&e Na%ional +n%ernal 6e!en"e Co(e or o%&er la's a()inis%ere( -y %&e #"rea" of +n%ernal 6e!en"e/ '&ere %&e Na%ional +n%ernal 6e!en"e Co(e ro!i(es a s e*ifi* erio( of a*%ion/ in '&i*& *ase %&e ina*%ion s&all -e (ee)e( a (enial@ 1. De*isions/ or(ers or resol"%ions of %&e 6e4ional Trial Co"r%s in lo*al %a5 *ases ori4inally (e*i(e( or resol!e( -y %&e) in %&e e5er*ise of %&eir ori4inal or a ella%e ."ris(i*%ion@ 4. De*isions of %&e Co))issioner of C"s%o)s in *ases in!ol!in4 lia-ili%y for *"s%o)s ("%ies/ fees or o%&er )oney *&ar4es/ sei8"re/ (e%en%ion

16

or release of ro er%y affe*%e(/ fines/ forfei%"res or o%&er enal%ies in rela%ion %&ere%o/ or o%&er )a%%ers arisin4 "n(er %&e C"s%o)s :a' or o%&er la's a()inis%ere( -y %&e #"rea" of C"s%o)s@ >. De*isions of %&e Cen%ral #oar( of Assess)en% A eals in %&e e5er*ise of i%s a ella%e ."ris(i*%ion o!er *ases in!ol!in4 %&e assess)en% an( %a5a%ion of real ro er%y ori4inally (e*i(e( -y %&e ro!in*ial or *i%y -oar( of assess)en% a eals@ H. De*isions of %&e Se*re%ary of Cinan*e on *"s%o)s *ases ele!a%e( %o &i) a"%o)a%i*ally for re!ie' fro) (e*isions of %&e Co))issioner of C"s%o)s '&i*& are a(!erse %o %&e Ao!ern)en% "n(er Se*%ion 211> of %&e Tariff an( C"s%o)s Co(e@ J. De*isions of %&e Se*re%ary of Tra(e an( +n("s%ry/ in *ase of nona4ri*"l%"ral ro("*%/ *o))o(i%y or ar%i*le/ an( %&e Se*re%ary of A4ri*"l%"re in %&e *ase of a4ri*"l%"ral ro("*%/ *o))o(i%y or ar%i*le/ in!ol!in4 (") in4 an( *o"n%er!ailin4 ("%ies "n(er Se*%ion 101 an( 102/ res e*%i!ely/ of %&e Tariff an( C"s%o)s Co(e/ an( safe4"ar( )eas"res "n(er 6e "-li* A*% No. 7700/ '&ere ei%&er ar%y )ay a eal %&e (e*ision %o i) ose or no% %o i) ose sai( ("%ies. -. ro!i(e(? 0"ris(i*%ion o!er *ases in!ol!in4 *ri)inal offenses as &erein

1. E5*l"si!e ori4inal ."ris(i*%ion o!er all *ri)inal *ases arisin4 fro) !iola%ions of %&e na%ional +n%ernal 6e!en"e Co(e or Tariff an( C"s%o)s Co(e an( o%&er la's a()inis%ere( -y %&e #"rea" of +n%ernal 6e!en"e or %&e #"rea" of C"s%o)s? Provi.e., #owever, T&a% offenses or felonies )en%ione( in %&is ara4ra & '&ere %&e rin*i al a)o"n% of %a5es an( fees/ e5*l"si!e of *&ar4es an( enal%ies *lai)e(/ is less %&an One )illion esos <P1/000/000.00= or '&ere %&ere is no s e*ifie( a)o"n% *lai)e( s&all -e %rie( -y %&e re4"lar Co"r%s an( %&e ."ris(i*%ion of %&e CTA s&all -e a ella%e. Any ro!ision of la' or %&e 6"les of Co"r% %o %&e *on%rary no%'i%&s%an(in4/ %&e *ri)inal a*%ion an( %&e *orres on(in4 *i!il a*%ion for %&e re*o!ery of *i!il lia-ili%y for %a5es an( enal%ies s&all a% all %i)es -e si)"l%aneo"sly ins%i%"%e( 'i%&/ an( .oin%ly (e%er)ine( in %&e sa)e ro*ee(in4 -y %&e CTA/ %&e filin4 of %&e *ri)inal a*%ion -ein4 (ee)e( %o ne*essarily *arry 'i%& i% %&e filin4 of %&e *i!il a*%ion/ an( no ri4&% %o reser!e %&e filin4 of s"*& *i!il a*%ion se ara%ely fro) %&e *i!il a*%ion 'ill -e re*o4ni8e(. 2. E5*l"si!e a ella%e ."ris(i*%ion in *ri)inal offenses? a. O!er a eals fro) %&e ."(4)en%s/ resol"%ions or or(ers of %&e 6e4ional Trial Co"r%s in %a5 *ases ori4inally (e*i(e( -y %&e)/ in %&eir res e*%i!e %erri%orial ."ris(i*%ion. -. O!er e%i%ions for re!ie' of %&e ."(4)en%s/ resol"%ions or(ers of %&e 6e4ional Trial Co"r%s in %&e e5er*ise of %&eir a ella%e ."ris(i*%ion o!er %a5 *ases ori4inally (e*i(e( -y %&e Me%ro oli%an Trial Co"r%s/ M"ni*i al Trial Co"r%s an( M"ni*i al Cir*"i% Trial Co"r%s in %&eir res e*%i!e ."ris(i*%ion. *. 0"ris(i*%ion o!er %a5 *olle*%ion *ases? 1. E5*l"si!e ori4inal ."ris(i*%ion in %a5 *olle*%ion *ases in!ol!in4 final an( e5e*"%ory assess)en%s for %a5es/ fees/ *&ar4es an( enal%ies? Provi.e., #owever, T&a% *olle*%ion *ases '&ere %&e rin*i al a)o"n% of %a5es an( fees/ e5*l"si!e of *&ar4es an( enal%ies/ *lai)e( is less %&an One )illion esos <P1/000/000= s&all -e %rie( -y %&e ro er M"ni*i al Trial Co"r%/ Me%ro oli%an Trial Co"r% an( 6e4ional Trial Co"r%. 2. E5*l"si!e a ella%e ."ris(i*%ion in %a5 *olle*%ion *ases?

17

a. O!er a eals fro) ."(4)en%s/ resol"%ions/ or or(ers of %&e 6e4ional Trial Co"r%s in %a5 *olle*%ion *ases ori4inally (e*i(e( -y %&e)/ in %&eir res e*%i!e %erri%orial ."ris(i*%ion. -. O!er e%i%ions for re!ie' of %&e ."(4)en%s/ resol"%ions or or(ers of %&e 6e4ional Trial Co"r%s in %&e e5er*ise of %&eir a ella%e ."ris(i*%ion o!er %a5 *olle*%ion *ases ori4inally (e*i(e( -y %&e Me%ro oli%an Trial Co"r%s/ M"ni*i al Trial Co"r%s an( M"ni*i al Cir*"i% Trial Co"r%s/ in %&eir res e*%i!e ."ris(i*%ion. <Se*. J/ 6. A. No. 112>/ as a)en(e( -y 6. A. No. 3272/ e) &asis s" lie(= E5*l"si!e a ella%e ."ris(i*%ion of Co"r% of Ta5 A (e*isions of %&e Co))issioner of +n%ernal 6e!en"e. a. Cases in!ol!in4? 1) Dis "%e( assess)en%s@ 1= 6ef"n(s of in%ernal re!en"e %a5es/ fees or o%&er *&ar4es@ 2) Penal%ies i) ose( in rela%ion %&ere%o. -. O%&er )a%%ers arisin4 "n(er? 1= T&e Na%ional +n%ernal 6e!en"e Co(e/ or 2= O%&er la's a()inis%ere( -y %&e #"rea" of +n%ernal 6e!en"e. <Se*. J/ 6. A. No. 112>/ as a)en(e( -y 6. A. No. 3272=. T&e Co"r% of Ta5 A eals &as ."ris(i*%ion o!er (e*isions of %&e Co))issioner of C"s%o)s o!er? a. Cases in!ol!in4? 1= :ia-ili%y for *"s%o)s ("%ies/ fees or o%&er )oney *&ar4es/ 2= Sei8"res/ (e%en%ion or release of ro er%y affe*%e(/ 1= Cines/ forfei%"res an( o%&er enal%ies i) ose( in rela%ion %&ere%o@ -. O%&er )a%%ers arisin4 "n(er? 1= %&e *"s%o)s la'/ or 2= O%&er la' or ar% of la' a()inis%ere( -y %&e #"rea" of C"s%o)s a E5*l"si!e a ella%e ."ris(i*%ion of Co"r% of Ta5 A eals %o re!ie' -y eal (e*isions/ or(ers or resol"%ions of %&e 6e4ional Trial Co"r%s eals %o re!ie' -y a eal

a. +n lo*al %a5 *ases ori4inally (e*i(e( or resol!e( -y %&e) in %&e e5er*ise of %&eir ori4inal or a ella%e ."ris(i*%ion. <Se*. J/ 6. A. No. 112>/ as a)en(e( -y 6. A. No. 3272= -. O!er a eals fro) %&e ."(4)en%s/ resol"%ions or or(ers of %&e 6e4ional Trial Co"r%s in %a5 *olle*%ion *ases (e*i(e( -y %&e)/ in %&eir res e*%i!e %erri%orial ."ris(i*%ion. < $bi..= *. O!er e%i%ions for re!ie' of %&e ."(4)en%s/ resol"%ions or or(ers of %&e 6e4ional Trial Co"r%s in %&e e5er*ise of %&eir a ella%e ."ris(i*%ion o!er %a5 *olle*%ion *ases ori4inally (e*i(e( -y %&e Me%ro oli%an Trial Co"r%s/ M"ni*i al Trial Co"r%s an( M"ni*i al Cir*"i% Trial Co"r%s/ in %&eir res e*%i!e ."ris(i*%ion. <$bi..= E5*l"si!e ori4inal ."ris(i*%ion of 6e4ional Trial Co"r%s in %a5 *olle*%ion *ases. Ci!il a*%ions for %a5 *olle*%ion '&ere %&e rin*i al a)o"n% of %a5es an( fees/ e5*l"si!e of *&ar4es an( enal%ies *lai)e( e5*ee(s T'o &"n(re( %&o"san( esos <P200/000.00=/ or in Me%ro Manila '&ere %&e a)o"n% of %&e (e)an( e5*ee(s Co"r &"n(re( %&o"san( esos <P400/000.00=/ ro!i(e( %&a% %&e a)o"n% *lai)e( is less %&an One )illion esos <P1/000/000.00=. <Se*. 13/ #.P .#l4. 123/as a)en(e( -y 6. A. No. JH31 in rela%ion %o Se*. >/ 6.A. No. JH31 an( Se*. J/ 6. A. No. 112> as a)en(e( -y 6. A. No. 3272=

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NOTE? Ta5 *olle*%ion *ases %&a% are -elo' %&e %&res&ol( a)o"n%s of P200/000.00 an( P400/000.00 fall 'i%&in %&e ."ris(i*%ion of %&e M"ni*i al Trial Co"r%s/ %&e M"ni*i al Trial Co"r%s in Ci%ies/ %&e M"ni*i al Cir*"i% Trial Co"r%s/ or %&e Me%ro oli%an Trial Co"r%s. B&ere %&e a)o"n% e5*ee(s P1 )illion/ e5*l"si!e ori4inal ."ris(i*%ion is !es%e( 'i%& %&e Co"r% of Ta5 A eals. E5*l"si!e a ella%e ."ris(i*%ion of 6e4ional Trial Co"r%s in %a5 *olle*%ion *ases. 6e4ional Trial Co"r%s s&all e5er*ise a ella%e ."ris(i*%ion o!er all *ases (e*i(e( -y Me%ro oli%an Trial Co"r%s/ M"ni*i al Trial Co"r%s an( M"ni*i al Cir*"i% Trial Co"r%s in %&eir res e*%i!e %erri%orial ."ris(i*%ion. <Se*. 22/ #. P. #l4. 123= E5*l"si!e a ella%e ."ris(i*%ion of %&e Co"r% of Ta5 A eal (e*isions of Co))issioner of C"s%o)s? a. +n *ases in!ol!in4? 1= :ia-ili%y for *"s%o)s ("%ies/ fees or o%&er )oney *&ar4es@ 2= Sei8"re/ (e%en%ion or release of ro er%y affe*%e(@ 1= Cines/ forfei%"res or o%&er enal%ies i) ose( in rela%ion %&ere%o@ -. O%&er )a%%ers arisin4 "n(er@ 1= %&e C"s%o)s :a'/ or 2= O%&er la's a()inis%ere( -y #"rea" of C"s%o)s. <Se*. J/ 6. A . No. 112>/ as a)en(e( -y Se*. J.a.4/ 6. A. No. 3272= eals %o re!ie' -y

as (enial of a ro%es% '&i*& ser!e as -asis for a eal %o %&e Co"r% of Ta5 A eals? a. Cilin4 -y %&e #+6 of a *i!il s"i% for *olle*%ion of %&e (efi*ien*y %a5 is *onsi(ere( a (enial of %&e re,"es% for re*onsi(era%ion. < Co&&i%%ioner of $nternal Revenue v. <nion '#ippin3 Corporation, 1+4 'CRA 44) -. An in(i*a%ion %o %&e %a5 ayer -y %&e Co))issioner in *lear an( "ne,"i!o*al lan4"a4e of &is final (enial no% %&e iss"an*e of %&e 'arran% of (is%rain% an( le!y. B&a% is %&e s"-.e*% of %&e a eal is %&e final (e*ision no% %&e 'arran% of (is%rain%. (Co&&i%%ioner of $nternal Revenue v. <nion '#ippin3 Corporation, 1+4 'CRA 44) *. A #+6 (e)an( le%%er sen% %o %&e %a5 ayer af%er &is ro%es% of %&e assess)en% no%i*e is *onsi(ere( as %&e final (e*ision of %&e Co))issioner on %&e ro%es%. ('uri3ao 2le"tri" Co., $n". v. Court of 5a8 Appeal%, et al., 4) 'CRA 423 A le%%er of %&e #+6 Co))issioner rei%era%in4 %o a %a5 ayer &is re!io"s (e)an( %o ay an assess)en% is *onsi(ere( a (enial of %&e re,"es% for re*onsi(era%ion or ro%es% an( is a eala-le %o %&e Co"r% of Ta5 A eals. (Co&&i%%ioner v. Ayala 'e"uritie% Corporation, )0 'CRA 204 T&e a*%"al iss"an*e of a 'arran% of (is%rain% an( le!y in *er%ain *ases *anno% -e *onsi(ere( a final (e*ision on a (is "%e( assess)en%. T&e %a5 ayer s&o"l( a eal/ -y 'ay of a e%i%ion for re!ie'/ %o %&e Co"r% of Ta5 A eals no% on %&e 4ro"n( of %&e (enial of %&e ro%es% -"% on o%&er )a%%er arisin4 "n(er %&e ro!isions of %&e Na%ional +n%ernal 6e!en"e Co(e. C"r%&er)ore/ an a li*a%ion s&o"l( li2e'ise -e )a(e for %&e iss"an*e of an in."n*%i!e 'ri% %o en.oin %&e #+6 fro) *olle*%in4 ("rin4 %&e en(en*y of %&e e%i%ion. (Co&&i%%ioner of $nternal Revenue v. <nion '#ippin3 Corp., 1+4 'CRA 44) Cinal no%i*e -efore sei8"re *onsi(ere( as *o))issioners (e*ision of %a5 ayers re,"es% for re*onsi(era%ion '&o re*ei!e( no o%&er res onse. Co&&i%%ioner of $nternal Revenue v. $%abela Cultural Corporation, G.R. No. 134210, 1uly 11, 2001 &el( %&a% no% only is %&e No%i*e %&e only res onse re*ei!e(? i%s *on%en% an( %enor s" or%s %&e %&eory %&a% i% 'as %&e C+6s final a*%

BAR: 29. T&e follo'in4 are %&e a*%s of #+6 Co))issioner *onsi(ere(

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re4ar(in4 %&e re,"es% for re*onsi(era%ion. T&e !ery %i%le e5 ressly in(i*a%e( %&a% i% 'as a final no%i*e rior %o sei8"re of ro er%y. T&e le%%er i%self *learly s%a%e( %&a% %&e %a5 ayer 'as -ein4 4i!en %&is :AST OPPO6TUN+TD %o ay@ o%&er'ise/ i%s ro er%ies 'o"l( -e s"-.e*%e( %o (is%rain% an( le!y. To a !ali( (e*ision on a (is "%e( assess)en%/ %&e (e*ision of %&e Co))issioner or &is ("ly a"%&ori8e( re resen%a%i!e s&all <a= s%a%e %&e fa*%s/ %&e a li*a-le la'/ r"les an( re4"la%ions/ or ."ris r"(en*e on '&i*& s"*& (e*ision is -ase(/ o%&er'ise/ %&e (e*ision s&all -e !oi(/ in '&i*& *ase %&e sa)e s&all no% -e *onsi(ere( a (e*ision on %&e (is "%e( assess)en%@ an( <-= %&a% %&e sa)e is &is final (e*ision. <Se*. 1.1.H/ 6e!. 6e4s. 12933= As a 4eneral r"le/ %&ere )"s% al'ays -e a (e*ision of %&e Co))issioner of +n%ernal 6e!en"e or Co))issioner of C"s%o)s -efore %&e Co"r% of Ta5 A eals/ 'o"l( &a!e ."ris(i*%ion. +f %&ere is no s"*& (e*ision/ %&e 'o"l( -e (is)isse( for la*2 of ."ris(i*%ion "nless %&e *ase falls "n(er any of %&e follo'in4 e5*e %ions. +ns%an*es '&ere %&e Co"r% of Ta5 A eals 'o"l( &a!e ."ris(i*%ion e!en if %&ere is no (e*ision ye% -y %&e Co))issioner of +n%ernal 6e!en"e? a. B&ere %&e Co))issioner &as no% a*%e( on %&e (is "%e( assess)en% af%er a erio( of 170 (ays fro) s"-)ission of *o) le%e s" or%in4 (o*")en%s/ %&e %a5 ayer &as a erio( of 10 (ays fro) %&e e5 ira%ion of %&e 170 (ay erio( 'i%&in '&i*& %o a eal %o %&e Co"r% of Ta5 A eals. <las% ar./ Se*. 227 <e=/ N+6C of 133J= Co&&i%%ioner of $nternal Revenue v. $%abela Cultural Corporation, G.R. No. 134210, 1uly 11, 2001 -. B&ere %&e Co))issioner &as no% a*%e( on an a li*a%ion for ref"n( or *re(i% an( %&e %'o year erio( fro) %&e %i)e of ay)en% is a-o"% %o e5 ire/ %&e %a5 ayer &as %o file &is a eal 'i%& %&e Co"r% of Ta5 A eals -efore %&e e5 ira%ion of %'o years fro) %&e %i)e %&e %a5 'as ai(. +% is (is&ear%enin4 eno"4& %o a %a5 ayer %o -e 2e % 'ai%in4 for an in(efini%e erio( for %&e r"lin4/. +% 'o"l( )a2e )a%%ers )ore e5as era%in4 for %&e %a5 ayer if %&e (oors of ."s%i*e 'o"l( -e *lose( for s"*& a relief "n%il af%er %&e Co))issioner/ 'o"l( &a!e/ a% &is ersonal *on!enien*e/ 4i!en &is 4o si4nal. (Co&&i%%ioner of Cu%to&%, et al, v. Court of 5a8 Appeal%, et al., G.R. No. +2*1+, 0ar"# 1*, 19+9, unrep.

+ns%an*es '&ere %&e Co"r% of Ta5 A eals 'o"l( &a!e ."ris(i*%ion e!en if %&ere is no (e*ision of %&e Co))issioner of C"s%o)s? a. De*isions of %&e Se*re%ary of Tra(e an( +n("s%ry or %&e Se*re%ary of A4ri*"l%"re in an%i9(") in4 an( *o"n%er!ailin4 ("%y *ases are a eala-le %o %&e Co"r% of Ta5 A eals 'i%&in %&ir%y <10= (ays fro) re*ei % of s"*& (e*isions. -. +n *ase of a"%o)a%i* re!ie' -y %&e Se*re%ary of Cinan*e in sei8"re or forfei%"re *ases '&ere %&e !al"e of %&e i) or%a%ion e5*ee(s P> )illion or '&ere %&e (e*ision of %&e Colle*%or of C"s%o)s '&i*& f"lly or ar%ially releases %&e s&i )en% sei8e( is affir)e( -y %&e Co))issioner of C"s%o)s. *. +n *ase of a"%o)a%i* re!ie' -y %&e Se*re%ary of Cinan*e of a (e*ision of a Colle*%or of C"s%o)s a*%in4 fa!ora-ly " on a *"s%o)s ro%es%.
T&e %a5a-le in*o)e s&all -e *o) "%e( " on %&e -asis of %&e %a5 ayers ann"al a**o"n%in4 erio( <fis*al year or *alen(ar year/ as %&e *ase )ay -e= in a**or(an*e 'i%& %&e )e%&o( of a**o"n%in4 re4"larly e) loye( in 2ee in4 %&e -oo2s of s"*& %a5 ayer@ -"% if no s"*& )e%&o( of a**o"n%in4 &as -een so e) loye(/ or if %&e )e%&o( e) loye( (oes no% *learly refle*% %&e in*o)e/ %&e *o) "%a%ion s&all -e in a**or(an*e 'i%& s"*& )e%&o( as in %&e o inion of %&e Co))issioner *learly refle*%s %&e in*o)e. <Se*. 41/ N+6C of 133J= B&en a re or% re,"ire( -y la' as a -asis for %&e assess)en% of any na%ional in%ernal re!en"e %a5 s&all no% -e for%&*o)in4 'i%&in %&e %i)e fi5e( -y

20

la's or r"les an( re4"la%ions or '&en %&ere is reason %o -elie!e %&a% any s"*& re or% is false/ in*o) le%e or erroneo"s/ %&e Co))issioner s&all assess %&e ro er %a5 on %&e -es% e!i(en*e o-%aina-le. +n *ase a erson fails %o file a re,"ire( re%"rn or o%&er (o*")en% a% %&e %i)e res*ri-e( -y la'/ or 'illf"lly or o%&er'ise files a false or fra"("len% re%"rn or o%&er (o*")en%/ %&e Co))issioner s&all )a2e or a)en( %&e re%"rn fro) &is o'n 2no'le(4e an( fro) s"*& infor)a%ion as &e *an o-%ain %&ro"4& %es%i)ony or o%&er'ise/ '&i*& s&all -e pri&a fa"ie *orre*% an( s"ffi*ien% for all le4al "r oses. ISe*. H <#=/ N+6C of 133JK #"rea" of +n%ernal 6e!en"e for re*ons%r"*%in4 a %a5 ayers in*o)e '&ere %&e re*or(s (o no% s&o' %&e %r"e in*o)ne or '&ere no re%"rn 'as file( or '&a% 'as file( 'as a false an( fra"("len% re%"rn <a= Per*en%a4e )e%&o(@ <-= Ne% 'or%& )e%&o(.@ <*= #an2 (e osi% )e%&o(@ <(= Cas& e5 en(i%"re )e%&o(@ <e= Uni% an( !al"e )e%&o(@ <f= T&ir( ar%y infor)a%ion or a**ess %o re*or(s )e%&o(@ <4= S"r!eillan*e an( assess)en% )e%&o(. <C&a %er G+++. +n(ire*% A roa*& %o +n!es%i4a%ion/ ;an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ . H79J4= Un(er %&e er*en%a4e )e%&o(/ %&e *o) "%e( a)o"n% of re!en"es -ase( on %&e er*en%a4e *o) "%a%ion is *o) are( %o %&e a)o"n% of re!en"es refle*%e( on %&e re%"rn. T&e er*en%a4es "se( )ay -e o-%aine( fro) %&e %a5 ayer/ in("s%ry "-li*a%ion/ rior years a"(i% res"l%s/ or %&ir( ar%ies. T&e *o) arison 'ill ro!i(e an in(i*a%ion on %&e ossi-ili%y of re!en"e -ein4 "n(ers%a%e(. A)on4 %&e si4nifi*an% ra%ios an( %ren(s %o -e analy8e( are %&e er*en%a4e )ar29" / 4ross rofi%s ra%io or 4ross )ar4in er*en%a4e/ rofi% )ar4in/ %o%al asse%s %"rno!er/ an( in!en%ory %"rno!er. <C&a %er G+++. +n(ire*% A roa*& %o +n!es%i4a%ion/ ;an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ . H79J4= T&e ne% 'or%& )e%&o( is a )e%&o( of re*ons%r"*%in4 in*o)e '&i*& is -ase( on %&e %&eory %&a% if %&e %a5 ayers ne% 'or%& &as in*rease( in a 4i!en year in an a)o"n% lar4er %&an &is re or%e( in*o)e/ &e &as "n(ers%a%e( &is in*o)e for %&a% year. T&e ne% 'or%& on a fi5e( s%ar%in4 (a%e is *o) are( 'i%& %&e ne% 'or%& on a fi5e( en(in4 (a%e. Any in*rease in ne% 'or%& is res")e( %o -e in*o)e no% (e*lare( for %a5 "r oses. <C&a %er G+++. +n(ire*% A roa*& %o +n!es%i4a%ion/ ;an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ . H79J4= T&e (iffi*"l%y of es%a-lis&in4 %&e o enin4 ne% 'or%& of a %a5 ayer &as le( %o %&e Co&an 6"le '&i*& is %&e "se of es%i)a%es or a ro5i)a%ions of %&e a)o"n% of *as& an( o%&er asser%s '&ere %&e %a5 ayer la*2s a(e,"a%e re*or(s. <C&a %er G+++. +n(ire*% A roa*& %o +n!es%i4a%ion/ ;an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ . H79J4= Un(er %&e -an2 (e osi% )e%&o(/ %&e -an2 re*or(s of %&e %a5 ayer are analy8e( an( %&e #+6 es%i)a%es in*o)e on %&e -asis of %&e %o%al -an2 (e osi%s af%er eli)ina%in4 non9in*o)e i%e)s. T&is )e%&o( s%an(s on %&e re)ise %&a% (e osi%s re resen% %a5a-le in*o)e "nless o%&er'ise e5 laine( as -ein4 non9 %a5a-le i%e)s. T&is )e%&o( )ay -e "se( only '&ere %&e #+6 &as -een le4ally allo'e( a**ess %o %&e %a5 ayers -an2 re*or(s. <C&a %er G+++. +n(ire*% A roa*& %o +n!es%i4a%ion/ ;an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ . H79J4= T&e *as& e5 en(i%"re )e%&o( ass")es %&a% %&e e5*ess of a %a5 ayers e5 en(i%"res ("rin4 %&e %a5 erio( o!er &is re or%e( in*o)e for %&a% erio( is %a5a-le %o %&e e5%en% no% (is ro!e( o%&er'ise. <C&a %er G+++. +n(ire*% A roa*& %o

BAR: 30. T&e follo'in4 are %&e 4eneral )e%&o(s (e!elo e( -y %&e

21

+n!es%i4a%ion/ ;an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ H79J4=

Un(er %&e "ni% an( !al"e )e%&o(/ %&e (e%er)ina%ion or !erifi*a%ion of 4ross re*ei %s )ay -e *o) "%e( -y a lyin4 ri*e an( rofi% fi4"res %o %&e 2no'n as*er%aina-le ,"ali%y of -"siness of %&e %a5 ayer. <C&a %er G+++. +n(ire*% A roa*& %o +n!es%i4a%ion/ ;an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ . H79J4= Cor e5a) le/ in or(er %o (e%er)ine %&e 4ross re*ei %s of a i88a arlor/ )"l%i ly %&e o"n(s of flo"r "se( -y %&e n")-er of i88as er o"n( '&i*& in %"rn 'o"l( %&en -e )"l%i lie( -y %&e a!era4e ri*e er i88a.

BAR: 31. T&ir( ar%y infor)a%ion or a**ess %o re*or(s )e%&o(. T&e #+6 )ay re,"ire %&ir( ar%ies/ "-li* or ri!a%e %o s" ly infor)a%ion %o %&e #+6/ an( %&"s/ o-%ain on a re4"lar -asis fro) any erson o%&er %&an %&e erson '&ose in%ernal re!en"e %a5 lia-ili%y is s"-.e*% %o a"(i% or in!es%i4a%ion/ or fro) any offi*e or offi*er of %&e na%ional an( lo*al 4o!ern)en%s/ 4o!ern)en% a4en*ies an( ins%r")en%ali%ies in*l"(in4 %&e #an42o Sen%ral n4 Pili inas an( 4o!ern)en%9 o'ne( or L*on%rolle( *or ora%ions/ any infor)a%ion s"*& as/ -"% no% li)i%e( %o/ *os%s an( !ol")e of ro("*%ion/ re*ei %s or sales an( 4ross in*o)es of %a5 ayers/ an( %&e na)es / a((resses/ an( finan*ial s%a%e)en%s of *or ora%ions/ )"%"al f"n( *o) anies/ ins"ran*e *o) anies/ re4ional o era%in4 &ea(,"ar%ers or )"l%ina%ional *o) anies/ .oin% a**o"n%s/ asso*ia%ions/ .oin% !en%"res or *onsor%ia an( re4is%ere( ar%ners&i s/ an( %&eir )e)-ers@ 555 ISe*. > <#=/ N+6C of 133J=
A re9assess)en% no%i*e is a le%%er sen% -y %&e #"rea" of +n%ernal 6e!en"e %o a %a5 ayer as2in4 &i) %o e5 lain 'i%&in a erio( of fif%een <1>= (ays fro) re*ei % '&y &e s&o"l( no% -e %&e s"-.e*% of an assess)en% no%i*e. +% is ar% of %&e ("e ro*ess ri4&%s of a %a5 ayer. As a 4eneral r"le/ %&e #+6 *o"l( no% iss"e an assess)en% no%i*e 'i%&o"% firs% iss"in4 a re9assess)en% no%i*e -e*a"se i% is ar% of %&e ("e ro*ess ri4&%s of a %a5 ayer %o -e 4i!en no%i*e in %&e for) of a re9assess)en% no%i*e/ an( for &i) %o e5 lain '&y &e s&o"l( no% -e %&e s"-.e*% of an assess)en% no%i*e. -efore a no%i*e of assess)en% is sen% %o %&e %a5 ayer. a. B&en %&e fin(in4 for any (efi*ien*y %a5 is %&e res"l% of )a%&e)a%i*al error in %&e *o) "%a%ion of %&e %a5 as a earin4 on %&e fa*e of %&e re%"rn@ or -. B&en a (is*re an*y &as -een (e%er)ine( -e%'een %&e %a5 'i%&&el( an( %&e a)o"n% a*%"ally re)i%%e( -y %&e 'i%&&ol(in4 a4en%@ or *. B&en a %a5 ayer o %e( %o *lai) a ref"n( or %a5 *re(i% of e5*ess *re(i%a-le 'i%&&ol(in4 %a5 for a %a5a-le erio( 'as (e%er)ine( %o &a!e *arrie( o!er an( a"%o)a%i*ally a lie( %&e sa)e a)o"n% *lai)e( a4ains% %&e es%i)a%e( %a5 lia-ili%ies for %&e %a5a-le ,"ar%er or ,"ar%ers of %&e s"**ee(in4 %a-le year@ or (. B&en %&e e5*ess %a5 ("e on e5*isa-le ar%i*les &as no% -een ai(@ or e. B&en an ar%i*le lo*ally "r*&ase( or i) or%e( -y an e5e) % erson/ s"*& as/ -"% no% li)i%e( %o !e&i*les/ *a i%al e,"i )en%/ )a*&ineries an( s are ar%s/ &as -een sol(/ %ra(e or %ransferre( %o non9e5e) % ersons. <Se*. 227/ N+6C of 133J= Cor in%ernal re!en"e %a5a%ion assess)en% as layin4 a %a5. T&e "l%i)a%e "r ose of an assess)en% %o s"*& a *onne*%ion is %o as*er%ain %&e a)o"n% %&a% ea*& %a5 ayer is %o ay. (Co&&i%%ioner of $nternal Revenue v. Pa%"or Realty an. (evelop&ent Corporation, et al., G.R. No. 12+314, 1une 29, 1999 T&e 'or( assess)en% '&en "se( in *onne*%ion 'i%& %a5a%ion/ )ay &a!e )ore %&an one )eanin4.. More *o))only %&e 'or( assess)en% )eans %&e

BAR: 32. +ns%an*es '&ere a re9assess)en% no%i*e is no% re,"ire(

22

offi*ial !al"a%ion of a %a5 ayers ro er%y for "r ose of %a5a%ion. T&e a-o!e (efini%ion of assess)en% fin(s a li*a%ion "n(er %ariff an( *"s%o)s %a5a%ion as 'ell as lo*al 4o!ern)en% %a5a%ion. Cor real ro er%y %a5a%ion/ %&ere )ay -e a s e*ial )eanin4 %o %&e -"r(ens %&a% are i) ose( " on real ro er%ies %&a% &a!e -een -enefi%e( -y a "-li* 'or2s e5 en(i%"re of a lo*al 4o!ern)en%. +% is so)e%i)es *alle( a s e*ial assess)en% or a s e*ial le!y. (Co&&i%%ioner of $nternal Revenue v. Pa%"or Realty an. (evelop&ent Corporation, et al., G.R. No. 12+314, 1une 29, 1999 An assess)en% is a no%i*e ("ly sen% %o %&e %a5 ayer '&i*& is (ee)e( )a(e only '&en %&e #+6 releases/ )ails or sen(s s"*& no%i*e %o %&e %a5 ayer. (Co&&i%%ioner of $nternal Revenue v. Pa%"or Realty an. (evelop&ent Corporation, et al., G.R. No. 12+314, 1une 29, 1999 An affi(a!i%9re or% of %&e e5a)iners "se( %o s" or% a *ri)inal *o) lain% for %a5 e!asion (oes no% *ons%i%"%e an assess)en% %&a% )ay -e %&e s"-.e*% of a )o%ion for re*onsi(era%ionMrein!es%i4a%ion. T&e affi(a!i%9re or% )erely *on%ains a *o) "%a%ion of %&e lia-ili%ies. +% (oes no% s%a%e a (e)an( or a erio( for ay)en%. +% is no% a((resse( %o %&e %a5 ayers -"% %o %&e De ar%)en% of 0"s%i*e. Clearly/ i% 'as no% )ean% %o -e a no%i*e of %&e %a5 ("e an( a (e)an( for %&e ay)en% %&ereof. (Co&&i%%ioner of $nternal Revenue v. Pa%"or Realty an. (evelop&ent Corporation, et al., G.R. No. 12+314, 1une 29, 1999 a. %&ree <1= years fro) %&e las% (ay 'i%&in '&i*& %o file a re%"rn or '&en %&e re%"rn 'as a*%"ally file(/ '&i*&e!er is la%er@ -. %en years fro) (is*o!ery of %&e fail"re %o file %&e %a5 re%"rn or (is*o!ery of falsi%y or fra"( in %&e re%"rn@ or *. 'i%&in %&e erio( a4ree( " on -e%'een %&e 4o!ern)en% an( %&e %a5 ayer '&ere %&ere is a 'ai!er of %&e res*ri %i!e erio( for assess)en%. A .eo ar(y assess)en% is a (elin,"en*y %a5 assess)en% '&i*& 'as assesse( 'i%&o"% %&e -enefi% of *o) le%e or ar%ial a"(i% -y an a"%&ori8e( re!en"e offi*er/ '&o &as reason %o -elie!e %&a% %&e assess)en% an( *olle*%ion of a (efi*ien*y %a5 'ill -e .eo ar(i8e( -y (elay -e*a"se of %&e %a5 ayers fail"re %o *o) ly 'i%& %&e a"(i% an( in!es%i4a%ion re,"ire)en%s %o resen% &is -oo2s of a**o"n%s an(Mor er%inen% re*or(s/ or %o s"-s%an%ia%e all or any of %&e (e("*%ions/ e5e) %ions/ or *re(i%s *lai)e( in &is re%"rn. ISe*. 1.1 <a=/ 6e!. 6e4s. No. H9 2000= 0eo ar(y assess)en% is an in(i*a%ion of %&e (o"-%f"l !ali(i%y of %&e assess)en%/ &en*e i% )ay -e s"-.e*% %o a *o) ro)ise. ISe*. 1.1 <a=/ 6e!. 6e4s. No. H92000K 6e,"ire)en%s for !ali(i%y of for)al le%%er of (e)an( an( assess)en% no%i*e? a. T&ere )"s% &a!e -een re!io"sly iss"e( a re9assess)en% no%i*e "n%il e5*e %e(@ -. +% )"s% &a!e -een iss"e( rior %o %&e res*ri %i!e erio(@ an( *. T&e le%%er of (e)an( *allin4 for ay)en% of %&e %a5 ayers (efi*ien*y %a5 or %a5es s&all s%a%e %&e fa*%s/ %&e la'/ r"les an( re4"la%ions/ or ."ris r"(en*e on '&i*& %&e assess)en% is -ase(/ o%&er'ise/ %&e for)al le%%er of (e)an( an( assess)en% no%i*e s&all -e !oi(. <Se*. 1.1.4/ 6e!. 6e4s. No. 12933=

BAR: 33. T&e res*ri %i!e erio(s for )a2in4 assess)en%s are?

BAR: 34. T&e &ol(in4 in Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., G.R. No. 114)12, :ebruary 24, 1999 <Carna%ion *ase= %&a% %&e 'ai!er of %&e erio( for assess)en% )"s% -e in 'ri%in4 an( &a!e %&e 'ri%%en *onsen% of %&e #+6 Co))issioner is s%ill (o*%rinal -e*a"se of %&e ro!isions of

23

Se*. 221/ N+6C of 133J '&i*& ro!i(es for %&e s"s ension of %&e res*ri %i!e erio(? a. B&en %&e Co))issioner is ro&i-i%e( fro) )a2in4 %&e assess)en%/ or -e4innin4 (is%rain%/ or le!y or ro*ee(in4 in *o"r% an( for si5%y <H0= (ays %&ereaf%er@ -. B&en %&e %a5 ayer re,"es%s for an( is 4ran%e( a rein!es%i4a%ion -y %&e *o))issioner@ *. B&en %&e %a5 ayer *o"l( no% -e lo*a%e( in %&e a((ress 4i!en -y &i) in %&e re%"rn file( " on '&i*& %&e %a5 is -ein4 assesse( or *olle*%e(@ (. B&en %&e 'arran% of (is%rain% an( le!y is ("ly ser!e( " on %&e %a5 ayer/ &is a"%&ori8e( re resen%a%i!e/ or a )e)-er of &is &o"se&ol( 'i%& s"ffi*ien% (is*re%ion/ an( no ro er%y *o"l( -e lo*a%e(@ an( e. B&en %&e %a5 ayer is o"% of %&e P&ili ines. T&e si4na%"res of -o%& %&e Co))issioner an( %&e %a5 ayer/ are re,"ire( for a 'ai!er of %&e res*ri %i!e erio(/ %&"s a "nila%eral 'ai!er on %&e ar% of %&e %a5 ayer (oes no% s"s en( %&e res*ri %i!e erio(. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., G.R. No. 114)12, :ebruary 24, 1999 (Carnation "a%e

BAR: 36. T&e follo'in4 are %&e re,"ire)en%s for %&e !ali(i%y of a %a5 ayers ro%es%? a. +% )"s% -e file( 'i%&in %&e re4le)en%ary erio( of %&ir%y <10= (ays fro) re*ei % of %&e no%i*e of assess)en%. -. T&e %a5 ayer )"s% s&o' %&e errors of %&e #"rea" of +n%ernal 6e!en"e as 'ell as %&e *orre*% *o) "%a%ion %&ro"4& 1= A s%a%e)en% of %&e fa*%s/ %&e a li*a-le la'/ r"les an( re4"la%ions/ or ."ris r"(en*e on '&i*& %&e %a5 ayers ro%es% is -ase(/ 2= +f %&ere are se!eral iss"es in!ol!e( in %&e (is "%e( assess)en% an( %&e %a5 ayer fails %o s%a%e %&e fa*%s/ %&e a li*a-le la'/ r"les an( re4"la%ions/ or ."ris r"(en*e in s" or% of &is ro%es% a4ains% so)e of %&e se!eral iss"es on '&i*& %&e assess)en% is -ase(/ %&e sa)e s&all -e *onsi(ere( "n(is "%e( iss"e or iss"es/ in '&i*& *ase/ %&e %a5 ayer s&all -e re,"ire( %o ay %&e *orres on(in4 (efi*ien*y %a5 or %a5es a%%ri-"%a-le %&ere%o. <Se*. 1.1.>/ 6e!. 6e4s. 12933= *. Bi%&in si5%y <H0= (ays fro) filin4 of %&e ro%es%/ %&e %a5 ayer s&all s"-)i% all rele!an% s" or%in4 (o*")en%s. I4 %& ar./ Se*. 227 <e=/ N+6C of 133JK
:a's on res*ri %ion s&o"l( -e li-erally *ons%r"e( in fa!or of %&e %a5 ayer . Cor %&e "r ose of safe4"ar(in4 %a5 ayers fro) an "nreasona-le e5a)ina%ion/ in!es%i4a%ion or assess)en%/ o"r %a5 la' ro!i(es a s%a%"%e of li)i%a%ion on %&e *olle*%ion of %a5es. T&e res*ri %i!e erio( 'as re*isely in%en(e( %o 4i!e %&e %a5 ayers ea*e of )in(. (Co&&i%%ioner of $nternal Revenue v. -.:. Goo.ri"# P#il%., $n"., et al., G.R. No. 1041)1, :ebruary 24, 1999 Assess)en% an( ref"n( *ases *o"l( no% -e *onsoli(a%e(. 6eason? :ife-loo( (o*%rine. +f %&ere a en(in4 assess)en%/ ref"n( s&o"l( no% -e 4ran%e(. Assess)en% no% ne*essary -efore a %a5 ayer )ay -e rose*"%e( for 'illf"lly a%%e) %in4 in any )anner %o e!a(e or (efea% any %a5 i) ose( -y %&e +n%ernal 6e!en"e Co(e. A *ri)inal *&ar4e for %a5 e!asion is (ifferen% fro) a %a5 assess)en%? a. Cri)inal *&ar4e nee( only -e s" or%e( -y a pri&a fa"ie s&o'in4 of fail"re %o file a re,"ire( re%"rn B;+:E %&e fa*% of fail"re %o file a re%"rn nee( no% -e ro!en -y an assess)en%.

24

-. #efore an assess)en% is iss"e(/ %&ere is/ -y ra*%i*e/ a re9 assess)en% no%i*e sen% %o %&e %a5 ayer B;+:E s"*& is no% so 'i%& a *ri)inal *&ar4e. T&e *&ar4e is file( (ire*%ly 'i%& %&e De ar%)en% of 0"s%i*e. *. A *ri)inal *o) lain% is ins%i%"%e( no% %o (e)an( ay)en%/ -"% %o enali8e %&e %a5 ayer for !iola%ion of %&e Ta5 Co(e B;+:E %&e "r ose of %&e iss"an*e of an assess)en% is %o *olle*% %&e %a5. (Co&&i%%ioner of $nternal Revenue v. Pa%"or Realty an. (evelop&ent Corporation, et al., G.R. No. 12+314, 1une 29, 1999 T&e (o*%rines in Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., G.R. No. 119322, 1une 4, 199* / Co&&i%%ioner of $nternal Revenue v. Pa%"or Realty an. (evelop&ent Corporation, et al., G.R. No. 12+314, 1une 29, 1999 an( Un4a- !. C"si/ 3J SC6A 7JJ/ are (ifferen% fro) one ano%&er. +n <n3ab/ %&ere 'as a pri&a fa"ie a%%e) % %o e!a(e %a5es -e*a"se of %&e %a5 ayers fail"re %o (e*lare in &is in*o)e %a5 re%"rn &is in*o)e (eri!e( fro) -anana sa lin4s &en*e %&e *ase 'as file( (es i%e %&e a-sen*e of a no%i*e of assess)en%. +n %&e :ortune 5oba""o *ase no *ri)inal *ase 'as file(/ -e*a"se %&e re4is%ere( '&olesale ri*e of %&e 4oo(s/ a ro!e( -y %&e #+6 is res")e( %o -e %&e a*%"al '&olesale ri*e/ %&erefore/ no% fra"("len% an( "nless an( "n%il %&e #+6 &as )a(e a final (e%er)ina%ion of '&a% is s" ose( %o -e %&e *orre*% %a5es/ %&e %a5 ayer s&o"l( no% -e la*e( in %&e *r"*i-le of *ri)inal rose*"%ion.

B&ile i% is %r"e as s%a%e( on Co&&i%%ioner v. Pa%"or Realty an. (evelop&ent Corporation/ %&a% a *ri)inal *o) lain% is ins%i%"%e( no% %o (e)an(
ay)en%/ -"% %o enali8e %&e %a5 ayer for !iola%ion of %&e Ta5 Co(e/ T&e ."(4)en% in %&e *ri)inal *ase s&all no% only i) ose %&e enal%y -"% s&all also or(er ay)en% of %&e %a5es s"-.e*% of %&e *ri)inal *ase as finally (e*i(e( -y %&e Co))issioner. I1r( ar./ Se*. 20> <-=/ N+6C of 133JK A *o) ro)ise is a *on%ra*% '&ere-y %&e ar%ies/ %&ro"4& )"%"al a4ree)en% an( -y )a2in4 re*i ro*al *on*essions/ a!oi( a li%i4a%ion or "% an en( %o one alrea(y *o))en*e(. <Ar%. 2027/ Ci!il Co(e= %a5 ayer (i( no% a4ree. A *o) ro)ise -ein4/ -y i%s na%"re/ )"%"al in essen*e re,"ires a4ree)en%. T&e ay)en% )a(e "n(er ro%es% *o"l( only si4nify %&a% %&ere 'as no% a4ree)en% %&a% &a( effe*%i!ely -een rea*&e( -e%'een %&e ar%ies. <6.a. .e 'an A3u%tin, et al., v. Co&&i%%ioner of $nternal Revenue, G.R.No. 13+4+4, 'epte&ber 10, 2001 %&e -asis for *o) ro)ise/ -e %&e s"-.e*% )a%%er of *o) ro)ise se%%le)en%? a. Delin,"en% a**o"n%s@ -. Cases "n(er a()inis%ra%i!e ro%es% af%er iss"an*e of %&e Cinal Assess)en% No%i*e %o %&e %a5 ayer '&i*& are s%ill en(in4 in %&e 6e4ional Offi*es/ 6e!en"e Dis%ri*% Offi*es/ :e4al Ser!i*e/ :ar4e Ta5 ayer Ser!i*e <:TS=/ Colle*%ion Ser!i*e/ Enfor*e)en% Ser!i*e an( o%&er offi*es in %&e Na%ional Offi*e@ *. Ci!il %a5 *ases -ein4 (is "%e( -efore %&e *o"r%s@ (. Colle*%ion *ases file( in *o"r%s@ e. Cri)inal !iola%ions/ o%&er %&an %&ose alrea(y file( in *o"r%/ or %&ose in!ol!in4 *ri)inal %a5 fra"(. <Se*. 2/ 6e!. 6e4s. No. 1092002=

BAR: 37. A *o) ro)ise enal%y *o"l( no% -e i) ose( -y %&e #+6/ if %&e

BAR: 38. T&e follo'in4 *ases )ay/ " on %a5 ayers *o) lian*e 'i%&

57. Ta5 *ases '&i*& *o"l( no% -e %&e s"-.e*% of *o) ro)ise? a. Bi%&&ol(in4 %a5 *ases "nless %&e a li*an%9%a5 ayer in!o2es ro!isions of la' %&a% *as% (o"-% on %&e %a5 ayers o-li4a%ion %o 'i%&&ol(.@

25

-. Cri)inal %a5 fra"( *ases/ *onfir)e( as s"*& -y %&e Co))issioner of +n%ernal 6e!en"e or &is ("ly a"%&ori8e( re resen%a%i!e@ *. Cri)inal !iola%ions alrea(y file( in *o"r%@ (. Delin,"en% a**o"n%s 'i%& ("ly a ro!e( s*&e("le of ins%all)en% ay)en%s@ e. Cases '&ere final re or%s of rein!es%i4a%ion or re*onsi(era%ion &a!e -een iss"e( res"l%in4 %o re("*%ion in %&e ori4inal assess)en% an( %&e %a5 ayer is a4reea-le %o s"*& (e*ision -y si4nin4 %&e re,"ire( a4ree)en% for) for %&e "r ose. On %&e o%&er &an(/ o%&er ro%es%e( *ases s&all -e &an(le( -y %&e 6e4ional E!al"a%ion #oar( <6E#= or %&e Na%ional E!al"a%ion #oar( <NE#= on a *ase %o *ase -asis@ f. Cases '&i*& -e*o)e final an( e5e*"%ory af%er final ."(4)en% of a *o"r% '&ere *o) ro)ise is re,"es%e( on %&e 4ro"n( of (o"-%f"l !ali(i%y of %&e assess)en%@ an( 4. Es%a%e %a5 *ases '&ere *o) ro)ise is re,"es%e( on %&e 4ro"n( of finan*ial in*a a*i%y of %&e %a5 ayer. <Se*. 2/ 6e!. 6e4s. No. 1092002= 58. T&e Co))issioner )ay *o) ro)ise %&e ay)en% of any in%ernal re!en"e %a5 '&en? a. A reasona-le (o"-% as %o %&e !ali(i%y of %&e *lai) a4ains% %&e %a5 ayer e5is%s ro!i(e( %&a% %&e )ini)") *o) ro)ise en%ere( in%o is e,"i!alen% %o for%y er*en% <40N= of %&e -asi* %a5@ or -. T&e finan*ial osi%ion of %&e %a5 ayer (e)ons%ra%es a *lear ina-ili%y %o ay %&e assesse( %a5 ro!i(e( %&a% %&e )ini)") *o) ro)ise en%ere( in%o is e,"i!alen% %o %en er*en% <10N= of %&e -asi* assesse( %a5 +n %&e a-o!e ins%an*es %&e Co))issioner is allo'e( %o en%er in%o a *o) ro)ise only if %&e -asi* %a5 in!ol!e( (oes no% e5*ee( One )illion esos <P1/000/000.00=/ an( %&e se%%le)en% offere( is no% less %&an %&e res*ri-e( er*en%a4es. ISe*. 204 <A=/ N+6C of 133JK +n ins%an*es '&ere %&e Co))issioner is no% a"%&ori8e(/ %&e *o) ro)ise s&all -e s"-.e*% %o %&e a ro!al of %&e E!al"a%ion #oar( *o) ose( of %&e Co))issioner an( %&e fo"r <4= De "%y Co))issioners.

BAR: 39. T&e Co))issioner of +n%ernal 6e!en"e is a"%&ori8e( %o a-a%e or *an*el a %a5 lia-ili%y/ '&en? a. T&e %a5 or any or%ion %&ereof a ears %o -e "n."s%ly or e5*essi!ely assesse(@ or -. T&e a()inis%ra%ion an( *olle*%ion *os%s in!ol!e( (o no% ."s%ify %&e *olle*%ion of %&e a)o"n% ("e. ISe*. 204 <#=/ N+6C of 133JK
T&e offer %o *o) ro)ise a (elin,"en% a**o"n% or (is "%e( assess9)en% on %&e 4ro"n( of reasona-le (o"-% as %o %&e !ali(i%y of %&e assess)en% )ay -e a**e %e( '&en i% is s&o'n %&a%? a. T&e (elin,"en% a**o"n% or (is "%e( assess)en% is one res"l%in4 fro) a .eo ar(y assess)en%. or -. T&e assess)en% see)s %o -e ar-i%rary in na%"re/ a earin4 %o -e -ase( on res") %ions an( %&ere is reason %o -elie!e %&a% i% is la*2in4 in le4al an(Mor fa*%"al -asis@ or *. T&e %a5 ayer faile( %o file an a()inis%ra%i!e ro%es% on a**o"n% of %&e alle4e( fail"re %o re*ei!e no%i*e of assess)en% an( %&ere is reason %o -elie!e %&a% %&e assess)en% is la*2in4 in le4al an(Mor fa*%"al -asis@ or (. T&e %a5 ayer faile( %o file a re,"es% for rein!es%i4a%ionMre*onsi(era%ion 'i%&in 10 (ays fro) re*ei % of final assess)en% no%i*e an( %&ere is reason %o -elie!e %&a% %&e assess)en% is la*2in4 in le4al an(Mor fa*%"al -asis@ or e. T&e %a5 ayer faile( %o ele!a%e %o %&e Co"r% of Ta5 A eals <CTA= an a(!erse (e*ision of %&e Co))issioner/ or &is a"%&ori8e( re resen%a%i!e/ in so)e *ases/ 'i%&in 10 (ays fro) re*ei % %&ereof an( %&ere is reason %o -elie!e %&a% %&e assess)en% is la*2in4 in le4al an(Mor fa*%"al -asis@ or

26

f. T&e assess)en%s 'ere iss"e( on or af%er 0an"ary 1/ 1337/ '&ere %&e (e)an( no%i*e alle4e(ly faile( %o *o) ly 'i%& %&e for)ali%ies "n(er Se*. 227 of %&e Na%ional +n%ernal 6e!en"e Co(e of 133J@ or 4. Assess)en%s )a(e -ase( on %&e #es% E!i(en*e O-%aina-le 6"le an( %&ere is reason %o -elie!e %&a% %&e sa)e *an -e (is "%e( -y s"ffi*ien% an( *o) e%en% e!i(en*e@ or &. T&e assess)en% 'as iss"e( 'i%&in %&e res*ri %i!e erio( for assess)en% as e5%en(e( -y %&e %a5 ayers e5e*"%ion of Bai!er of %&e S%a%"%e of :i)i%a%ions %&e !ali(i%y or a"%&en%i*i%y of '&i*& is -ein4 ,"es%ione( or a% iss"e an( %&ere is s%ron4 reason %o -elie!e an( e!i(en*e %o ro!e %&a% i% is no% a"%&en%i*. <Se*. 1/ 1/ 6e!. 6e4s. No. 1091002= T&e offer %o *o) ro)ise -ase( on finan*ial in*a a*i%y )ay -e a**e %e( " on s&o'in4 %&a%? a. T&e *or ora%ion *ease( o era%ion or is alrea(y (issol!e( Pro!i(e(/ %&a% %a5 lia-ili%ies *orres on(in4 %o %&e S"-s*ri %ion 6e*ei!a-le or Asse%s (is%ri-"%e(M(is%ri-"%a-le %o %&e s%o*2&ol(ers re resen%in4 re%"rn of *a i%al a% %&e %i)e of *essa%ion of o era%ion or (issol"%ion of -"siness s&all no% -e *onsi(ere( for *o) ro)ise@ or -. T&e %a5 ayer/ as refle*%e( in i%s la%es% #alan*e S&ee% s" ose( %o -e file( 'i%& %&e #"rea" of +n%ernal 6e!en"e/ is s"fferin4 fro) s"r l"s or earnin4s (efi*i% res"l%in4 %o i) air)en% in %&e ori4inal *a i%al -y a% leas% >0N/ ro!i(e( %&a% a)o"n%s aya-le %o ("e %o s%o*2&ol(ers o%&er %&an -"siness9rela%e( %ransa*%ions '&i*& are ro erly inel"(i-le in %&e re4"lar a**o"n%s aya-le are -y fi*%ion of la' *onsi(ere( as ar% of *a i%al an( no% lia-ili%y/ an( ro!i(e( f"r%&er %&a% %&e %a5 ayer &as no s"ffi*ien% li,"i( asse% %o sa%isfy %&e %a5 lia-ili%y@ or *. T&e %a5 ayer is s"fferin4 fro) a ne%'or%& (efi*i% <%o%al lia-ili%ies e5*ee( %o%al asse%s= *o) "%e( -y (e("*%in4 %o%al lia-ili%ies <ne% of (eferre( *re(i%s an( a)o"n%s aya-le %o s%o*2&ol(ersMo'ners refle*%e( as lia-ili%ies/ e5*e % -"siness9 rela%e( %ransa*%ions= fro) %o%al asse%s <ne% of re ai( e5 enses/ (eferre( *&ar4es/ re9o era%in4 e5 enses/ as 'ell as a raisal in*reases in fi5e( asse%s= %a2en fro) %&e la%es% a"(i%e( finan*ial s%a%e)en%s/ ro!i(e( %&a% in %&e *ase of an in(i!i("al %a5 ayer/ &e &as no o%&er le!ia-le ro er%ies "n(er %&e la' o%&er %&an &is fa)ily &o)e@ or (. T&e %a5 ayer is a *o) ensa%ion in*o)e earner 'i%& no o%&er so"r*e of in*o)e an( %&e fa)ilys 4ross )on%&ly *o) ensa%ion in*o)e (oes no% e5*ee(/ if sin4le/ P10/>00 or less/ or if )arrie(/ '&ose salary %o4e%&er 'i%& &is s o"se is P21/000 er )on%&/ or less/ an( i% a ears %&a% %&e %a5 ayer ossesses no o%&er le!ia-leM(is%raina-le asse%s o%&er %&an &is fa)ily &o)e@ or e. T&e %a5 ayer &as -een (e*lare( -y any *o) e%en% %ri-"nalM a"%&ori%yM-o(yM4o!ern)en% a4en*y as -an2r" % or insol!en%. <Se*. 1. 2/ 6e!. in rela%ion %o Se*.4.1.1 -o%& of 6e4s. No. 1091002=

BAR: 40. T&e filin4 of an a()inis%ra%i!e *lai) for ref"n( 'i%& %&e #+6/ -efore filin4 a *ase 'i%& %&e Co"r% of Ta5 A eals/ is ne*essary for %&e follo'in4 reasons? a. To affor( %&e Co))issioner an o or%"ni%y %o *orre*% &is errors or %&a% of s"-or(ina%e offi*ers. (Gon,ale% v. Court of 5a8 Appeal%, et al., 14 'CRA )9 -. To no%ify %&e Ao!ern)en% %&a% s"*& %a5es &a!e -een ,"es%ione( an( %&e no%i*e s&o"l( -e -orne in )in( in es%i)a%in4 %&e re!en"e a!aila-le for e5 en(i%"res. (-er&e>o v. Colle"tor, G.R. No. !/302+, 1uly 2+, 1940
fa%al %o a e%i%ion for re!ie' in!ol!in4 a (is "%e( assess)en%. To &ol( %&a% %&e %a5 ayer &as no' los% %&e ri4&% %o a eal fro) %&e r"lin4 on %&e (is "%e( assess)en% an( re,"ire &i) %o file a *lai) for a ref"n( of %&e %a5es ai( as a *on(i%ion re*e(en% %o &is ri4&% %o a eal/ 'o"l( in effe*% re,"ire of &i) %o 4o %&ro"4& a "seless an( nee(less *ere)ony %&a% 'o"l( only (elay

BAR: 41. T&e fail"re %o firs% file a 'ri%%en *lai) for ref"n( or *re(i% is no%

27

%&e (is osi%ion of %&e *ase/ for %&e Co))issioner 'o"l( *er%ainly (isallo' %&e *lai) for ref"n( in %&e sa)e 'ay as &e (isallo'e( %&e ro%es% a4ains% %&e assess)en%. T&e la'/ s&o"l( no% -e in%er re%e( as %o res"l% in a-s"r(i%ies . (v.a. .e 'an A3u%tin., et".,v. Co&&i%%ioner of $nternal Revenue, G.R. No. 13+4+4, 'epte&ber 10, 2001 *i%in4 Ro&an Cat#oli" Ar"#bi%#op of Cebu v. Colle"tor of $nternal Revenue, 4 'CRA 2)9 6e*on*ilia%ion -e%'een no. 40 an( 41. An a li*a%ion for ref"n( or *re(i% "n(er Se*. 223 of %&e N+6C of 133J is re,"ire( '&ere %&e *ase file( -efore %&e CTA is a ref"n( *ase/ '&i*& is no% re)ise( " on a (is "%e( assess)en%. T&ere is no nee( for a rior a li*a%ion for ref"n( or *re(i%/ if %&e ref"n( is )erely a *onse,"en*e of %&e resol"%ion of %&e #+6s (enial of a ro%es%e( assess)en%. Se*. H3 of %&e 13JJ N+6C <no' Se*. JH of %&e N+6C of 133J= ro!i(es %&a% any e5*ess of %&e %o%al ,"ar%erly ay)en%s o!er %&e a*%"al in*o)e %a5 *o) "%e( in %&e a(."s%)en% or final *or ora%e in*o)e %a5 re%"rn/ s&all ei%&er <a= -e ref"n(e( %o %&e *or ora%ion/ or <-= )ay -e *re(i%e( a4ains% %&e es%i)a%e( ,"ar%erly in*o)e %a5 lia-ili%ies for %&e ,"ar%ers of %&e s"**ee(in4 %a5a-le year. To ease %&e a()inis%ra%ion of %a5 *olle*%ion/ %&ese re)e(ies are in %&e al%erna%i!e an( %&e *&oi*e of one re*l"(es %&e o%&er. Sin*e %&e #an2 &as *&osen %&e %a5 *re(i% a roa*& i% *anno% any)ore a!ail of %&e %a5 ref"n(. (P#ilippine -an; of Co&&uni"ation% v. Co&&i%%ioner of $nternal Revenue, et al., G.R. No. 112024, 1anuary 2+, 1999 T&e %i)ely ser!i*e of a 'arran% of (is%rain% or le!y s"s en(s %&e r"nnin4 of %&e erio( %o *olle*% %&e %a5 (efi*ien*y in %&e sense %&a% %&e (is osi%ion of %&e a%%a*&e( ro er%ies )i4&% 'ell %a2e %i)e %o a**o) lis&/ e5%en(in4 e!en af%er %&e la se of %&e s%a%"%ory erio( for *olle*%ions. (A.verti%in3 A%%o"iate%, $n"., v. Court of Appeal%, 133 'CRA )*4= Palan"a v. Co&&i%%ioner of $nternal Revenue, 114 P#il. 203 T&e enfor*e)en% of %a5 *olle*%ion %&ro"4& s"))ary ro*ee(in4s )ay -e *arrie( o"% -eyon( %&e s%a%"%ory erio(. (Republi" of t#e P#ilippine%, et". v. ?i,on, G.R. No. 1304, (e"e&ber 13, 1999 T&e s%a%"%ory erio( for *olle*%ion a lies only '&ere a *o"r% s"i% is a!aile( of for *olle*%ion.

BAR: 42. Ci!il an( *ri)inal a*%ions an( ro*ee(in4s ins%i%"%e( in -e&alf of %&e Ao!ern)en% "n(er %&e a"%&ori%y of %&e N+6C of 133J or o%&er la' enfor*e( -y %&e #"rea" of +n%ernal 6e!en"e s&all -e -ro"4&% in %&e na)e of %&e Ao!ern)en% of %&e P&ili ines an( s&all -e *on("*%e( -y le4al offi*ers of %&e #"rea" of +n%ernal 6e!en"e -"% no *i!il or *ri)inal a*%ion for %&e re*o!ery of %a5es or %&e enfor*e)en% of any fine/ enal%y or forfei%"re "n(er %&e N+6C of 133J s&all -e file( in *o"r% 'i%&o"% %&e a ro!al of %&e Co))issioner of +n%ernal 6e!en"e. <Se*. 220/ N+6C of 133J=
T&e %'o year erio( a lies only %o re*o!ery of %a5es or enal%ies NOT %o %a5 *re(i%s a!ail)en%. A-sen% a s e*ifi* ro!ision in %&e Ta5 Co(e or s e*ial la's/ %&e erio( 'o"l( -e 10 years. <0"s%i*e Vi%"4/ *on*"rrin4 in Co))issioner of +n%ernal 6e!en"e !. T&e P&ili ine :ife +ns"ran*e Co./ e% al. A.6. No. 10>207/ May 23/ 133> rei%era%in4 %&e TMG *ase= B&ere a *or ora%ion is (issol!e( +% -e*o)es ne*essary for %&e -an2 %o file i%s in*o)e %a5 re%"rn 'i%&in 10 (ays af%er a ro!al -y %&e SEC of i%s lan or resol"%ion of (issol"%ion. +n(ee(/ i% 'o"l( -e a-s"r( for %&e -an2 %o 'ai% "n%il %&e fif%een%& (ay of A ril/ af%er i% *ease( i%s o era%ions/ -efore filin4 i%s in*o)e %a5 re%"rn. T&"s/ %&e %'o9year res*ri %i!e erio( s&o"l( -e *o"n%e( fro) 10 (ays af%er %&e a ro!al -y %&e SEC of i%s lan for (issol"%ion. T&ere is no nee( %o file

28

a Cinal A(."s%)en% 6e%"rn -e*a"se %&ere is no%&in4 %o a(."s% or %o a"(i%. Af%er %&e *or ora%ion *ease( o era%ion i%s %a5a-le year 'o"l( -e s&or%ene(. (-an; of t#e P#ilippine $%lan.% v. Co&&i%%ioner of $nternal Revenue, G.R. No. 144*43, Au3u%t 2+, 2001= A si)"l%aneo"s filin4 of %&e a li*a%ion 'i%& %&e #+6 for ref"n(M*re(i% an( %&e ins%i%"%ion of %&e *o"r% s"i% 'i%& %&e CTA is allo'e(. T&ere is no nee( %o 'ai% for a #+6 (enial. 6EASONS? a. T&e osi%i!e re,"ire)en% of Se*%ion 210 N+6C <no' Se*. 223/ N+6C of 133J=@ -. T&e (o*%rine %&a% (elay of %&e Co))issioner in ren(erin4 (e*ision (oes no% e5%en( %&e ere) %ory erio( fi5e( -y %&e s%a%"%e@ *. T&e la' fi5e( %&e sa)e erio( %'o years for filin4 a *lai) for ref"n( 'i%& %&e Co))issioner "n(er Se*. 204/ ar. 1/ N+6C <no' Se*. 204 ICK/ N+6C of 133J=/ an( for filin4 s"i% in *o"r% "n(er Se*. 210/ N+6C <no' Se*. 223/ N+6C of 133J=/ "nli2e in ro%es%s of assess)en%s "n(er Se*. 223 <no' Se*. 227/ N+6C of 133J=/ '&i*& fi5e( %&e erio( <%&ir%y (ays fro) re*ei % of (e*ision= for a ealin4 %o %&e *o"r%/ %&"s *learly i) lyin4 %&a% %&e rior (e*ision of %&e Co))issioner is ne*essary %o %a2e *o4ni8an*e of %&e *ase. (Co&&i%%ioner of $nternal Revenue v. -an; of P#ilippine $%lan.%, et". et al., CA/G.R. 'P No. 34102, 'epte&ber 9, 1994= Gibb% v. Colle"tor of $nternal Revenue, et al., 10) P#il, 232= 1o#n%ton !u&ber Co. v. C5A, 101 P#il. 141 T&e r"le is %&a% no in%eres% on ref"n( of %a5 *an -e a'ar(e( "nless a"%&ori8e( -y la' or %&e *olle*%ion of %&e %a5 'as a%%en(e( -y ar-i%rariness. An a*%ion is no% ar-i%rary '&en e5er*ise( &ones%ly an( " on ("e *onsi(era%ion '&ere %&ere is roo) for %'o o inions/ &o'e!er )"*& i% )ay -e -elie!e( %&a% an erroneo"s *on*l"sion 'as rea*&e(. Ar-i%rariness res" oses ine5*"sa-le or o-s%ina%e (isre4ar( of le4al ro!isions. (P#ile8 0inin3 Corporation v. Co&&i%%ioner of $nternal Revenue, et al., G.R. No. 120324, April 21, 1999 T&e ins%i%"%ion or *o))en*e)en% -efore a ro er *o"r% of *i!il an( *ri)inal a*%ions an( ro*ee(in4s arisin4 "n(er %&e Ta5 6efor) A*% / s"*& as re*o!ery of %a5es or %&e enfor*e)en% of any fine/ enal%y or forfei%"re/ s&all -e *on("*%e( -y le4al offi*ers of %&e #"rea" of +n%ernal 6e!en"e 'i%& %&e a ro!al of %&e Co))issioner. On %&e o%&er &an(/ i% is %&e Soli*i%or Aeneral '&o &as %&e ri)ary res onsi-ili%y %o a eal for %&e 4o!ern)en% in a ella%e ro*ee(in4s. (Co&&i%%ioner of $nternal Revenue v. !a 'uerte Ci3ar an. Ci3arette :a"tory, G. r. No. 144942, 1uly 4, 2002

NATIONAL INTERNAL REVENUE CODE

THE BUREAU OF INTERNAL REVENUE
Any in%ernal re!en"e offi*er in %&e (is*&ar4e of &is offi*ial ("%ies )ay en%er any &o"se/ -"il(in4 or la*e '&ere ar%i*les s"-.e*% %o e5*ise %a5es are ro("*e( or 2e %/ or are -elie!e( -y &i) " on reasona-le 4ro"n(s %o -e ro("*e( or 2e % so far as )ay -e ne*essary %o e5a)ine/ (is*o!er or sei8e %&e sa)e. <1s% ar./ Se*. 1J1/ N+6C of 133J= +n%ernal re!en"e offi*ers s&all &a!e a"%&ori%y %o )a2e arres%s an( sei8"res for !iola%ion of any enal la' or re4"la%ion a()inis%ere( -y %&e #"rea" of +n%ernal 6e!en"e. Any erson so arres%e( s&all for%&'i%& -e -ro"4&% -efore a *o"r%/ %&ere %o -e (eal% 'i%& a**or(in4 %o la'. <Se*. 11/ N+6C of 133J= No sear*& 'arran% or 'arran% of arres% is re,"ire( "n(er %&e (o*%rine of ri)ary ."ris(i*%ion '&i*& osi%s %&a% in %e*&ni*al )a%%ers '&ere %&e

29

a()inis%ra%i!e -o(ies &a!e o-%aine( e5 er%ise/ %&e *o"r%s 'ill (efer. T&is is li2e'ise re)ise( on %&e life-loo( %&eory '&i*& )an(a%es %&e i))e(ia%e *olle*%ion of %a5es %o ens"re %&e *on%in"e( e5is%en*e of %&e S%a%e. T&ere are %'o 2in(s of r"lin4s %&e #+6 )ay iss"e 9 in%er re%a%i!e r"lin4s an( le4isla%i!e r"lin4s. +n%er re%a%i!e r"les are (esi4ne( %o ro!i(e 4"i(elines %o %&e la' '&i*& %&e a()inis%ra%i!e a4en*y is in *&ar4e of enfor*in4. No no%i*e/ &earin4 or "-li*a%ion is re,"ire(/ as %&ey are iss"e( )erely for %&e 4"i(an*e of a()inis%ra%i!e offi*ers. +ll"s%ra%ion? 6e!en"e Me)oran(") Cir*"lar No. 4J931 *lassifyin4 *o ra as an a4ri*"l%"ral non9foo( i%e) (e*larin4 i% e5e) % fro) VAT only if %&e sale is )a(e -y %&e ri)ary ro("*er. < 0i%a&i% 7riental A%%o"iation of Co"o 5ra.er%, $n". v. (epart&ent of :inan"e 'e"retary, et al., 23+ 'CRA *3 @1994A :e4isla%i!e r"les are in %&e na%"re of s"-or(ina%e le4isla%ion/ (esi4ne( %o i) le)en% a ri)ary le4isla%ion -y ro!i(in4 %&e (e%ails %&ereof. T&ey are iss"e( "n(er %&e ,"asi9le4isla%i!e a"%&ori%y of %&e #+6 Co))issioner. T&ere is a re,"ire)en% for no%i*e/ &earin4 an( "-li*a%ion. +ll"s%ra%ion? 6e!en"e Me)oran(") Cir*"lar No. 1J931 '&i*& la*e( ;o e :"5"ry/ Pre)i") More an( C&a) ion *i4are%%es 'i%&in %&e s*o e of %&e a)en(a%ory la' 6.A. No. JH>4 an( s"-.e*%e( %&e) %o %&e in*rease( %a5 ra%e re,"ires no%i*e/ &earin4 an( "-li*a%ion. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., 2*1 'CRA 23* T&e r"lin4s an( *ir*"lars ro)"l4a%e( -y %&e Co))issioner (o no% &a!e re%roa*%i!e a li*a%ion if %&e re!o*a%ion/ )o(ifi*a%ion/ or re!ersal 'o"l( -e re."(i*ial %o %&e %a5 ayers. ('e". 24*, N$RC of 199)= Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., 2*) 'CRA 44) +ns%an*es '&en re!en"e r"lin4s an( re4"la%ions &a!e re%roa*%i!e effe*% e!en if re."(i*ial %o %&e %a5 ayer? a. B&ere %&e %a5 ayer (eli-era%ely )iss%a%es or o)i%s )a%erial fa*%s fro) &is re%"rn or in any (o*")en% re,"ire( of &i) -y %&e #+6@ -. B&ere %&e fa*%s s"-se,"en%ly 4a%&ere( -y %&e #+6 are )a%erially (ifferen% fro) %&e fa*%s on '&i*& %&e r"lin4 is -ase(/ or *. B&ere %&e %a5 ayer a*%e( in -a( fai%&. <Se*. 24H/ N+6C of 133J= 9. T&e Co))issioner or &is a"%&ori8e( re resen%a%i!e is e) o'ere( %o s"s en( %&e -"siness o era%ions an( %e) orarily *lose %&e -"siness es%a-lis&)en% of any erson for any of %&e follo'in4 !iola%ions? a. +n *ase of a VAT9re4is%ere( erson? 1= Cail"re %o iss"e re*ei %s or in!oi*es@ 2= Cail"re %o file a VAT re%"rn as re,"ire( "n(er %&e Ta5 Co(e@ 1= Un(ers%a%e)en% of %a5a-le sales or re*ei %s -y 10N or )ore of &is *orre*% %a5a-le sales or re*ei %s for %&e %a5a-le ,"ar%er. -. Cail"re %o re4is%er "n(er %&e VAT ro!isions of %&e Ta5 Co(e. T&e %e) orary *los"re of %&e es%a-lis&)en% s&all for %&e ("ra%ion of no% less %&an fi!e <>= (ays an( s&all -e lif%e( only " on *o) lian*e 'i%& '&a%e!er re,"ire)en%s res*ri-e( -y %&e Co))issioner in %&e *los"re or(er. (Atla% Con%oli.ate. 0inin3 B (evelop&ent Corporation v. Co&&i%%ioner of $nternal Revenue, G.R. No. 1344*), Nove&ber 1), 1999 T&e Co))issioner of +n%ernal 6e!en"e is a"%&ori8e( "n(er %&e Ta5 Co(e %o (ele4a%e %&e o'ers !es%e( in &i) "n(er %&e er%inen% ro!isions of %&e Ta5 Co(e %o any s"-or(ina%e offi*ial 'i%& %&e ran2 e,"i!alen% %o a (i!ision *&ief or &i4&er.

30

T&e follo'in4 are so)e of %&e o'ers %&a% %&e Co))issioner of +n%ernal 6e!en"e *o"l( no% (ele4a%e? a. T&e o'er %o re*o))en( %&e r"les an( re4"la%ions -y %&e Se*re%ary of Cinan*e@ -. T&e o'er %o iss"e r"lin4s of firs% i) ression or %o re!erse/ re!o2e/ or )o(ify any e5is%in4 r"lin4 of %&e #"rea"@ *. T&e o'er %o *o) ro)ise or a-a%e/ any %a5 (efi*ien*y/ Pro!i(e(/ &o'e!er/ %&a% assess)en%s iss"e( -y %&e 6e4ional Offi*es in!ol!in4 -asi* (efi*ien*y %a5es of P>00/000.00 or less/ an( )inor *ri)inal !iola%ions as )ay -e (e%er)ine( -y r"les an( re4"la%ions %o -e ro)"l4a%e( -y %&e Se*re%ary of Cinan*e/ " on %&e re*o))en(a%ion of %&e Co))issioner/ (is*o!ere( -y re4ional an( (is%ri*% offi*ials/ )ay -e *o) ro)ise( -y a re4ional e!al"a%ion -oar( '&i*& s&all -e *o) ose( of %&e 6e4ional Dire*%or as C&air)an/ %&e Assis%an% 6e4ional Dire*%or/ &ea(s of %&e :e4al/ Assess)en% an( Colle*%ion Di!isions an( %&e 6e!en"e Dis%ri*% Offi*er &a!in4 ."ris(i*%ion o!er %&e %a5 ayer/ as )e)-ers@ an( (. T&e o'er %o assi4n or reassi4n in%ernal re!en"e offi*ers %o es%a-lis&)en%s '&ere ar%i*les s"-.e*% %o e5*ise %a5 are ro("*e( or 2e %. <Se*. J/ N+6C of 133J *i%e( in Republi" of t#e P#ilippine%, et". v. ?i,on, G.R. No. 130430, (e"e&ber 13, 1999= T&e Co))issioner of +n%ernal 6e!en"e &as %&e o'er %o o-%ain on a re4"lar -asis fro) any erson o%&er %&an %&e erson '&ose in%ernal re!en"e %a5 lia-ili%y is s"-.e*% %o a"(i% or in!es%i4a%ion/ an infor)a%ion s"*& as/ -"% no% li)i%e( %o/ *os%s an( !ol")e of ro("*%ion/ re*ei %s or sales an( 4ross in*o)e %a5 ayers/ a)on4 o%&ers. ISe*. > <#=/ N+6C of 133JK

BAR: 43. 6e . A*% No. 140>/ %&e #an2 De osi%s Se*re*y :a' ro&i-i%s in,"iry in%o -an2 (e osi%s. As e5*e %ions %o 6e . A*% No. 140>/ %&e Co))issioner of +n%ernal 6e!en"e is only a"%&ori8e( %o in,"ire in%o %&e -an2 (e osi%s of? a. a (e*e(en% %o (e%er)ine &is 4ross es%a%e@ an( -. any %a5 ayer '&o &as file( an a li*a%ion for *o) ro)ise of &is %a5 lia-ili%y -y reason of finan*ial in*a a*i%y %o ay &is %a5 lia-ili%y. ISe*. > <C=/ N+6C of 133JK *. A %a5 ayer '&o a"%&ori8es %&e Co))issioner %o in,"ire in%o &is -an2 (e osi%s. INCOME TAXATION
T&e Ta5 Co(e &as in*l"(e( "n(er %&e %er) *or ora%ion ar%ners&i s/ no )a%%er &o' *rea%e( or or4ani8e(/ .oin%9s%o*2 *o) anies/ .oin% a**o"n%s < "uenta% en parti"ipa"ion=/ asso*ia%ions/ or ins"ran*e *o) anies. ISe*. 24 no' Se*. 24 <#= of %&e N+6C of 133JK +n 2van3eli%ta v. Colle"tor, 102 P#il. 140, %&e S" re)e Co"r% &el( *i%in4 Mer%ens %&a% %&e %er) ar%ners&i in*l"(es a syn(i*a%e/ 4ro" / ool/ .oin% !en%"re or o%&er "nin*or ora%e( or4ani8a%ion/ %&ro"4& or -y )eans of '&i*& any -"siness/ finan*ial o era%ion/ or !en%"re is *arrie( on. Cer%ain -"siness or4ani8a%ions (o no% fall "n(er %&e *a%e4ory of *or ora%ions "n(er %&e Ta5 Co(e/ an( %&erefore no% s"-.e*% %o %a5 as *or ora%ions/ in*l"(e? a. Aeneral rofessional ar%ners&i s@ -. 0oin% !en%"re or *onsor%i") for)e( for %&e "r ose of "n(er%a2in4 *ons%r"*%ion ro.e*%s en4a4in4 in e%role")/ *oal/ 4eo%&er)al/ an( o%&er ener4y o era%ions/ "rs"an% %o an o era%ion or *onsor%i") a4ree)en% "n(er a ser!i*e *on%ra*% 'i%& %&e Ao!ern)en%. I1 s% sen%en*e/ Se*. 22 <#=/ #+6C of 133JK

31

BAR: 44. Co9&eirs '&o o'n in&eri%e( ro er%ies '&i*& ro("*e in*o)e s&o"l( no% a"%o)a%i*ally -e *onsi(ere( as ar%ners of an "nre4is%ere( *or ora%ion s"-.e*% %o in*o)e %a5 for %&e follo'in4 reasons? a. %&e s&arin4 of 4ross re%"rns (oes no% of i%self es%a-lis& a ar%ners&i / '&e%&er or no% %&e ersons s&arin4 %&e) &a!e a .oin% or *o))on ri4&% or in%eres% in any ro er%y fro) '&i*& %&e re%"rns are (eri!e(. T&ere )"s% -e an "n)is%a2a-le in%en%ion %o for) a ar%ners&i or .oin% !en%"re . (7billo%, 1r. v. Co&&i%%ioner of $nternal Revenue, 139 'CRA 43* -. T&ere is no *on%ri-"%ion or in!es%)en% of a((i%ional *a i%al %o in*rease or e5 an( %&e in&eri%e( ro er%ies/ )erely *on%in"in4 %&e (e(i*a%ion of %&e ro er%y %o %&e "se %o '&i*& i% &a( -een "% -y %&eir fore-ears. < $bi..= *. Persons '&o *on%ri-"%e ro er%y or f"n(s %o a *o))on en%er rise an( a4ree %o s&are %&e 4ross re%"rns of %&a% en%er rise in ro or%ion %o %&eir *on%ri-"%ion/ -"% '&o se!erally re%ain %&e %i%le %o %&eir res e*%i!e *on%ri-"%ion/ are no% %&ere-y ren(ere( ar%ners. T&ey &a!e no *o))on s%o*2 *a i%al/ an( no *o))"ni%y of in%eres% as rin*i al ro rie%ors in %&e -"siness i%self fro) '&i*& %&e ro*ee(s 'ere (eri!e(. <Ele)en%s of %&e :a' of Par%ners&i -y Cloy( 6. Me*&e)/ 2n( E(./ Se*. 71/ . J4 *i%e( in Pa%"ual v. Co&&i%%ioner of $nternal Revenue, 1** 'CRA 4*0=
5. +n or(er %o *ons%i%"%e a ar%ners&i inter %e%e %&ere )"s% -e? a. an in%en% %o for) %&e sa)e@ -. 4enerally ar%i*i a%in4 in -o%& rofi%s an( losses@ *. an( s"*& a *o))"ni%y of in%eres%/ as far as %&ir( ersons are *on*erne( as ena-les ea*& ar%y %o )a2e a *on%ra*%/ )ana4e %&e -"siness/ an( (is ose of %&e '&ole ro er%y. < 0uni"ipality Pavin3 Co. v. ?errin3, 140 7. 10*), 40 $ll. 4)0/ *i%e( in Pa%"ual v. Co&&i%%ioner of $nternal Revenue, 1** 'CRA 4*0=

BAR: 45. T&e *o))on o'ners&i of ro er%y (oes no% i%self *rea%e a ar%ners&i -e%'een %&e o'ners/ %&o"4& %&ey )ay "se i% for "r ose of )a2in4 4ains/ an( %&ey )ay/ 'i%&o"% -e*o)in4 ar%ners/ are a)on4 %&e)sel!es as %o %&e )ana4e)en% an( "se of s"*& ro er%y an( %&e a li*a%ion of %&e ro*ee(s %&erefro).. <'purlo"; v,. Cil%on, 142 '.C. 3*3, 1*0 No. App. 14 / *i%e( in Pa%"ual v. Co&&i%%ioner of $nternal Revenue, 1** 'CRA 4*0 =
T&e in*o)e fro) %&e ren%al of %&e &o"se/ -o"4&% fro) %&e earnin4s of *o9 o'ne( ro er%ies/ s&all -e %rea%e( as %&e in*o)e of an "nre4is%ere( ar%ners&i %o -e %a5a-le as a *or ora%ion -e*a"se of %&e *lear in%en%ion of %&e -ro%&ers %o .oin %o4e%&er in a !en%"re for )a2in4 )oney o"% of ren%als. B&ere %&e lain%iff/ &is -ro%&er an(/ an( ano%&er a4ree( %o -e*o)e o'ners of a sin4le %ra*% of real%y &ol(in4 as %enan%s in *o))on/ an( %o (i!i(e %&e rofi%s of (is osin4 of i%/ %&e -ro%&er an( %&e o%&er no% -ein4 en%i%le( %o s&are in lain%iffs *o))issions/ no ar%ners&i e5is%e( as -e%'een %&e %&ree ar%ies/ '&a%e!er %&eir rela%ion )ay &a!e -een as %o %&ir( ar%ies. < 0a3ee v. 0a3ee, 123 N.2. *)3, 233 0a%%. 341 *i%e( in Pa%"ual v. Co&&i%%ioner of $nternal Revenue, 1** 'CRA 4*0= +n*o)e is an a)o"n% of )oney *o)in4 %o a erson 'i%&in a s e*ifie( %i)e/ '&e%&er ay)en% for ser!i*es/ in%eres%/ or rofi% fro) in!es%)en%. +% )eans *as& or i%s e,"i!alen%. +n*o)e is 4ain (eri!e( an( se!ere( fro) *a i%al/ fro) la-or or fro) -o%& *o)-ine(. Cor e5a) le/ %o %a5 a s%o*2 (i!i(en( 'o"l( -e %o %a5 a *a i%al in*rease ra%&er %&an %&e in*o)e. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., G.R. No. 10+4)*, 1anuary 20, 1999 Dis%in*%ions -e%'een 'eal%& an( in*o)e.

32

a. Ca i%al is 'eal%& or f"n(/ B;+:E in*o)e is rofi% or 4ain fro) %&e flo' of 'eal%&. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., G.R. No. 10+4)*, 1anuary 20, 1999 -. Ca i%al is a f"n( of ro er%y e5is%in4 a% an ins%an% of %i)e B;+:E in*o)e is %&a% flo' of ser!i*es ren(ere( -y %&a% *a i%al -y %&e ay)en% of )oney fro) i% or any o%&er -enefi% ren(ere( -y a f"n( of *a i%al in rela%ion %o s"*& f"n( %&ro"4& a erio( of %i)e. *. Ca i%al is 'eal%& B;+:E in*o)e is %&e ser!i*e of 'eal%&@ an( (. Ca i%al is %&e %ree B;+:E in*o)e is %&e fr"i%. (0a.ri3al v. Rafferty, 3+ P#il. 414 6eali8a%ion is (e%er)ina%i!e of earnin4 Bi%&o"% reali8a%ion/ %&ere is no in*o)e. ro*ess res"l%in4 %o in*o)e.

T&e (e%er)inin4 fa*%or for %&e i) osi%ion of in*o)e %a5 is '&e%&er any 4ain or rofi% 'as (eri!e( fro) %&e %ransa*%ion. +n %&e )e%a &or of 2i%ner v. 0a"o&ber, 242 <.'. 42*/ in*o)e is no% (ee)e( reali8e( "n%il %&e fr"i% &as -een l"*2e( fro) %&e %ree.

BAR: 46. T&e %er) %a5a-le in*o)e )eans %&e er%inen% i%e)s of 4ross in*o)e s e*ifie( in %&e Ta5 Co(e/ less %&e (e("*%ions an(Mor ersonal an( a((i%ional e5e) %ions/ if any/ a"%&ori8e( for s"*& %y es of in*o)e -y %&e Ta5 Co(e or o%&er s e*ial la's. <Se*. 11/ N+6C of 133J=
47. T&e *an*ella%ion an( for4i!eness of in(e-%e(ness )ay a)o"n% %o <a= ay)en% of in*o)e@ <-= 4if%@ or %o a <*= *a i%al %ransa*%ion (e en(in4 " on %&e *ir*")s%an*es. +f an in(i!i("al erfor)s ser!i*es for a *re(i%or '&o/ in *onsi(era%ion %&ereof/ *an*els %&e (e-%/ i% is in*o)e %o %&e e5%en% of %&e a)o"n% reali8e( -y %&e (e-%or as *o) ensa%ion for &is ser!i*es. An insol!en% (e-%or (oes no% reali8e %a5a-le in*o)e fro) %&e *an*ella%ion or for4i!eness. (Co&&i%%ioner v. 'i&&on% Gin Co., 43 :. 32) CCA 10 t# T&e insol!en% (e-%or reali8es in*o)e res"l%in4 fro) %&e *an*ella%ion or for4i!eness of in(e-%e(ness '&en &e -e*o)es sol!en%. (!a;elan. Gro"ery Co., v. Co&&i%%ioner 3* -5A (: 2+9 +f a *re(i%or )erely (esires %o -enefi% a (e-%or an( 'i%&o"% any *onsi(era%ion %&erefor *an*els %&e a)o"n% of %&e (e-% i% is a 4if% fro) %&e *re(i%or %o %&e (e-%or an( nee( no% -e in*l"(e( in %&e la%%ers in*o)e. +f a *or ora%ion %o '&i*& a s%o*2&ol(er is in(e-%e( for4i!es %&e (e-%/ %&e %ransa*%ion &as %&e effe*% of ay)en% of a (i!i(en(. <Se*. >0/ 6e!.6e4s. No. 2= T&e Alo-al sys%e) of in*o)e %a5a%ion is a sys%e) e) loye( '&ere %&e %a5 sys%e) !ie's in(ifferen%ly %&e %a5 -ase an( 4enerally %rea%s in *o))on all *a%e4ories of %a5a-le in*o)e of %&e in(i!i("al. (5an v. .el Ro%ario, 1r., 23) 'CRA 324, 331 T&e S*&e("lar sys%e) of in*o)e %a5a%ion is a sys%e) e) loye( '&ere %&e in*o)e %a5 %rea%)en% !aries an( is )a(e %o (e en( on %&e 2in( or *a%e4ory of %a5a-le in*o)e of %&e %a5 ayer. (5an v. .el Ro%ario, 1r., 23) 'CRA 324, 331 a Un(er %&e Na%ional +n%ernal 6e!en"e Co(e %&e 4lo-al sys%e) is li*a-le %o %a5a-le *or ora%ions an( %&e s*&e("lar %o in(i!i("als.

BAR:

33

BAR: 48. T&e 4eneral rin*i les of in*o)e %a5a%ion in %&e P&ili ines O6 %&e si%"s of in*o)e %a5a%ion in %&e P&ili ines O6 %&e so"r*e r"le of in*o)e %a5a%ion as a lie( in %&e P&ili ines. a. A *i%i8en of %&e P&ili ines resi(in4 %&erein is %a5a-le on all in*o)e (eri!e( fro) so"r*es 'i%&in an( 'i%&o"% %&e P&ili ines. -. A nonresi(en% *i%i8en is %a5a-le only on in*o)e (eri!e( fro) so"r*es 'i%&in %&e P&ili ines. *. An in(i!i("al *i%i8en of %&e P&ili ines '&o is 'or2in4 an( (eri!in4 in*o)e fro) a-roa( as an o!erseas *on%ra*% 'or2er is %a5a-le only on in*o)e fro) so"r*es 'i%&in %&e P&ili ines? Pro!i(e(/ T&a% a sea)an '&o is a *i%i8en of %&e P&ili ines an( '&o re*ei!es *o) ensa%ion for ser!i*es ren(ere( a-roa( as a )e)-er of %&e *o) le)en% of a !essel en4a4e( e5*l"si!ely in in%erna%ional %ra(e s&all -e %rea%e( as an o!erseas *on%ra*% 'or2er. (. An alien in(i!i("al/ '&e%&er resi(en% or no% of %&e P&ili ines/ is %a5a-le only on in*o)e (eri!e( fro) so"r*es 'i%&in %&e P&ili ines. e. A (o)es%i* *or ora%ion is %a5a-le on all in*o)e (eri!e( fro) so"r*es 'i%&in an( 'i%&o"% %&e P&ili ines. f. A forei4n *or ora%ion/ '&e%&er en4a4e( or no% in %ra(e or -"siness in %&e P&ili ines/ is %a5a-le only on in*o)e (eri!e( fro) so"r*es 'i%&in %&e P&ili ines. <Se*. 21/ N+6C of 133J= BAR: 49. Co) ensa%ion in*o)e is *onsi(ere( as &a!in4 -een earne( in %&e la*e '&ere %&e ser!i*e 'as ren(ere( an( no% *onsi(ere( as so"r*e( fro) %&e la*e of ori4in of %&e )oney. BAR: 50. Pay)en% for ser!i*es/ o%&er %&an *o) ensa%ion in*o)e/ is *onsi(ere( as &a!in4 -een earne( a% %&e la*e '&ere %&e )oney ori4ina%e( an( no% a% %&e la*e '&ere %&e a*%i!i%y or ser!i*e 'as erfor)e(.
A non9resi(en% alien/ '&o &as s%aye( in %&e P&ili ines for an a44re4a%e erio( of )ore %&an 170 (ays ("rin4 %&e *alen(ar year 2001/ s&all -e *onsi(ere( as a non9resi(en% alien (oin4 -"siness in %&e P&ili ines. Conse,"en%ly/ &e s&all -e s"-.e*% %o in*o)e %a5 on &is in*o)e (eri!e( fro) so"r*es fro) 'i%&in %&e P&ili ines. ISe*. 2> <A= <1=/ N+6CK ;e is allo'e( %o a!ail of %&e i%e)i8e( (e("*%ions in*l"(in4 %&e ersonal an( a((i%ional e5e) %ions s"-.e*% %o %&e r"le on re*i ro*i%y. +) ro erly a**")"la%e( earnin4s are %&e earnin4s or rofi%s of a *or ora%ion '&i*& are er)i%%e( %o a**")"la%e ins%ea( of -ein4 (i!i(e( -y a *or ora%ion %o i%s s&are&ol(ers for %&e "r ose of a!oi(in4 %&e in*o)e %a5 on (i!i(en(s 'i%& res e*% %o i%s s&are&ol(ers or %&e s&are&ol(ers of ano%&er *or ora%ion. +f %&e in*o)e 'ere (i!i(e( an( (is%ri-"%e(/ %&ey 'o"l( &a!e -een %a5e( as (i!i(en(s. +n a((i%ion %o o%&er in*o)e %a5es/ %&ere is i) ose( for ea*& %a5a-le year on %&e i) ro erly a**")"la%e( %a5a-le in*o)e of ea*& *or ora%ion/ an i) ro erly a**")"la%e( earnin4s %a5 e,"al %o 10N of %&e i) ro erly a**")"la%e( %a5a-le in*o)e. ISe*. 23 <A=/ N+6C of 133JK E!ery *or ora%ion for)e( or a!aile( for %&e "r ose of a!oi(in4 in*o)e %a5 'i%& res e*% %o i%s s&are&ol(ers or %&e s&are&ol(ers of ano%&er *or ora%ion/ -y er)i%%in4 earnin4s an( rofi%s %o a**")"la%e ins%ea( of -ein4 (i!i(e( or (is%ri-"%e(. ISe*. 23 <#= <1=/ N+6C of 133JK Cor ora%ions e5e) % fro) %&e i) ro erly a**")"la%e( earnin4s %a5? a. P"-li*ly9&el( *or ora%ions@ -. #an2s an( o%&er non-an2 finan*ial in%er)e(iaries@ an( *. ns"ran*e *o) anies. ISe*. 23 <#= <2=/ N+6C of 133JK

34

T&e fa*% %&a% %&e earnin4s or rofi%s of a *or ora%ion are er)i%%e( %o a**")"la%e( -eyon( %&e reasona-le nee(s of %&e -"siness s&all -e (e%er)ina%i!e of %&e "r ose %o a!oi( %&e %a5 " on i%s s&are&ol(ers or )e)-ers "nless %&e *or ora%ion/ -y *lear re on(eran*e of e!i(en*e/ s&all ro!e %&e *on%rary. ISe*. 23 <C= <2=/ N+6C of 133JK 6easona-le nee(s of -"siness in*l"(es %&e reasona-ly an%i*i a%e( nee(s of %&e -"siness. ISe*. 23 <E=/ N+6C of 133JK +n or(er %o (e%er)ine '&e%&er rofi%s are a**")"la%e( for %&e reasona-le nee(s of %&e -"siness %o a!oi( %&e s"r%a5 " on s&are&ol(ers/ i% )"s% -e s&o'n %&a% %&e *on%rollin4 in%en%ion of %&e %a5 ayer is )anifes%e( a% %&e %i)e of %&e a**")"la%ion/ no% in%en%ions (e*lare( s"-se,"en%ly/ '&i*& are )ere af%er%&o"4&%s. C"r%&er)ore/ %&e a**")"la%e( rofi%s )"s% -e "se( 'i%&in a reasona-le %i)e af%er %&e *lose of %&e %a5a-le year. (Cyana&i. P#ilippine%, $n". v. Court of Appeal%, et al., G.R. No. 10+0*), 1anuary 20, 2000 T&e %es%s %o (e%er)ine ."s%ifie( a**")"la%ion of earnin4s/ an( no% s"-.e*% %o %a5 are <a= %&e i))e(ia*y %es%@ <-= %&e 2 %o 1 ra%io@ an( %&e <*= %&e #ar(a&l for)"la. Un(er %&e i))e(ia*y %es%/ reasona-le nee(s of %&e -"siness )eans %&e i))e(ia%e nee(s of %&e -"siness/ an( i% 'as 4enerally &el( %&a% if %&e *or ora%ion (i( no% ro!e an i))e(ia%e nee( for %&e a**")"la%ion of %&e earnin4s an( rofi%s/ %&e a**")"la%ion 'as no% for %&e reasona-le nee(s of %&e -"siness an( %&e enal%y %a5 'o"l( a ly. < Cyana&i. P#ilippine%, $n". v. Court of Appeal%, et al., G.R. No. 10+0*), 1anuary 20, 2000 *i%in4 0anila Cine 0er"#ant%, $n". v. Co&&i%%ioner of $nternal Revenue in %"rn *i%in4 Mer%ens= Un(er %&e 2 %o 1 r"le/ %&e ra%io of *"rren% asse%s %o *"rren% lia-ili%ies is "se( %o (e%er)ine %&e s"ffi*ien*y of 'or2in4 *a i%al. +(eally/ %&e 'or2in4 *a i%al s&o"l( e,"al %&e *"rren% lia-ili%ies an( %&ere )"s% -e 2 "ni%s of *"rren% asse%s for e!ery "ni% of *"rren% lia-ili%y/ &en*e %&e so9*alle( 2 %o 1 6"le. < Cyana&i. P#ilippine%, $n". v. Court of Appeal%, et al., G.R. No. 10+0*), 1anuary 20, 2000 *i%in4 0anila Cine 0er"#ant%, $n". v. Co&&i%%ioner of $nternal Revenue in %"rn *i%in4 Mer%ens= T&e #ar(a&l for)"la allo's re%en%ion as 'or2in4 *a i%al reser!e/ s"ffi*ien% a)o"n%s of li,"i( asse%s %o *arry %&e *o) any %&ro"4& one o era%in4 *y*le. T&e for)"la re,"ires an e5a)ina%ion of '&e%&er %&e %a5 ayer &as s"ffi*ien% li,"i( asse%s %o ay all i%s *"rren% lia-ili%ies an( any e5%raor(inary e5 enses reasona-ly an%i*i a%e(/ l"s eno"4& %o o era%e %&e -"siness ("rin4 one o era%in4 *y*le. < Cyana&i. P#ilippine%, $n". v. Court of Appeal%, et al., G.R. No. 10+0*), 1anuary 20, 2000 *i%in4 0anila Cine 0er"#ant%, $n". v. Co&&i%%ioner of $nternal Revenue in %"rn *i%in4 Mer%ens= Al%&o"4& %&e #ar(a&l for)"la is 'ell9es%a-lis&e( an( ro"%inely a lie( -y %&e *o"r%s/ i% is no% a re*ise r"le. +% is "se( only for a()inis%ra%i!e *on!enien*e. <Cyana&i. P#ilippine%, $n". v. Court of Appeal%, et al., G.R. No. 10+0*), 1anuary 20, 2000 *i%in4 0anila Cine 0er"#ant%, $n". v. Co&&i%%ioner of $nternal Revenue in %"rn *i%in4 Mer%ens= T&e o era%in4 *y*le is %&e erio( of %i)e i% %a2es %o *on!er% *as& in%o ra' )a%erials/ ra' )a%erials in%o in!en%ory/ an( in!en%ory in%o sales/ in*l"(in4 %&e %i)e i% %a2es %o *olle*% ay)en% for %&e sales. T&ere are !aria%ions in %&e a li*a%ion of %&e #ar(a&l for)"la/ s"*& as a!era4e o era%in4 *y*le or ea2 o era%in4 *y*le. +n %i)es '&en %&ere is no re*"rren*e of a -"siness *y*le/ %&e 'or2in4 *a i%al nee(s *anno% -e re(i*%e( 'i%& a**"ra*y. < Cyana&i. P#ilippine%, $n". v. Court of Appeal%, et al., G.R. No. 10+0*), 1anuary 20, 2000

35

*i%in4 0anila Cine 0er"#ant%, $n". v. Co&&i%%ioner of $nternal Revenue in %"rn *i%in4 Mer%ens= T&e %'o <2= rin*i al a**o"n%in4 )e%&o(s for re*o4ni%ion of in*o)e are %&e <a= a**r"al )e%&o(@ an( %&e <-= *as& )e%&o(. Un(er %&e a**r"al )e%&o( of a**o"n%in4/ in*o)e is re or%a-le '&en all %&e e!en%s &a!e o**"rre( %&a% fi5 %&e %a5 ayers ri4&% %o re*ei!e %&e in*o)e/ an( %&e a)o"n% *an -e (e%er)ine( 'i%& reasona-le a**"ra*y. T&"s i% is %&e ri4&% %o re*ei!e in*o)e/ an( no% %&e a*%"al re*ei %/ %&a% (e%er)ines '&en %o in*l"(e %&e a)o"n% in 4ross in*o)e. (:ilipina% :iber Corporation v. Court of Appeal%, et al., G.R. No%. 11+49+ B 1243)), 7"tober 12, 1999 T&e re,"isi%es of %&e a**r"al )e%&o( of in*o)e re*o4ni%ion? a. T&a% %&e ri4&% %o re*ei!e %&e in*o)e )"s% -e !ali(/ "n*on(i%ional an( enfor*ea-le/ i.e. no% *on%in4en% " on f"%"re %i)e@ -. T&e a)o"n% )"s% -e reasona-ly s"s*e %i-le of a**"ra%e es%i)a%e@ an( *. T&ere )"s% -e a reasona-le e5 e*%a%ion %&a% %&e a)o"n% 'ill -e ai( in ("e *o"rse. (:ilipina% :iber Corporation v. Court of Appeal%, et al., G.R. No%. 11+49+ B 1243)), 7"tober 12, 1999 Un(er %&e *as& )e%&o( in*o)e is %o -e *ons%r"e( as in*o)e for %a5 "r oses only " on a*%"al re*ei % of %&e *as& ay)en%. +% is also referre( %o as %&e *as& re*ei %s an( (is-"rse)en%s )e%&o( -e*a"se -o%& %&e re*ei % an( (is-"rse)en%s are *onsi(ere(. T&"s/ in*o)e is re*o4ni8e( only " on a*%"al re*ei % of %&e *as& ay)en% -"% no (e("*%ions are allo'e( fro) %&e *as& in*o)e "nless a*%"ally (is-"rse( %&ro"4& an a*%"al ay)en% in *as&. T&e o%&er )e%&o(s of a**o"n%in4 are <a= %&e *o) le%ion of *on%ra*% -asis <no% re*o4ni8e( "n(er %&e N+6C of 133J=@ <-= %&e er*en%a4e of *o) le%ion )e%&o(@ an( <*= %&e ins%all)en% )e%&o(. T&e ins%all)en% -asis is a )e%&o( *onsi(ere( '&en *olle*%ions e5%en( o!er rela%i!ely lon4 erio(s of %i)e an( %&ere is a s%ron4 ossi-ili%y %&a% f"ll *olle*%ion 'ill no% -e )a(e. As *"s%o)ers )a2e ins%all)en% ay)en%s/ %&e seller re*o4ni8es %&e 4ross rofi% on sale in ro or%ion %o %&e *as& *olle*%e(. <C&a %er ++/ A**o"n%in4 Me%&o(s/ ;an(-oo2 on A"(i% Pro*e("res an( Te*&ni,"es L Vol")e +/ 6e!ision 2000/ . 194=

BAR: 51. T&e frin4e -enefi%s %a5 is a final 'i%&&ol(in4 %a5 i) ose( on %&e 4rosse(9" )one%ary !al"e of frin4e -enefi%s f"rnis&e(/ 4ran%e( or ai( -y %&e e) loyer %o %&e e) loyee/ e5*e % ran2 an( file e) loyees. I1 s% ar./ Se*. 2.11 <A=/ 6e!. 6e4s. No. 1937K +% is %&e e) loyer %&a% ays %&e %a5.
Cor "r oses of %a5a%ion/ frin4e -enefi% )eans any 4oo(/ ser!i*e/ or o%&er -enefi% f"rnis&e( or 4ran%e( in *as& or in 2in( -y an e) loyer %o an in(i!i("al e) loyee <e5*e % ran2 an( file e) loyees=/ s"*& as -"% no% li)i%e( %o? a. ;o"sin4@ -. E5 ense a**o"n%@ *. Ve&i*le of any 2in(@ (. ;o"se&ol( ersonnel/ s"*& as )ai(/ (ri!er an( o%&ers@ e. +n%eres% on loan a% less %&an )ar2e% ra%e %o %&e e5%en% of %&e (ifferen*e -e%'een %&e )ar2e% ra%e an( a*%"al ra%e 4ran%e(@ f. Me)-ers&i fees/ ("es an( o%&er e5 enses -orne -y %&e e) loyer for %&e e) loyee in so*ial an( a%&le%i* *l"-s or o%&er si)ilar or4ani8a%ions@ 4. E5 enses for forei4n %ra!el@ &. ;oli(ay an( !a*a%ion e5 enses@ i. E("*a%ional assis%an*e %o %&e e) loyee or &is (e en(en%s@ an(

36

.. :ife or &eal%& ins"ran*e an( o%&er non9life ins"ran*e re)i")s or si)ilar a)o"n%s in e5*ess of '&a% %&e la' allo's. ISe*. 11 <#=/ N+6C of 133J@ 1 s% ar./ Se*. 2.11 <#=/ 6e!. 6e4s. No. 1937K a. B&en %&e frin4e -enefi% is re,"ire( -y %&e na%"re of/ or ne*essary %o %&e %ra(e/ -"siness or rofession of %&e e) loyer@ or -. B&en %&e frin4e -enefi% is for %&e *on!enien*e or a(!an%a4e of %&e e) loyer. ISe*. 12<A=/ N+6C of 133J@ 1 s% ar./ Se*. 2.11 <A=/ 6e!. 6e4s. No. 19 37K *. Crin4e -enefi%s '&i*& are a"%&ori8e( an( e5e) %e( fro) in*o)e %a5 "n(er %&e Ta5 Co(e or "n(er any s e*ial la'@ (. Con%ri-"%ions of %&e e) loyer for %&e -enefi% of %&e e) loyee %o re%ire)en%/ ins"ran*e an( &os i%ali8a%ion -enefi% lans@ e. #enefi%s 4i!en %o %&e ran2 an( file e) loyees/ '&e%&er 4ran%e( "n(er a *olle*%i!e -ar4ainin4 a4ree)en% or no%@ an( f. (e &ini&i% -enefi%s as (efine( in %&e r"les an( re4"la%ions %o -e ro)"l4a%e( -y %&e Se*re%ary of Cinan*e " on re*o))en(a%ion of %&e Co))issioner of +n%ernal 6e!en"e. I1 s% ar./ Se*. 12 <C=/ N+6C of 133J@ Se*. 2.11 <C=/ 6e!. 6e4s. No. 1937K (e &ini&i% -enefi%s are fa*ili%ies an( ri!ile4es <s"*& as en%er%ain)en%/ )e(i*al ser!i*es/ or so9*alle( *o"r%esy (is*o"n%s on "r*&ases=/ f"rnis&e( or offere( -y an e) loyer %o &is e) loyees. T&ey are no% *onsi(ere( as *o) ensa%ion s"-.e*% %o in*o)e %a5 an( *onse,"en%ly %o 'i%&&ol(in4 %a5/ if s"*& fa*ili%ies are offere( or f"rnis&e( -y %&e e) loyer )erely as a )eans of ro)o%in4 %&e &eal%&/ 4oo('ill/ *on%en%)en%/ or effi*ien*y of &is e) loyees. ISe*. 2.J7/1 <A= <1=/ 6e!. 6e4s. 2937 as a)en(e( -y 6e!. 6e4s. No. 792000K

BAR: 52. Crin4e -enefi%s %&a% are no% s"-.e*% %o %&e frin4e -enefi%s %a5?

BAR: 53. T&e follo'in4 s&all -e *onsi(ere( as .e &ini&i% -enefi%s no% s"-.e*% %o 'i%&&ol(in4 %a5 on *o) ensa%ion in*o)e of -o%& )ana4erial an( ran2 an( file e) loyees? a. Mone%i8e( "n"se( !a*a%ion lea!e *re(i%s of e) loyees no% e5*ee(in4 %en <10= (ays ("rin4 %&e year@ -. Me(i*al *as& allo'an*e %o (e en(en%s of e) loyees no% e5*ee(in4 PJ>0.00 er e) loyee er se)es%er or P12> er )on%&@ *. 6i*e s"-si(y of P1/000.00 or one <1= sa*2 of >0924. ri*e er )on%& a)o"n%in4 %o no% )ore %&an P1/000.00@ (. Unifor)s an( *lo%&in4 allo'an*e no% e5*ee(in4 P1/000.00 er ann")@ e. A*%"al yearly )e(i*al -enefi%s no% e5*ee(in4 P10/000.00 er ann")@ f. :a"n(ry allo'an*e no% e5*ee(in4 P100 er )on%&@ 4. E) loyees a*&ie!e)en% a'ar(s/ e.4. for len4%& of ser!i*e or safe%y a*&ie!e)en%/ '&i*& )"s% -e in %&e for) of a %an4i-le ersona ro er%y o%&er %&an *as& or 4if% *er%ifi*a%e/ 'i%& an ann"al )one%ary !al"e no% e5*ee(in4 P10/000.00 re*ei!e( -y an e) loyee "n(er an es%a-lis&e( 'ri%%en lan '&i*& (oes no% (is*ri)ina%e in fa!or of &i4&ly ai( e) loyees@ &. Aif%s 4i!en ("rin4 C&ris%)as an( )a.or anni!ersary *ele-ra%ions no% e5*ee(in4 P>/000 er e) loyee er ann")@ i. Clo'ers/ fr"i%s/ -oo2s/ or si)ilar i%e)s 4i!en %o e) loyees "n(er s e*ial *ir*")s%an*es/ e.4. on a**o"n% of illness/ )arria4e/ -ir%& of a -a-y/ e%*.@ an( .. Daily )eal allo'an*e for o!er%i)e 'or2 no% e5*ee(in4 %'en%y fi!e er*en% <2>N= of %&e -asi* )ini)") 'a4e. T&e a)o"n% of .e &ini&i% -enefi%s *onfor)in4 %o %&e *eilin4 &erein res*ri-e( s&all no% -e *onsi(ere( in (e%er)inin4 %&e P10/000 *eilin4 of o%&er -enefi%s ro!i(e( "n(er Se*%ion 12 <#=<J=<e= of %&e Co(e. ;o'e!er/ if %&e e) loyer ays )ore %&an %&e *eilin4 res*ri-e( -y %&ese re4"la%ions/ %&e e5*ess s&all -e %a5a-le %o %&e e) loyee re*ei!in4 %&e -enefi%s only if s"*& e5*ess is -eyon( %&e P10/000.00 *eilin4/ ro!i(e(/ f"r%&er/ %&a% any a)o"n% 4i!en -y %&e

37

e) loyer as -enefi%s %o i%s e) loyees/ '&e%&er *lassifie( as .e &ini&i% -enefi%s or frin4e -enefi%s/ s&all *ons%i%"%e as (e("*%i-le e5 ense " on s"*& e) loyer. ISe*. 2.J7.1 <A= <1=/ 6e!. 6e4s. 2937 as a)en(e( -y 6e!. 6e4s. No. 792000K 51. +n*o)e s"-.e*% %o final %a5 refers %o an in*o)e *olle*%e( %&ro"4& %&e 'i%&&ol(in4 %a5 sys%e). T&e ayor of %&e in*o)e 'i%&&ol(s %&e %a5 an( re)i%s i% %o %&e 4o!ern)en% as a final se%%le)en% of %&e in*o)e %a5 as a final se%%le)en% of %&e in*o)e %a5 ("e on sai( in*o)e. T&e re*i ien% is no lon4er re,"ire( %o in*l"(e %&e in*o)e s"-.e*%e( %o a final %a5 as ar% of &is 4ross in*o)e in &is in*o)e %a5 re%"rn. T'o e5a) les of in*o)e s"-.e*% %o final %a5 are in%eres% fro) -an2 (e osi%s an( royal%ies. 54. 6oyal%ies s"-.e*% %o final %a5 in*l"(es %e*&ni*al a(!i*e/ assis%an*e or ser!i*es ren(ere( in *onne*%ion 'i%& %e*&ni*al )ana4e)en% or a()inis%ra%ion of any s*ien%ifi*/ in("s%rial or *o))er*ial "n(er%a2in4/ !en%"re/ ro.e*% or s*&e)e/ s"*& as *ons"l%an*y an( %e*&ni*al ser!i*es ren(ere( in*i(en%al %o %&e (is%ri-"%ion/ s" or% an( "se of *o) "%er sys%e)s.

BAR:

BAR: 55. S%o*2 (i!i(en(s are "nreali8e( 4ains an( *anno% -e s"-.e*% %o in*o)e %a5 "n%il %&e 4ains &a!e -een reali8e(. #efore reali8a%ion/ s%o*2 (i!i(en(s are no%&in4 -"% a re resen%a%ion of an in%eres% in %&e *or ora%e ro er%ies. As *a i%al/ i% is no% ye% s"-.e*% %o in*o)e %a5. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., G.R. No. 10+4)*, 1anuary 20, 1999 An e5a) le of reali8a%ion 'o"l( -e sales of %&e s%o*2 (i!i(en(s/ or '&ere %&e iss"an*e res"l%s %o a ro or%iona%e *&an4e in o'ners&i .
E5*l"sions (is%in4"is&e( fro) (e("*%ions? a. E5*l"sions fro) 4ross in*o)e refer %o a flo' of 'eal%& %o %&e %a5 ayer '&i*& are no% %rea%e( as ar% of 4ross in*o)e for "r oses of *o) "%in4 %&e %a5 ayers %a5a-le in*o)e/ ("e %o %&e follo'in4 reasons? <1= +% is e5e) %e( -y %&e f"n(a)en%al la'@ <2= +% is e5e) %e( -y s%a%"%e@ an( <1= +% (oes no% *o)e 'i%&in %&e (efini%ion of in*o)e <Se*. H1/ 6e!. 6e4s. No. 2= B;+:E (e("*%ions are %&e a)o"n%s '&i*& %&e la' allo's %o -e s"-%ra*%e( fro) 4ross in*o)e in or(er %o arri!e a% ne% in*o)e. -. E5*l"sions er%ain %o %&e *o) "%a%ion of 4ross in*o)e B;+:E (e("*%ions er%ain %o %&e *o) "%a%ion of ne% in*o)e. *. E5*l"sions are so)e%&in4 re*ei!e( or earne( -y %&e %a5 ayer '&i*& (o no% for) ar% of 4ross in*o)e B;+:E (e("*%ions are so)e%&in4 s en% or ai( in earnin4 4ross in*o)e. An e5a) le of an e5*l"sion fro) 4ross in*o)e are life ins"ran*e ro*ee(s/ an( an e5a) le of a (e("*%ion are losses. a. Pro*ee(s of life ins"ran*e oli*ies ai( %o %&e &eirs or -enefi*iaries " on %&e (ea%& of %&e ins"re( '&e%&er in a sin4le s") or o%&er'ise. -. A)o"n%s re*ei!e( -y %&e ins"re( as a re%"rn of re)i")s ai( -y &i) "n(er life ins"ran*e/ en(o')en% or ann"i%y *on%ra*%s ei%&er ("rin4 %&e %er)/ or a% )a%"ri%y of %&e %er) )en%ione( in %&e *on%ra*%/ or " on s"rren(er of %&e *on%ra*%. *. Val"e of ro er%y a*,"ire( -y 4if%/ -e,"es%/ (e!ise/ or (es*en%. (. A)o"n%s re*ei!e(/ %&ro"4& a**i(en% or &eal%& ins"ran*e or Bor2)ens Co) ensa%ion A*%s as *o) ensa%ion for ersonal in."ries or si*2ness/ l"s %&e a)o"n%s of any (a)a4es re*ei!e( on '&e%&er -y s"i% or a4ree)en% on a**o"n% of s"*& in."ries or si*2ness. e. +n*o)e of any 2in( %o %&e e5%en% re,"ire( -y any %rea%y o-li4a%ion -in(in4 " on %&e Ao!ern)en% of %&e P&ili ines.

BAR: 56. T&e follo'in4 are e5*l"(e( fro) 4ross in*o)e?

38

f. 6e%ire)en% -enefi%s re*ei!e( "n(er 6e "-li* A*% No. JH41. 6e%ire)en% re*ei!e( fro) reasona-le ri!a%e -enefi% lan af%er *o) lian*e 'i%& *er%ain *on(i%ions. A)o"n%s re*ei!e( for -eyon( *on%rol se ara%ion. Corei4n so*ial se*"ri%y/ re%ire)en% 4ra%"i%ies/ ensions/ e%*. USVA -enefi%s/ SSS -enefi%s an( AS+S -enefi%s.

BAR: 57. Con(i%ions for e5*l"(in4 re%ire)en% -enefi%s fro) 4ross in*o)e/ &en*e %a59e5e) %? a. 6e%ire)en% -enefi%s re*ei!e( "n(er 6e "-li* A*% No. JH41 an( %&ose re*ei!e( -y offi*ials an( e) loyees of ri!a%e fir)s/ '&e%&er in(i!i("al or *or ora%e/ in a**or(an*e 'i%& %&e e) loyers reasona-le ri!a%e -enefi% lan a ro!e( -y %&e #+6. -. 6e%irin4 offi*ial or e) loyee 1= +n %&e ser!i*e of %&e sa)e e) loyer for a% leas% %en <10= years@ 2= No% less %&an fif%y <>0= years of a4e a% %i)e of re%ire)en%@ 1= A!aile( of %&e -enefi% of e5*l"sion only on*e. ISe*. 12 <#= <H= <a=/ N+6C of 133JK T&e re%irin4 offi*ial or e) loyee s&o"l( no% &a!e re!io"sly a!aile( of %&e ri!ile4e "n(er %&e re%ire)en% lan of %&e sa)e or ano%&er e) loyer. I1s% ar./ Se*. 2.J7 <#= <1=/ 6e!. 6e4s. No. 2937K
&en*e %a59e5e) %? a. Any a)o"n% re*ei!e( -y an offi*ial/ e) loyee or -y &is &eirs/ -. Cro) %&e e) loyer *. As a *onse,"en*e of se ara%ion of s"*& offi*ial or e) loyee fro) %&e ser!i*e of %&e e) loyer -e*a"se of 1= Dea%&/ si*2ness or o%&er &ysi*al (isa-ili%y@ or 2= Cor any *a"se -eyon( %&e *on%rol of sai( offi*ial or e) loyee ISe*. 12 <#= <H= <-=/ N+6C of 133JK/ s"*& as re%ren*&)en%/ re("n(an*y an( *essa%ion of -"siness. I1 s% ar./ Se*. 2.J7 <#=/ <1= <-=/ 6e!. 6e4s. No. 2937K %a5a-le? a. Pri8es an( a'ar(s )a(e ri)arily in re*o4ni%ion of reli4io"s/ *&ari%a-le/ s*ien%ifi*/ e("*a%ional/ ar%is%i*/ li%erary/ or *i!i* a*&ie!e)en% -"% only if 1= T&e re*i ien% 'as sele*%e( 'i%&o"% any a*%ion on &is ar% %o en%er %&e *on%es% or ro*ee(in4@ an( 2= T&e re*i ien% is no% re,"ire( %o ren(er s"-s%an%ial f"%"re ser!i*es as a *on(i%ion %o re*ei!in4 %&e ri8e or a'ar(. ISe*. 12 <#= OJP O*P/ N+6C of 133JK -. All ri8es an( a'ar(s 1= Aran%e( %o a%&le%es 2= +n lo*al an( in%erna%ional s or%s %o"rna)en%s an( *o) e%i%ions 1= B&e%&er &el( in %&e P&ili ines or a-roa(/ an( 4= San*%ione( -y %&eir na%ional s or%s asso*ia%ions ISe*. 12<#= OJP O(P/ N+6C of 133JK/ '&i*& er #+6 r"lin4 is a**re(i%a%ion 'i%& %&e P&ili ine Oly) i* Co))i%%ee. No%e %&a% %&e e5e) %ion refers only %o a)a%e"r s or%s. Cor rofessional -o5in4/ a s e*ial la' 4ran%s %&e e5e) %ion no% %&e N+6C. Only resi(en% *i%i8ens an( resi(en% alien in(i!i("als are allo'e( %o (e("*% %&e o %ional s%an(ar( (e("*%ion on %&eir 4ross in*o)e o%&er %&an assi!e or *o) ensa%ion in*o)e. Nonresi(en% in(i!i("als/ es%a%es/ %r"s%s or *or ora%ions are no% allo'e( %o a!ail of %&is (e("*%ion.

BAR: 58. Se ara%ion <re%ire)en%= ay e5*l"(e( fro) 4ross in*o)e/

BAR:

59.

Pri8es %&a% are e5*l"(e( fro) 4ross in*o)e/ &en*e no%

BAR: 60. +%e)i8e( (e("*%ions fro) 4ross in*o)e an( '&o )ay a!ail?

39

a. O !"#$ % $#! #&'&(($ % %ra(e/ -"siness or rofessional &)*&#(&(. -. T&e a)o"n% of "#+& &(+ ai( or in*"rre( 'i%&in a %a5a-le year on in(e-%e(ness in *onne*%ion 'i%& %&e %a5 ayers rofession/ %ra(e or -"siness. 6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es o%&er fro) *o) ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5 enses. Do)es%i* *or ora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5 ense. Nonresi(en% *i%i8ens an( forei4n *or ora%ions on %&eir 4ross in*o)es fro) 'i%&in )ay also (e("*% %&is e5 ense. Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e P&ili ines are no% allo'e( %o (e("*% %&is e5 ense. *. T$)&( ai( or in*"rre( 'i%&in %&e %a5a-le year in *onne*%ion 'i%& %&e %a5 ayers rofession. 6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es o%&er fro) *o) ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5 enses. Do)es%i* *or ora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5 ense. Nonresi(en% *i%i8ens an( forei4n *or ora%ions on %&eir 4ross in*o)es fro) 'i%&in )ay also (e("*% %&is e5 ense. Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e P&ili ines are no% allo'e( %o (e("*% %&is e5 ense. (. Or(inary ,-((&(/ losses fro) *as"al%y/ %&ef% or e)-e88le)en%@ an( ne% o era%in4 losses. 6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es o%&er fro) *o) ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5 enses. Do)es%i* *or ora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5 ense. Nonresi(en% *i%i8ens an( forei4n *or ora%ions on %&eir 4ross in*o)es fro) 'i%&in )ay also (e("*% %&is e5 ense. Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e P&ili ines are no% allo'e( %o (e("*% %&is e5 ense. e. B$! !&.+( ("e %o %&e %a5 ayer/ a*%"ally as*er%aine( %o -e 'or%&less an( *&ar4e( off 'i%&in %&e %a5a-le year/ *onne*%e( 'i%& rofession/ %ra(e or -"siness/ no% s"s%aine( -e%'een rela%e( ar%ies. 6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es o%&er fro) *o) ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5 enses. Do)es%i* *or ora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5 ense. Nonresi(en% *i%i8ens an( forei4n *or ora%ions on %&eir 4ross in*o)es fro) 'i%&in )ay also (e("*% %&is e5 ense. Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e P&ili ines are no% allo'e( %o (e("*% %&is e5 ense. f. /&* &'"$+"-# or a reasona-le allo'an*e for %&e e5&a"s%ion/ 'ear an( %ear <in*l"(in4 reasona-le allo'an*e for o-soles*en*e= of ro er%y "se( in %ra(e or -"siness. 6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es o%&er fro) *o) ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5 enses. Do)es%i* *or ora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5 ense. Nonresi(en% *i%i8ens an( forei4n *or ora%ions on %&eir 4ross in*o)es fro) 'i%&in )ay also (e("*% %&is e5 ense. Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e P&ili ines are no% allo'e( %o (e("*% %&is e5 ense. 4. /&*,&+"-# or (e("*%ion arisin4 fro) %&e e5&a"s%ion of a non9 re la*ea-le asse%/ "s"ally a na%"ral reso"r*e. 6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es o%&er fro) *o) ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5 enses. Do)es%i* *or ora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5 ense.

40

Nonresi(en% *i%i8ens an( forei4n *or ora%ions on %&eir 4ross in*o)es fro) 'i%&in )ay also (e("*% %&is e5 ense. Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e P&ili ines are no% allo'e( %o (e("*% %&is e5 ense. &. C0$ "+$.,& an( o%&er '-#+ ".1+"-#(. 6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es o%&er fro) *o) ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5 enses. Do)es%i* *or ora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5 ense. Nonresi(en% *i%i8ens an( forei4n *or ora%ions on %&eir 4ross in*o)es fro) 'i%&in )ay also (e("*% %&is e5 ense. Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e P&ili ines are no% allo'e( %o (e("*% %&is e5 ense. i. R&(&$ '0 $#! !&2&,-*3&#+ e5 en(i%"res %rea%e( as (eferre( e5 enses ai( or in*"rre( -y %&e %a5 ayer in *onne*%ion 'i%& &is %ra(e/ -"siness or rofession/ no% (e("*%e( as e5 enses an( *&ar4ea-le %o *a i%al a**o"n% -"% no% *&ar4ea-le %o ro er%y of a *&ara*%er '&i*& is s"-.e*% %o (e re*ia%ion or (e le%ion. 6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es o%&er fro) *o) ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5 enses. Do)es%i* *or ora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5 ense. Nonresi(en% *i%i8ens an( forei4n *or ora%ions on %&eir 4ross in*o)es fro) 'i%&in )ay also (e("*% %&is e5 ense. Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e P&ili ines are no% allo'e( %o (e("*% %&is e5 ense. .. C-#+ ".1+"-#( +- *&#("-# + 1(+( . 6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es o%&er fro) *o) ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5 enses. Do)es%i* *or ora%ions/ es%a%es an( %r"s%s )ay also (e("*% %&is e5 ense. Nonresi(en% *i%i8ens an( forei4n *or ora%ions on %&eir 4ross in*o)es fro) 'i%&in )ay also (e("*% %&is e5 ense. Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e P&ili ines are no% allo'e( %o (e("*% %&is e5 ense. 2. I#(1 $#'& * &3"13( for &eal%& an( &os i%ali8a%ion. 6esi(en% *i%i8ens/ resi(en% alien in(i!i("als an( nonresi(en% alien in(i!i("als '&o are en4a4e( in %ra(e an( -"siness/ on %&eir 4ross in*o)es o%&er fro) *o) ensa%ion in*o)e are allo'e( %o (e("*% %&ese e5 enses. Nonresi(en% *i%i8ens an( nonresi(en% alien in(i!i("al en4a4e( in %ra(e or -"siness in %&e P&ili ine on %&eir 4ross in*o)es fro) 'i%&in )ay also (e("*% %&ese re)i")s. Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e P&ili ines are no% allo'e( %o (e("*% %&ese re)i")s. l. 4& (-#$, $#! $!!"+"-#$, &)&3*+"-#( . 6esi(en% *i%i8ens/ an( resi(en% alien on %&eir 4ross in*o)es an( fro) *o) ensa%ion in*o)e are allo'e( %o (e("*% %&ese re)i")s. Nonresi(en% *i%i8ens on %&eir 4ross in*o)es fro) 'i%&in )ay also (e("*% %&is e5 ense. Nonresi(en% alien in(i!i("als en4a4e( in %ra(e or -"siness in %&e P&ili ines are allo'e( %o (e("*% %&ese e5e) %ions "n(er re*i ro*i%y. Nonresi(en% alien in(i!i("als no% en4a4e( in %ra(e or -"siness in %&e P&ili ines are no% allo'e( %o (e("*% %&is e5 ense. E5%raor(inary (e("*%ions a. T&ose allo'e( %o ins"ran*e *o) anies -. De("*%ions allo'e( %o es%a%es an( %r"s%s a!ailin4 of i%e)i8e( (e("*%ions of in*o)e *"rren%ly (is%ri-"%e( %o -enefi*iaries. *. :osses fro) 'as& sales of s%o*2s or se*"ri%ies. (. Cer%ain *a i%al losses -"% only fro) *a i%al 4ains. Or(inary e5 enses are %&ose '&i*& are *o))on %o in*"r in %&e %ra(e or -"siness of %&e %a5 ayer B;+:E *a i%al e5 en(i%"res are %&ose in*"rre( %o

41

i) ro!e asse%s an( -enefi%s for )ore %&an one %a5a-le year. Or(inary e5 enses are "s"ally in*"rre( ("rin4 a %a5a-le year an( -enefi%s s"*& %a5a-le year. Ne*essary e5 enses are %&ose '&i*& are a ro ria%e or &el f"l %o %&e -"siness. e5 enses? a. Co) lian*e 'i%& %&e -"siness %es%? 1= M"s% -e or(inary an( ne*essary@ 2= M"s% -e ai( or in*"rre( 'i%&in %&e %a5a-le year@ 1= M"s% -e ai( or in*"rre( in *arryin4 on a %ra(e or -"siness. 4= M"s% no% -e -ri-es/ 2i*2-a*2s or o%&er ille4al e5 en(i%"res -. Co) lian*e 'i%& %&e s"-s%an%ia%ion %es%. Proof -y e!i(en*e or re*or(s of %&e (e("*%ions allo'e( -y la' in*l"(in4 *o) lian*e 'i%& %&e -"siness %es%.

BAR: 61. T&e follo'in4 are %&e re,"isi%es for (e("*%i-ili%y of -"siness

sale of )er*&an(ise are no% (e("*%i-le T&ese are e5 en(i%"res in or(er %o *rea%e or )ain%ain so)e for) of 4oo('ill. T&ese e5 en(i%"res are %o -e s rea( o!er a reasona-le erio( of %i)e -e*a"se %&ey are *onsi(ere( %&a% a *a i%al asse% '&i*& &as a (e%er)ina-le life &as -een a*,"ire(. (General :oo.% @P#il%.A, $n". v. Co&&i%%ioner of $nternal Revenue, C5A Ca%e No. 43+*, :ebruary +, 1994

BAR: 62. A(!er%isin4 e5 enses no% (esi4ne( %o s%i)"la%e %&e f"%"re

E5 enses in*"rre( %o *rea%e a fa!ora-le i)a4e for %&e *or ora%ion %o 4enera%e sales of i%s s&ares of s%o*2 *ons%i%"%e *a i%al in!es%)en% -e*a"se %&e ar%i*"lar a(!er%isin4 e5 ense 'as in*"rre( in rela%ion %o %&e *a i%al asse% or e,"i%y of %&e *o) any (Atla% Con%oli.ate. 0inin3 an. (evelop&ent Corporation v. Co&&i%%ioner of $nternal Revenue, 102 'CRA 24* , an( are %o-e *a i%ali8e( or s rea( o!er a reasona-le erio(. 6e,"isi%es of (e("*%i-ili%y of En%er%ain)en%/ A)"se)en% an( 6e*rea%ion E5 enses? a. +% )"s% -e a reasona-le allo'an*e for en%er%ain)en%/ a)"se)en% an( re*rea%ion e5 enses ISe*. 14 <A= <1= <i!=/ N+6C of 133JK@ -. +% )"s% -e ai( or in*"rre( ("rin4 %&e %a5a-le year@ *. +% )"s% -e 1= (ire*%ly *onne*%e( %o %&e (e!elo )en%/ )ana4e)en% an( o era%ion of %&e %ra(e/ -"siness or rofession of %&e %a5 ayer/ or 2= (ire*%ly rela%e( %o or in f"r%&eran*e of %&e *on("*% of i%s %ra(e/ -"siness or e5er*ise of a rofession@ (. +% )"s% no% -e *on%rary %o la'/ )orals/ 4oo( *"s%o)s/ "-li* oli*y or "-li* or(er@ e. +% )"s% no% &a!e -een ai(/ (ire*%ly or in(ire*%ly/ %o an offi*ial or e) loyee of %&e na%ional 4o!ern)en%/ or any lo*al 4o!ern)en% "ni%/ or of any 4o!ern)en%9o'ne( or *on%rolle( *or ora%ion <AOCC=/ or of a forei4n 4o!ern)en%/ or %o a ri!a%e in(i!i("al/ or *or ora%ion/ or 4eneral rofessional ar%ners&i <APP=/ or a si)ilar en%i%y/ if i% *ons%i%"%es a -ri-e/ 2i*2-a*2 or o%&er si)ilar ay)en%@ f. +% )"s% -e ("ly s"-s%an%ia%e( -y a(e,"a%e roof. T&e offi*ial re*ei %s/ or in!oi*es/ or -ills or s%a%e)en%s of a**o"n%s s&o"l( -e in %&e na)e of %&e %a5 ayer *lai)in4 %&e (e("*%ion@ an( 4. T&e a ro ria%e a)o"n% of 'i%&&ol(in4 %a5/ if a li*a-le/ s&o"l( &a!e 'i%&&el( %&erefro) an( ai( %o %&e #"rea" of +n%ernal 6e!en"e. <Se*. 4/ 6e!. 6e4s. No. 1092002= i. +% )"s% *onfor) %o %&e follo'in4 *eilin4s? 1= in an a)o"n% e,"i!alen% %o %&e a*%"al en%er%ain)en%/ a)"se)en% an( re*rea%ion e5 ense ai( or in*"rre( 'i%&in %&e %a5a-le year -y %&e %a5 ayer/

42

2= -"% in no *ase s&all s"*& (e("*%ion e5*ee( 0.>0 er*en% <.>N= of ne% sales <i.e. 4ross sales less sales re%"rnsMallo'an*es an( sales (is*o"n%s= for %a5 ayers en4a4e( in sale of 4oo(s or ro er%ies@ or 1= 1.00 er*en% <1N= of ne% re!en"e <i.e./ 4ross re!en"e less (is*o"n%s= for %a5 ayers en4a4e( in sale of ser!i*es/ in*l"(in4 e5er*ise of rofession an( "se or lease of ro er%ies. 4= ;o'e!er/ if %&e %a5 ayer is (eri!in4 in*o)e fro) -o%& sale of 4oo(sM ro er%ies an( ser!i*es/ %&e allo'a-le en%er%ain)en%/ a)"se)en% an( re*rea%ion e5 ense s&all in all *ases -e (e%er)ine( -ase( on an a or%ion)en% for)"la %a2in4 in%o *onsi(era%ion %&e er*en%a4e of %&e ne% salesMne% re!en"e %o %&e %o%al ne% salesMne% re!en"e/ -"% '&i*& in no *ase s&all e5*ee( %&e )a5i)") er*en%a4e *eilin4. <Se*. >/ $bi..= B&o are allo'e( %o (e("*% en%er%ain)en%/ a)"se)en% an( re*rea%ion e5 enses? a. +n(i!i("als en4a4e( in %ra(e or -"siness/ in*l"(in4 %a5a-le es%a%es an( %r"s%s@ -. +n(i!i("als en4a4e( in %&e ra*%i*e of rofession@ *. Do)es%i* *or ora%ions@ (. 6esi(en% forei4n *or ora%ions@ e. Aeneral rofessional ar%ners&i s. En%er%ain)en%/ A)"se)en% an( 6e*rea%ion E5 enses/ in*l"(e re resen%a%ion e5 enses an(Mor (e re*ia%ion or ren%al e5 ense rela%in4 %o en%er%ain)en% fa*ili%ies. <1 s% ar./ Se*. 2/ 6e!. 6e4s. 11092002= 6e resen%a%ion e5 enses/ s&all refer %o e5 enses in*"rre( -y a %a5 ayer in *onne*%ion 'i%& %&e *on("*% of &is %ra(e/ -"siness or e5er*ise of rofession/ in en%er%ainin4/ ro!i(in4 a)"se)en% an( re*rea%ion %o/ or )ee%in4 'i%& a 4"es% or 4"es%s a% a (inin4 la*e/ la*e of a)"se)en%/ *o"n%ry *l"-/ %&ea%er/ *on*er%/ lay/ s or%in4 e!en%/ an( si)ilar e!en%s or la*es. <2 n( ar./ Se*. 2/ 6e!. 6e4s. 1092002= 6e resen%a%ion e5 enses s&all no% refer %o fi5e( re resen%a%ion allo'an*es %&a% are s"-.e*% %o 'i%&&ol(in4 %a5 on 'a4es "rs"an% %o a ro ria%e re!en"e re4"la%ions. <$bi..= Cl"- ("es/ '&en frin4e -enefi%s an( '&en re resen%a%ion e5 enses. +n %&e *ase ar%i*"larly of a *o"n%ry/ 4olf/ s or%s *l"-/ or any o%&er si)ilar *l"'&ere %&e e) loyee or offi*er of %&e %a5 ayer is %&e re4is%ere( )e)-er an( %&e e5 enses in*"rre( in rela%ion %&ere%o are ai( for -y %&e %a5 ayer/ %&ere s&all -e a res") %ion %&a% s"*& e5 enses are frin4e -enefi%s s"-.e*% %o frin4e -enefi%s %a5 "nless %&e %a5 ayer *an ro!e %&a% %&ese are a*%"ally re resen%a%ion e5 enses. Cor "r ose of ro!in4 %&a% %&e sai( e5 ense is a re resen%a%ion e5 ense an( no% frin4e -enefi%s/ %&e %a5 ayer s&o"l( )ain%ain re*ei %s an( a(e,"a%e re*or(s %&a% in(i*a%e a= %&e a)o"n% of e5 ense -= (a%e an( la*e of e5 ense *= "r ose of e5 ense (= rofessional or -"siness rela%ions&i of e5 ense (= rofessional or -"siness rela%ions&i of e5 ense e= na)e of erson an( *o) any en%er%aine( 'i%& *on9%a*% (e%ails. <2 n( ar./ Se*. 2/ 6e!. 6e4s. 1092002= D"es ai( -y *o) any offi*ers %o any one *l"- (e("*%i-le -y e) loyer as -"siness e5 ense -"% no% as re resen%a%ion or en%er%ain)en%? a. D"es ai( %o any one so*ial/ a%&le%i*/ or s or%in4 *l"- or or4ani8a%ion er offi*er )ay -e (e("*%i-le as a -"siness e5 ense. ;o'e!er/ "r*&ase of ro rie%ary s&ares an( layin4 ri4&%s an( e5 enses in %&e sai( *l"- or or4ani8a%ion )ay -e (e("*%i-le only if sai( e5 ense *o) lies 'i%& %&e r"les on

43

s"-s%an%ia%ion. D"es on *o) any )e)-ers&i *ons%i%"%e (e("*%i-le e5 ense. <No. 1.4.2/ 6AMO No. 197J= -. D"es or fees ai( %o rofessional or -"siness or4ani8a%ions an( *i!i* *l"-s s"*& as :ions/ 6o%ary/ Diwani% s&all -e (e("*%i-le %o %&e e) loyer %o %&e e5%en% of one *l"-. <No. 1.4.1/ 6AMO No. 197J= T&e a-o!e ro!isions of 6AMO No. 197J are %o -e rea( in rela%ion %o %&e ro!isions of 6e!. 6e4s. No. 1092002. +f *onsi(ere( as a frin4e -enefi% s"-.e*% %o %&e frin4e -enefi%s %a5 "n(er Se*. 11/ N+6C of 133J/ )ay -e (e("*%i-le fro) %&e e) loyerEs 4ross in*o)e. En%er%ain)en% fa*ili%ies s&all refer %o <1= a ya*&%/ !a*a%ion &o)e or *on(o)ini")@ an( 2= any si)ilar i%e) of real or ersonal ro er%y "se( -y %&e %a5 ayer ri)arily for %&e en%er%ain)en%/ a)"se)en%/ or re*rea%ion of 4"es%s or e) loyees. To -e *onsi(ere( an en%er%ain)en% fa*ili%y/ s"*& ya*&%/ !a*a%ion &o)e or *on(o)ini")/ or i%e) of real or ersonal ro er%y )"s% -e o'ne( or for) ar% of %&e %a5 ayers %ra(e/ -"siness or rofession/ or ren%e( -y s"*& %a5 ayer/ for '&i*& %&e %a5 ayer *lai)s a (e re*ia%ion or ren%al e5 ense. A ya*&% s&all -e *onsi(ere( an en%er%ain)en% fa*ili%y if i%s "se is in fa*% no% res%ri*%e( %o s e*ifie( offi*ers or e) loyees or osi%ions in s"*& a )anner as %o )a2e %&e sa)e a frin4e -enefi% for "r oses of i) osin4 %&e frin4e -enefi%s %a5. <4%& ar./ Se*. 2/ 6e!. 6e4s. 1092002= A"es%s s&all )ean ersons or en%i%ies 'i%& '&i*& %&e %a5 ayer &as (ire*% -"siness rela%ions/ s"*& as -"% no% li)i%e( %o/ *lien%sM*"s%o)ers or ros e*%i!e *lien%sM*"s%o)ers. T&e %er) s&all no% in*l"(e e) loyees/ offi*ers/ ar%ners/ (ire*%ors/ s%o*2&ol(ers/ or %r"s%ees of %&e %a5 ayer. <las% ar./ Se*. 2/ 6e!. 6e4s. No. 1092002= E5 enses no% *onsi(ere( as en%er%ain)en%/ a)"se)en% an( re*rea%ional e5 enses? a. E5 enses '&i*& are %rea%e( as *o) ensa%ion or frin4e -enefi%s for ser!i*es ren(ere( "n(er an e) loyer9e) loyee rela%ions&i @ -. E5 enses for *&ari%a-le or f"n( raisin4 e!en%s@ *. E5 enses for -ona fi(e -"siness )ee%in4 of s%o*29&ol(ers/ ar%ners or (ire*%ors@ (. E5 enses for a%%en(in4 or s onsorin4 an e) loyee %o a -"siness lea4"e or rofessional or4ani8a%ional )ee%in4@ e. E5 enses or4ani8e( for ro)o%ion/ )ar2e%in4 an( a(!er%isin4 in*l"(in4 *on*er%s/ *onferen*es/ se)inars/ 'or2s&o s/ *on!en%ions/ an( o%&er si)ilar e!en%s@ f. O%&er e5 enses of si)ilar na%"re. No%'i%&s%an(in4 %&e fore4oin4 s"*& i%e)s of e5*l"sions )ay/ none%&eless ,"alify as i%e)s of (e("*%ion "n(er Se*%ion 14 of %&e Ta5 Co(e of 133J/ s"-.e*% %o *on(i%ions for (e("*%i-ili%y s%a%e( %&erein. <Se*. 1/ 6e!. 6e4s. No. 1092002= 6ei)-"rse)en%s for e5 enses rela%in4 %o en%er%ain)en% s&all -e (e("*%i-le -y %&e e) loyer if a. Use( ri)arily for %&e f"r%&eran*e of e) loyers %ra(e or -"siness -. Only %o %&e e5%en% allo'a-le/ %&e sa)e is (ire*%ly rela%e( %o %&e a*%i!e *on("*% of %&e e) loyers %ra(e or -"siness an( *. S"-.e*% %o %&e r"le of s"-s%an%ia%ion.. <No. 1.4.1/ 6AMO No. 197J= +f *onsi(ere( as a frin4e -enefi% s"-.e*% %o %&e frin4e -enefi%s %a5 "n(er Se*. 11/ N+6C of 133J/ )ay -e (e("*%i-le fro) %&e e) loyerEs 4ross in*o)e. 6efer %o re!io"s (is*"ssion for li)i%a%ions. 6e resen%a%ion e5 enses fall "n(er %&e *a%e4ory of -"siness e5 enses '&i*& are allo'a-le (e("*%ions/ if %&ey are or(inary an( ne*essary@ ai( or in*"rre( in *arryin4 on a %ra(e or -"siness@ an( %&ey are reasona-le. (Ea&ora

44

v. Col. of $nt. Revenue, + 'CRA 1*3 "ite. in Para&ount $n%uran"e Corporation v. Co&&i%%ioner of $nternal Revenue, C5A Ca%e No. 4+44,. 1une ), 199* +f %rea%e( as a frin4e -enefi%/ s"-.e*% %o %&e frin4e -enefi%s %a5 "n(er Se*. 11/ N+6C of 133J/ i% )ay -e allo'e( as a (e("*%ion fro) %&e e) loyerEs 4ross in*o)e. 6e resen%a%ion e5 enses no% s" or%e( -y offi*ial re*ei %s s&o"l( -e (isallo'e(. Mere re*ei %s '&en si4ne( -y %&e *o) any offi*ers %&e)sel!es are no% s"ffi*ien%/ for '&ile %&ey )ay s&o' %&a% %&ey re*ei!e( %&e a)o"n% fro) %&e *o) any/ %&ey (o no% ro!e ay)en% of %&e alle4e( re resen%a%ion e5 enses %o %&e en%i%y in '&i*& %&e sa)e 'ere in*"rre(. C"r%&er)ore/ %&e a-sen*e of in!oi*es re*ei %s or !o"*&ers/ ar%i*"larly la*2 of roof of %&e i%e)s *ons%i%"%in4 %&e e5 ense is fa%al %o %&e allo'an*e of %&e (e("*%ion. (Para&ount $n%uran"e Corporation v. Co&&i%%ioner of $nternal Revenue, C5A Ca%e No. 4+44, 1une ), 199* "itin3 Colle"tor of $nternal Revenue v. Goo.ri"# $nt. Rubber Co., 21 'CRA 133* an. Gan"ay"o v. Colle"tor of $nternal Revenue, 1 'CRA 9+0

BAR: 63. Preferre( s&ares are *onsi(ere( *a i%al re4ar(less of %&e *on(i%ions "n(er '&i*& s"*& s&ares are iss"e( an( (i!i(en(s or in%eres%s ai( %&ereon are no% allo'e( as (e("*%ions fro) %&e 4ross in*o)e of *or ora%ions. <6e!en"e Me)oran(") Cir*"lar No. 1J9J1=
+n a((i%ion %o %&e e5 enses allo'a-le as (e("*%ions a ri!a%e e("*a%ional ins%i%"%ion/ )ay a% i%s o %ion ele*% ei%&er? a. To (e("*% e5 en(i%"res o%&er'ise *onsi(ere( as *a i%al o"%lays of (e re*ia-le asse%s in*"rre( ("rin4 %&e %a5a-le year for %&e e5 ansion of s*&ool fa*ili%ies/ or -. To (e("*% allo'an*e for (e re*ia%ion %&ereof. ISe*. 14 <A= <2=/ N+6C of 133JK Cinan*ial s%a%e)en%s a"(i%e( -y in (e en(en% e5%ernal a"(i%ors *ons%i%"%e %&e nor)al )e%&o( of roof of %&e rofi% an( loss erfor)an*e of a *o) any. A *o) ara%i!e s%a%e)en% of re!en"e an( e5 enses for %'o years/ -y i%self/ is no% *on*l"si!e roof of serio"s -"siness losses. (-o3o/0e.ellin 'u3ar"ane Planter% A%%o"iation, $n". v. N!RC, et al., 29* 'CRA 10+, 121 #a( (e-%s are %&ose '&i*& res"l% fro) %&e 'or%&lessness or "n*olle*%i-ili%y/ in '&ole or in ar%/ of a)o"n%s ("e %&e %a5 ayer -y o%&ers/ arisin4 fro) )oney len% or fro) "n*olle*%i-le a)o"n%s of in*o)e fro) 4oo(s sol( or ser!i*es ren(ere(. <Se*. 2.a/ 6e!. 6e4s. >933= T&e follo'in4 are rela%e( ar%ies? a. Me)-ers of %&e sa)e fa)ily. T&e fa)ily of an in(i!i("al s&all in*l"(e only &is -ro%&ers an( sis%ers <'&e%&er -y %&e '&ole or &alf9-loo(=/ s o"se/ an*es%ors/ an( lineal (es*en(an%s@ -. An in(i!i("al an( a *or ora%ion )ore %&an fif%y er*en% <>0N= in !al"e of %&e o"%s%an(in4 s%o*2 of '&i*& is o'ne(/ (ire*%ly or in(ire*%ly/ -y or for s"*& in(i!i("al@ *. T'o *or ora%ions )ore %&an fif%y er*en% <>0N= in !al"e of %&e o"%s%an(in4 s%o*2 of '&i*& is o'ne(/ (ire*%ly or in(ire*%ly/ -y or for %&e sa)e in(i!i("al@ (. A 4ran%or an( a fi("*iary of any %r"s%@ or e. T&e fi("*iary of a %r"s% an( %&e fi("*iary of ano%&er %r"s% if %&e sa)e erson is a 4ran%or 'i%& res e*% %o ea*& %r"s%@ or f. A fi("*iary of a %r"s% an( a -enefi*iary of s"*&. ISe*. 1H <#=/ N+6C of 133JK in*o)e?

BAR:

64.

6e,"isi%es for !ali( (e("*%ion of -a( (e-%s fro) 4ross

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a. T&ere )"s% -e an e5is%in4 in(e-%e(ness ("e %o %&e %a5 ayer '&i*& )"s% -e !ali( an( le4ally (e)an(a-le@ -. T&e sa)e )"s% -e *onne*%e( 'i%& %&e %a5 ayers %ra(e/ -"siness or ra*%i*e of rofession@ *. T&e sa)e )"s% no% -e s"s%aine( in a %ransa*%ion en%ere( in%o -e%'een rela%e( ar%ies@ (. T&e sa)e )"s% -e a*%"ally *&ar4e( off %&e -oo2s of a**o"n%s of %&e %a5 ayer as of %&e en( of %&e %a5a-le year@ an( e. T&e (e-% )"s% -e a*%"ally as*er%aine( %o -e 'or%&less an( "n*olle*%i-le ("rin4 %&e %a5a-le year@ f. T&e (e-%s are "n*olle*%i-le (es i%e (ili4en% effor% e5er%e( -y %&e %a5 ayer. ISe*. 14 <E= <1=/ N+6C of 133J@ Se*. 1/ 6e!. 6e4s. No. >933 rei%era%e( in 6e!. 6e4s. No. 2>92002@ P#ilippine Refinin3 Corporation v. Court of Appeal%, et al., 24* 'CRA **)K 4. M"s% &a!e -een re or%e( as re*ei!a-les in %&e in*o)e %a5 re%"rn of %&e *"rren% or rior years. <Se*. 101/ 6e!. 6e4s. No. 2= ? 6eser!e for -a( (e-%s are no% (e("*%i-le fro) 4ross in*o)e -e*a"se %&e (e-%s &a!e no% ye% -een as*er%aine( %o -e -a( (e-%s. T&e !al"e of 'or%&less se*"ri%ies are no% allo'e( %o -e (e("*%i-le fro) 4ross in*o)e -e*a"se %&ey are *onsi(ere( as *a i%al losses an( )ay -e (e("*%e( only fro) *a i%al 4ains. re!io"sly allo'e( as (e("*%ion in %&e re*e(in4 year or years s&all -e in*l"(e( as ar% of %&e %a5 ayers 4ross in*o)e in %&e year of s"*& re*o!ery %o %&e e5%en% of %&e in*o)e %a5 -enefi% of sai( (e("*%ion.

BAR: 65. T&e %a5 -enefi% r"le osi%s %&a% %&e re*o!ery of -a( (e-%s

+f in %&e year %&e %a5 ayer *lai)e( (e("*%ion of -a( (e-%s 'ri%%en9off/ &e reali8e( a re("*%ion of %&e in*o)e %a5 ("e fro) &i) on a**o"n% of %&e sai( (e("*%ion/ &is s"-se,"en% re*o!ery %&ereof fro) &is (e-%or s&all -e %rea%e( as a re*ei % of reali8e( %a5a-le in*o)e. <Se*. 4/ 6e!. 6e4s. >933= +f %&e sai( %a5 ayer (i( no% -enefi% fro) %&e (e("*%ion of %&e sai( -a( (e-% 'ri%%en9off -e*a"se i% (i( no% res"l% %o any re("*%ion of &is in*o)e %a5 in %&e year of s"*& (e("*%ion <i.e. '&ere %&e res"l% of &is -"siness o era%ion 'as a ne% loss e!en 'i%&o"% (e("*%ion of %&e -a( (e-%s 'ri%%en9off=/ %&en &is s"-se,"en% re*o!ery %&ereof s&all -e %rea%e( as a )ere re*o!ery or a re%"rn of *a i%al/ &en*e/ no% %rea%e( as re*ei % of reali8e( %a5a-le in*o)e. <Se*. 4/ 6e!. 6e4s. >9 33= De re*ia%ion is %&e 4ra("al (i)in"%ion in %&e "sef"l !al"e of %an4i-le ro er%y res"l%in4 fro) or(inary 'ear an( %ear an( fro) nor)al o-soles*en*e. T&e %er) is also a lie( %o a)or%i8a%ion of %&e !al"e of in%an4i-le asse%s %&e "se of '&i*& in %&e %ra(e or -"siness is (efini%ely li)i%e( in ("ra%ion. T&e )e%&o(s of (e re*ia%ion are %&e follo'in4? a. S%rai4&% line )e%&o(@ -. De*linin4 -alan*e )e%&o(@ *. S") of years (i4i%s )e%&o(@ an( (. Any o%&er )e%&o( res*ri-e( -y %&e Se*re%ary of Cinan*e " on %&e re*o))en(a%ion of %&e Co))issioner of +n%ernal 6e!en"e? 1= A or%ion)en% %o "ni%s of ro("*%ion@ 2= ;o"rs of ro("*%i!e "se@ 1= 6e!al"a%ion )e%&o(@ an( 4= sin2in4 f"n( )e%&o(.

46

T&e s&ares of %&e *or ora%ion are *onsi(ere( as *a i%al asse%s '&ere %&e &ol(er is no% a (ealer in se*"ri%ies. B&ere %&e s&ares are lis%e( an( %ra(e( in %&e s%o*2 e5*&an4e %&e &ol(er s&all -e s"-.e*% %o %&e %ransa*%ion %a5/ of Q of 1N of %&e 4ross sellin4 ri*e/ '&i*& is in lie" of in*o)e %a5. Ca i%al asse%s s&all refer %o all real ro er%ies &el( -y a %a5 ayer/ '&e%&er or no% *onne*%e( 'i%& &is %ra(e or -"siness/ an( '&i*& are no% in*l"(e( a)on4 %&e real ro er%ies *onsi(ere( as or(inary asse%s. <Se*. 2.a/ 6e!. 6e4s. No. J9 2001=

BAR: 66. T&e %er) *a i%al asse%s )eans ro er%y &el( -y %&e %a5 ayer <'&e%&er or no% *onne*%e( 'i%& &is %ra(e or -"siness=/ #UT DOES NOT +NC:UDE? a. S%o*2 in %ra(e of %&e %a5 ayer/ or -. O%&er ro er%y of a 2in( '&i*& 'o"l( ro erly -e in*l"(e( in %&e in!en%ory of %&e %a5 ayer if on &an( a% %&e *lose of %&e %a5a-le year/ or *. Pro er%y &el( -y %&e %a5 ayer ri)arily for sale %o *"s%o)ers in %&e or(inary *o"rse of &is %ra(e or -"siness/ or (. Pro er%y "se( in %&e %ra(e or -"siness/ of a *&ara*%er '&i*& is s"-.e*% %o %&e allo'an*e for (e re*ia%ion@ or real ro er%y "se( in %&e %ra(e or -"siness of %&e %a5 ayer. ISe*. 13 <A= <1=/ N+6C of 133J/ *a i%ali8e( 'or(s/ n")-erin4 an( arran4e)en% s" lie(@ Se*. 2.a/ 6e!. 6e4s. No. J92001K
T&e s%a%"%ory (efini%ion of *a i%al asse%s is ne4a%i!e in na%"re. +f %&e asse% is no% a)on4 %&e e5*e %ions/ i% is a *a i%al asse%@ *on!ersely/ asse%s fallin4 'i%&in %&e e5*e %ions are or(inary asse%s. An( ne*essarily/ any 4ain res"l%in4 fro) %&e sale or e5*&an4e of an asse% is a *a i%al 4ain or an or(inary 4ain (e en(in4 on %&e 2in( of asse% in!ol!e( in %&e %ransa*%ion. (Cala%an, v. Co&&i%%ioner of $nternal Revenue, et al= 144 'CRA **4, **9/*)0 E5a) les of *a i%al asse%s? a. S%o*2 an( se*"ri%ies &el( -y %a5 ayers o%&er %&an (ealers in se*"ri%ies@ -. 0e'elry no% "se( for %ra(e an( -"siness@ *. 6esi(en%ial &o"ses an( lan(s o'ne( an( "se( as s"*&@ (. A"%o)o-iles no% "se( in %ra(e an( -"siness@ e. Pain%in4s/ s*"l %"res/ s%a) *olle*%ions/ o-.e*%s of ar%s '&i*& are no% "se( in %ra(e or -"siness@ f. +n&eri%e( lar4e %ra*%s of a4ri*"l%"ral lan( '&i*& 'ere s"-(i!i(e( "rs"an% %o %&e 4o!ern)en% )an(a%e "n(er lan( refor)/ %&en sol( %o %enan%s. (Ro8a% v. Court of 5a8 Appeal%, et". !/24043, April 2*, 19*+ 4. 6eal ro er%y "se( -y an e5e) % *or ora%ion in i%s e5e) % o era%ions/ s"*& as a *or ora%ion in*l"(e( in %&e en")era%ion of Se*%ion 10 of %&e Co(e/ s&all no% -e *onsi(ere( "se( for -"siness "r oses/ an( %&erefore *onsi(ere( as *a i%al asse%. <las% sen%en*e/ 1 r( ar./ Se*. 1.-/ 6e!. 6e4s. No. J92001= &. 6eal ro er%y/ '&e%&er sin4le (e%a*&e(/ %o'n&o"se/ or *on(o)ini") "ni%/ no% "se( in %ra(e or -"siness as e!i(en*e( -y a *er%ifi*a%ion fro) %&e #aran4ay C&air)an or fro) %&e &ea( of a()inis%ra%ion/ in *ase of *on(o)ini") "ni%/ %o'n&o"se or a ar%)en%/ an( as !ali(a%e( fro) %&e e5is%in4 a!aila-le re*or(s of %&e #"rea" of +n%ernal 6e!en"e/ o'ne( -y an in(i!i("al en4a4e( in -"siness/ s&all -e %rea%e( as *a i%al asse%. <las% ar./ Se*. 1.-./ 6e!. 6e4s. No. J92001= Or(inary asse%s s&all refer %o all real ro er%ies s e*ifi*ally e5*l"(e( fro) %&e (efini%ion of *a i%al asse%s/ na)ely? a. S%o*2 in %ra(e of a %a5 ayer or o%&er real ro er%y of a 2in( '&i*& 'o"l( ro erly -e in*l"(e( in %&e in!en%ory of a %a5 ayer if on &an( a% %&e *lose of %&e %a5a-le year@ or

47

-. 6eal ro er%y &el( -y %&e %a5 ayer ri)arily for sale %o *"s%o)ers in %&e or(inary *o"rse of &is %ra(e or -"siness@ or *. 6eal ro er%y "se( in %ra(e or -"siness <i.e. -"il(in4s an(Mor i) ro!e)en%s=/ of a *&ara*%er '&i*& is s"-.e*% %o %&e allo'an*e for (e re*ia%ion@ or (. 6eal ro er%y "se( in %ra(e or -"siness of %&e %a5 ayer. <Se*. 2. -/ 6e!. 6e4s. No. J92001= 6eal ro er%ies a*,"ire( -y -an2s %&ro"4& fore*los"re sales are *onsi(ere( %&eir or(inary asse%s. ;o'e!er/ -an2s s&all no% -e *onsi(ere( as &a-i%"ally en4a4e( in %&e real es%a%e -"siness for "r oses of (e%er)inin4 %&e a li*a-le ra%e of 'i%&&ol(in4 %a5. <Se*. 2. -/ 6e!. 6e4s. No. J92001= A ro er%y "r*&ase( for f"%"re "se in %&e -"siness/ e!en %&o"4& %&is "r ose is la%er %&'ar%e( -y *ir*")s%an*es -eyon( %&e %a5 ayers *on%rol/ (oes no% lose i%s *&ara*%er as an or(inary asse%. Nor (oes a )ere (is*on%in"an*e of %&e a*%i!e "se of %&e ro er%y *&an4e i%s *&ara*%er re!io"sly es%a-lis&e( as a -"siness ro er%y. <las% sen%en*e/ Se*. 1.a.4/ 6e!. 6e4s. No. J92001= E5a) les of or(inary asse%s &en*e no% *a i%al asse%s? a. T&e )a*&inery an( e,"i )en% of a )an"fa*%"rin4 *on*ern s"-.e*% %o (e re*ia%ion@ -. T&e %ra*%ors/ %railers an( %r"*2s of a &a"lin4 *o) any@ *. T&e *on(o)ini") -"il(in4 o'ne( -y a real%y *o) any %&e "ni%s of '&i*& are for ren% or for sale@ (. T&e 'oo(/ ain%/ !arnis&/ nails/ 4l"e/ e%*. '&i*& are %&e ra' )a%erials of a f"rni%"re fa*%ory@ e. +n&eri%e( ar*els of lan( of s"-s%an%ial areas lo*a%e( in %&e &ear% of Me%ro Manila/ '&i*& 'ere s"-(i!i(e( in%o s)aller lo%s %&en sol( on ins%all)en% -asis af%er in%ro("*in4 *o) ara%i!ely !al"a-le i) ro!e)en%s no% for %&e "r ose of si) ly li,"i(a%in4 %&e es%a%e -"% %o )a2e %&e) )ore salea-le @ %&e e) loy)en% of an a%%orney9in9fa*% for %&e "r ose of (e!elo in4/ )ana4in4/ a()inis%erin4 an( sellin4 %&e lo%s@ sales )a(e 'i%& fre,"en*y an( *on%in"i%y@ ann"al sales in*o)e fro) %&e sales 'as *onsi(era-le@ an( %&e &eir 'as no% a s%ran4er %o %&e real es%a%e -"siness. (5ua,on, 1r. v. !in3a., 4+ 'CRA 1)0 f. +n&eri%e( a4ri*"l%"ral ro er%y i) ro!e( -y in%ro("*%ion of 4oo( roa(s/ *on*re%e 4"%%ers/ (raina4e an( li4&%in4 sys%e)s *on!er%s %&e ro er%y %o an or(inary asse%. T&e ro er%y for)s ar% of %&e s%o*2 in %ra(e of %&e o'ner/ &en*e an or(inary asse%. T&is is so/ as %&e o'ner is no' en4a4e( in %&e -"siness of s"-(i!i(in4 real es%a%e. <Cala%an, v. Co&&i%%ioner of $nternal Revenue, 144 'CRA at p. *)2 a. Ca i%al asse%s are no% "se( in %ra(e or -"siness '&ile or(inary ase%s are "se( in %ra(e or -"siness. -. :osses fro) *a i%al asse%s are allo'e( %o -e (e("*%e( only fro) *a i%al 4ains '&ile fro) *a i%al 4ains (eri!e( fro) (is osi%ion of ersonal ro er%y o%&er %&an s&ares of s%o*2 )ay -e (e("*%e( or(inary losses res"l%in4 fro) losses in*"rre( in or(inary asse% %ransa*%ions. *. T&e *on*e % of *a i%al asse% %ransa*%ions )ay in*l"(e %&e &ol(in4 erio( '&ile %&is is no% so 'i%& or(inary asse% %ransa*%ions.

BAR: 67. Ca i%al asse%s (is%in4"is&e( fro) or(inary asse%s?

BAR: 68. +% is ro&i-i%e( %o (e("*% *a i%al losses fro) or(inary 4ains in or(er %o re!en% %a5 lea2a4es arisin4 fro) %&e s&if%in4 of (e("*%ions fro) 4ains s"-.e*% %o lo'er %a5 ra%es<s"*& as *a i%al 4ains=/ %o %&ose s"-.e*% %o &i4&er %a5 ra%es <s"*& as or(inary 4ains=.
Ta5 %rea%)en% of real ro er%ies %&a% &a!e -een %ransferre(. 6eal ro er%ies *lassifie( as *a i%al or or(inary asse% in %&e &an(s of %&e sellerM%ransferor )ay *&an4e %&eir *&ara*%er in %&e &an(s of %&e -"yerM%ransferee.

48

T&e *lassifi*a%ion of s"*& ro er%y in %&e &an(s of %&e -"yerM%ransferee s&all -e (e%er)ine( in a**or(an*e 'i%& %&e follo'in4 r"les? a. 6eal ro er%y %ransferre( %&ro"4& s"**ession or (ona%ion %o %&e &eir or (onee '&o is no% en4a4e( in %&e real es%a%e -"siness 'i%& res e*% %o %&e real ro er%y in&eri%e( or (ona%e(/ an( '&o (oes no% s"-se,"en%ly "se s"*& ro er%y in %ra(e or -"siness/ s&all -e *onsi(ere( as a *a i%al asse% in %&e &an(s of %&e &eir or (onee. -. 6eal ro er%y re*ei!e( as (i!i(en( -y s%o*2&ol(ers '&o are no% en4a4e( in %&e real es%a%e -"siness an( '&o no% s"-se,"en%ly "se s"*& real ro er%y in %ra(e or -"siness s&all -e %rea%e( as *a i%al asse%s in %&e &an(s of %&e re*i ien% e!en if %&e *or ora%ion '&i*& (e*lare( %&e real ro er%y (i!i(en( is en4a4e( in real es%a%e -"siness. *. T&e real ro er%y re*ei!e( in an e5*&an4e s&all -e %rea%e( as or(inary asse% in %&e &an(s of %&e %ransferee in %&e *ase of a %a59free e5*&an4e -y %a5 ayer no% en4a4e( in real es%a%e -"siness %o a %a5 ayer '&o is en4a4e( in real es%a%e -"siness/ or %o a %a5 ayer '&o/ e!en if no% en4a4e( in real es%a%e -"siness/ 'ill "se in -"siness %&e ro er%y re*ei!e( in %&e e5*&an4e. <Se*. 1.f./ 6e!. 6e4s. No. J92001= Ca*%ors *onsi(ere( as &el f"l 4"i(es in (e%er)inin4 '&e%&er asse% is or(inary or *a i%al? a. T&e "r ose for '&i*& %&e ro er%y 'as ini%ially a*,"ire(@ -. T&e "r ose for '&i*& %&e ro er%y 'as s"-se,"en%ly &el(@ *. T&e e5%en% %o '&i*& %&e i) ro!e)en%s/ if any/ 'ere )a(e -y %&e %a5 ayer@ (. T&e fre,"en*y/ n")-er an( *on%in"i%y of sales@ e. T&e e5%en% an( na%"re of %&e %ransa*%ions in!ol!e(@ f. T&e or(inary -"siness of %&e %a5 ayer@ 4. T&e e5%en% of a(!er%isin4/ ro)o%ion/ or o%&er a*%i!i%ies "se( in soli*i%in4 -"yers for %&e sale of %&e ro er%y@ &. T&e lis%in4 of ro er%y/ 'i%& -ro2ers@ an( i. T&e "r ose for '&i*& %&e ro er%y 'as &el( a% %&e %i)e of sale. I2lu&ba, et al. v. 5#e ?onorable Co&&i%%ioner of $nternal Revenue, C5A Ca%e No. 4103, Au3u%t 1*, 199*= Dlar;ow%;i, 5C0 19*4/32+, affir&e. 3+4 :. 2. (CA/ ), 19*)=K .. 6eal ro er%ies a*,"ire( -y -an2s %&ro"4& fore*los"re sales are *onsi(ere( as %&eir or(inary asse%s. ;o'e!er/ -an2s s&all no% -e *onsi(ere( as &a-i%"ally en4a4e( in %&e real es%a%e -"siness for "r oses of (e%er)inin4 %&e a li*a%ion ra%e of 'i%&&ol(in4 %a5 i) ose( "n(er 6e!en"e 6e4"la%ions. <las% ar./ Se*. 2.-/ 6e!. 6e4s. No. J92001= Mone%ary *onsi(era%ion or %&e resen*e or a-sen*e of rofi% in %&e o era%ion of %&e ro er%y is no% si4nifi*an% in %&e *&ara*%eri8a%ion of %&e ro er%y. So lon4 as %&e ro er%y is or &as -een "se( for -"siness "r oses/ '&e%&er for %&e -enefi% of %&e o'ner or nay of i%s )e)-ers or s%o*2&ol(ers/ i% s&all -e *onsi(ere( as an or(inary asse%. <1 s% an( 2n( sen%en*es/ 1r( ar./ Se*. 1.-./ 6e!. 6e4s. No. J92001= Ta5 ayers en4a4e( in %&e real es%a%e -"siness s&all refer *olle*%i!ely %o real es%a%e (ealers/ real es%a%e (e!elo ers/ an(Mor real es%a%e lessors. <Se*. 2.4/ 6e!. 6e4s. No. J92001= T&e %er) %a5 ayers no% en4a4e( in %&e real es%a%e -"siness s&all refer %o ersons o%&er %&an real es%a%e (ealers/ real es%a%e (e!elo ers an(Mor real es%a%e lessors. A %a5 ayer '&ose ri)ary "r ose of en4a4in4 in -"siness/ or '&ose Ar%i*les of +n*or ora%ion s%a%es %&a% i%s ri)ary "r ose is %o en4a4e in %&e real es%a%e -"siness s&all -e (ee)e( %o -een en4a4e( in %&e real es%a%e -"siness. <Se*. 2.4/ 6e!. 6e4s. No. J92001=

49

T&e %a5 is i) ose( " on *a i%al 4ains res")e( %o &a!e -een reali8e( fro) %&e sale/ e5*&an4e/ or o%&er (is osi%ion of real ro er%y lo*a%e( in %&e P&ili ines/ *lassifie( as *a i%al asse%s. ISe*. 24 <D= <1R=/ N+6C of 133JK 6e!en"e 6e4"la%ions No. J92001 &as (efine( real ro er%y as &a!in4 %&e sa)e )eanin4 a%%ri-"%e( %o %&a% %er) "n(er Ar%i*le 41> of 6e "-li* A*% No. 17H/ o%&er'ise 2no'n as %&e SCivil Co.e of t#e P#ilippine%.F <Se*. 2.*/ 6e!. 6e4s. No. J92001= Pro er%y )"s% -e lo*a%e( in %&e P&ili %a5a%ion. . ISe*. 24 <D= <1=/ N+6C of 133JK ines for "r oses of *a i%al 4ains

Ta5 %rea%)en% '&ere ro er%y is no% lo*a%e( in %&e P&ili ines. Aains reali8e( fro) %&e sale/ e5*&an4e/ or o%&er (is osi%ion of real ro er%y/ no% lo*a%e( in %&e P&ili ines/ re4ar(less of *lassifi*a%ion -y resi(en% *i%i8ens or (o)es%i* *or ora%ions s&all -e s"-.e*% %o or(inary in*o)e %a5a%ion. I1 s% sen%en*e/ Se*. 4.f./ 6e!. 6e4s. No. J92001@ Se*. 24 <A= <1=/ or Se*. 2J <A= or <E=/ all of %&e N+6C of 133JK S"*& in*o)e )ay -e e5e) % in %&e *ase of non9resi(en% *i%i8ens/ alien in(i!i("als an( forei4n *or ora%ions. I1 s% sen%en*e/ Se*. 4.f./ 6e!. 6e4s. No. J9 2001@ Se*. 21 <#=/ <D= an( <C= of %&e N+6C of 133JK real ro er%y? a. sale/ -. e5*&an4e/ *. or o%&er (is osi%ion/ in*l"(in4 pa"to .e retro sales an( o%&er for)s of *on(i%ional sales. ISe*. 24 <D= <1=/ N+6C of 133J/ n")-erin4 an( arran4e)en% s" lie(K Sale/ e5*&an4e/ or o%&er (is osi%ion in*l"(es %a2in4 -y %&e 4o!ern)en% %&ro"4& *on(e)na%ion ro*ee(in4s. (Gutierre, v. Court of 5a8 Appeal%, et al., 101 P#il. )13= Gon,ale% v. Court of 5a8 Appeal%, et al., 121 P#il. +*1 Transfers %&a% )ay *&an4e %&e *&ara*%er of %&e *lassifi*a%ion ro er%ies in%o or(inary or *a i%al? a. s"**ession or (ona%ion@ -. a (i!i(en( (e*lara%ion@ an( *. e5*&an4e. of real

BAR 69. Transa*%ions *o!ere( -y %&e res")e( *a i%al 4ains %a5 on

56eal ro er%y %ransferre( %&ro"4& s"**ession or (ona%ion %o %&e &eir or (onor '&o is no% en4a4e( in %&e real es%a%e -"siness 'i%& res e*% %o %&e real ro er%y in&eri%e( or (ona%e(/ an( '&o (oes no% s"-se,"en%ly "se s"*& ro er%y in %ra(e or -"siness/ s&all -e *onsi(ere( as a *a i%al asse% in %&e &an(s of %&e &eir or (onee. <Se*. 1.f.1/ 6e!. 6e4s. No. J92001= 6eal ro er%y re*ei!e( as (i!i(en(s -y s%o*2&ol(ers '&o are no% en4a4e( in %&e real es%a%e -"siness an( '&o (o no% s"-se,"en%ly "se s"*& real ro er%y in %ra(e or -"siness s&all -e %rea%e( as *a i%al asse%s in %&e &an(s of %&e re*i ien%s e!en if %&e *or ora%ion '&i*& (e*lare( %&e real ro er%y (i!i(en( is en4a4e( in real es%a%e -"siness. <Se*. 1.f.2/ 6e!. 6e4s. No. J92001/ ara &rasin4 s" lie(= T&e real ro er%y re*ei!e( in an e5*&an4e s&all -e %rea%e( as or(inary asse% in %&e &an(s of %&e %ransferee in %&e *ase of a %a59free e5*&an4e -y %a5 ayer no% en4a4e( in real es%a%e -"siness %o a %a5 ayer '&o is en4a4e( in real es%a%e -"siness/ or %o a %a5 ayer '&o/ e!en if no% en4a4e( in real es%a%e -"siness/ 'ill "se in -"siness %&e ro er%y re*ei!e( in %&e e5*&an4e. <Se*. 1.f.1/ 6e!. 6e4s. No. J92001/ ara &rasin4 s" lie(=

50

+n %&e *ase of in!ol"n%ary %ransfers of real ro er%ies/ in*l"(in4 e5 ro ria%ion or fore*los"re sale/ %&e in!ol"n%ariness of s"*& sale s&all &a!e no effe*% on %&e *lassifi*a%ion of s"*& real ro er%y in %&e &an(s of %&e in!ol"n%ary seller/ ei%&er as *a i%al asse% or or(inary asse% as %&e *ase )ay -e. <Se*. 1.4/ 6e!. 6e4s. No. J92001= +n *ase %&e )or%4a4or e5er*ises &is ri4&% of re(e) %ion 'i%&in one <1= year fro) %&e iss"an*e of %&e *er%ifi*a%e of sale/ in a fore*los"re of )or%4a4e sale of real ro er%y/ no *a i%al 4ains %a5 s&all -e i) ose( -e*a"se no *a i%al 4ains &as -een (eri!e( -y %&e )or%4a4or an( no sale or %ransfer of real ro er%y 'as reali8e(. ISe*. 1 <1=/ 6e!. 6e4s. No. 4933K +n *ase of non9re(e) %ion of %&e ro er%y sol( " on a fore*los"re of )or%4a4e sale/ %&e res")e( *a i%al 4ains %a5 s&all -e i) ose(/ -ase( on %&e -i( ri*e of %&e &i4&es% -i((er -"% only " on %&e e5 ira%ion of %&e one year erio( of re(e) %ion ro!i(e( for "n(er Se*. H of A*% No. 111>/ as a)en(e( -y A*% No. 4117/ an( s&all -e ai( 'i%&in %&ir%y <10= (ays fro) %&e e5 ira%ion of %&e sai( one9year re(e) %ion erio(. ISe*. 1 <2=/ 6e!. 6e4s. No. 4933K 6eal ro er%ies a*,"ire( -y -an2s %&ro"4& fore*los"re sales are *onsi(ere( as %&eir or(inary asse%s. ;o'e!er/ -an2s s&all no% -e *onsi(ere( as &a-i%"ally en4a4e( in %&e real es%a%e -"siness for "r oses of (e%er)inin4 %&e a li*a%ion ra%e of 'i%&&ol(in4 %a5 i) ose( "n(er 6e!en"e 6e4"la%ions. <las% ar./ Se*. 2.-/ 6e!. 6e4s. No. J92001=

BAR: 70. T&e -asis for %&e final res")e( *a i%al 4ains %a5 of si5 er *en% <HN= is '&i*&e!er is %&e &i4&er of %&e a. 4ross sellin4 ri*e/ or -. %&e *"rren% fair )ar2e% !al"e as (e%er)ine( -elo'? 1= %&e fair )ar2e% !al"e or real ro er%ies lo*a%e( in ea*& 8one or area as (e%er)ine( -y %&e Co))issioner of +n%ernal 6e!en"e af%er *ons"l%a%ion 'i%& *o) e%en% a raisers -o%& fro) %&e ri!a%e an( "-li* se*%ors@ or 2= %&e fair )ar2e% !al"e as s&o'n in %&e s*&e("le of !al"es of %&e Pro!in*ial an( Ci%y Assessors. ISe*. 24 <D= <1= in rela%ion %o Se*. H <E=/ -o%& of %&e N+6C of 133JK
;ol(in4 erio( no% a lie( %o %&e %a5a%ion of %&e res")e( *a i%al 4ains (eri!e( fro) %&e sale of real ro er%y *onsi(ere( as *a i%al asse%s. T&e %a5 lia-ili%y/ of in(i!i("al %a5 ayers <no% *or ora%e=/ if any/ on 4ains fro) sales or o%&er (is osi%ions of real ro er%y/ *lassifie( as *a i%al asse%s/ %o %&e 4o!ern)en% or any of i%s oli%i*al s"-(i!isions or a4en*ies or %o 4o!ern)en% o'ne( or *on%rolle( *or ora%ions s&all -e (e%er)ine(/ a% %&e o %ion of %&e %a5 ayer/ -y in*l"(in4 %&e ro*ee(s as ar% of 4ross in*o)e %o -e s"-.e*%e( %o %&e allo'a-le (e("*%ions an(Mor ersonal an( a((i%ional e5e) %ions/ %&en %o %&e s*&e("lar %a5 ISe*. 24 <D= <1=/ in rela%ion %o Se*. 24 <A= <1=/ -o%& of %&e N+6C of 133JK or %&e final res")e( *a i%al 4ains %a5 of si5 er*en% <HN=. ISe*. 24 <D= <1= in rela%ion %o Se*. H <E=/ -o%& of %&e N+6C of 133JK T&e in%eres% a% %&e le4al ra%e on %&e !al"e of e5 ro ria%e( lan( s&o"l( -e %a5e( as or(inary in*o)e/ an( no% as *a i%al 4ains. (Gon,ale% v. Court of 5a8 Appeal%, et al., 121 P#il. +*1 T&e seller of %&e real ro er%y/ *lassifie( as a *a i%al asse%/ res")e( *a i%al 4ains %a5 '&e%&er? a. an in(i!i("al ISe*. 24 <D= <1=/ N+6C of 133JK@ 1= Ci%i8en/ '&e%&er resi(en% or no% I $bi..K@ 2= 6esi(en% alien I$bi..K@ ays %&e

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1= Nonresi(en% alien en4a4e( in %ra(e or -"siness in %&e P&ili ines ISe*. 2> <A= <1= in rela%ion %o Se*. 24 <D= <1=/ -o%& of %&e N+6C of 133JK@ 4= Nonresi(en% alien no% en4a4e( in %ra(e or -"siness in %&e P&ili ines ISe*. 2> <#= in rela%ion %o Se*. 24 <D= <1=/ -o%& of %&e N+6C of 133JK@ -. an es%a%e or %r"s% <$bi..=@ *. a (o)es%i* *or ora%ion. ISe*. 2J <D= <>=/ N+6C of 133JK T&e ro*ee(s of sale of real ro er%y/ *lassifie( as *a i%al asse%s/ -y forei4n *or ora%ions s&all -e s"-.e*% %o or(inary in*o)e %a5a%ion of '&i*&e!er is &i4&er -e%'een %&e re("*e( ra%e of 12N an( %&e )ini)") *or ora%e in*o)e %a5 ISe*. 27 <A= <1= <2= in rela%ion %o Se*. 2J <E=/ -o%& of %&e N+6C of 133JK +n %&e ins%an*es '&ere non9resi(en% aliens are ,"alifie( %o o'n real ro er%y in %&e P&ili ines <li2e *on(o)ini") "ni%s/ or -"il(in4s/ or o%&er i))o!a-les as (efine( "n(er Ar%. 41> of 6e . A*% No. 17H/ %&e Ci!il Co(e of %&e P&ili ines=/ an( %&ese are *onsi(ere( as *a i%al in *&ara*%er/ %&ey are %o -e s"-.e*% %o %a5 in %&e sa)e )anner as *i%i8ens an( resi(en% aliens. ISe*. 2> <A= <1= an( Se*. 2> <#= in rela%ion %o Se*. 24 <D=/ all of %&e N+6C of 133JK are %&ose res")e( %o &a!e -een reali8e( fro) %&e (is osi%ion -y na%"ral ersons of %&eir rin*i al la*e of resi(en*e a. %&e ro*ee(s of '&i*& is f"lly "%ili8e( in a*,"irin4 or *ons%r"*%in4 a ne' rin*i al resi(en*e@ -. 'i%&in ei4&%een <17= *alen(ar )on%&s fro) %&e (a%e of sale or (is osi%ion *. %&e #+6 Co))issioner s&all &a!e -een ("ly no%ifie( -y %&e %a5 ayer 'i%&in %&ir%y <10= (ays fro) %&e (a%e of sale or (is osi%ion %&ro"4& a res*ri-e( re%"rn of &is in%en%ion %o a!ail of %&e %a5 e5e) %ion@ an( (. %&e sai( %a5 e5e) %ion *an only -e a!aile( of on*e e!ery %en <10= years. ISe*. 24 <D= <2=/ N+6C of 133JK T&e &is%ori*al *os% or a(."s%e( -asis of %&e real ro er%y sol( or (is ose( s&all -e *arrie( o!er%o %&e ne' rin*i al resi(en*e &"il% or a*,"ire(/ ro!i(e( %&a% if %&ere is no f"ll "%ili8a%ion of %&e ro*ee(s of sale or (is osi%ion/ %&e or%ion of %&e 4ain res")e( %o &a!e -een reali8e( fro) %&e sale or (is osi%ion s&all -e s"-.e*% %o *a i%al 4ains %a5. ISe*. 24 <D= <2=/ N+6C of 133JK Ne% loss *arry9o!er )eans %&e (e("*%ion fro) ne% *a i%al 4ains of a s"**ee(in4 year %&e ne% *a i%al loss s"ffere( ("rin4 %&e rior year. Ne% o era%in4 loss *arry9o!er is %&e (e("*%ion fro) 4ross in*o)e for %&e ne5% %&ree <1= *onse*"%i!e %a5a-le years follo'in4 %&e year of s"*& loss/ %&e e5*ess of allo'a-le (e("*%ion o!er %&e 4ross in*o)e. <Se*. 13 IDK/ N+6C of 133J= Dis%in*%ions -e%'een ne% loss *arry9o!er an( ne% o era%in4 loss *arry9 o!er. So"r*e? T&e so"r*e of ne% loss *arry9o!er are *a i%al losses only B;+:E %&e so"r*e of ne% o era%in4 loss *arry9o!er are fro) %&e or(inary %ra(e an( -"siness of %&e %a5 ayer. B&o )ay en.oy %&e *arry9o!er? Only %a5 ayers o%&er %&an *or ora%ions )ay en.oy ne% loss *arry9o!er B;+:E only *or ora%ions )ay en.oy %&e ne% o era%in4 loss *arry9o!er. <Se*. 13 IDK/ N+6C of 133J= Any %a5 ayer/ o%&er %&an a *or ora%ion <in(i!i("als in*l"(in4 %r"s%s an( es%a%es=/ '&o s"s%ains in any %a5a-le year a ne% *a i%al loss fro) *a i%al %ransa*%ions in!ol!in4 *a i%al asse%s <o%&er %&an real ro er%y or s&ares of s%o*2 no% lis%e( or %ra(e( in %&e s%o*2 e5*&an4e=/ is allo'e( %o %rea% ("rin4 %&e s"**ee(in4 year s"*& ne% *a i%al loss as a loss fro) %&e sale or e5*&an4e of a *a i%al asse% <o%&er %&an real ro er%y or s&ares of s%o*2 no% lis%e( an( %ra(e( in

BAR: 71. E5*e %e( fro) %&e ay)en% of %&e res")e( *a i%al 4ains %a5

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%&e s%o*2 e5*&an4e=/ &el( for )ore %&an %'el!e )on%&s. <Se*. 13 IDK/ N+6C of 133J=

BAR: 72. T&e e,"i%y in!es%)en% -y a -an2 in ano%&er *or ora%ion is *a i%al in *&ara*%er/ %&e loss of '&i*& *o"l( -e (e("*%i-le only fro) *a i%al 4ains/ an( no% fro) any o%&er in*o)e of %&e %a5 ayer. (C#ina -an;in3 Corporation v. Court of Appeal%, et al., G.R. No. 1240+, 1uly 19, 2000
A *a i%al 4ain or a *a i%al loss nor)ally re,"ires %&e *on*"rren*e of %'o *on(i%ions for i% %o res"l%? a. T&ere is a sale or e5*&an4e@ an( -. T&e %&in4 sol( or e5*&an4e( is a *a i%al asse%. B&en se*"ri%ies -e*o)e 'or%&less %&ere is s%ri*%ly no sale or e5*&an4e -"% %&e la' (ee)s %&e loss any'ay %o -e a loss fro) %&e sale or e5*&an4e of *a i%al asse%s. (C#ina -an;in3 Corporation v. Court of Appeal%, et al., G.R. No. 1240+, 1uly 19, 2000 Se*"ri%ies/ (efine( for (e("*%i-ili%y of -a( (e-%s are s&ares of s%o*2 in a *or ora%ion an( ri4&%s %o s"-s*ri-e for or %o re*ei!e s"*& s&ares. T&e %er) in*l"(es -on(s/ (e-en%"res/ no%es or *er%ifi*a%es/ or o%&er e!i(en*e of in(e-%e(ness/ iss"e( -y any *or ora%ion/ in*l"(in4 %&ose iss"e( -y a 4o!ern)en% or oli%i*al s"-(i!ision %&ereof/ 'i%& in%eres% *o" ons or in re4is%ere( for). <Se*. 2.-/ 6e!. 6e4s. No. >933= Aeneral r"le? +f se*"ri%ies/ &el( as *a i%al asse%/ are as*er%aine( %o -e 'or%&less an( *&ar4e( off 'i%&in %&e %a5a-le year/ %&e loss res"l%in4 %&erefro) s&all -e *onsi(ere( as a loss fro) %&e sale or e5*&an4e of *a i%al asse% )a(e on %&e las% (ay of s"*& %a5a-le year. T&e %a5 ayer/ &o'e!er/ &as %o ro!e %&ro"4& *lear an( *on!in*in4 e!i(en*e %&a% %&e se*"ri%ies are in fa*% 'or%&less. <Se*. >/ 6e!. 6e4s. No. >933= T&e a-o!e r"le/ &o'e!er/ is no% %r"e in %&e *ase of -an2s or %r"s% *o) anies in*or ora%e( "n(er %&e la's of %&e P&ili ines/ a s"-s%an%ial ar% of '&ose -"siness is %&e re*ei % of (e osi%s. <Se*. >/ 6e!. 6e4s. No. >933=

BAR: 73. Non9s%o*2 non rofi% ins%i%"%ions are e5e) % fro) in*o)e %a5a%ion only on %&eir in*o)e fro) ri)ary so"r*es no% on %&eir in*o)e fro) se*on(ary so"r*es irres e*%i!e of "%ili8a%ion. T&"s/ reli4io"s so*ie%ies are e5e) % only fro) in*o)e res"l%in4 fro) %&eir reli4io"s a*%i!i%ies s"*& as *olle*%ion la%es/ -a %is)al/ )arria4es an( (ea%& fees -"% no% fro) %&eir in*o)e 4enera%in4 ren%al ro er%ies. T&e r"le is (ifferen% 'i%& res e*% %o non9 rofi%/ non9s%o*2 e("*a%ional ins%i%"%ions '&i*& (e!o%e %&eir re!en"es a*%"ally/ /(ire*%ly an( e5*l"si!ely %o e("*a%ional "r oses. T&e *ons%i%"%ional e5e) %ion (oes no% (is%in4"is& 'i%& res e*% %o so"r*e an( no% %o ori4in &en*e %&e li)i%a%ion in Se*. 10 of %&e N+6C of 133J (oes no% a ly. TRAN6FER TAXE6 BAR: 74. T&e 4ross es%a%e for "r oses of es%a%e %a5a%ion of Cili ino *i%i8ens/ '&e%&er resi(en%s or nonresi(en%s an( resi(en% alien in*l"(es %&e !al"e a% %&e %i)e of &is (ea%& of all &is real ro er%y/ '&ere!er si%"a%e(/ ersonal ro er%y/ '&e%&er %an4i-le/ in%an4i-le or )i5e(/ '&ere!er si%"a%e(/ %o %&e e5%en% of %&e in%eres% e5is%in4 %&erein of %&e (e*e(en% a% %&e %i)e of &is (ea%&.
resi(en% aliens in*l"(es %&e !al"e a% %&e %i)e of &is (ea%& of all %&e real ro er%y si%"a%e( in %&e P&ili ines/ ersonal ro er%y '&e%&er %an4i-le/ in%an4i-le or

BAR: 75. T&e 4ross es%a%e for "r oses of es%a%e %a5a%ion of non9

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)i5e(/ si%"a%e( in %&e P&ili ines/ %o %&e e5%en% of %&e in%eres% %&erein of %&e (e*e(en% a% %&e %i)e of &is (ea%&.

BAR: 76. :ife ins"ran*e ro*ee(s in*l"(e( as ar% of %&e 4ross es%a%e of a (e*e(en%? a. T&e ins"ran*e 'as %a2en -y %&e (e*e(en% on &is o'n life an( %&e -enefi*iary 1= is &i)self/ &is es%a%e/ &is e5e*"%or or a()inis%ra%or. 2= irres e*%i!e of '&e%&er %&e (esi4na%ion is re!o*a-le or irre!o*a-le. -. T&e ins"ran*e 'as %a2en -y %&e (e*e(en% on &is o'n life an( %&e (esi4na%e( -enefi*iary is no% &i)self/ &is es%a%e/ &is e5e*"%or or a()inis%ra%or <s"*& as &is 'ife/ *&il(/ aren%/ or o%&er rela%i!e/ frien(/ e%*.= -"% %&e (esi4na%ion is re!o*a-le. *. T&e ins"ran*e 'as %a2en -y one '&o is no% %&e (e*e(en% <s"*& as an e) loyer/ a rela%i!e/ e%*.=/ an( %&e (esi4na%e( -enefi*iary is %&e (e*e(en%/ &is es%a%e/ a()inis%ra%or or e5e*"%or/ '&e%&er %&e (esi4na%ion is re!o*a-le or irre!o*a-le. BAR: 77. :ife ins"ran*e ro*ee(s no% in*l"(e( as ar% of %&e 4ross es%a%e of a (e*e(en%? a. T&e ins"ran*e 'as %a2en -y %&e (e*e(en% on &is o'n life an( %&e (esi4na%e( -enefi*iary is no% &i)self/ &is es%a%e/ &is e5e*"%or or a()inis%ra%or <s"*& as &is 'ife/ *&il(/ aren%/ or o%&er rela%i!e/ frien(/ e%*.= -"% %&e (esi4na%ion is irre!o*a-le. -. T&e ins"ran*e 'as %a2en -y one '&o is no% %&e (e*e(en% <s"*& as an e) loyer/ a rela%i!e/ e%*.=/ an( %&e (esi4na%e( -enefi*iary is no% %&e (e*e(en%/ &is es%a%e/ a()inis%ra%or or e5e*"%or/ '&e%&er %&e (esi4na%ion is re!o*a-le or irre!o*a-le.
+%e)s (e("*%i-le fro) %&e 4ross es%a%e of a resi(en% or nonresi(en% Cili ino (e*e(en% or resi(en% alien (e*e(en%? a. E5 enses/ losses/ *lai)s/ in(e-%e(ness an( %a5es@ -. Pro er%y re!io"sly %a5e(@ *. Transfers for "-li* "se@ (. T&e Ca)ily ;o)e " %o a !al"e no% e5*ee(in4 P1 )illion@ e. S%an(ar( (e("*%ion of P1 )illion@ f. Me(i*al e5 enses no% e5*ee(in4 P>00/000.00@ 4. A)o"n% of e5e) % re%ire)en% re*ei!e( -y %&e &eirs "n(er 6e . A*% Mo. 431J@ &. Ne% s&are of %&e s"r!i!in4 s o"se in %&e *on."4al ar%ners&i . T&e no%arial fee ai( for %&e e5%ra."(i*ial se%%le)en% is *learly a (e("*%i-le e5 ense sin*e s"*& se%%le)en% effe*%e( a (is%ri-"%ion of %&e es%a%e %o &is la'f"l &eirs/ Si)ilarly/ %&e a%%orneys fees for a 4"ar(ian of %&e ro er%y ("rin4 %&e (e*e(en%s life%i)e s&o"l( also -e *onsi(ere( as a (e("*%i-le a()inis%ra%ion e5 ense. T&e 4"ar(ian 4i!es a (e%aile( a**o"n%in4 of (e*e(en%s ro er%y an( 4i!es a(!i*e as %o %&e ro er se%%le)en% of %&e es%a%e/ a*%s '&i*& *on%ri-"%e( %o'ar(s %&e *olle*%ion of (e*e(en%s asse%s an( %&e s"-se,"en% se%%le)en% of %&e *ase. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., G.R. No. 12320*, 0ar"# 22, 2000 0"(i*ial e5 enses are e5 enses of a()inis%ra%ion. A()inis%ra%ion e5 enses/ as an allo'a-le (e("*%ion fro) 4ross es%a%e of %&e (e*e(en% for "r oses of arri!in4 a% %&e !al"e of %&e ne% es%a%e/ &a!e -een *ons%r"e( %o in*l"(e all e5 enses essen%ial %o %&e *olle*%ion of %&e asse%s/ ay)en% of (e-%s or %&e (is%ri-"%ion of %&e ro er%y %o %&e ersons en%i%le( %o i%. +n o%&er 'or(s/ %&e e5 enses )"s% -e essen%ial %o %&e ro er se%%le)en% of %&e es%a%e.

54

No% (e("*%i-le are e5 en(i%"res in*"rre( for %&e in(i!i("al -enefi% of %&e &eirs/ (e!isees or le4a%ees. T&"s/ in :oren8o !. Posa(as/ %&e Co"r% *ons%r"e( %&e &rase ."(i*ial e5 enses of %&e %es%a)en%ary or in%es%a%e ro*ee(in4s as no% in*l"(in4 %&e *o) ensa%ion ai( %o a %r"s%ee of %&e (e*e(en%s es%a%e '&en i% a eare( %&a% s"*& %r"s%ee 'as a oin%e( for %&e "r ose of )ana4in4 %&e (e*e(en%s real ro er%y for %&e -enefi% of %&e %es%a)en%ary &eir. +n ano%&er *ase/ %&e Co"r% (isallo'e( %&e re)i")s ai( on %&e -on( file( -y %&e a()inis%ra%or as an e5 ense of a()inis%ra%ion sin*e %&e 4i!in4 of a -on( is in %&e na%"re of a ,"alifi*a%ion for %&e offi*e/ an( no% ne*essary in %&e se%%le)en% of %&e es%a%e. Nei%&er )ay a%%orneys fees in*i(en% %o li%i4a%ion in*"rre( -y %&e &eirs in asser%in4 %&eir res e*%i!e ri4&%s -e *lai)e( as a (e("*%ion fro) %&e 4ross es%a%e. (Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., G.R. No. 12320*, 0ar"# 22, 2000 No% e!ery in%er9!i!os %ransfer in an%i*i a%ion of (ea%& is *onsi(ere( %ransfer in *on%e) la%ion of (ea%& for "r oses of (e%er)inin4 %&e ro er%y %o -e in*l"(e( in %&e 4ross es%a%e of a (e*e(en%. (e*e(en% &as a% any %i)e )a(e a %ransfer/ -y %r"s% or o%&er'ise/ in *on%e) la%ion of or in%en(e( %o %a2e effe*% in ossession or en.oy)en% a% or af%er (ea%& ISe*. 7> <#=/ N+6C of 133JK. +% is *lear %&a% %&e ro er%ies are no% %ransferre( in *on%e) la%ion of or in%en(e( %o %a2e effe*% in ossession or en.oy)en% a% or af%er (ea%&.

BAR: 78. To -e *onsi(ere( a %ransfer in *on%e) la%ion of (ea%& %&e

T&ere is no %ransfer in *on%e) la%ion of (ea%& if %&ere is no s&o'in4 %&e %ransferor re%aine( for &is life or for any erio( '&i*& (oes no% in fa*% en( -efore &is (ea%&? <1= %&e ossession or en.oy)en% of/ or %&e ri4&% %o %&e in*o)e fro) %&e ro er%y/ or <2= %&e ri4&%/ ei%&er alone or in *on."n*%ion 'i%& any erson/ %o (esi4na%e %&e erson '&o s&all ossess or en.oy %&e ro er%y or %&e in*o)e %&erefro). ISe*. 7> <#=/ N+6C of 133JK T&e a ro!al of %&e *o"r% si%%in4 in ro-a%e/ or as a se%%le)en% %ri-"nal o!er %&e es%a%e of %&e (e*ease( is no% a )an(a%ory re,"ire)en% for %&e *olle*%ion of %&e es%a%e. T&e ro-a%e *o"r% is (e%er)inin4 iss"es '&i*& are no% a4ains% %&e ro er%y of %&e (e*e(en%/ or a *lai) a4ains% %&e es%a%e as s"*&/ -"% is a4ains% %&e in%eres% or ro er%y ri4&% '&i*& %&e &eir/ le4a%ee/ (e!isee/ e%*. &as in %&e ro er%y for)erly &el( -y %&e (e*e(en%. T&e no%i*es of le!y 'ere re4"larly iss"e( 'i%&in %&e res*ri %i!e erio(. T&e %a5 assess)en% &a!in4 -e*o)e final/ e5e*"%ory an( enfor*ea-le/ %&e sa)e *an no lon4er -e *on%es%e( -y )eans of a (is4"ise( ro%es%. (0ar"o%, $$ v. Court of Appeal%, et al., 2)3 'CRA 4)

BAR: 80. B&en %&e (onee or -enefi*iary is a s%ran4er/ %&e %a5 aya-le -y %&e (onor s&all -e 10N of %&e ne% 4if%s.
no% a?

BAR: 81. Cor "r oses of %&e (onors %a5/ a s%ran4er is erson '&o is

<1= #ro%&er/ sis%er <'&e%&er -y '&ole or &alf9-loo(=/ s o"se/ an*es%or an( lineal (es*en(an%@ or <2= 6ela%i!e -y *onsan4"ini%y in %&e *olla%eral line 'i%&in %&e fo"r%& (e4ree of rela%ions&i . ISe*. 33 <#=/ N+6C of 133JK is e5e) % fro) (onors %a5. ISe*. 33 <A=/ N+6C of 133JK T&"s/ a P200/000.00 (e osi% *o"l( -e s li%%e( in *alen(ar years %o a!ail of %&e%a5 e5e) %ion.

BAR: 82. T&e a)o"n% of P100/000.00 (ona%e( ("rin4 a *alen(ar year

55

T&e (ona%ion of a ri8e %o an a%&le%e in an in%erna%ional s or%s %o"rna)en% &el( a-roa( an( san*%ione( -y %&e na%ional s or%s asso*ia%ion is e5e) % fro) (onors %a5. <Se*. 1/ 6e . A*% No. J>43= *on%ri-"%ion in *as& or in 2in( %o any *an(i(a%e or oli%i*al ar%y or *oali%ion of ar%ies for *a) ai4n "r oses/ ("ly re or%e( %o %&e Co))ission on Ele*%ions/ s&all no% -e s"-.e*% %o %&e ay)en% of any 4if% %a5. <las% ar./ Se*. 11/ 6. A. No. J1HH= A non9resi(en% *i%i8en or alien is e5e) % only fro) %&e ay)en% of (onors %a5es if &is 4if%s are )a(e %o or for %&e "se of %&e Na%ional Ao!ern)en% or any en%i%y *rea%e( -y any of i%s a4en*ies '&i*& is no% *on("*%e( for rofi%/ or %o any oli%i*al s"-(i!ision of %&e sai( Ao!ern)en%.

BAR: 83. Any ro!ision of la' %o %&e *on%rary no%'i%&s%an(in4/ any

BAR: 84. A non9resi(en% *i%i8en or alien is s"-.e*% %o (onors %a5 '&ere %&e 4if% is no% )a(e in fa!or of an e("*a%ional an(Mor *&ari%a-le/ reli4io"s/ *"l%"ral or so*ial 'elfare *or ora%ion/ ins%i%"%ion/ fo"n(a%ion/ %r"s% or &ilan%&ro i* or4ani8a%ion or resear*& ins%i%"%ion or *or ora%ion '&i*& (oes no% "se )ore %&an 10N of %&e (ona%ion for a()inis%ra%ion "r oses. RETURN6 AN/ WITHHOL/ING
+n*o)e %a5 re%"rns -ein4 "-li* (o*")en%s/ "n%il *on%ro!er%e( -y *o) e%en% e!i(en*e/ are *o) e%en% e!i(en*e/ are pri&a fa"ie *orre*% 'i%& res e*% %o %&e en%ries %&erein. (Ropali 5ra.in3 v. N!RC, et al., 29* 'CRA 309, 31) 85. Marrie( in(i!i("als/ '&e%&er *i%i8ens/ resi(en% or non9 resi(en% aliens/ '&o (o no% (eri!e in*o)e "rely fro) *o) ensa%ion s&all file a re%"rn for %&e %a5a-le year %o in*l"(e %&e in*o)e of -o%& s o"ses/ -"% '&ere i% is i) ra*%i*a-le for %&e s o"ses %o file one re%"rn/ ea*& s o"se )ay file a se ara%e re%"rn of in*o)e -"% %&e re%"rns so file( s&all -e *onsoli(a%e( -y %&e #"rea" for "r oses of !erifi*a%ion Se*%ion >1 <D= of %&e N+6C of 133J T&ere is no s&o'in4 in %&e ro-le) %&a% i% is i) ra*%i*a-le for #ill an( ;illary %o file one re%"rn/ &en*e %&ey s&o"l( file a sin4le re%"rn. a. E!ery Cili ino *i%i8en resi(in4 in %&e P&ili ines@ -. E!ery Cili ino *i%i8en resi(in4 o"%si(e %&e P&ili ines on &is in*o)e fro) so"r*es 'i%&in %&e P&ili ines@ *. E!ery alien resi(in4 in %&e P&ili ines on in*o)e (eri!e( fro) so"r*es 'i%&in %&e P&ili ines@ an( (. E!ery nonresi(en% alien en4a4e( in %ra(e or -"siness or in %&e e5er*ise of rofession in %&e P&ili ines. ISe*. >1 <A= <1=/ N+6C of 133JK a. An in(i!i("al '&ose 4ross in*o)e (oes no% e5*ee( &is %o%al ersonal an( a((i%ional e5e) %ions for (e en(en%s/ Provi.e., T&a% a *i%i8en of %&e P&ili ines an( any alien in(i!i("al en4a4e( in -"siness or ra*%i*e of rofession 'i%&in %&e P&ili ines s&all file an in*o)e %a5 re%"rn re4ar(less of %&e a)o"n% of 4ross in*o)e@ -. An in(i!i("al 'i%& res e*% %o "re *o) ensa%ion in*o)e for ser!i*es in '&a%e!er for) ai(/ in*l"(in4/ -"% no% li)i%e( %o fees/ salaries/ 'a4es/ *o))issions/ an( si)ilar i%e)s/ (eri!e( fro) so"r*es 'i%&in %&e P&ili ines/ %&e in*o)e %a5 on '&i*& &as -een *orre*%ly 'i%&&el(/ Provi.e., T&a% an in(i!i("al (eri!in4 *o) ensa%ion *on*"rren%ly fro) %'o or )ore e) loyers a% any %i)e ("rin4 %&e %a5a-le year s&all file an in*o)e %a5 re%"rn? Provi.e., furt#er, T&a% an

BAR:

BAR: 86. +n(i!i("als re,"ire( %o file an in*o)e %a5 re%"rn.

BAR: 87. +n(i!i("als '&o are no% re,"ire( %o file an in*o)e %a5 re%"rn.

56

in(i!i("al '&ose "re *o) ensa%ion in*o)e (eri!e( fro) so"r*es 'i%&in %&e P&ili ines e5*ee(s Si5%y %&o"san( esos <PH0/000.00=/ s&all also file an in*o)e %a5 re%"rn@ *. An in(i!i("al '&ose sole in*o)e &as -een s"-.e*% %o final 'i%&&ol(in4 %a5@ (. An in(i!i("al '&o is e5e) % fro) in*o)e %a5 "rs"an% %o %&e ro!isions of %&e N+6C of 133J/ an( o%&er la's/ 4eneral or s e*ial. ISe*. >1 <A= <2=/ N+6C of 133JK An in(i!i("al '&o is no% re,"ire( %o file an in*o)e %a5 re%"rn )ay ne!er%&eless -e re,"ire( %o file an infor)a%ion re%"rn. ISe*. >1 <A= <1=/ N+6C of 133JK A *or ora%ion files i%s in*o)e %a5 re%"rn an( ays i%s in*o)e %a5 fo"r <4= %i)es ("rin4 a sin4le %a5a-le year. $"ar%erly re%"rns are re,"ire( %o -e file( for %&e firs% %&ree ,"ar%ers/ %&en a final a(."s%)en% re%"rn is file( *o!erin4 %&e %o%al %a5a-le in*o)e for %&e '&ole %a5a-le year/ -e i% *alen(ar or fis*al. An in(i!i("al earnin4 fro) %&e ra*%i*e of &is rofession or '&o en4a4es in %ra(e or -"siness files &is in*o)e %a5 re%"rn an( ays &is in*o)e %a5 fo"r <4= %i)es ("rin4 a sin4le %a5a-le year. $"ar%erly re%"rns are re,"ire( %o -e file( for %&e firs% %&ree ,"ar%ers/ %&en an ann"al in*o)e %a5 re%"rn is file( *o!erin4 %&e %o%al %a5a-le in*o)e for %&e '&ole of %&e re!io"s *alen(ar year. T&e "r ose of %&e a-o!e fo"r <4= %i)es a year re,"ire)en% is %o )a2e a!aila-le s"ffi*ien% f"n(s %o )ee% %&e -"(4e%ary re,"ire)en%s/ on a ,"ar%erly -asis %&ere-y in*reasin4 4o!ern)en% li,"i(i%y. +% also eases &ar(s&i s on %&e ar% of in(i!i("als '&o are re,"ire( %o )a2e %&is fo"r %i)e re%"rn. T&"s/ %&e %a5 ayer (oes no% &a!e %o raise lar4e s")s of )oney in or(er %o ay %&e %a5. An in(i!i("al earnin4 "rely *o) ensa%ion in*o)e files only one ann"al in*o)e %a5 re%"rn *o!erin4 %&e %o%al %a5a-le *o) ensa%ion in*o)e for %&e '&ole of %&e re!io"s *alen(ar year. Un(er %&e 'i%&&ol(in4 %a5 sys%e)/ %a5es i) ose( or res*ri-e( -y %&e N+6C of 133J are %o -e (e("*%e( an( 'i%&&el( -y %&e ayors fro) ay)en%s )a(e %o ayees for %&e for)er %o ay (ire*%ly %o %&e #"rea" of +n%ernal 6e!en"e. +% is also 2no'n as *olle*%ion of %&e %a5 a% so"r*e. A 'i%&&ol(in4 a4en% is e5 li*i%ly )a(e ersonally lia-le "n(er %&e Ta5 Co(e for %&e ay)en% of %&e %a5 re,"ire( %o -e 'i%&&el(/ in or(er %o *o) el %&e 'i%&&ol(in4 a4en% %o 'i%&&ol( %&e %a5 "n(er any an( all *ir*")s%an*es. +n effe*%/ %&e res onsi-ili%y for %&e *olle*%ion of %&e %a5 as 'ell as %&e ay)en% %&ereof is *on*en%ra%e( " on %&e erson o!er '&o) %&e Ao!ern)en% &as ."ris(i*%ion. <Cili inas Syn%&e%i* Ci-er Cor ora%ion !. Co"r% of A eals/ e% al./ A.6. Nos. 117437 T 1241JJ/ O*%o-er 12/ 1333= T&e sys%e) fa*ili%a%es %a5 *olle*%ion. T&e %'o <2= %y es of 'i%&&ol(in4 a% so"r*e are %&e 1= final 'i%&&ol(in4 %a5@ an( 2= *re(i%a-le 'i%&&ol(in4 %a5. Un(er %&e final 'i%&&ol(in4 %a5 sys%e) %&e a)o"n% of in*o)e %a5 'i%&&el( -y %&e 'i%&&ol(in4 a4en% is *ons%i%"%e( as a f"ll an( final ay)en% of %&e in*o)e ("e fro) %&e ayee on %&e sai( in*o)e. I1 s% sen%en*e/ 1s% ar./ Se*. 2.>J <A=/ 6e!. 6e4s. No. 2937K T&e lia-ili%y for ay)en% of %&e %a5 res%s ri)arily on %&e ayor or %&e 'i%&&ol(in4 a4en%.. T&"s/ in *ase of &is fail"re %o 'i%&&ol( %&e %a5 or in *ase of "n(er 'i%&&ol(in4/ %&e (efi*ien*y %a5 s&all -e *olle*%e( fro) %&e ayor 'i%&&ol(in4 a4en%. T&e ayee is no% re,"ire( %o file an in*o)e %a5 re%"rn for %&e ar%i*"lar in*o)e.

57

Un(er %&e *re(i%a-le 'i%&&ol(in4 %a5 sys%e)/ %a5es 'i%&&el( on *er%ain in*o)e ay)en%s are in%en(e( %o e,"al or a% leas% a ro5i)a%e &e %a5 ("e fro) %&e ayee on %&e sai( in*o)e. T&e in*o)e re*i ien% is s%ill re,"ire( %o file an in*o)e %a5 re%"rn an(Mor ay %&e (ifferen*e -e%'een %&e %a5 'i%&&el( an( %&e %a5 ("e on %&e in*o)e. I1s% an( 2n( sen%en*es/ Se*. 2>J<#=/ 6e!. 6e4s. No. 2937K T&e %'o 2in(s of *re(i%a-le 'i%&&ol(in4 %a5es are <a= %a5es 'i%&&el( on in*o)e ay)en%s *o!ere( -y %&e e5 an(e( 'i%&&ol(in4 %a5@ an( <-= %a5es 'i%&&el( on *o) ensa%ion in*o)e. Pay)en%s %o %&e follo'in4 are e5e) % fro) %&e re,"ire)en% of 'i%&&ol(in4 or '&en no 'i%&&ol(in4 %a5es re,"ire(? a. Na%ional Ao!ern)en% an( i%s ins%r")en%ali%ies in*l"(in4 ro!in*ial/ *i%y/ or )"ni*i al 4o!ern)en%s@ -. Persons en.oyin4 e5e) %ion fro) ay)en% of in*o)e %a5es "rs"an% %o %&e ro!isions of any la'/ 4eneral or s e*ial/ s"*& as -"% no% li)i%e( %o %&e follo'in4? 1= Sales of real ro er%y -y a *or ora%ion '&i*& is re4is%ere( 'i%& an( *er%ifie( -y %&e ;:U6# or ;UDCC as en4a4e( in so*iali8e( &o"sin4 ro.e*% '&ere %&e sellin4 ri*e of %&e &o"se an( lo% or only %&e lo% (oes no% e5*ee( P170/000.00 in Me%ro Manila an( o%&er &i4&ly "r-ani8e( areas an( P1>0/000.00 in o%&er areas or s"*& a(."s%e( a)o"n% of sellin4 ri*e for so*iali8e( &o"sin4 as )ay la%er -e (e%er)ine( an( a(o %e( -y %&e ;:U6#@ 2= Cor ora%ions re4is%ere( 'i%& %&e #oar( of +n!es%)en%s an( en.oyin4 e5e) %ions fro) in*o)e "n(er %&e O)ni-"s +n!es%)en% Co(e of 133J@ 1= Cor ora%ions e5e) % fro) in*o)e %a5 "n(er Se*. 10/ of %&e Ta5 Co(e/ li2e %&e SSS/ AS+S/ %&e PCSO/ e%*. ;o'e!er/ in*o)e ay)en%s arisin4 fro) any a*%i!i%y '&i*& is *on("*%e( for rofi% or in*o)e (eri!e( fro) real or ersonal ro er%y s&all -e s"-.e*% %o a 'i%&&ol(in4 %a5. <Se*. >J.>/ 6e!. 6e4s. No. 2937=

BAR: 88. +n a li*a%ions for ref"n(/ %&e 'i%&&ol(in4 a4en% is a %a5 ayer (Co&&i%%ioner of $nternal Revenue v. Pro"ter B Ga&ble P#ilippine 0anufa"turin3 Corporation, 204 'CRA 3)), 3+3/3+* , -"% for %a5 a)nes%y "r oses/ &e is no%. <Co&&i%%ioner of $nternal Revenue v. Court of Appeal%, et al., G.R. No. 10+4)*, 1anuary 20, 1999, t#e An%"or "a%e BAR: 89. :e4al re,"ire)en%s for *lai)in4 %a5 re'ar(s for in%ernal re!en"e %a5es? a. T&e infor)an% s&o"l( !ol"n%arily file a *onfi(en%ial infor)a%ion "n(er oa%& 'i%& %&e :a' Di!ision of %&e #"rea" of +n%ernal 6e!en"e alle4in4 %&erein %&e s e*ifi* !iola%ions *ons%i%"%in4 fra"(@ -. T&e infor)a%ion )"s% no% ye% -e in %&e ossession of %&e #"rea" of +n%ernal 6e!en"e/ or refer %o a *ase alrea(y en(in4 or re!io"sly in!es%i4a%e( -y %&e #"rea" of +n%ernal 6e!en"e@ *. T&e infor)an% )"s% no% -e a 4o!ern)en% e) loyee or a rela%i!e of a 4o!ern)en% e) loyee 'i%&in %&e si5%& (e4ree of *onsan4"ini%y@ an( (. T&e infor)a%ion )"s% res"l% %o *olle*%ions of re!en"e an(Morfines. 4ENALTIE67 INTERE6T6 AN/ 6URCHARGE6
S"r%a5 or s"r*&ar4e/ also 2no'n as %&e *i!il enal%ies/ are %&e a)o"n%s i) ose( in a((i%ion %o %&e %a5 re,"ire(. T&ey are in %&e na%"re of enal%ies an( s&all -e *olle*%e( a% %&e sa)e %i)e/ in %&e sa)e )anner/ an( as ar% of %&e %a5. ISe*.247 <A=/ N+6C of 133JK

58

T&e %'o <2= 2in(s of *i!il enal%ies are <a= %&e 2>N s"r*&ar4e for la%e filin4 or la%e ay)en% ISe*. 247 <A=/ N+6C of 133JK <also 2no'n as %&e (elin,"en*y s"r*&ar4e=/ an( %&e >0N 'illf"l ne4le*% or fra"( s"r*&ar4e. ISe*. 247 <#=/ $bi..K Defi*ien*y in*o)e %a5 is %&e a)o"n% -y '&i*& %&e %a5 i) ose( "n(er %&e N+6C of 133J e5*ee(s %&e a)o"n% s&o'n as %&e %a5 ("e -y %&e %a5 ayer " on &is re%"rn. ISe*. >H <#= <1=/ N+6C of 133JK Defi*ien*y in%eres% is %&e in%eres% assesse( an( *olle*%e( on any "n ai( a)o"n% of %a5 a% %&e ra%e of 20N er ann") or s"*& &i4&er ra%e as )ay -e res*ri-e( -y re4"la%ions/ fro) %&e (a%e res*ri-e( for ay)en% "n%il %&e a)o"n% is f"lly ai(. ISe*. 243 <A= <#=/ N+6C of 133JK Delin,"en*y in%eres% is %&e in%eres% assesse( an( *olle*%e( on %&e "n ai( a)o"n% "n%il f"ll"y ai( '&ere %&ere is fail"re on %&e ar% of %&e %a5 ayer %o ay %&e a)o"n% (ie on any re%"rn re,"ire( %o -e file(@ or %&e a)o"n% of %&e %a5 ("e for '&i*& no re%"rn is re,"ire(@ or a (efi*ien*y %a5/ or any s"r*&ar4e or in%eres% %&ereon/ on %&e (a%e a earin4 in %&e no%i*e an( (e)an( -y %&e Co))issioner of +n%ernal 6e!en"e. ISe*.243 <*=/ N+6C of 133JK Co) ro)ise enal%y is %&e a)o"n% a4ree( " on -e%'een %&e %a5 ayer an( %&e Ao!ern)en% %o -e ai( as a enal%y in *ases of a *o) ro)ise. T&e fi!e year res*ri %i!e erio( for %&e filin4 of *ri)inal a*%ion for !iola%ion of %&e Ta5 Co(e <assess)en% *ases= s%ar%s %o r"n '&en %&e assess)en% &as -e*o)e final an( "na eala-le.

TARIFF AND CUSTOMS CODE

+) or%a%ion -e4ins '&en %&e *on!eyin4 !essel or air*raf% en%ers %&e ."ris(i*%ion of %&e P&ili ines 'i%& in%en%ion %o "nla(e %&erein. <Se*. 1202/ TCCP= +) or%a%ion is (ee)e( %er)ina%e( " on ay)en% of %&e ("%ies/ %a5es an( o%&er *&ar4es ("e " on %&e a4en*ies/ or se*"re( %o -e ai(/ a% %&e or% of en%ry an( %&e le4al er)i% for 'i%&(ra'al s&all &a!e -een 4ran%e(. +n *ase %&e ar%i*les are free of ("%ies/ %a5es an( o%&er *&ar4es/ "n%il %&ey &a!e le4ally lef% %&e ."ris(i*%ion of %&e *"s%o)s. <Se*. 1202/ TCCP= C"s%o)s Co(e/ '&i*& i) le)en%s %&e *ons%i%"%ionally (ele4a%e( o'er of %&e Presi(en% of %&e P&ili ines/ in %&e in%eres% of na%ional e*ono)y/ 4eneral 'elfare an(Mor na%ional se*"ri%y " on re*o))en(a%ion of %&e NEDA <a= %o in*rease/ re("*e or re)o!e e5is%in4 ro%e*%i!e ra%es of i) or% ("%y/ ro!i(e( %&a%/ %&e in*rease s&o"l( no% -e &i4&er %&an 100N a( !alore)@ <-= %o es%a-lis& i) or% ,"o%a or %o -an i) or%s of any *o))o(i%y/ an( <*= %o i) ose a((i%ional ("%y on all i) or%s no% e5*ee(in4 10N a( !alore)/ a)on4 o%&ers. C"s%o)s ("%ies is %&e na)e 4i!en %o %a5es on %&e i) or%a%ion an( e5 or%a%ion of *o))o(i%ies/ %&e %ariff or %a5 assesse( " on )er*&an(ise i) or%e( fro)/ or e5 or%e( %o/ a forei4n *o"n%ry. <Nes%le P&ils. !. Co"r% of A eals/ e% al./ A.6. No. 114114/ 0"ly H/ 2001= S e*ial *"s%o)s ("%ies are a((i%ional i) or% ("%ies i) ose( on s e*ifi* 2in(s of i) or%e( ar%i*les "n(er *er%ain *on(i%ions. T&e s e*ial *"s%o)s ("%ies are %&e an%i9(") in4 ("%y/ %&e *o"n%er!ailin4 ("%y/ %&e (is*ri)ina%ory ("%y an( %&e )ar2in4 ("%y.

BAR: 90. T&e fle5i-le %ariff *la"se is a ro!ision in %&e Tariff an(

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T&e s e*ial *"s%o)s ("%ies are i) ose( for %&e ro%e*%ion of *ons")ers an( )an"fa*%"rers/ as 'ell as P&ili ine ro("*%s.

BAR: 91. D") in4 ("%y is an a((i%ional s e*ial ("%y a)o"n%in4 %o %&e (ifferen*e -e%'een %&e e5 or% ri*e an( %&e nor)al !al"e of s"*& ro("*%/ *o))o(i%y or ar%i*le <Se*. 101 <s= <1=/ TCC/ as a)en(e( -y 6e . A*% No. 7J>2/ An%i9D") in4 A*% of 1333.= i) ose( on %&e i) or%a%ion of a ro("*%/ *o))o(i%y or ar%i*le of *o))er*e in%o %&e P&ili ines a% less %&an i%s nor)al !al"e '&en (es%ine( for (o)es%i* *ons") %ion in %&e e5 or%in4 *o"n%ry '&i*& is *a"sin4 or is %&rea%enin4 %o *a"se )a%erial in."ry %o a (o)es%i* in("s%ry/ or )a%erially re%ar(in4 %&e es%a-lis&)en% of a (o)es%i* in("s%ry ro("*in4 %&e li2e ro("*%. ISe*. 101 <s= <>=/ TCC/ as a)en(e( -y 6e . A*% No. 7J>2/ An%i9 D") in4 A*% of 1333K
T&e an%i9(") in4 ("%y is i) ose( a. B&ere a ro("*%/ *o))o(i%y or ar%i*le of *o))er*e is e5 or%e( in%o %&e P&ili ines a% a ri*e less %&an i%s nor)al !al"e '&en (es%ine( for (o)es%i* *ons") %ion in %&e e5 or%in4 *o"n%ry/ -. an( s"*& e5 or%a%ion is *a"sin4 or is %&rea%enin4 %o *a"se )a%erial in."ry %o a (o)es%i* in("s%ry/ or )a%erially re%ar(s %&e es%a-lis&)en% of a (o)es%i* in("s%ry ro("*in4 %&e li2e ro("*%. ISe*. 101 <a=/ TCC/ as a)en(e( -y 6e . A*% No. 7J>2/ An%i9D") in4 A*% of 1333K Nor)al !al"e for "r oses of i) osin4 %&e an%i9(") in4 ("%y is %&e *o) ara-le ri*e a% %&e (a%e of sale of li2e ro("*%/ *o))o(i%y/ or ar%i*le in %&e or(inary *o"rse of %ra(e '&en (es%ine( for *ons") %ion in %&e *o"n%ry of e5 or%. ISe*. 101 <s= <1 =/ TCC/ as a)en(e( -y 6e . A*% No. 7J>2/ An%i9D") in4 A*% of 1333K A (") e( i) or%e( ro("*% is any ro("*%/ *o))o(i%y or ar%i*le of *o))er*e in%ro("*e( in%o %&e P&ili ines a% an e5 or% ri*e less %&an i%s nor)al !al"e in %&e or(inary *o"rse of %ra(e/ for %&e li2e ro("*%/ *o))o(i%y or ar%i*le (es%ine( for *ons") %ion in %&e e5 or%in4 *o"n%ry/ '&i*& is *a"sin4 or is %&rea%enin4 %o *a"se )a%erial in."ry %o a (o)es%i* in("s%ry/ or )a%erially re%ar(in4 %&e es%a-lis&)en% of a (o)es%i* in("s%ry ro("*in4 %&e li2e ro("*%. ISe*. 101 <s= <>=/ TCC/ as a)en(e( -y 6e . A*% No. 7J>2/ An%i9D") in4 A*% of 1333K T&e i) osin4 a"%&ori%y for %&e an%i9(") in4 ("%y is %&e Se*re%ary of Tra(e an( +n("s%ry in %&e *ase of non9a4ri*"l%"ral ro("*%/ *o))o(i%y/ or ar%i*le or %&e Se*re%ary of A4ri*"l%"re/ in %&e *ase of a4ri*"l%"ral ro("*%/ *o))o(i%y or ar%i*le/ af%er for)al in!es%i4a%ion an( affir)a%i!e fin(in4 of %&e Tariff Co))ission. ISe*. 101 <a=/ TCC/ as a)en(e( -y 6e . A*% No. 7J>2/ An%i9D") in4 A*% of 1333K E!en '&en all %&e re,"ire)en%s for %&e i) osi%ion &a!e -een f"lfille(/ %&e (e*ision on '&e%&er or no% %o i) ose a (efini%i!e an%i9(") in4 ("%y re)ains %&e rero4a%i!e of %&e Tariff Co))ission. ISe*. 101 <a=/ TCC/ as a)en(e( -y 6e . A*% No. 7J>2/ An%i9D") in4 A*% of 1333K +n %&e (e%er)ina%ion of '&e%&er %o i) ose %&e an%i9(") in4 ("%y/ %&e Tarrif Co))ission/ )ay *onsi(er a)on4 o%&ers/ %&e effe*% of i) osin4 an an%i9 (") in4 ("%y on %&e 'elfare of %&e *ons")ers an(Mor %&e 4eneral "-li*/ an( o%&er rela%e( lo*al in("s%ries. <Se*. 101 <a=/ TCC/ as a)en(e( -y 6e . A*% No. 7J>2/ An%i9D") in4 A*% of 1333= T&e a)o"n% of an%i9(") in4 ("%y %&a% )ay -e i) ose( is %&e (ifferen*e -e%'een %&e e5 or% ri*e an( %&e nor)al !al"e of s"*& ro("*%/ *o))o(i%y or ar%i*le. <Se*. 101 <s= <1=/ TCC/ as a)en(e( -y 6e . A*% No. 7J>2/ An%i9 D") in4 A*% of 1333=

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T&e an%i9(") in4 ("%y s&all -e e,"al %o %&e )ar4in of (") in4 on s"*& ro("*%/ *o))o(i%y or ar%i*le %&ereaf%er i) or%e( %o %&e P&ili ines "n(er si)ilar *ir*")s%an*es/ in a((i%ion %o or(inary ("%ies/ %a5es an( *&ar4es i) ose( -y la' on %&e i) or%e( ro("*%/ *o))o(i%y or ar%i*le/ on any ro("*%/ *o))o(i%y or ar%i*le of *o))er*e '&i*& is 4ran%e( (ire*%ly or in(ire*%ly -y %&e 4o!ern)en% in %&e *o"n%ry of ori4in or e5 or%a%ion/ any 2in( or for) of s e*ifi* s"-si(y " on %&e ro("*%ion/ )an"fa*%"re or e5 or%a%ion of s"*& ro("*% *o))o(i%y or ar%i*le/ an( %&e i) or%a%ion of s"*& s"-si(i8e( ro("*%/ *o))o(i%y/ or ar%i*le &as *a"se( or %&rea%ens %o *a"se )a%erial in."ry %o a (o)es%i* in("s%ry or &as )a%erially re%ar(e( %&e 4ro'%& or re!en%s %&e es%a-lis&)en% of a (o)es%i* in("s%ry. <Se*. 102/ TCCP as a)en(e( -y Se*%ion 1/ 6.A. No. 7J>1=

BAR: 92. Co"n%er!ailin4 ("%ies are a((i%ional *"s%o)s ("%ies i) ose(

T&e i) osin4 a"%&ori%y for %&e *o"n%er!ailin4 ("%ies is %&e Se*re%ary of Tra(e an( +n("s%ry in %&e *ase of non9a4ri*"l%"ral ro("*%/ *o))o(i%y/ or ar%i*le or %&e Se*re%ary of A4ri*"l%"re/ in %&e *ase of a4ri*"l%"ral ro("*%/ *o))o(i%y or ar%i*le/ af%er for)al in!es%i4a%ion an( affir)a%i!e fin(in4 of %&e Tariff Co))ission. E!en '&en all %&e re,"ire)en%s for %&e i) osi%ion &a!e -een f"lfille(/ %&e (e*ision on '&e%&er or no% %o i) ose a (efini%i!e an%i9(") in4 ("%y re)ains %&e rero4a%i!e of %&e Tariff Co))ission. <Se*. 101 <a=/ TCC/ as a)en(e( -y 6e . A*% No. 7J>2/ An%i9D") in4 A*% of 1333= T&e *o"n%er!ailin4 ("%y is e,"i!alen% %o %&e !al"e of %&e s e*ifi* s"-si(y.

BAR: 93. Mar2in4 ("%ies are %&e a((i%ional *"s%o)s ("%ies i) ose( on forei4n ar%i*les <or i%s *on%ainers if %&e ar%i*le i%self *anno% -e )ar2e(=/ no% )ar2e( in any offi*ial lan4"a4e in %&e P&ili ines/ in a *ons i*"o"s la*e as le4i-ly/ in(eli-ly an( er)anen%ly in s"*& )anner as %o in(i*a%e %o an "l%i)a%e "r*&aser in %&e P&ili ines %&e na)e of %&e *o"n%ry of ori4in.
T&e Co))issioner of C"s%o)s i) oses %&e )ar2in4 ("%y. T&e )ar2in4 ("%y is e,"i!alen% %o fi!e er*en% <>N= a( !alore).

BAR: 94. A (is*ri)ina%ory ("%y is a ne' an( a((i%ional *"s%o)s ("%y i) ose( " on ar%i*les '&olly or in ar% %&e 4ro'%& or ro("*% of/ or i) or%e( in a !essel/ of any forei4n *o"n%ry '&i*& i) oses/ (ire*%ly or in(ire*%ly/ " on %&e (is osi%ion or %rans or%a%ion in %ransi% %&ro"4& or re9e5 or%a%ion fro) s"*& *o"n%ry of any ar%i*le '&olly or in ar% %&e 4ro'%& or ro("*% of %&e P&ili ines/ any "nreasona-le *&ar4e/ e5a*%ion/ re4"la%ion or li)i%a%ion '&i*& is no% e,"ally enfor*e( " on li2e ar%i*les of e!ery forei4n *o"n%ry/ or (is*ri)ina%es a4ains% %&e *o))er*e of %&e P&ili ines/ (ire*%ly or in(ire*%ly/ -y la' or a()inis%ra%i!e re4"la%ion or ra*%i*e/ -y or in res e*% %o any *"s%o)s/ %onna4e/ or or% ("%y/ fee/ *&ar4e/ e5a*%ion/ *lassifi*a%ion/ re4"la%ion/ *on(i%ion/ res%ri*%ion or ro&i-i%ion/ in s"*& )anner as %o la*e %&e *o))er*e of %&e P&ili ines a% a (isa(!an%a4e *o) are( 'i%& %&e *o))er*e of any forei4n *o"n%ry.
T&e Presi(en% of %&e P&ili ines i) oses %&e (is*ri)ina%ory ("%ies.

BAR: 95. 6e%"rnin4 resi(en% s are na%ionals '&o &a!e s%aye( in a forei4n *o"n%ry for a erio( of a% leas% si5 <H= )on%&s.
lia-ili%y for ("%ies/ %a5es/ fees/ or o%&er *&ar4es are (e%er)ine(/ e5*e % %&e fi5in4 of fines in sei8"re *ases/ %&e ar%y a(!ersely affe*%e( )ay ro%es% s"*& r"lin4 or (e*ision

BAR: 96. B&en a r"lin4 or (e*ision of %&e *olle*%or is )a(e '&ere-y

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a. -y resen%in4 %o %&e Colle*%or a% %&e %i)e '&en ay)en% is )a(e/ or 'i%&in fif%een <1>= (ays %&ereaf%er/ -. a 'ri%%en ro%es% se%%in4 for%& &is o-.e*%ion %o %&e r"lin4 or (e*ision in ,"es%ion/ %o4e%&er 'i%& &is reasons %&erefor. No ro%es% s&all -e *onsi(ere( "nless ay)en% of %&e a)o"n% ("e af%er final li,"i(a%ion &as firs% -een )a(e an( %&e *orres on(in4 (o*2e% fee. <Se*. 2107/ TCC n")-erin4 an( arran4e)en% s" lie(= Pro%es% E5*l"si!e 6e)e(y in Pro%es%a-le Cases. +n all *ases s"-.e*% %o ro%es%/ %&e in%eres%e( ar%y '&o (esires %o &a!e %&e a*%ion of %&e *olle*%or re!ie'e(/ s&all )a2e a ro%es%/ o%&er'ise %&e a*%ion of %&e *olle*%or s&all -e final an( *on*l"si!e a4ains% &i). <Se*. 2103/ TCC= a( !alore) *"s%o)s ("%ies is %&e %ransa*%ion !al"e/ '&i*& s&all -e %&e ri*e a*%"ally ai( or aya-le for %&e 4oo(s '&en sol( for e5 or% %o %&e P&ili ines/ a(."s%e( -y a((in4 *er%ain *os% ele)en%s %o %&e e5%en% %&a% %&ey are in*"rre( -y %&e -"yer -"% are no% in*l"(e( in %&e ri*e a*%"ally ai( or aya-le for %&e i) or%e( 4oo(s/ an( )ay in*l"(e %&e follo'in4? a. Cos% of *on%ainers an( a*2in4/ -. +ns"ran*e/ an( *. Crei4&%. <Se*. 201/ TCC as a)en(e( -y Se*. 1/ 6e . A*% No. 311>= T&e a-o!e %ransa*%ion !al"e is %&e ri)ary )e%&o( of (e%er)inin4 ("%ia-le !al"e. +f %&e %ransa*%ion !al"e of %&e i) or%e( ar%i*le *o"l( no% -e (e%er)ine( "sin4 %&e a-o!e/ %&e follo'in4 al%erna%i!e )e%&o(s s&o"l( -e "se( one af%er %&e o%&er? a. Transa*%ion !al"e of i(en%i*al 4oo(s -. Transa*%ion !al"e of si)ilar 4oo(s *. De("*%i!e )e%&o( (. Co) "%e( )e%&o( e. Call-a*2 )e%&o( T&ere is a )is%a2en -elief %&a% *lai)s for ref"n( are 4o!erne( -y %&e r"le on ,"asi9*on%ra*% of %olutio in.ebeti '&i*& res*ri-es in si5 <H= years "n(er Ar%i*le 114> of %&e Ci!il Co(e. +n or(er for %&e r"le on %olutio in.ebeti %o a ly i% is an essen%ial *on(i%ion %&a% %&e e%i%ioner )"s% firs% s&o' %&a% i%s ay)en% of %&e *"s%o)s ("%ies 'as in e5*ess of '&a% 'as re,"ire( -y %&e la' a% %&e %i)e %&e s"-.e*% 1H i) or%a%ions of )il2 an( )il2 ro("*%s 'ere )a(e. Unless s&o'n o%&er'ise/ %&e (is "%a-le res") %ion of re4"lari%y of erfor)an*e of ("%y lies in fa!or of %&e Colle*%or of C"s%o)s. (Ne%tle P#il. v. Court of Appeal%, et al., G.R. No. 134114, 1uly *, 2001 T&ere is no a"%o)a%i* 4ran% of ref"n(. +n (e%er)inin4 '&e%&er Nes%le is en%i%le( %o ref"n( of alle4e( o!er ay)en% of *"s%o) ("%ies/ i% is ne*essary %o (e%er)ine e5a*%ly &o' )"*& %&e Ao!ern)en% is en%i%le( %o *olle*% as *"s%o)s ("%ies. Un%il %&ere is s"*& a (e%er)ina%ion -y %&e Colle*%or an( affir)e( or re.e*%e( -y %&e Co))issioner/ %&en %&e Co"r% of Ta5 A eals (oes no% &a!e ."ris(i*%ion. T&e CTAs ."ris(i*%ion "n(er %&e Tariff an( C"s%o)s Co(e is no% *on*"rren% 'i%& %&a% of %&e Co))issioner of C"s%o)s ("e %o %&e a-sen*e of any *er%ifi*a%ion fro) %&e Colle*%or of C"s%o)s of Manila %&a% s"*& i) or% ("%ies s&o"l( -e ref"n(e(. Conse,"en%ly/ %&e fin(in4 -y %&e CTA in ano%&er *ase of o!er ay)en% of in%ernal re!en"e %a5es is no% ne*essarily a fin(in4 %&a% %&ere 'as o!er ay)en% of *"s%o)s ("%ies. (Ne%tle P#il. v. Court of Appeal%, et al., G.R. No. 134114, 1uly *, 2001 All *lai)s for ref"n( of ("%ies s&all -e )a(e in 'ri%in4 an( for'ar(e( %o %&e Colle*%or of C"s%o)s %o '&o) s"*& ("%ies are ai(/ '&o " on re*ei % of s"*& *lai)/ s&all !erify %&e sa)e -y %&e re*or(s of &is Offi*e/ an( if fo"n( %o -e

BAR: 97. T&e -asis of ("%ia-le !al"e of )er*&an(ise %&a% is s"-.e*% %o

62

*orre*% an( in a**or(an*e 'i%& la'/ s&all *er%ify %&e sa)e %o %&e Co))issioner of C"s%o)s 'i%& &is re*o))en(a%ion %o4e%&er 'i%& all ne*essary a ers an( (o*")en%s. U on re*ei % -y %&e Co))issioner of s"*& *er%ifie( *lai) &e s&all *a"se %&e sa)e %o -e ai( if fo"n( *orre*%. <Se*. 1J07/ TCC= 98. Un(er %&e (o*%rine of ri)ary ."ris(i*%ion/ %&e #"rea" of C"s%o)s &as e5*l"si!e a()inis%ra%i!e ."ris(i*%ion %o *on("*% sear*&es/ sei8"res an( forfei%"res of *on%ra-an( 'i%&o"% in%erferen*e fro) %&e *o"r%s. +% *o"l( *on("*% sear*&es an( sei8"res 'i%&o"% nee( of a ."(i*ial 'arran% e5*e % if %&e sear*& is %o -e *on("*%e( in a ('ellin4 la*e. T&e (o*%rine of e5*l"si!e *"s%o)s ."ris(i*%ion o!er *"s%o)s *ases %o %&e e5*l"sion of %&e 6TCs is an*&ore( " on %&e oli*y of la*in4 no "nne*essary &in(ran*e on %&e 4o!ern)en%s (ri!e/ no% only %o re!en% s)"44lin4 an( o%&er fra"(s " on C"s%o)s/ -"% )ore i) or%an%ly/ %o ren(er effe*%i!e an( effi*ien% %&e *olle*%ion of i) or% an( e5 or% ("%ies ("e %&e S%a%e/ '&i*& ena-les %&e 4o!ern)en% %o *arry o"% %&e f"n*%ions i% &as -een ins%i%"%e( %o erfor). (1ao, et al., v. Court of Appeal%, et al., an. "o&panion "a%e, 249 'CRA 34, 43 T&e Colle*%or of C"s%o)s si%%in4 in sei8"re an( forfei%"re ro*ee(in4s &as e5*l"si!e ."ris(i*%ion %o &ear an( (e%er)ine all ,"es%ions %o"*&in4 on %&e sei8"re an( forfei%"re of ("%ia-le 4oo(s. 6TCs are re*l"(e( fro) ass")in4 *o4ni8an*e o!er s"*& )a%%ers e!en %&ro"4& e%i%ions of *er%iorari/ ro&i-i%ion or )an(a)"s. (5#e -ureau of Cu%to&%, et al., v. 73ario, et al., G.R. No. 13+0+1, 0ar"# 20, 2000 6e4ional Trial Co"r%s &a!e no ."ris(i*%ion %o re le!in a ro er%y '&i*& is s"-.e*% %o sei8"re an( forfei%"re ro*ee(in4s for !iola%ion of %&e Tariff an( C"s%o)s Co(e o%&er'ise/ a*%ions for forfei%"re of ro er%y for !iola%ion of %&e C"s%o)s la's *o"l( easily -e "n(er)ine( -y %&e si) le (e!i*e of re le!in. < (e la :uente v. (e 6eyra, et al., 120 'CRA 444 T&e *"s%o)s a"%&ori%ies (o no% &a!e %o ro!e %o %&e sa%isfa*%ion of %&e *o"r% %&a% %&e ar%i*les on -oar( a !essel 'ere i) or%e( fro) a-roa( or are in%en(e( %o -e s&i e( a-roa( -efore %&ey )ay e5er*ise %&e o'er %o effe*% *"s%o)s sear*&es/ sei8"res/ or arres%s ro!i(e( -y la' an( *on%in"e 'i%& %&e a()inis%ra%i!e &earin4s. (5#e -ureau of Cu%to&%, et al., v. 73ario, et al., G.R. No. 13+0+1, 0ar"# 20, 2000 T&e Tariff an( C"s%o)s Co(e allo's %&e #"rea" of C"s%o)s %o resor% %o %&e a()inis%ra%i!e re)e(y of sei8"re/ s"*& as -y enfor*in4 %&e %a5 lien on %&e i) or%e( ar%i*le '&en %&e i) or%e( ar%i*les *o"l( -e fo"n( an( -e s"-.e*% %o sei8"re an( forfei%"re. T&e Tariff an( C"s%o)s Co(e allo's %&e #"rea" of C"s%o)s %o resor% %o %&e ."(i*ial re)e(y of filin4 an a*%ion in *o"r% '&en %&e i) or%e( ar%i*les *o"l( no% any)ore -e fo"n(. +ns%an*es '&ere %&ere is no ri4&% of re(e) %ion of sei8e( an( forfei%e( ar%i*les? a. T&ere is fra"(@ -. T&e i) or%a%ion is a-sol"%ely ro&i-i%e(/ or *. T&e release of %&e ro er%y 'o"l( -e *on%rary %o la'. (5ran%3lobe $nternational, $n". v. Court of Appeal%, et al., G.R. No. 12**34, 1anuary 24, 1999 +n A,nar v. Court of 5a8 Appeal%, 4+ 'CRA 419 / rei%era%e( in :arolan, 1r. v. Court of 5a8 appeal%, et al., 21) 'CRA 29+ / %&e S" re)e *o"r% *larifie( %&a% %&e fra"( *on%e) la%e( -y la' )"s% -e a*%"al an( no% *ons%r"*%i!e. +% )"s% -e

BAR:

63

in%en%ional/ *onsis%in4 of (e*e %ion/ 'illf"lly an( (eli-era%ely (one or resor%e( %o in or(er %o in("*e ano%&er %o 4i!e " so)e ri4&%. Cra"( )"s% -e ro!e( %o ."s%ify forfei%"re. +% )"s% -e a*%"al/ a)o"n%in4 %o in%en%ional 'ron49(oin4 'i%& %&e *lear "r ose of a!oi(in4 %&e %a5. Corfei%"re is no% fa!ore( in la' nor in e,"i%y. Mere ne4li4en*e is no% e,"i!alen% %o %&e fra"( *on%e) la%e( -y la'. An &ones% )is%a2e/ 'ill no% (e ri!e %&e 4o!ern)en% of i%s ri4&% %o *olle*% %&e ro er %a5. (Republi", et"., v. 5#e Court of Appeal%, et al., G.R. No. 139040, 7"tober 2, 2001 6e,"isi%es for forfei%"re of i) or%e( 4oo(s? a. Bron4f"l )a2in4 -y %&e o'ner/ i) or%er/ e5 or%er or *onsi4nee of any (e*lara%ion or affi(a!i%/ or %&e 'ron4f"l )a2in4 or (eli!ery -y %&e sa)e erson of any in!oi*e/ le%%er or a er L all %o"*&in4 on %&e i) or%a%ion or e5 or%a%ion of )er*&an(ise. -. %&e falsi%y of s"*& (e*lara%ion/ affi(a!i%/ in!oi*e/ le%%er or a er@ an( *. an in%en%ion on %&e ar% of %&e i) or%erM*onsi4nee %o e!a(e %&e ay)en% of %&e ("%ies ("e. (Republi", et"., v. 5#e Court of Appeal%, et al., G.R. No. 139040, 7"tober 2, 2001 Corfei%"re of sei8e( 4oo(s in %&e #"rea" of C"s%o)s is in %&e na%"re of a ro*ee(in4 in re&/ i.e. (ire*%e( a4ains% %&e re% or i) or%e( 4oo(s an( en%ails a (e%er)ina%ion of %&e le4ali%y of %&eir i) or%a%ion. +n %&is ro*ee(in4/ i% is in le4al *on%e) la%ion %&e ro er%y i%self '&i*& *o))i%s %&e !iola%ion an( is %rea%e( as %&e offen(er/ 'i%&o"% referen*e '&a%soe!er %o %&e *&ara*%er or *on("*% of %&e o'ner. T&e iss"e is li)i%e( %o '&e%&er %&e i) or%e( 4oo(s s&o"l( -e forfei%e( an( (is ose( of in a**or(an*e 'i%& la' for !iola%ion of %&e Tariff an( C"s%o)s Co(e. .(5ran%3lobe $nternational, $n". v. Court of Appeal%, et al., G.R. No. 12**34, 1anuary 24, 1999 T&e one9year res*ri %i!e erio( for forfei%"re ro*ee(in4s a lies only in %&e a-sen*e of fra"(. (Co&&i%%ioner of Cu%to&% v. Court of 5a8 Appeal%, et al., G.R. No. 132929, 0ar"# 2), 2000

BAR: 99. T&e Colle*%or of C"s%o)s " on ro-a-le *a"se %&a% %&e ar%i*les are i) or%e( or e5 or%e(/ or are a%%e) %e( %o -e i) or%e( or e5 or%e(/ in !iola%ion of %&e %ariff an( *"s%o)s la's s&all iss"e a 'arran% of sei8"re. <Se*. H/ Ti%le +++/ CAO No. 3931= +f %&e sear*& an( sei8"re is %o -e *on("*%e( in a ('ellin4 la*e/ %&en a sear*& 'arran% s&o"l( -e iss"e( -y %&e re4"lar *o"r%s no% %&e #"rea" of C"s%o)s. T&ere )ay -e ins%an*es '&ere no 'arran%s iss"e( -y %&e #"rea" of C"s%o)s or %&e re4"lar *o"r%s is re,"ire(/ as in sear*& an( sei8"res of )o%or !e&i*les an( !essels.

LOCAL TAXATION

a. Unifor)i%y@ -. Ta5es/ fees/ *&ar4es an( o%&er i) osi%ions s&all -e e,"i%a-le an( -ase( on a-ili%y %o ay/ for "-li* "r oses/ no% "n."s%/ e5*essi!e/ o ressi!e or *onfis*a%ory/ no% *on%rary %o la'/ "-li* oli*y/ na%ional e*ono)i* oli*y or in res%rain% of %ra(e@ *. T&e le!y an( *olle*%ion s&all no% -e le% %o any ri!a%e erson@

BAR: 100. T&e f"n(a)en%al rin*i les of lo*al %a5a%ion are?

64

(. +n"res solely %o %&e lo*al 4o!ern)en% "ni% le!yin4 %&e %a5@ e. T&e ro4ressi!i%y rin*i le )"s% -e o-ser!e(. Un(er %&e no' re!ailin4 Cons%i%"%ion/ '&ere %&ere is nei%&er a 4ran% nor ro&i-i%ion -y s%a%"%e/ %&e %a5in4 o'er of lo*al 4o!ern)en%s )"s% -e (ee)e( %o e5is% al%&o"4& Con4ress )ay ro!i(e s%a%"%ory li)i%a%ions an( 4"i(elines in or(er %o safe4"ar( %&e !ia-ili%y an( self9s"ffi*ien*y of lo*al 4o!ern)en% "ni%s -y (ire*%ly 4ran%in4 %&e) 4eneral an( -roa( %a5 o'ers. < City Govern&ent of 'an Pablo, !a3una, et al., v. Reye%, et al., G.R. No. 12))0+, 0ar"# 24, 1999 lo*al 4o!ern)en% "ni%s res"l%s fro) %&e reali8a%ion %&a% 4en"ine (e!elo )en% *an -e a*&ie!e( only -y s%ren4%&enin4 lo*al a"%ono)y an( ro)o%in4 (e*en%rali8a%ion of 4o!ernan*e. Cor alon4 %i)e/ %&e *o"n%rys &i4&ly *en%rali8e( 4o!ern)en% s%r"*%"re &as -re( a *"l%"re of (e en(en*e a)on4 lo*al 4o!ern)en% lea(ers " on %&e na%ional lea(ers&i . +% &as also (a) ene( %&e s iri% of ini%ia%i!e/ inno!a%ion an( i)a4ina%i!e resilien*e in )a%%ers of lo*al (e!elo )en% on %&e ar% of lo*al 4o!ern)en% lea(ers. T&e only 'ay %o s&a%%er %&is *"l%"re of (e en(en*e is %o 4i!e %&e :AUs a 'i(er role in %&e (eli!ery of -asi* ser!i*es an( *onfer %&e) s"ffi*ien% o'ers %o 4enera%e %&eir o'n so"r*es of re!en"e for %&e "r ose. (National Power Corporation v. City of Cabanatuan, G. R. No. 149110, April 9, 2003

BAR: 101. T&e ara(i4) s&if% %o %&e 4ran% of %&e o'er of %a5a%ion %o

BAR: 102. T&e :o*al Ao!ern)en% Co(e e5 li*i%ly a"%&ori8es ro!in*es an( *i%ies/ no%'i%&s%an(in4 any e5e) %ion 4ran%e( -y any la' or o%&er s e*ial la' %o i) ose a %a5 on -"sinesses en.oyin4 a fran*&ise. +n(i*a%i!e of %&e le4isla%i!e in%en% %o *arry o"% %&e *ons%i%"%ional )an(a%e of !es%in4 -roa( %a5 o'ers %o lo*al 4o!ern)en% "ni%s/ %&e :o*al Ao!ern)en% Co(e &as 'i%&(ra'n %a5 e5e) %ions or in*en%i!es %&ere%ofore en.oye( -y *er%ain en%i%ies. (City Govern&ent of 'an Pablo, !a3una, et al., v. Reye%, et al., G.R. No. 12))0+, 0ar"# 24, 1999
:AUs s"*& as %&e ro!in*e or %&e *i%y *an i) ose fran*&ise %a5 no%'i%&s%an(in4 any e5e) %ion 4ran%e( -y la' or o%&er s e*ial la'. T&e le4isla%i!e "r ose %o 'i%&(ra' %a5 e5e) %ion ri!ile4es "n(er e5is%in4 la' or *&ar%er is *learly )anifes%e( -y %&e lan4"a4e "se( *a%e4ori*ally 'i%&(ra'in4 s"*& e5e) %ion s"-.e*% only %o %&e e5*e %ions en")era%e(. Sin*e i% 'o"l( -e no% only %e(io"s an( i) ra*%i*al %o a%%e) % %o en")era%e all %&e e5is%in4 s%a%"%es ro!i(in4 for s e*ial %a5 e5e) %ions or ri!ile4es %&e :o*al Ao!ern)en% Co(e ro!i(e( for an e5 ress/ al-ei% 4eneral/ 'i%&(ra'al of s"*& e5e) %ions or ri!ile4es. No )ore "ne,"i!o*al lan4"a4e *o"l( &a!e -een "se(. (National Power Corporation v. City of Cabanatuan, G. R. No. 149110, April 9, 2003 6a%ionale for -lan2e% 'i%&(ra'al of lo*al 4o!ern)en% %a5 e5e) %ions? Do"-%less %&e o'er %o %a5 is %&e )os% effe*%i!e ins%r")en% %o raise nee(e( re!en"es %o finan*e an( s" or% )yria( a*%i!i%ies of %&e :AUs for %&e (eli!ery of -asi* ser!i*es essen%ial %o %&e ro)o%ion of %&e 4eneral 'elfare an( %&e en&an*e)en% of ea*e/ ro4ress an( ros eri%y of %&e eo le. T&e ori4inal reasons for %&e 'i%&(ra'al of lo*al 4o!ern)en% %a5 e5e) %ions %o 4o!ern)en% o'ne( or *on%rolle( *or ora%ions an( all o%&er "ni%s of 4o!ern)en% 'ere %&a% s"*& ri!ile4e res"l%e( in serio"s %a5 -ase erosion an( (is%or%ion in %&e %a5 %rea%)en% of si)ilarly si%"a%e( en%er rises. Bi%& %&e a((e( -"r(en of (e!ol"%ion/ i% is e!en )ore i) era%i!e for 4o!ern)en% en%i%ies %o s&are in %&e re,"ire)en%s of (e!elo )en%/ fis*al or o%&er'ise/ -y ayin4 %a5es or o%&er *&ar4es ("e fro) %&e). (National Power Corporation v. City of Cabanatuan, G. R. No. 149110, April 9, 2003

65

P#ilippine !on3 (i%tan"e 5elep#one Co&pany, $n"., v. City of (avao, et al., et".,G.R.No. 143+*), Au3u%t 22, 2001 / " &el( %&e a"%&ori%y of %&e Ci%y of Da!ao/ a lo*al 4o!ern)en% "ni%/ %o i) ose an( *olle*% a lo*al fran*&ise %a5 -e*a"se %&e :o*al Ao!ern)en% &as 'i%&(ra'n all %a5 e5e) %ions re!io"sly en.oye( -y all ersons an( a"%&ori8e( lo*al 4o!ern)en% "ni%s %o i) ose a %a5 on -"siness en.oyin4 a fran*&ise %a5 no%'i%&s%an(in4 %&e 4ran% of %a5 e5e) %ion %o %&e). Po'er of lo*al 4o!ern)en%s %o %a5 is only a (ele4a%e( o'er. :o*al 4o!ern)en%s (o no% &a!e %&e in&eren% o'er %o %a5 e5*e % %o %&e e5%en% %&a% s"*& o'er )i4&% -e (ele4a%e( %o %&e) ei%&er -y %&e -asi* la' or s%a%"%e. Presen%ly/ "n(er Ar%i*le G of %&e 137J Cons%i%"%ion a 4eneral (ele4a%ion of %&a% o'er &as -een 4i!en in fa!or of lo*al 4o!ern)en% "ni%s. < 0anila 2le"tri" Co&pany v. Provin"e of !a3una, et al., G.R. No. 131349, 0ay 4, 1999 T&e f"n(a)en%al la' (i( no% in%en( %&e (ele4a%ion %o lo*al 4o!ern)en% "ni%s %o -e a-sol"%e an( "n*on(i%ional/ %&e *ons%i%"%ional o-.e*%i!e o-!io"sly is %o ens"re %&a%/ '&ile lo*al 4o!ern)en% "ni%s are -ein4 s%ren4%&ene( an( )a(e )ore a"%ono)o"s/ %&e le4isla%"re )"s% s%ill see %o i% %&a%? a. %&e %a5 ayer 'ill no% -e o!er9-"r(ene( or sa((le( 'i%& )"l%i le an( "nreasona-le i) osi%ions@ -. ea*& lo*al 4o!ern)en% "ni% 'ill &a!e i%s fair s&are of a!aila-le reso"r*es@ *. %&e reso"r*es of %&e na%ional 4o!ern)en% 'ill -e "n("ly (is%"r-e(@ an( (. lo*al %a5a%ion 'ill -e fair/ "nifor) an( ."s%. (0anila 2le"tri" Co&pany v. Provin"e of !a3una, et al., G.R. No. 131349, 0ay 4, 1999 T&e 'i%&(ra'al of a %a5 e5e) %ion s&o"l( no% -e *ons%r"e( as ro&i-i%in4 f"%"re 4ran%s of e5e) %ion fro) all %a5es. +n(ee(/ %&e 4ran% of %a5in4 o'ers %o lo*al 4o!ern)en% "ni%s "n(er %&e :o*al Ao!ern)en% Co(e (oes no% affe*% %&e o'er of Con4ress %o 4ran% e5e) %ions %o *er%ain ersons/ "rs"an% %o a (e*lare( na%ional oli*y. T&e le4al effe*% of %&e *ons%i%"%ional 4ran% %o lo*al 4o!ern)en%s si) ly )eans %&a% in in%er re%in4 s%a%"%ory ro!isions on )"ni*i al %a5in4 o'ers/ (o"-%s )"s% -e resol!e( in fa!or of )"ni*i al *or ora%ions. (P#ilippine !on3 (i%tan"e 5elep#one Co&pany, $n"., v. City of (avao, et al., et".,G.R. No. 143+*), Au3u%t 22, 2001 S)ar% an( Alo-e are e5e) % fro) lo*al %a5es <in*l"(in4 %&e fran*&ise %a5= -e*a"se %&eir fran*&ises '&i*& 'ere 4ran%e( af%er %&e effe*%i!i%y of %&e :AC e5e) %e( %&e) fro) %&e ay)en% of lo*al fran*&ise an( -"siness %a5es. (P#ilippine !on3 (i%tan"e 5elep#one Co&pany, $n"., v. City of (avao, et al., et".,G.R. No. 143+*), Au3u%t 22, 2001 B&en Con4ress a ro!e( a ro!ision %&a%/ Any a(!an%a4e/ fa!or/ ri!ile4e/ e5e) %ion/ or i))"ni%y 4ran%e( "n(er e5is%in4 fran*&ises/ or )ay &ereaf%er -e 4ran%e(/ s&all i so fa*%o -e*o)e ar% of re!io"sly 4ran%e( %ele*o))"ni*a%ions fran*&ises an( s&all -e a**or(e( i))e(ia%ely an( "n*on(i%ionally %o %&e 4ran%ees of s"*& fran*&ises? Pro!i(e(/ &o'e!er/ T&a% %&e fore4oin4 s&all nei%&er a ly %o nor affe*% ro!isions of %ele*o))"ni*a%ions fran*&ises *on*ernin4 %erri%ory *o!ere( -y %&e fran*&ise/ %&e life s an of %&e fran*&ise/ or %&e %y e of ser!i*e a"%&ori8e( -y %&e fran*&ise. <Un(ers*orin4 s" lie(= %&ere 'as no in%en%ion for i% %o o era%e as a -lan2e% %a5 e5e) %ion %o all %ele*o))"ni*a%ions en%i%ies. A lyin4 %&e r"le of s%ri*% *ons%r"*%ion of la's 4ran%in4 %a5 e5e) %ions an( %&e r"le %&a% (o"-%s s&o"l( -e resol!e( in fa!or of )"ni*i al *or ora%ions in in%er re%in4 s%a%"%ory ro!isions on )"ni*i al %a5a%ion/ i% 'as &el( %&a% sai( ro!isions *anno% -e *onsi(ere( as e5%en(in4 i%s a li*a%ion %o fran*&ises s"*& as %&a% of P:DT. (P#ilippine !on3 (i%tan"e 5elep#one Co&pany, $n"., v. City of (avao, et al., et".,G.R.No. 143+*), Au3u%t 22, 2001

66

BAR: 103. A la' '&i*& (e ri!es lo*al 4o!ern)en% "ni%s of %&eir o'er %o %a5 'o"l( -e "n*ons%i%"%ional. T&e *ons%i%"%ion &as (ele4a%e( %o lo*al 4o!ern)en%s %&e o'er %o le!y %a5es/ fees an( o%&er *&ar4es. T&is *ons%i%"%ional (ele4a%ion )ay only -e re)o!e( -y a *ons%i%"%ional a)en()en%.
so"r*es of re!en"e is e5er*ise( %&ro"4& %a5 or(inan*es San44"nian4s an( a ro!e( -y %&e :AU C&ief E5e*"%i!e.

BAR: 104. T&e o'er of lo*al 4o!ern)en%s %o %a5 an( raise %&eir o'n
asse( -y %&e lo*al

T&e a"%&ori%y "n(er %&e :o*al Ao!ern)en% Co(e %o *olle*% %a5es on ,"arry reso"r*es a lies only %o %&ose e5%ra*%e( fro) "-li* lan(s. <Se*. 114 in rela%ion %o Se*. 117/ :o*al Ao!ern)en% Co(e= T&e :o*al Ao!ern)en% Co(e ro&i-i%s lo*al 4o!ern)en% "ni%s fro) *olle*%in4 e5*ise %a5es on ar%i*les en")era%e( "n(er %&e N+6C/ an( %a5es/ fees or *&ar4es on e%role") ro("*%s. <Se*. 111 I&K/ :o*al Ao!ern)en% Co(e in rela%ion %o %&e Ta5 Co(eK B&ile %&e Ta5 Co(e le!ies a %a5 on all ,"arry reso"r*es/ re4ar(less of ori4in/ '&e%&er e5%ra*%e( fro) "-li* or ri!a%e lan(s/ %&e :o*al Ao!ern)en% Co(e a"%&ori8es %&e lo*al 4o!ern)en% "ni% %o i) ose s"*& %a5es on %&ose %a2en fro) "-li* lan(s. T&"s/ ,"arry reso"r*es e5%ra*%e( fro) ri!a%e lan(s are %a5a-le "n(er %&e N+6C an( no% -y lo*al 4o!ern)en% "ni%s. <5#e Provin"e of -ula"an, et al., v. 5#e Court of Appeal%, et"., et al., 299 'CRA 442

BAR: 105. Professional -as2e%-all 4a)es s&o"l( ay %&e a)"se)en% %a5es *olle*%e( -y %&e #+6 an( no% %&e a)"se)en% %a5es *olle*%e( -y %&e lo*al 4o!ern)en%s. T&e a)"se)en% %a5 '&i*& ro!in*es an( *i%ies are allo'e( %o *olle*% "n(er Se*. 140 of %&e :o*al Ao!ern)en% Co(e/ refers %o an a)"se)en% %a5 %o -e *olle*%e( fro) ro rie%ors/ lessees/ or o era%ors of %&ea%ers/ *ine)as/ *on*er% &alls/ *ir*"ses/ -o5in4 s%a(ia/ an( o%&er la*es of a)"se)en%. T&e a"%&ori%y %o %a5 rofessional -as2e%-all 4a)es is no% in*l"(e( %&erein -e*a"se i% is a na%ional %a5 ro!i(e( for "n(er Se*. 12> of %&e 133J Ta5 Co(e '&i*& ro!i(es %&a%/ T&ere s&all -e *olle*%e( fro) %&e ro rie%or/ lessee or o era%or of *o*2 i%s/ *a-are%s/ ni4&% or (ay *l"-s/ -o5in4 e5&i-i%ions/ rofessional -as2e%-all 4a)es/ 0ai9Alai an( ra*e%ra*2s/ a %a5 e,"i!alen% %o? 5555 <(= Cif%een er*en% <1>N= in %&e *ase of rofessional -as2e%-all 4a)es en!isione( in Presi(en%ial De*ree No. 3J1? Provi.e., #owever, T&a% %&e %a5 &erein s&all -e in lie" of all o%&er er*en%a4e %a5es of '&a%e!er na%"re an( (es*ri %ion@ 555 (P#ilippine -a%;etball A%%o"iation v. Court of Appeal%, et al., G.R. No. 119122, Au3u%t +, 2000
or(inan*e is an a eal %o %&e Se*re%ary of 0"s%i*e 'i%&in a erio( of %&ir%y <10= (ays fro) effe*%i!i%y. T&e Se*re%ary &as a erio( of H0 (ays 'i%&in '&i*& %o (e*i(e. S&o"l( %&e SO0 fail %o (e*i(e 'i%&in %&a% erio(/ or if %&e (e*ision is a(!erse %o %&e %a5 ayer or %o %&e 4o!ern)en%/ %&e ar%y )ay a eal %o %&e 6TC 'i%&in a erio( of 10 (ays fro) %&e e5 ira%ion of %&e H0 (ay erio( 'i%&in '&i*& %o (e*i(e or 'i%&in 10 (ays fro) re*ei % of %&e a(!erse ."(4)en%.

BAR: 106. T&e re)e(y %o i) "4n %&e *ons%i%"%ionali%y of a lo*al %a5

REAL PROPERTY TAXATION

a. -. *. (. erson@

BAR: 107. T&e f"n(a)en%al rin*i les of real ro er%y %a5a%ion are?

A raisal a% *"rren% an( fair )ar2e% !al"e@ Classifi*a%ion for assess)en% on %&e -asis of a*%"al "se@ Assess)en% on %&e -asis of "nifor) *lassifi*a%ion@ A raisal/ assess)en%/ le!y an( *olle*%ion s&all no% -e le% %o a ri!a%e

67

e. A

raisal an( assess)en% s&all -e e,"i%a-le.

T&e reasona-le )ar2e% !al"e is (e%er)ine( -y %&e assessor in %&e for) of a s*&e("le of fair )ar2e% !al"es. T&e s*&e("le is %&en ena*%e( -y %&e lo*al %an33unian. T&e assess)en% le!el is fi5e( -y or(inan*es of %&e a %an33unian. T&e %a5 ra%e is also fi5e( -y or(inan*es of %&e a ro ria%e

ro ria%e %an33unian.

BAR: 108. Personal ro er%y "n(er %&e *i!il la' )ay -e *onsi(ere( as real ro er%y for "r oses of %a5es '&ere %&e ro er%y is essen%ial %o %&e *on("*% of %&e -"siness. Un(er4ro"n( %an2s are essen%ial %o %&e *on("*% of %&e -"siness of a 4asoline s%a%ion 'i%&o"% '&i*& i% 'o"l( no% -e o era%ional. (Calte8 P#il%., $n". v. Central -oar. of A%%e%%&ent Appeal%, et al., 114 'CRA 29*
:i4&% 6ail Transi% <:6T= i) ro!e)en%s s"*& as -"il(in4s/ *arria4e'ays/ assen4er %er)inals s%a%ions/ an( si)ilar s%r"*%"res (o no% for) ar% of %&e "-li* roa(s sin*e %&e for)er are *ons%r"*%e( o!er %&e la%%er in s"*& a 'ay %&a% %&e flo' of !e&i*"lar %raffi* 'o"l( no% -e i) aire(. T&e *arria4e'ays an( %er)inals ser!e a f"n*%ion (ifferen% fro) %&e "-li* roa(s. C"r%&er)ore/ %&ey are no% o en %o "se -y %&e 4eneral "-li* &en*e n % e5e) % fro) real ro ery %a5es. <!i3#t Rail 5ran%it Aut#ority v. Central -oar. of A%%e%%&ent Appeal%, et al., G. R. No. 12)31*, 7"tober 12, 2000 E!en 4ran%in4 %&a% %&e na%ional 4o!ern)en% o'ns %&e *arria4e'ays an( %er)inal s%a%ions/ %&e ro er%y is no% e5e) % -e*a"se %&eir -enefi*ial "se &as -een 4ran%e( %o :6TA a %a5a-le en%i%y. (!i3#t Rail 5ran%it Aut#ority v. Central -oar. of A%%e%%&ent Appeal%, et al., G. R. No. 12)31*, 7"tober 12, 2000 a. 6eal ro er%y o'ne( -y %&e 6e "-li* of %&e P&ili ines or any of i%s oli%i*al s"-(i!isions e5*e % '&en %&e -enefi*ial "se %&ereof &as -een 4ran%e( %o a %a5a-le erson for a *onsi(era%ion or o%&er'ise@ -. C&ari%a-le ins%i%"%ions/ *&"r*&es/ arsona4es or *on!en%s a "r%enan% %&ere%o/ )os,"es/ non9 rofi% or reli4io"s *e)e%eries/ an( all lan(s/ -"il(in4s an( i) ro!e)en%s a*%"ally/ (ire*%ly an( e5*l"si!ely "se( for reli4io"s/ *&ari%a-le an( e("*a%ional "r oses@ *. Ma*&ineries an( e,"i )en%/ a*%"ally/ (ire*%ly an( e5*l"si!ely "se( -y lo*al 'a%er (is%ri*%s@ an( 4o!ern)en% o'ne( an( *on%rolle( *or ora%ions en4a4e( in %&e s" ly an( (is%ri-"%ion of 'a%er an( 4enera%ion an( %rans)ission of ele*%ri* o'er@ (. 6eal ro er%y o'ne( -y ("ly re4is%ere( *oo era%i!es@ e. Ma*&inery an( e,"i )en% "se( for oll"%ion *on%rol an( en!iron)en%al ro%e*%ion. T&e res%ri*%ion " on %&e o'er of *o"r%s %o i) ea*& %a5 assess)en% 'i%&o"% a rior ay)en%/ "n(er ro%es%/ of %&e %a5es assesse( is *onsis%en% 'i%& %&e (o*%rine %&a% %a5es are %&e life-loo( of %&e na%ion/ an( as s"*& %&eir *olle*%ion *anno% -e *"r%aile( -y in."n*%ion or any li2e a*%ion@ o%&er'ise/ %&e s%a%e or/ in %&is *ase/ %&e lo*al 4o!ern)en% "ni%/ s&all -e *ri le( in (is ensin4 %&e nee(e( ser!i*es %o %&e eo le/ an( i%s )a*&inery 4ra!ely (isa-le(. (0anila 2le"tri" Co&pany v. -arli%, G.R. No. 114231, 0ay 1+, 2001 T&"s/ %&e %rial *o"r% &as no ."ris(i*%ion %o en%er%ain a e%i%ion for ro&i-i%ion a-sen% ay)en% "n(er ro%es% of %&e %a5 assesse(. < $bi.. a4ains% %&e

BAR: 109. Pro er%y e5e) % fro) %&e ay)en% of real ro er%y %a5?

BAR: 110. Un ai( real%y %a5es a%%a*& %o %&e ro er%y an( is *&ar4ea-le
erson '&o &a( a*%"al or -enefi*ial "se an(

ossession of i%

68

re4ar(less of '&e%&er or no% &e is %&e o'ner. To i) ose %&e real ro er%y %a5 on %&e s"-se,"en% o'ner '&i*& 'as nei%&er %&e o'ner no% %&e -enefi*ial "ser of %&e ro er%y ("rin4 %&e (esi4na%e( erio(s 'o"l( no% only -e *on%rary %o la' -"% also "n."s%. Conse,"en%ly/ ME6A:CO %&e for)er o'nerM"ser of %&e ro er%y 'as re,"ire( %o ay %&e %a5 ins%ea( of %&e ne' o'ner NAPOCO6 . (0anila 2le"tri" Co&pany v. -arli%, G.R. No. 114231, 0ay 1+, 2001

BAR: 111. T&e a()inis%ra%i!e re)e(ies %&a% are ro!i(e( for "n(er %&e ro!isions of 6e . A*% No. J1H0/ %&e :o*al Ao!ern)en% Co(e/ -efore resor% %o *o"r%s is )a(e rela%i!e %o real ro er%y %a5es . a. A %a5 ayer )ay ,"es%ion %&e *ons%i%"%ionali%y or le4ali%y of a %a5 or(inan*e on a eal 'i%&in %&ir%y <10= (ays fro) effe*%i!i%y %&ereof/ %o %&e Se*re%ary of 0"s%i*e. T&e %a5 ayer af%er fin(in4 %&a% &is assess)en% is "n."s%/ *onfis*a%ory/ or e5*essi!e/ )"s% -rin4 %&e *ase -efore %&e Se*re%ary of 0"s%i*e for ,"es%ions of le4ali%y or *ons%i%"%ionali%y of a *i%y or(inan*e. -. An o'ner of real ro er%y '&o is no% sa%isfie( 'i%& %&e assess)en% of &is ro er%y )ay/ 'i%&in si5%y <H0= (ays fro) no%i*e of assess)en%/ a eal %o %&e :o*al #oar( of Assess)en% A eals. *. S&o"l( %&e %a5 ayer ,"es%ion %&e e5*essi!eness of %&e a)o"n% of %a5/ &e )"s% firs% ay %&e a)o"n% ("e. T&en/ &e )"s% re,"es% %&e anno%a%ion of %&e &rase ai( "n(er ro%es% an( a**or(in4ly a eal %o %&e :o*al #oar( of Assess)en% A eals -y filin4 a e%i%ion "n(er oa%& %o4e%&er 'i%& *o ies of %&e %a5 (e*lara%ions an( affi(a!i%s or (o*")en%s %o s" or% &is a eal . (!ope, v. City of 0anila, et al., G.R. No. 12)139, :ebruary 19, 1999
Se*re%ary of 0"s%i*e *an %a2e *o4ni8an*e of a *ase in!ol!in4 %&e *ons%i%"%ionali%y or le4ali%y of %a5 or(inan*es '&ere %&ere are fa*%"al iss"es in!ol!e(. (:i3uerre% v. Court of Appeal%, et al., G.R. No. 1191)2, 0ar"# 24, 1999 Ta5 ayer files a eal %o %&e Se*re%ary of 0"s%i*e/ 'i%&in 10 (ays fro) effe*%i!i%y %&ereof. +n *ase %&e Se*re%ary (e*i(es %&e a eal/ a erio( also of 10 (ays is allo'e( for an a44rie!e( ar%y %o 4o %o *o"r%. #"% if %&e Se*re%ary (oes no% a*% %&ereon/ af%er %&e la se of H0 (ays/ a ar%y *o"l( alrea(y see2 relief in *o"r%. T&ese %&ree se ara%e erio(s are *learly 4i!en for *o) lian*e as a rere,"isi%e -efore see2in4 re(ress in a *o) e%en% *o"r%. S"*& s%a%"%ory erio(s are se% %o re!en% (elays as 'ell as en&an*e %&e or(erly an( s ee(y (is*&ar4e of ."(i*ial f"n*%ions. Cor %&is reason %&e *o"r%s *ons%r"e %&ese ro!isions of s%a%"%es as )an(a%ory. (Reye%, et al., v. Court of Appeal%, et al., G.R. No. 11+233, (e"e&ber 10, 1999 A Ci%y Assessor *anno% -e *o))an(e( -y )an(a)"s %o *lassify a ar%i*"lar ro er%y as e5e) % fro) real ro er%y %a5a%ion -e*a"se %&is is an e5er*ise of &is f"n*%ion of assessin4 ro er%ies for %a5a%ion "r oses. B&ile i% is &is ("%y %o *on("*% assess)en%s is a )inis%erial f"n*%ion/ %&e a*%"al e5er*ise %&ereof is ne*essarily (is*re%ionary. C"r%&er)ore/ re*o"rse %o *o"r%s 'ill !iola%e %&e (o*%rine of e5&a"s%ion of a()inis%ra%i!e re)e(ies -e*a"se %&e a*%ion of %&e Ci%y Assessor is a eala-le %o %&e :o*al #oar( of Assess)en% A eals/ %&en*e %o %&e Cen%ral #oar( of Assess)en% A eals ('y%te&% Plu% Co&puter Colle3e of Caloo"an City v. !o"al Govern&ent of Caloo"an City, et al., G. R. No. 14*3+2, Au3u%t ), 2003 P"-li* &earin4s are )an(a%ory rior %o a ro!al of %a5 or(inan*e/ -"% %&is s%ill re,"ires %&e %a5 ayer %o a(("*e e!i(en*e %o s&o' %&a% no "-li* &earin4s e!er %oo2 la*e. (Reye%, et al., v. Court of Appeal%, et al., G.R. No. 11+233, (e"e&ber 10, 1999

69

'olutio in.ebeti an( iss"es rela%i!e %o !ali(i%y (o no% re,"ire "n(er ro%es%.

ay)en%

T&e *on*"rren% an( si)"l%aneo"s re)e(ies affor(e( lo*al 4o!ern)en% "ni%s in enfor*in4 *olle*%ion of real ro er%y %a5es? a. Dis%rain% of ersonal ro er%y@ -. Sale of (elin,"en% real ro er%y/ an( *. Colle*%ion of real ro er%y %a5 %&ro"4& or(inary *o"r% a*%ion. T&e re)e(y of le!y *an -e "rs"e( -y "%%in4 " for sale %&e real ro er%y s"-.e*% of %a5/ i.e./ %&e (elin,"en% ro er%y " on '&i*& %&e %a5 lien a%%a*&es/ re4ar(less of %&e resen% o'ner or ossessor %&ereof. ;o'e!er %&is re)e(y is only one of %&e o%&er re)e(ies. (0anila 2le"tri" Co&pany v. -arli%, G.R. No. 114231, 0ay 1+, 2001 T&e :AU *o"l( also a!ail of %&e re)e(y of (is%rain% an( le!y of ersonal ro er%y s"-.e*%in4 any ersonal ro er%y of %&e %a5 ayer %o e5e*"%ion. %&"s/ %&e iss"an*e of %&e 'arran%s of 4arnis&)en% o!er ME6A:COs -an2 (e osi%s 'as no% i) ro er or irre4"lar. (0anila 2le"tri" Co&pany v. -arli%, et al., G.R. No. 114231, 0ay 1+, 2001 *&ar4ea-le a4ains% %&e erson '&o &as a*%"al or -enefi*ial "se an( ossession of i% re4ar(less of '&e%&er or no% &e is %&e o'ner. ;o'e!er/ %o i) ose %&e real ro er%y %a5 on %&e s"-se,"en% o'ner '&i*& 'as nei%&er %&e o'ner nor %&e -enefi*ial "ser of %&e ro er%y ("rin4 %&e (esi4na%e( erio(s 'o"l( no% only -e *on%rary %o la' -"% also "n."s%. < (0anila 2le"tri" Co&pany v. -arli%, et al., G.R. No. 114231, 0ay 1+, 2001 *i%in4 5e%tate 2%tate of Con"or.ia 5. !i& v. City of 0anila, 1+2 'CRA 4+2= T&"s ME6A:CO %&e for)er o'ner/ no% NAPOCO6/ %&e resen% o'ner/ is lia-le for %&e ay)en% of %&e -a*2 %a5es on %&e a-o!e ro er%ies. No%i*e an( "-li*a%ion/ as 'ell as %&e le4al re,"ire)en%s for a %a5 (elin,"en*y sale/ are )an(a%ory/ an( %&e fail"re %o *o) ly %&ere'i%& *an in!ali(a%e %&e sale. T&e res*ri-e( no%i*es )"s% -e sen% %o *o) ly 'i%& %&e re,"ire)en%s of ("e ro*ess . ((e Dne"#t, et al,. v. Court of Appeal%= (e Dne"#t, et al., v. ?onorable 'ayo, 290 'CRA 223,23* T&e reason -e&in( %&e no%i*e re,"ire)en% is %&a% %a5 sales are a()inis%ra%i!e ro*ee(in4s '&i*& are in per%ona& in na%"re. (Pu,on v. Abellera, 1*9 'CRA )+9, )94= (e A%i% v. $.A.C., 1*9 'CRA 314 S%e s %o -e follo'e( for %&e )an(a%ory *on("*% of Aeneral 6e!ision of 6eal Pro er%y Assess)en%s? a. Pre ara%ion of S*&e("le of Cair Mar2e% Val"es@ - . Ena*%)en% of Or(inan*es? 1= :e!yin4 an ann"al a( !alore) %a5 on real ro er%y an( an a((i%ional %a5 a**r"in4 %o %&e S e*ial E("*a%ion C"n(@ 2= Ci5in4 %&e assess)en% le!els %o -e a lie( %o %&e )ar2e% !al"es of real ro er%ies@ 1= Pro!i(in4 %&e ne*essary a ro ria%ions %o (efray e5 enses in*i(en% %o 4eneral re!ision of real ro er%y assess)en%s/@ an( 4= A(o %in4 %&e S*&e("le of Cair Mar2e% Val"es re are( -y %&e assessors. <!ope, v. City of 0anila, et al., G.R. No. 12)139, :ebruary 19, 1999 Pre ara%ion of fair )ar2e% !al"es? a. T&e *i%y or )"ni*i al assessor s&all re are a s*&e("le of fair )ar2e% !al"es for %&e (ifferen% *lasses of real ro er%y si%"a%e( in %&eir res e*%i!e :o*al

BAR: 112. +% is %r"e %&a% %&e "n ai( %a5 a%%a*&es %o %&e ro er%y an( is

70

Ao!ern)en% Uni%s for %&e ena*%)en% of an or(inan*e -y %&e %an33unian *on*erne(@ an( -. T&e s*&e("le of fair )ar2e% !al"es s&all -e "-lis&e( in a ne's a er of 4eneral *ir*"la%ion in %&e ro!in*e/ *i%y or )"ni*i ali%y *on*erne( or %&e os%in4 in %&e ro!in*ial *a i%ol or o%&er la*es as re,"ire( -y la'. (!ope, v. City of 0anila, et al., G.R. No. 12)139, :ebruary 19, 1999 Pro ose( fair )ar2e% !al"es of real ro er%y in a lo*al 4o!ern)en% "ni% as 'ell as %&e or(inan*e *on%ainin4 %&e s*&e("le )"s% -e "-lis&e( in f"ll for %&ree <1= *onse*"%i!e (ays in a ne's a er of lo*al *ir*"la%ion/ '&ere a!aila-le/ 'i%&in %en <10= (ays of i%s a ro!al/ an( os%e( in a% lease %'o <2= ro)inen% la*es in %&e ro!in*ial *a i%ol/ *i%y/ )"ni*i al or baran3ay &all for a )ini)") of %&ree <1= *onse*"%i!e 'ee2s. (:i3uerre% v. Court of Appeal%, et al,. G.R. No. 1191)2, 0ar"# 24, 1999 A s e*ial le!y or s e*ial assess)en% is an i) osi%ion -y a ro!in*e/ a *i%y or a )"ni*i ali%y 'i%&in %&e Me%ro oli%an Manila Area " on real ro er%y s e*ially -enefi%e( -y a "-li* 'or2s e5 en(i%"re of %&e :AU %o re*o!er no% )ore %&an H0N of s"*& e5 en(i%"re. T&e real ro er%y %a5es %&a% )ay -e *olle*%e( -y ro!in*es/ *i%ies an( )"ni*i ali%ies 'i%&in %&e Me%ro Manila area are %&e -asi* real ro er%y %a5/ %&e s e*ial e("*a%ion f"n(/ an( %&e a( !alore) %a5 on i(le lan(s.

G O O D LU C K AN D PRA Y E R S FOR YO U R PASSI N G THE BAR.