2001 PRE-WEEK REVIEW NOTES

TAXATION
By
Prof. Abelardo T. Domondon
HOW TO USE THESE NOTES:
These Notes n the form of re!e" #$estons and te%t$al materals "ere
s&e'ally &re&ared by the a$thor for the e%'l$s!e $se of Bar (anddates "ho
attended hs le't$res n Ta%aton. They are to be $sed as s$&&lements to hs Bar
Re!e"er n Ta%aton) Vols) I and II.
The &$r&ose of these Notes s to test the 'anddate*s ablty to ans"er
hy&othet'al #$estons as "ell as those based on sele'ted 'ases de'ded by the
S$&reme (o$rt d$rn+ the &erod ,--.-/....
It s s$++ested that the re!e"ee sho$ld 'o!er the s$++ested ans"ers "hle
readn+ the #$estons. Ths sho$ld for'e hm to re'all the a&&l'able la" and
0$rs&r$den'e. If there s tme) the ans"ers sho$ld be "rtten on a +rade s'hool
noteboo1 $sn+ the s+n &en to be $sed d$rn+ the a't$al e%ams. Ea'h #$eston
sho$ld be ans"ered "thn a s&an of nne 2-3 mn$tes only. (he'1 yo$r ans"ers
referrn+ to the S455ESTED ANSWERS.
Do not 6E6ORI7E the s$++ested ans"ers. They "ere &$r&osely made to
be len+thy to ser!e as e%&lanatory de!'es. Ths s so) be'a$se the re!e"ee does
not ha!e tme any more to refer ba'1 to the re!e" materals. If the 'anddate stll
'o$ld not $nderstand the 'on'e&ts after readn+ these notes) then refer to the
a$thor*s Bar Re!e"er n Ta%aton) Vols) I and II.
IMPORTANT: The #$estons as1ed n the Bar may not be "orded n the same
manner as the #$estons sho"n n these notes) therefore the re!e"ee s "arned
that t sho$ld be the 'on'e&ts sho"n n the #$estons and s$++estons that he
sho$ld master and not the #$estons and ans"ers per se. Be s&e'ally 'aref$l
"here the Bar #$estons are !aratons of the #$estons n'l$ded be'a$se the
ans"ers may be dfferent. It s s$++ested that &art'$lar attenton be +!en to
#$estons and areas "h'h are mar1ed ***
WARNING:
These materals are 'o&yr+hted and are only a$thor8ed for the $se of bar
'anddates "ho ha!e attended the Ta% Re!e" le't$res of Prof. Domondon and
others he has &ersonally a$thor8ed. These n'l$de those "ho ha!e attended the
le't$res 'ond$'ted by Primus 6ana+ement 4nlmted Ser!'es) In'.) held at the
Asan So'al Instt$te) In'.) Le Bar Re!e"s and Semnars) In'.) 4n!ersty of the
Phl&&nes) 4n!ersty of Santo Tomas) Ateneo de 6anla 4n!ersty) San
Sebastan (olle+e-Re'olletos and 9ar Eastern 4n!ersty. S!u"en!s o# o!$er
s%$ools &n" re'ie(ees o# o!$er re'ie( %en!ers &re no! &u!$ori)e" !o use !$ese
no!es. These materals are 'o&yr+hted. UNAUTHORI*E+ USERS SHALL ,E
SU,-E.T TO THE LAW O/ KARMA SU.H THAT THE0 WILL NE1ER
PASS THE ,AR2
GENERAL PRINCIPLES OF TAXATION
*** 12 W$en m&y !$e 3o(er !o !& in%lu"e !$e 3o(er !o "es!roy4 W$en is
eer%ise o# !$e 3o(er !o !& no! "es!ru%!i'e o# !&3&yer5s 3ro3er!y4
S455ESTED ANSWER:
The &o"er to ta% n'l$des the &o"er to destroy) "here the ta% s a !ald ta%. Ths
s so be'a$se a ta%&ayer 'o$ld not see1 the n$llf'aton of the !ald ta% solely $&on the
&remse that the ta% "ll m&o!ersh hm.
The e%er'se of the &o"er to ta% s not destr$'t!e of ta%&ayer*s &ro&erty "here t
s an n!ald ta%) "h'h !olates the nherent or 'onstt$tonal lmtatons. Ths s so
be'a$se there s a sym&athet' 'o$rt that shall 'ome to the s$''or of the ta%&ayer and
de'lare s$'h ta% as n!ald.
22 +is%uss !$e %on%e3! o# in!er3re!&!ion o# !& l&(s &s "i##eren!i&!e" #rom !$e
%on%e3! o# in!er3re!&!ion o# !& eem3!ion l&(s2
S455ESTED ANSWER: A ta% 'annot be m&osed $nless t s s$&&orted by the
'lear and e%&ress lan+$a+e of a stat$te. 2Da!ao 5$lf ;$mber (or&oraton !.
(ommssoner of Internal Re!en$e) et al.) /-< S(RA =>) ??3 In short) n 'ase of do$bt)
ta% la"s m$st be 'onstr$ed str'tly a+anst the State and lberally n fa!or of the ta%&ayer.
Ths s be'a$se ta%es) as b$rdens "h'h m$st be end$red by the ta%&ayer) sho$ld not be
&res$med to +o beyond "hat the la" e%&ressly and 'learly de'lares. 2;n'oln Phl&&ne
;fe Ins$ran'e (om&any) In'.) et'.) !. (o$rt of A&&eals) et al.) /-< S(RA -/) --3
On the other hand) "hen a ta% s $n#$estonably m&osed) a 'lam of e%em&ton
form ta% &ayments m$st be 'learly sho"n and based on lan+$a+e n the la" too &lan to be
msta1en. 2Da!ao 5$lf ;$mber (or&oraton) supra3
NOTES AND (O66ENTS: The abo!e 'on'e&ts are also the holdn+ n
2(ommssoner of Internal Re!en$e !. (o$rt of A&&eals) et al.) 5.R. No. ,.=,<@) &rom.
9ebr$ary /<) ,---3 Ths s the (ENVO(O 'ase.
9$rthermore) a re!ersal of a BIR r$ln+ fa!orable to a ta%&ayer "o$ld not
ne'essarly 'reate a &er&et$al e%em&ton n hs fa!or) for after all the +o!ernment s ne!er
esto&&ed from 'olle'tn+ ta%es be'a$se of msta1es or errors on the &art of ts a+ents.
2Ibid.3
*** 62 W$&! "o you un"ers!&n" 7y !$e in$eren! &n" %ons!i!u!ion&l limi!&!ions &s
7ein8 res!ri%!i'e o# !$e o!$er(ise unlimi!e" &n" 3len&ry 3o(er o# !&&!ion4
S455ESTED ANSWER:
The nherent and 'onstt$tonal lmtatons to the &o"er of ta%aton are safe+$ards
"h'h "o$ld &re!ent ab$se n the e%er'se of ths other"se $nlmted and &lenary &o"er.
*** 92 W$&! &re !$e in$eren! limi!&!ions !o !$e 3o(er o# !&&!ion4
S455ESTED ANSWER:
a. P4B;I( P4RPOSE. The ta% re!en$es m$st be $tl8ed for the beneft of the
'omm$nty n +eneral. An alternat!e meann+ s that ta% &ro'eeds sho$ld be $tl8ed only
to attan the ob0e't!es of +o!ernment.
b. NO I6PROPER DE;E5ATION O9 ;E5IS;ATIVE A4TAORITB. The
&o"er of ta%aton s e%er'sed by the le+slat$re "hose members are the mere dele+ates of
the &eo&le. Ths &o"er 'o$ld not therefore be dele+ated by the le+slat$re to other
de&artments of +o!ernment) l1e the e%e'$t!e.
'. TERRITORIA;ITB. The &o"er to ta% sho$ld be e%er'sed only "thn the
terrtoral bo$ndares of the ta%n+ a$thorty.
/
d. 5OVERN6ENT ECE6PTION SAO4;D BE RE(O5NI7ED. Ths s so n
order to red$'e the amo$nt of money the +o!ernment s handln+. There s !erty n the
ma%m) D9or the +o!ernment) e%em&ton s the r$le and ta%aton s the e%'e&ton.E
e. (O6ITB. Res&e't sho$ld be a''orded to other so!ere+n natons. The &o"er
of ta%aton s a h+h &rero+at!e of so!ere+nty. The &ro&ertes of other so!ere+n natons
"thn the terrtory of the ta%n+ a$thorty sho$ld not be s$b0e't to ta%aton as a meas$re
of res&e't to a 'o-e#$al.

*** :2 W$&! &re !$e %ons!i!u!ion&l limi!&!ions on !$e 3o(er o# !&&!ion4
S455ESTED ANSWER:
*** 5ENERA; OR INDIRE(T (ONSTIT4TIONA; ;I6ITATIONS:
a. +ue 3ro%ess %l&useF
b. E;u&l 3ro!e%!ion %l&useF
'. /ree"om o# !$e 3ressF
d. Reli8ious #ree"om<
e. Non=im3&irmen! %l&use<
f. L&(=m&>in8 3ro%ess:
,3 Bll sho$ld embra'e only one s$b0e't e%&ressed n the ttle thereofF
/3 Three 2<3 readn+s on three se&arate daysF
<3 Prnted 'o&es n fnal form dstrb$ted three 2<3 days before &assa+e.
+. Presi"en!i&l 3o(er !o 8r&n! re3rie'es) 'omm$tatons and &ardons and
remttal of fnes and forfet$re after 'on!'ton by fnal 0$d+ment.
GGG SPE(I9I( OR DIRE(T (ONSTIT4TIONA; ;I6ITATIONS:
a. No im3risonmen! #or non=3&ymen! o# & 3oll !&F
b. T&&!ion s$&ll 7e uni#orm &n" e;ui!&7leF
'. (on+ress shall e!ol!e a 3ro8ressi'e sys!em o# !&&!ionF
d. All &33ro3ri&!ion? re'enue or !&ri## 7ills s$&ll ori8in&!e e%lusi'ely in !$e
House o# Re3resen!&!i'es? b$t the Senate may &ro&ose and 'on'$r "th amendmentsF
e. The Presi"en! s$&ll $&'e !$e 3o(er !o 'e!o &ny 3&r!i%ul&r i!em or tems n
an a&&ro&raton) re!en$e) or tarff bll) b$t the !eto shall not affe't the tem or tems to
"h'h he does not ob0e'tF
f. +ele8&!e" 3o(er o# !$e Presi"en! !o im3ose !&ri## r&!es) m&ort and e%&ort
#$otas) tonna+e and "harfa+e d$es:
,3 Dele+aton by (on+ress
/3 Thro$+h a la"
<3 S$b0e't to (on+ressonal lmts and restr'tons
H3 Wthn the frame"or1 of natonal de!elo&ment &ro+ram.
+. T& eem3!ion o# %$&ri!&7le ins!i!u!ions? %$ur%$es? 3&rson&8es &n"
%on'en!s &33ur!en&n! !$ere!o? mos;ues? &n" &ll l&n"s? 7uil"in8s &n" im3ro'emen!s
o# &ll >in"s &%!u&lly? "ire%!ly &n" e%lusi'ely use" #or reli8ious? %$&ri!&7le or
e"u%&!ion&l 3ur3oses<
h. No ta% e%em&ton "tho$t the 'on'$rren'e of ma0orty !ote of all members of
(on+ressF
. No $se of &$bl' money or &ro&erty for rel+o$s &$r&oses e%'e&t f &rest s
ass+ned to the armed for'es) &enal nstt$tons) +o!ernment or&hana+e or le&rosar$mF
0. 6oney 'olle'ted on ta% le!ed for a s&e'al &$r&ose to be $sed only for s$'h
&$r&ose) balan'e f any) to +eneral f$ndsF
1. The S$&reme (o$rtIs &o"er to re!e" 0$d+ments or orders of lo"er 'o$rts n
all 'ases n!ol!n+ the le+alty of any ta%) m&ose) assessment or toll or the le+alty of any
&enalty m&osed n relaton to the abo!eF
l. Au!$ori!y o# lo%&l 8o'ernmen! uni!s !o %re&!e !$eir o(n sour%es o# re'enue?
!o le'y !&es? #ees &n" o!$er %$&r8es su7@e%! !o 8ui"elines &n" limi!&!ions im3ose" 7y
.on8ress %onsis!en! (i!$ !$e 7&si% 3oli%y o# lo%&l &u!onomy<
m. Au!om&!i% rele&se o# lo%&l 8o'ernmen!As @us! s$&re in n&!ion&l !&es<
n. T& eem3!ion o# &ll re'enues &n" &sse!s o# non=s!o%>? non=3ro#i!
e"u%&!ion&l ins!i!u!ions use" &%!u&lly? "ire%!ly &n" e%lusi'ely #or e"u%&!ion&l
3ur3osesF
<
o. T& eem3!ion o# &ll re'enues &n" &sse!s o# 3ro3rie!&ry or %oo3er&!i'e
e"u%&!ion&l ins!i!u!ions su7@e%! !o limi!&!ions 3ro'i"e" 7y l&( in%lu"in8 res!ri%!ions
on "i'i"en"s &n" 3ro'isions #or rein'es!men! o# 3ro#i!s<
&. T& eem3!ion o# 8r&n!s? en"o(men!s? "on&!ions or %on!ri7u!ions use"
&%!u&lly? "ire%!ly &n" e%lusi'ely #or e"u%&!ion&l 3ur3oses su7@e%! !o %on"i!ions
3res%ri7e" 7y l&(2
B2 Re3u7li% A%! No2 C22C %re&!e" !$e Su7i% S3e%i&l E%onomi% *one DSSE*E?
&n" 3ro'i"es !$&! !$e SSE* s$&ll 7e m&n&8e" &s & se3&r&!e %us!oms !erri!ory (i!$
su%$ in%en!i'es &s !& &n" "u!y=#ree im3or!&!ions o# r&( m&!eri&ls? %&3i!&l &n"
e;ui3men!2 I! #ur!$er 3ro'i"es !$&! Fno !&es? lo%&l &n" n&!ion&l? s$&ll 7e im3ose"
(i!$in !$e SSE*G? 7u! in lieu !$ereo#? 6H o# !$e 8ross in%ome e&rne" 7y 7usinesses
!$erein s$&ll 7e remi!!e" !o !$e N&!ion&l Go'ernmen! (i!$ 1H e&%$ !o !$e lo%&l
8o'ernmen! uni!s &##e%!e" 7y !$e "e%l&r&!ion o# !$e )one in 3ro3or!ion !o !$eir
3o3ul&!ion &re& &n" o!$er #&%!ors2 In &""i!ion? & "e'elo3men! #un" o# 1H o# !$e
8ross in%ome e&rne" 7y &ll 7usinesses (i!$in !$e SSE* s$&ll 7e u!ili)e" #or !$e
"e'elo3men! o# muni%i3&li!ies ou!si"e Olon8&3o .i!y &n" !$e Muni%i3&li!y o# Su7i%
&n" o!$er muni%i3&li!ies %on!i8uous !o !$e 7&se &re&s2
On -une 10? 1II6? Presi"en! R&mos issue" Ee%u!i'e Or"er No2 IC %l&ri#yin8
!$&! !& &n" im3or! "u!y=#ree im3or!&!ions s$&ll &33ly only !o r&( m&!eri&ls? %&3i!&l
8oo"s &n" e;ui3men! 7rou8$! in 7y 7usiness en!er3rises in !$e SSE*2 On -une 1I?
1II6? Presi"en! R&mos issue" Ee%u!i'e Or"er No? IC=A s3e%i#yin8 !$&! !$e se%ure"
&re&s !$&! s$&ll 7e %om3le!ely !& &n" "u!y=#ree in !$e SSE*/P* %onsis!s o# !$e
F3resen!ly #en%e"=in #ormer Su7i% N&'&l ,&se2G
Ee%u!i'e No2 IC=A is %$&llen8e" #or 7ein8 'iol&!i'e o# !$e e;u&l 3ro!e%!ion o#
!$e l&( %l&use 7e%&use o# i!s 7i&s in #&'or o# 7i8 in'es!ors2 Is !$ere meri! in !$e
%$&llen8e 4 E3l&in 7rie#ly2
S455ESTED ANSWER: No. E#$al &rote'ton of the la" 'la$se s s$b0e't to
reasonable 'lassf'aton. If the +ro$&n+s are 'hara'ter8ed by s$bstantal dstn'tons
that ma1e real dfferen'es) one 'lass may be treated and re+$lated dfferently from
another. The 'lassf'aton m$st also be +ermane to the &$r&ose of the la" and m$st a&&ly
to all those belon+n+ to the same 'lass.
GGG (lassf'aton) to be !ald) m$st 2,3 rest on s$bstantal dstn'tons) 2/3 be +ermane
to the &$r&ose of the la") 2<3 not be lmted to e%stn+ 'ondtons only) and 2H3 a&&ly
e#$ally to all members of the same 'lass.
In ss$n+ E.O. No. -=-A delmtn+ n'ent!es "thn the 'onfnes of the former
S$b' mltary base) the Presdent reasonably made a 'lassf'aton that s +ermane to the
&$r&ose of Re&$bl' A't No. =//=2 The &$r&ose of Re&$bl' A't No. =//= s to
a''elerate the 'on!erson of mltary reser!atons nto &rod$'t!e $ses. It "as reasonable
for the Presdent to ha!e delmted the a&&l'aton of some n'ent!es to the 'onfnes of
the former S$b' mltary base. The 'lassf'aton s therefore +ermane to the &$r&oses of
the la".
There are s$bstantal dfferen'es bet"een b+ n!estors ben+ ent'ed to the
Dse'$red areaE and the b$sness o&erators o$tsde that are n a''ord "th the e#$al
&rote'ton 'la$se that does not re#$re terrtoral $nformty of la"s. Of 'o$rse the
o$tsders) &ossessn+ the re#$ste n!estment 'a&tal 'an al"ays a!al of the same benefts
by 'hanneln+ ther reso$r'es or b$sness o&eratons nto the fen'ed-off free &ort 8one.
The 'lassf'aton set forth by E.O. No. -=-A does not merely a&&ly to e%stn+
'ondtons. As lad do"n n R.A. No. =//=) the ob0e't!e s to establsh a Dself-s$stann+)
nd$stral) 'ommer'al) fnan'al and n!estment 'enterE n the area. There "ll) therefore)
be a lon+-term dfferen'e bet"een s$'h n!estment 'enter and the areas o$tsde t.
The 'lassf'aton a&&les e#$ally to al the resdent nd!d$als and b$snesses
"thn the Jse'$red area.E The resdents) ben+ n l1e 'r'$mstan'es o 'ontrb$tn+
dre'tly to the a'he!ement of the end &$r&ose of the la") are not 'ate+or8ed f$rther.
Instead) they are smlarly treated) both n &r!le+es +ranted and obl+atons re#$red.
2T$) et al.) !. (o$rt of A&&eals) et al.) 5.R. No. ,/=H,.) Kan$ary /.) ,---3
C2 On -uly 1? 1II6? or & mon!$ &#!er !$e en&%!men! &n" !(o "&ys 7e#ore !$e
e##e%!i'i!y o# Re3u7li% A%! No2 CB:9? !$e ,IR issue" RM. No2 6C=I6 ($i%$
H
%onsi"ere" Ho3e Luury? Premium More &n" .$&m3ion %i8&re!!es 7ein8
m&nu#&%!ure" 7y /or!une To7&%%o %or3or&!ion &s lo%&lly m&nu#&%!ure" %i8&re!!es
7e&rin8 & #orei8n 7r&n" su7@e%! !o !$e $i8$er ::H ad valorem !& on %i8&re!!es2
T$e #ollo(in8 "&y? on -uly 2? 1II6? &! &7ou! :::0 32m2? !$e ,IR sen! 'i& #& &
%o3y o# RM. No2 6C=I6 !o /or!une To7&%%o 7u! (&s &""resse" !o no one in
3&r!i%ul&r2 On -uly 1:? 1II6 /or!une To7&%%o re%ei'e"? 7y or"in&ry m&il? & %er!i#ie"
ero %o3y o# RM. No2 6C=I62
/or!une To7&%%o no( %l&ims !$&! i!s %ons!i!u!ion&l ri8$! !o "ue 3ro%ess (&s
'iol&!e" 7e%&use !$ere (&s no $e&rin8 7e#ore ,IR issue" RM. No2 6C=I62 +o your
&8ree 4 E3l&in2
S455ESTED ANSWER:
Bes. There "as a !olaton of 9ort$ne Toba''o*s r+ht to d$e &ro'ess.
BIR ss$ed R6( No. <=--< for the &$r&ose of &la'n+ Ao&e ;$%$ry) Prem$m
6ore and (ham&on "thn the s'o&e of the amendatory la" and s$b0e't them to the
n'reased ta% rate.
In so don+) the BIR dd not sm&ly nter&ret the la") t ss$ed a le+slat!e r$le
"h'h s n the nat$re of s$bordnate le+slaton) des+ned to m&lement a &rmary
le+slaton by &ro!dn+ the detals thereof. In the same "ay that la"s m$st ha!e the
beneft of &$bl' hearn+) t s +enerally re#$red that before a le+slat!e r$le s ado&ted
there m$st be a hearn+ and &$bl'aton as re#$red $nder the Admnstrat!e (ode.
On the other hand) f "hat s ss$ed s merely an nter&retat!e r$le 2"h'h s not
the r$le ss$ed n ths 'ase3)no hearn+ or &$bl'aton s re#$red sn'e an nter&retat!e
r$le s des+ned merely to &ro!de +$delnes of the la" "h'h the admnstrat!e a+en'y s
n 'har+e of enfor'n+. 2(ommssoner of Internal Re!en$e !. (o$rt of A&&eals) et al.)
/>, S(RA /<> 3

J2 I! is %on!en"e" !$&! E3&n"e" 1&lue=A""e" T& is 'iol&!i'e o# !$e
%ons!i!u!ion&l rule !$&! !&es s$oul" 7e uni#orm &n" e;ui!&7le2 I! is li>e(ise
&"'&n%e" !$&! !$e E1AT is Fo33ressi'e? "is%rimin&!ory? &n" un@us!2G Ho( (ere
!$ese o7@e%!ions "is3ose" o# in !$e %&se o# Tolen!ino '2 Se%re!&ry o# /in&n%e &n"
%om3&nion %&ses? 29I S.RA B2J D1II:E 4
S455ESTED ANSWER:
*** a. It s nherent n the &o"er to ta% that the state be free to sele't the s$b0e'ts of
ta%aton and t has been re&eatedly held that ne#$altes "h'h res$lt from a sn+ln+ o$t
of one &art'$lar 'lass for ta%aton) or e%em&ton nfrn+e no 'onstt$tonal lmtaton.
Th$s) the EVAT on 'ertan +oods and ser!'es only) b$t not on others) do not !olate the
r$le on $nformty and e#$tableness.
*** b. E#$alty and $nformty of ta%aton means that all ta%able art'les or 1nds of
&ro&erty of the same 'lass be ta%ed at the same rate. The ta%n+ &o"er has the a$thorty
to ma1e reasonable and nat$ral 'lassf'atons for &$r&oses of ta%aton. To satsfy the
re#$rement of $nformty and e#$tableness) t s eno$+h that the stat$te or ordnan'e
a&&les e#$ally to all &ersons) forms and or+an8atons &la'ed n a smlar st$aton.
'. The EVAT s $nform be'a$se the ta% s a&&led smlarly on all +oods and
ser!'es sold to the &$bl') "h'h s not e%em&t) at the 'onstant rate of .L or ,.L.
d. The EVAT s e#$table be'a$se t s m&osed only on sale of +oods and ser!'es
by &ersons en+a+ed n b$sness "th an ann$al +ross sales as determned by the la".
Small 'orner sar-sar stores are 'onse#$ently e%em&t from ts a&&l'aton.
;1e"se e%em&t from the ta% are sales of farm and marne &rod$'ts. Th$s) the 'ost of
bas' food and other ne'esstes) s&ared as they are from EVAT) are e%&e'ted to be
relat!ely lo"er and "thn the rea'h of the +eneral &$bl'.
I2 On Au8us! :? 1IIJ? ,IR &8en!s &%!in8 u3on & re8ul&rly issue" Mission
Or"er e&mine" !$e 7oo>s o# &%%oun! o# '&rious @e(elers en8&8e" in !$e
m&nu#&%!ure o# @e(elry &n" &llie" un"er!&>in8s (ere e&mine" &n" in'es!i8&!e" #or
e%ise !& 3ur3oses2 Amon8 !$ese #irms (ere H&ns? Mil&"&y? Mer%elles? e!%2
Su7se;uen!ly? !$e @e(elers &n" !$eir &sso%i&!ion #ile" (i!$ !$e Re8ion&l Tri&l
.our! & 3e!i!ion #or "e%l&r&!ory relie# 3r&yin8 !$&! %er!&in 3ro'isions o# !$e NIR.
im3osin8 20H e%ise !& on @e(elry? 3e&rls &n" o!$er 3re%ious s!ones? &n"
3ro'isions o# !$e T&ri## &n" .us!oms .o"e im3osin8 !$ree !o !en 3er%en! D6H !o
@
10HE !&ri## &n" %us!oms "u!y on n&!ur&l &n" %ul!ure" 3e&rls &n" 3re%ious or semi=
3re%ious s!ones? 7e "e%l&re" un%ons!i!u!ion&l &n" null &n" 'oi"2
T$e @e(elers li>e(ise 3resen!e" &n e$&us!i'e s!u"y on !$e !& r&!es on
@e(elry le'ie" 7y "i##eren! Asi&n %oun!ries2
T$e !ri&l %our! "e%l&re" !$e ;ues!ione" 3ro'isions &s ino3er&!i'e &n" (i!$ou!
#or%e &n" e##e%! inso#&r &s !$e @e(elers &re %on%erne"2 T$e !ri&l %our! m&"e !$e
o7ser'&!ion !$&! in"ee" 8o'ernmen! !& 3oli%y !re&!s @e(elry &s non=essen!i&l i!ems?
&n" !$ere#ore? !&e" $e&'ily< !$&! !$e 3resen! !&ri## &n" !& s!ru%!ure in%re&se
m&nu#&%!urin8 %os! &n" ren"ers !$e lo%&l @e(elry m&nu#&%!urers un%om3e!i!i'e
&8&ins! o!$er %oun!ries2 W&s !$ere le8&l 7&sis #or !$e !ri&l %our!As "e%l&r&!ion 4
E3l&in2
S455ESTED ANSWER: No. There "as no le+al bass for the follo"n+ reasons:
a. The tral 0$d+e en'roa'hed $&on matters &ro&erly falln+ "thn the &ro!n'e of
le+slat!e f$n'tons. In ma1n+ the aforesad obser!atons) the tral 0$d+e o!erloo1ed the
fa't that s$'h matters are not for hm to de'de. There are reasons "hy 0e"elry) a non-
essental tem) s ta%ed as t s n ths 'o$ntry and these reasons) delberated $&on by the
le+slat$re are beyond the rea'h of 0$d'al #$estonn+.
b. The tral 'o$rt s not the &ro&er for$m for the !entlaton of the ss$es rased by
the 0e"elers. It s the le+slat$re to "h'h relef m$st be so$+ht) be'a$se "th the
le+slat$re &rmarly les the ds'reton to determne the nat$re 21nd3) ob0e't 2&$r&ose3)
e%tent 2rate3) 'o!era+e 2s$b0e'ts3 and situs 2&la'e3 of ta%aton. The 0$d'ary 'annot freely
del!e nto those matters "h'h) by 'onstt$tonal fat) r+htly rest on le+slat!e 0$d+ment.
'. The ta% rates of other 'o$ntres sho$ld not be $sed as a yardst'1) n
determnn+ "hat may be the &ro&er s$b0e'ts of ta%aton n o$r o"n 'o$ntry. It sho$ld be
&onted o$t that n m&osn+ the aforementoned ta%es and d$tes) the State) a'tn+ tho$+h
the le+slat!e and e%e'$t!e bran'hes) s e%er'sn+ ts so!ere+n &rero+at!e. It s
nherent n the &o"er to ta% that the State be free to sele't the s$b0e'ts of ta%aton) and t
has been re&eatedly held that) Mne#$altes "h'h res$lt from a sn+ln+ o$t of one
&art'$lar 'lass of ta%aton) or e%em&ton) nfrn+e no 'onstt$tonal lmtaton.M
2(ommssoner of Internal Re!en$e) et al.) !. Santos) et al.) /== S(RA >,=3
*** 102 A #ie" &nnu&l li%ense #ee on !$ose en8&8e" in !$e 7usiness o# 8ener&l
en!er3rise (&s &lso im3ose" on !$e s&le o# 7i7les 7y & reli8ious se%!2 Is !$is '&li" 4
S455ESTED ANSWER: No) be'a$se t !olates the 'onstt$tonally +$aranteed
freedom of the &ress) and of rel+on..
As a l'ense fee s f%ed n amo$nt and $nrelated to the re'e&ts of the ta%&ayer)
s$'h a l'ense fee) "hen a&&led to a rel+o$s se't s a't$ally m&osed as a 'ondton for
the free e%er'se of rel+on. A l'ense fee Drestrans n ad!an'e those 'onstt$tonal
lbertes of &ress and rel+on and ne!tably tends to s$&&ress ther e%er'se.E
***112 T$e E1AT L&( im3oses & 1AT re8is!r&!ion #ee o# P1?000200 on non=1AT
en!er3rises ($i%$ in%lu"es &mon8 o!$ers? reli8ious se%!s ($i%$ sells &n" "is!ri7u!es
reli8ious li!er&!ure2 Is !$is 'iol&!i'e o# reli8ious #ree"om 4
S455ESTED ANSWER: No. The P,)...... VAT re+straton fee) altho$+h a
f%ed amo$nt s not m&osed for the e%er'se of a &r!le+e b$t only for the &$r&ose of
defrayn+ &art of the 'ost of re+straton.
The re+straton re#$rement s a 'entral feat$re of the VAT system. It s des+ned
to &ro!de a re'ord of ta% 'redts be'a$se any &erson "ho s s$b0e't to the &ayment of the
VAT &ays an n&$t ta%) e!en as he 'olle'ts an o$t&$t ta% on sales made or ser!'es
rendered. The re+straton fee s th$s more of an admnstrat!e fee) one not m&osed on
the e%er'se of a &r!le+e) m$'h less a 'onstt$tonal r+ht. 2Tolentno !. Se'retary of
9nan'e) et al.) and 'om&anon 'ases) /<@ S(RA ><.3
*** 122 Airlines? In%2 (&s 8r&n!e" & le8isl&!i'e #r&n%$ise !o o3er&!e s%$e"ule"
#li8$! ser'i%es 7e!(een M&nil& &n" .e7u &n" 'i%e='ers&2 I! (&s su7@e%! !o &
#r&n%$ise !& o# 2H ;u&li#ie" 7y !$e Fm&8i% (or"s?G ($i%$ Fs$&ll 7e in lieu o# &ll
!&es2G Su7se;uen!ly? .on8ress en&%!e" Re3u7li% A%! No2 CC1B? !$e E3&n"e"
1&lue=A""e" T& DE1ATE L&( ($i%$ im3oses & 10H 1AT on &ll ser'i%es o##ere" 7y
Airlines? In%2
>
Airlines? In%2 &ss&ils !$e '&li"i!y o# R2A2 No2 CC1B #or 7ein8 'iol&!i'e o# !$e
non=im3&irmen! %l&use2 I! %i!es .ommissioner o# In!ern&l Re'enue '2 Lin8&yen
Gul# Ele%!ri% Po(er .o2? In%2? e! &l2? 1B9 S.RA 2C D1IJJE ($ere i! (&s $el" !$&! !$e
im3osi!ion o# & !& on #r&n%$ise $ol"ers (i!$ !$e Fm&8i% (or"sG is 'iol&!i'e o# !$e
non=im3&irmen! %l&use2
T$e Su3reme .our! in !$e Lin8&yen Gul# %&se $el" !$&! %$&r!ers or s3e%i&l
l&(s 8r&n!e" 7y !$e le8isl&!ure &re in !$e n&!ure o# 3ri'&!e %on!r&%!s2 Rule on !$e
%on!en!ion o# Airlines? In%2
S455ESTED ANSWER: The EVAT does not !olate the non-m&arment
'la$se. Tolentno !. Se'retary of 9nan'e and ts 'om&anon 'ases) /<@ S(RA ><.) /H-
S(RA.>/?) &ro!des the reasons "hy there s no !olaton:
a. Art'le CII) Se'. ,, of the (onstt$ton &ro!des that the +rant of a fran'hse
for the o&eraton of a &$bl' $tlty s s$b0e't to amendment. alteraton or re&eal by
(on+ress "hen the 'ommon +ood re#$resF
b. Not only e%stn+ la"s b$t also the reser!aton of essental attrb$tes of
so!ere+nty s read nto 'ontra'ts as a &ost$late of the le+al orderF
'. (ontra'ts m$st be $nderstood as ha!n+ been made n referen'e to the &ossble
e%er'se of the r+htf$l a$thorty of the +o!ernment and no obl+aton of 'ontra't 'an
e%tend to defeat that a$thortyF
d. A la"f$l ta% on a ne" s$b0e't) or an n'reased ta% on an old one) does not
nterfere "th a 'ontra't or m&ars ts obl+aton) "thn the meann+ of the 'onstt$ton.
E!en tho$+h s$'h ta%aton may affe't &art'$lar 'ontra'ts) as t may n'rease the debt of
one &erson and lessen the se'$rty of another) or may m&ose addtonal b$rdens $&on one
'lass and release the b$rdens of another) stll the ta% m$st be &ad $nless &rohbted by the
'onstt$ton) nor 'an t be sad that t m&ars the obl+atons of any e%stn+ 'ontra't n ts
tr$e and le+al sense.

*** 162 Mer&l%o (&s 8r&n!e" & #r&n%$ise !o o3er&!e &n ele%!ri% li8$! &n" 3o(er
ser'i%e in .&l&m7&? L&8un& some!ime in 1IJ6 un"er P2+2 No2 ::12 Un"er !$e
#r&n%$ise Mer&l%o 3&ys 2H #r&n%$ise !& on o# i!s 8ross re%ei3!s &n" F&ny l&( !o !$e
%on!r&ry no!(i!$s!&n"in8 7e in lieu o# &ll !&es &n" &ssessmen!s o# ($&!e'er n&!ure
im3ose" 7y &ny n&!ion&l or lo%&l &u!$ori!y or e&rnin8s? re%ei3!s? in%ome &n"
3ri'ile8e o# 8ener&!ion? "is!ri7u!ion &n" s&le o# ele%!ri% %urren!2G Pursu&n! !o !$e
Lo%&l Go'ernmen! .o"e? !$e 3ro'in%e o# L&8un& en&%!e" &n or"in&n%e im3osin8 &
#r&n%$ise o# :0H o# 1H o# !$e 8ross &nnu&l re%ei3!s o# 7usiness en@oyin8 & #r&n%$ise
re&li)e" "urin8 !$e 3re%e"in8 %&len"&r ye&r (i!$in !$e 3ro'in%e in%lu"in8 %i!ies
lo%&!e" !$erein2 Rule on !$e '&li"i!y o# !$e !& or"in&n%e2
S455ESTED ANSWER: The ta% ordnan'e s !ald. 4nder the no" &re!aln+
(onstt$ton) "here there s nether a +rant nor &rohbton by stat$te) the ta% &o"er m$st
be deemed to e%st altho$+h (on+ress may &ro!de stat$tory lmtatons and +$delnes.
The bas' ratonale for the '$rrent r$le s to safe+$ard the !ablty and self-s$ff'en'y of
lo'al +o!ernment $nts by dre'tly +rantn+ them +eneral and broad ta% &o"ers.
The ;o'al 5o!ernment (ode e%&l'tly a$thor8es &ro!n'es and 'tes)
not"thstandn+ Dany e%em&ton +ranted by any la" or other s&e'al la"E to m&ose a ta%
on b$snesses en0oyn+ a fran'hse. Ind'at!e of the le+slat!e ntent to 'arry o$t the
'onstt$tonal mandate of !estn+ broad ta% &o"ers to lo'al +o!ernment $nts) the ;o'al
5o!ernment (ode has "thdra"n ta% e%em&tons or n'ent!es theretofore en0oyed by
'ertan enttes.
In addton) the ;o'al 5o!ernment (ode 'ontans a +eneral re&ealn+ 'la$se. The
&hrase n Dle$ of all ta%esE has to +!e "ay to the &erem&tory lan+$a+e of the ;o'al
5o!ernment (ode "h'h s&e'f'ally &ro!des for the "thdra"al of all e%em&tons. The
(o$rt has !e"ed ts &re!o$s r$ln+s as layn+ stress on the le+slat!e ntent of the
amendatory la" "hether the ta% e%em&ton &r!le+e s to be "thdra"n or not rather than
on "hether the la" 'an or 'annot "thdra" the ta% e%em&ton) "tho$t !olatn+ the
'onstt$ton. 26anla Ele'tr' (om&any !. Pro!n'e of ;a+$na) et al.) 5.R. No. ,<,<@-)
6ay @) ,---3
The ;o'al 5o!ernment (ode &ro!sons on "thdra"al of ta% e%em&tons
&res'rbes the +eneral r$le) !8. the ta% e%em&tons or n'ent!es +ranted to or &resently
en0oyed by nat$ral or 0$rd'al &ersons are "thdra"n "th the effe't!ty of the ;o'al
=
5o!ernment (ode e%'e&t "th res&e't to those e%&ressly en$merated. 2(ty 5o!ernment
of San Pablo) ;a+$na) et al.) !. Reyes) et al.) 5.R. No. ,/==.?) 6ar'h /@) ,---3
NOTES AND (O66ENTS: It s &ossble that the Bar #$eston m+ht 'ome from
one of the follo"n+ areas:
*** Po(er o# lo%&l 8o'ernmen!s !o !&. ;o'al +o!ernments do not ha!e the nherent
&o"er to ta% e%'e&t to the e%tent that s$'h &o"er m+ht be dele+ated to them ether by
the bas' la" or stat$te. Presently) $nder Art'le C of the ,-?= (onstt$ton a +eneral
dele+aton of that &o"er has been +!en n fa!or of lo'al +o!ernment $nts.
Ne!ertheless) the f$ndamental la" dd not ntend the dele+aton to be absol$te and
$n'ondtonal) the 'onstt$tonal ob0e't!e ob!o$sly s to ens$re that) "hle lo'al
+o!ernment $nts are ben+ stren+thened and made more a$tonomo$s) the le+slat$re m$st
stll see to t that:
a. the ta%&ayer "ll not be o!er-b$rdened or saddled "th m$lt&le and
$nreasonable m&ostonsF
b. ea'h lo'al +o!ernment $nt "ll ha!e ts far share of a!alable reso$r'esF
'. the reso$r'es of the natonal +o!ernment "ll be $nd$ly dst$rbedF and
d. lo'al ta%aton "ll be far) $nform and 0$st. 26anla Ele'tr' (om&any !.
Pro!n'e of ;a+$na) et al.) 5.R. No. ,<,<@-) 6ay @) ,---3
The 6anla Ele'tr' (om&any 'ase do'trne re!ersed the holdn+ n (ty
5o!ernment of San Pablo) ;a+$na) et al.) !. Reyes) et al.) 5.R. No. ,/==.?) 6ar'h /@)
,--- that m$n'&al 'or&oratons are !ested by the (onstt$ton "th the &o"er to ta%. It
may be e%er'sed by lo'al le+slat!e bodes) no lon+er by !rt$e of a !ald dele+aton as
before) b$t &$rs$ant to dre't a$thorty 'onferred by the (onstt$ton.
T$e non=im3&irmen! %l&use2 Kues!ion&7le rulin8. The non-m&arment 'la$se
'annot be n!o1ed by fran'hses) as fran'hses are al"ays s$b0e't to &ol'e &o"er) as "ell
as the &o"er to ta% 2N3) "h'h l1e &ol'e &o"er 'annot be 'ontra'ted a"ay 2N3. 2(ty
5o!ernment of San Pablo) ;a+$na) et al.) !. Reyes) et al.) 5.R. No. ,/==.?) 6ar'h /@)
,---3 The a$thor 'onsders ths r$ln+ to be #$estonable be'a$se the ta%n+ &o"er s
nferor to the nonm&arment 'la$se.
Whle the (o$rt has) not too nfre#$ently) referred to ta% e%em&tons 'ontaned n
s&e'al fran'hses as ben+ n the nat$re of 'ontra'ts and a &art of the nd$'ement for
'arryn+ o$t the fran'hse) these e%em&tons) ne!ertheless far from ben+ str'tly
'ontra't$al n nat$re.
*** (onstt$tonal ta% e%em&tons) n the real sense of the term and "here the non-
m&arment 'la$se of the (onstt$ton 'an r+htly be n!o1ed) are those a+reed to by the
ta%n+ a$thorty n 'ontra'ts) s$'h as those 'ontaned n +o!ernment bonds or debent$res)
la"f$lly entered nto by them $nder enabln+ la"s n "h'h the +o!ernment) a'tn+ n ts
&r!ate 'a&a'ty sheds ts 'loa1 of a$thorty and "a!es ts +o!ernment mm$nty.
Tr$ly) ta% e%em&tons of ths 1nd may not be re!o1ed "tho$t m&arn+ the
obl+atons of 'ontra'ts. A fran'hse &arta1es of the nat$re of a +rant "h'h s not beyond
the &$r!e" of the non-m&arment 'la$se. Indeed the ,-?= (onstt$ton l1e ts
&re'$rsors the ,-<@ and the ,-=< (onstt$tons s e%&l't that no fran'hse for the
o&eraton of a &$bl' $tlty shall be +ranted e%'e&t $nder the 'ondton that s$'h &r!le+e
shall be s$b0e't to amendment) alteraton or re&eal by (on+ress as and "hen the 'ommon
+ood so re#$res. 26anla Ele'tr' (om&any !. Pro!n'e of ;a+$na) et al.) 5.R. No.
,<,<@-) 6ay @) ,---3
The reader sho$ld ta1e note of the 'onfl'tn+ do'trnes es&o$sed by the 6anla
Ele'tr' 'ase and the (ty 5o!ernment of San Pablo) ;a+$na 'ase. It may nterest the
reader also to 1no" that the &onente n the 6anla Ele'tr' 'ase s K$st'e Kose Vt$+)
"hle the &onente n the (ty 5o!ernment of San Pablo) ;a+$na s K$st'e 6ner!a
5on8a+a-Reyes.
*** 192 W$&! is !$e %on%e3! o# "ou7le !&&!ion 4
a. 6EANIN5. In ts +ener' sense) ths means ta%n+ the same s$b0e't or ob0e't
t"'e d$rn+ the same ta%able &erod. In ts &art'$lar sense) t may mean dre't d$&l'ate
ta%aton) "h'h s &rohbted $nder the 'onstt$ton be'a$se t !olates the 'on'e&t of
e#$al &rote'ton) $nformty and e#$tableness of ta%aton. Indre't d$&l'ate ta%aton s
not anathem8ed by the abo!e 'onstt$tonal lmtatons.
b. E;E6ENTS O9 DIRE(T D4P;I(ATE TACATION:
?
,3 Same
a3 S$b0e't or ob0e't s ta%ed t"'e
b3 Ta%n+ a$thorty
'3 Ta%n+ &$r&ose
d3 Ta%n+ &erod
/3 Ta%n+ all of the s$b0e'ts or ob0e'ts for the frst tme "tho$t ta%n+ all
of them for the se'ond tme.
If any of the elements are absent then there s ndre't d$&l'ate ta%aton
"h'h s not &rohbted by the 'onstt$ton.
NOTES AND (O66ENTS: There may be a &roblem on do$ble ta%aton)
n'l$dn+ 'om&ensaton and set-off.
*** 1:2 +e#ine in!ern&!ion&l @uri"i%&l "ou7le !&&!ion2
S455ESTED ANSWER: The m&oston of 'om&arable ta%es n t"o or more
states on the same ta%&ayer n res&e't of the same s$b0e't matter and for dent'al
+ro$nds.
Do$ble ta%aton $s$ally ta1es &la'e "hen a &erson s a resdent of a 'ontra'tn+
state and der!es n'ome from or o"ns 'a&tal n) the other 'ontra'tn+ state and both
states m&ose ta% on that n'ome or 'a&tal. 2(ommssoner of Internal Re!en$e !. S.(.
Kohnson and Son) In'.) et al.) 5.R. No. ,/=,.@) &rom. K$ne /@) ,---
*** 1B2 W$&! &re !$e me!$o"s #or &'oi"&n%e o# "ou7le !&&!ion 4 E3l&in e&%$
7rie#ly 7u! %om3re$ensi'ely2
S455ESTED ANSWER: The follo"n+ are the methods of a!odn+ do$ble
ta%aton:
a. Ta% treates "h'h e%em&ts fore+n natonals from lo'al ta%aton and lo'al
natonals from fore+n ta%aton $nder the &rn'&le of re'&ro'ty.
b. Ta% 'redts "here fore+n ta%es are allo"ed as ded$'tons from lo'al ta%es that
are d$e to be &ad.
'. Allo"n+ fore+n ta%es as a ded$'ton from +ross n'ome.
NOTES AND (O66ENTS:
a. Pur3ose o# !& !re&!ies. To re'on'le the natonal fs'al le+slatons of the
'ontra'tn+ &artes n order to hel& the ta%&ayer a!od sm$ltaneo$s ta%aton n t"o
dfferent 0$rsd'tons. 6ore &re'sely) the ta% 'on!entons are drafted "th a !e" to"ards
the elmnaton of nternatonal 0$rd'al do$ble ta%aton.
b. R&!ion&le #or &'oi"in8 "ou7le !&&!ion. To en'o$ra+e the free flo" of
+oods and ser!'es and the mo!ement of 'a&tal) te'hnolo+y and &ersons bet"een
'o$ntres) 'ondtons deemed !tal n 'reatn+ rob$st and dynam' e'onomes. 9ore+n
n!estments "ll only thr!e n a farly &red'table and reasonable nternatonal n!estment
'lmate and the &rote'ton a+anst do$ble ta%aton s 'r$'al n 'reatn+ s$'h a 'lmate.
*** '. Me!$o"s resor!e" !o 7y & !& !re&!y in or"er !o elimin&!e "ou7le !&&!ion:
9rst 6ethod: It sets o$t the res&e't!e r+hts to ta% of the state of so$r'e or st$s
and of the state of resden'e "th re+ard to 'ertan 'lasses of n'ome or 'a&tal. In some
'ases) an e%'l$s!e r+ht to ta% s 'onferred on one of the 'ontra'tn+ statesF ho"e!er) for
other tems of n'ome or 'a&tal) both states are +!en the r+ht to ta%) altho$+h the
amo$nt of ta% that may be m&osed by the state of so$r'e s lmted.
Se'ond 6ethod: The state of so$r'e s +!en a f$ll or lmted r+ht to ta% to+ether
"th the state of resden'e. In ths 'ase) the treates ma1e t n'$mbent $&on the state of
resden'e to allo" relef n order to a!od do$ble ta%aton. T"o methods of relef are
$sed:
,3 The e%em&ton method O the n'ome or 'a&tal "h'h s ta%able n the
state of so$r'e or st$s s e%em&ted n the state of resden'e) altho$+h n some
nstan'es t may be ta1en nto a''o$nt n determnn+ the rate of ta% a&&l'able to
the ta%&ayer*s remann+ n'ome or 'a&tal.
/3 The 'redt method O altho$+h the n'ome or 'a&tal "h'h s ta%ed n
the state of so$r'e s stll ta%able n the state of resden'e) the ta% &ad n the
former s 'redted a+anst the ta% le!ed n the latter. 2(ommssoner of Internal
Re!en$e !. S.(. Kohnson and Son) In'.) et al.) 5.R. No. ,/=,.@) &rom. K$ne /@)
,---3
-
Dfferen'e bet"een the e%em&ton method and the 'redt method. The e%em&ton
method fo'$ses on n'ome or 'a&tal tself "hle the 'redt method fo'$ses $&on the ta%. .
2(ommssoner of Internal Re!en$e !. S.(. Kohnson and Son) In'.) et al.) 5.R. No.
,/=,.@) &rom. K$ne /@) ,---3
GGG ,=. The RP-West 5ermany Ta% Treaty &ro!des a ,.L ta% on royaltes. b$t e%&ressly allo"s
a+anst 5erman n'ome and 'or&orate ta% of /.L of the +ross royaltes &ad $nder the la" of the
Phl&&nes. On the other hand the RP-4S Ta% Treaty does not &ro!de for a smlar ta% 'redtn+. Th$s)
the ta% on royaltes earned by 4.S. frms n the Phl&&nes may ether be of three rates: /@ &er'ent of
the +ross amo$nt of the royaltesF ,@ &er'ent "hen the royaltes are &ad by a 'or&oraton re+stered "th
the Phl&&ne Board of In!estments and en+a+ed n &referred areas of a't!tesF or the lo"est rate of
Phl&&ne ta% that may be m&osed on royaltes of the same 1nd &ad $nder smlar 'r'$mstan'es to a
resdent of a thrd state.
6ay 4.S. (or&oratons 'lam enttlement to the Dmost fa!ored natonE ta% rate of ,.L on
royaltes as &ro!ded n the RP-4S Ta% Treaty n relaton to the RP-West 5ermany Ta% Treaty N E%&lan
"th reasons.
S455ESTED ANSWER: No. The enttlement of the ,.L rate by 4.S. frms des&te the
absen'e of a mat'hn+ 'redt 2/.L for royaltes3 "o$ld dero+ate from the des+n behnd the most fa!ored
naton 'la$se to +rant e#$alty of nternatonal treatment sn'e the ta% b$rden lad $&on the n'ome of the
n!estor s not the same n the t"o 'o$ntres. The smlarty n the 'r'$mstan'es of &ayment of ta%es s a
'ondton for the en0oyment of the most fa!ored naton treatment &re'sely to $nders'ore the need for
e#$alty of treatment. 2(ommssoner of Internal Re!en$e !. S.(. Kohnson and Son) In'.) et al.) 5.R. No.
,/=,.@) &rom. K$ne /@) ,---3
NOTES AND (O66ENTS:
a. Intenton behnd ado&ton of &ro!son on Drelef from do$ble ta%aton.E The ntenton sho$ld
be 'onsdered n the l+ht of the &$r&ose behnd the most fa!ored naton 269N3 'la$se "h'h s to +rant to
the 'ontra'tn+ &arty treatment not less fa!orable than "h'h has been or may be +ranted to the Dmost
fa!oredE amon+ other 'o$ntres.
The 69N s ntended to establsh the &rn'&le of e#$alty of nternatonal treatment by &ro!dn+
that the 't8ens or s$b0e'ts of the 'ontra'tn+ natons may en0oy &r!le+es a''orded by ether &arty to
those of the most fa!ored naton. The essen'e of the &rn'&le s to allo" the ta%&ayer n one state to a!al
of more lberal &ro!sons +ranted n another ta% treaty to "h'h the 'o$ntry of resden'e of s$'h ta%&ayer
s also a &arty &ro!ded that the s$b0e't matter of ta%aton s the same as that n the ta% treaty $nder "h'h
the ta%&ayer s lable. 2(ommssoner of Internal Re!en$e !. S.(. Kohnson and Son) In'.) et al.) 5.R. No.
,/=,.@) &rom. K$ne /@) ,---3
,?. The E%&anded Val$e-Added Ta% ;a" s an ndre't ta% "h'h may be 'onsdered as
re+ress!e n 'hara'ter. It s a f%ed ta% therefore the lo"er s the n'ome the ta%es that are &ad are
&ro&ortonately h+her. Is ths !olat!e of the 'onstt$ton "h'h mandates that (on+ress shall e!ol!e a
&ro+ress!e system of ta%aton N E%&lan.
S455ESTED ANSWER: There s no !olaton of the 'onstt$tonal mandate for the follo"n+
reasons:
a. The mandate to (on+ress s not to &res'rbe b$t to e!ol!e a &ro+ress!e system of ta%aton.
Other"se) sales ta%es "h'h &erha&s are the oldest form of ndre't ta%es) "o$ld ha!e been &rohbted
"th the &ro'lamaton of the 'onstt$tonal &ro!son. Sales ta%es are also re+ress!e.
b. The (onstt$ton does not really &rohbt the m&oston of ndre't ta%es "h'h) l1e the VAT)
are re+ress!e. The 'onstt$tonal &ro!son means sm&ly that ndre't ta%es sho$ld be mnm8ed.
'. Resort to ndre't ta%es sho$ld be mnm8ed b$t not a!oded entrely be'a$se t s dff'$lt) f
not m&ossble) to a!od m&osn+ s$'h ta%es a''ordn+ to the ta%&ayer*s ablty to &ay.
In the 'ase of VAT) the la" mnm8es the re+ress!e effe'ts of ths m&oston by &ro!dn+ for
8ero ratn+ of 'ertan transa'tons "hle +rantn+ e%em&tons to other transa'tons. The transa'tons
"h'h are s$b0e't to VAT are those "h'h n!ol!e +oods and ser!'es "h'h are $sed or a!aled of manly
by h+her n'ome +ro$&s. 2Tolentno !. Se'retary of 9nan'e and 'om&anon 'ases) /H- S(RA >/?3
GGG,-. The (onstt$ton re#$res that all re!en$e blls shall or+nate e%'l$s!ely from the Ao$se of
Re&resentat!es. Was ths !olated "hen the EVAT bll that or+nated from the Ao$se dd not be'ome
the EVAT la" N E%&lan.
a. The (onstt$ton sm&ly means that the ntat!e for fln+ re!en$e) tarff or ta% blls m$st
'ome from the Ao$se of Re&resentat!es on the theory that) ele'ted as they are from the dstr'ts) the
6embers of the Ao$se 'an be e%&e'ted to be more senst!e to the lo'al needs and &roblems.
b. It s not the la" - b$t the re!en$e bll - "h'h s re#$red by the (onstt$ton to Dor+nate
e%'l$s!elyE n the Ao$se of Re&resentat!es be'a$se a bll or+natn+ n the Ao$se may $nder+o s$'h
e%tens!e 'han+es n the Senate that the res$lt may be a re"rtn+ of the "hole) and a dstn't bll may be
&rod$'ed.
'. To nsst that a re!en$e stat$te - not only the bll "h'h ntated the le+slat!e &ro'ess
'$lmnatn+ n the ena'tment of the la" - m$st s$bstantally be the same as the Ao$se bll "o$ld be to
deny the Senate*s &o"er not only to D'on'$r "th amendmentsE b$t also to D&ro&ose amendment.E It
"o$ld be to !olate the 'oe#$alty of le+slat!e &o"er of the t"o ho$ses of (on+ress and n fa't ma1e the
Ao$se s$&eror to the Senate.
5!en the &o"er of the Senate to &ro&ose amendments) t 'an &ro&ose ts o"n !erson e!en "th
res&e't to blls "h'h are re#$red by the (onstt$ton to or+nate n the Ao$se.
,.
d. Nor does the (onstt$ton &rohbt the fln+ n the Senate of a s$bstt$te bll n ant'&aton of
ts re'e&t of the bll from the Ao$se) so lon+ as a'ton by the Senate as a body s "thheld &endn+ re'e&t
of the Ao$se bll. 2Tolentno !. Se'retary of 9nan'e and 'om&anon 'ases) /<@ S(RA ><.3

/.. A &etton for 'ertorar andPor &rohbton 'hallen+n+ the !aldty of Re&$bl' A't No.
?/H.) amendn+ 'ertan &ro!sons of the NIR( by m&osn+ so-'alled Msn ta%esM 2a't$ally s&e'f' ta%es3
on the man$fa't$re of beer and '+arettes.
Re&. Arroyo 'har+es that 2,3 n !olaton of R$le VIII) Se'. <@ and R$le CVII) Se'. ,.< of the
r$les of the Ao$se of Re&resentat!es) the (har) n s$bmttn+ the 'onferen'e 'ommttee re&ort to the
Ao$se) dd not 'all for the yeas and nays) b$t sm&ly as1ed for ts a&&ro!al by moton n order to &re!ent
Re&. Arroyo from #$estonn+ the &resen'e of a #$or$mF 2/3 n !olaton of R$le CIC) Se'. ,,/) the
(har delberately +nored Re&. ArroyoIs #$eston) MWhat s that ... 6r. S&ea1er NM and dd not re&eal Re&.
AlbanoIs moton to a&&ro!e or ratfyF 2<3 n !olaton of R$le CC) Se's. ,/,-,//) R$le CCI) Se'. ,/<)
and R$le CVIII) Se'. ,.-) the (har s$s&ended the sesson "tho$t frst r$ln+ on Re&. ArroyoIs #$eston
"h'h) t s alle+ed) s a &ont of order or a &r!le+ed moton. It s ar+$ed that Re&. ArroyoIs #$ery sho$ld
ha!e been resol!ed $&on the res$m&ton of the sesson on No!ember /?) ,-->) be'a$se the &arlamentary
st$aton at the tme of the ad0o$rnment remaned $&on the res$m&ton of the sesson.
On the same day) No!ember /,) ,-->) the bll "as s+ned by the S&ea1er of the Ao$se of
Re&resentat!es and the Presdent of the Senate and 'ertfed by the res&e't!e se'retares of both Ao$ses
of (on+ress as ha!n+ been formally &assed by the Ao$se of Re&resentat!es and he Senate on No!ember
/,) ,-->. The enrolled bll "as s+ned nto la" by Presdent Ramos on No!ember //) ,-->.
It s no" 'har+ed that the sesson "as hastly ad0o$rned at <:H. &.m. on No!ember /,) ,--> and
the bll 'ertfed by S&ea1er de Vene'a to &re!ent Re&. Arroyo from formally 'hallen+n+ the e%sten'e of
a #$or$m and as1n+ for a re'onsderaton. R$le on the 'ontro!ersy.
S455ESTED ANSWER: There s no bass for the &ro'ed$re ben+ br$ted as ha!n+ been
!olated.
4nder the enrolled bll do'trne) the s+nn+ of the bll by the S&ea1er and the Senate Presdent
and the 'ertf'aton by the Se'retares of both Ao$ses are 'on'l$s!e of ts d$e ena'tment. 2Arroyo) et al.)
!. de Vene'a) et al.) /== S(RA />?3
/,. 6anla 5olf Q (o$ntry (l$b) In'. s a non-sto'1 'or&oraton. It mantans a +olf 'o$rse and
o&erates a 'l$bho$se "th a lo$n+e) bar and dnn+ room) b$t these fa'ltes are for the e%'l$s!e $se of ts
members and a''om&aned +$ests) and t 'har+es on 'ost-&l$s-e%&ense bass.
The 'l$b no" 'lams that Se'ton H/ nsertn+ a ne" Se'ton ,-,-A n the Natonal Internal
Re!en$e (ode "as !etoed by the Presdent. On the other hand) the BIR mantans that Se'ton H/ "as not
entrely !etoed b$t merely the "ords Dhotels) motels) restho$sesE on the +ro$nd that t m+ht restran the
de!elo&ment of hotels "h'h s essental to the to$rsm nd$stry.
R$le on the 'onfl'tn+ 'ontentons.
S455ESTED ANSWER: The BIR s 'orre't. The n'l$son of hotels) motels) and restho$ses
are 'onsdered as Dtems "thn the meann+ of no. 2/3) Se'. /=) Art. VI of the ,-?= (onstt$ton that) D
the Presdent shall ha!e the &o"er to !eto any &art'$lar tem or tems n an a&&ro&raton) re!en$e) or
tarff bll) b$t the !eto shall not affe't the tem or tems to "h'h he does not ob0e't.E
In the 'ase of (ommssoner of Internal Re!en$e !. (o$rt of Ta% A&&eals and 6anla 5olf Q
(o$ntry (l$b) 5.R. No. H=H/,) 6ay ,H) ,--. t "as held that Dhotels) motels and restho$sesE are
'onsdered as tems "h'h the Presdent has the &o"er to !eto.
An DtemE n a re!en$e bll does not refer to an entre se'ton m&osn+ a &art'$lar 1nd of ta%)
b$t rather to the s$b0e't of the ta% and the ta% rate. In the &orton of a re!en$e bll "h'h a't$ally m&oses
a ta%) a se'ton dentfes the ta% and en$merates the &ersons lable therefore "th the 'orres&ondn+ ta%
rate.
To 'onstr$e the "ord DtemE as referrn+ to the "hole se'ton "o$ld te the Presdent*s hand n
'hoosn+ ether to a&&ro!e the "hole se'ton at the e%&ense of also a&&ro!n+ a &ro!son theren "h'h he
deems $na''e&table or !eto the entre se'ton at the e%&ense of fore+on+ the 'olle'ton of the 1nd of ta%
alto+ether.
The e!l "h'h "as so$+ht to be &re!ented n +!n+ the Presdent the &o"er to dsa&&ro!e tems
n a re!en$e bll "o$ld be &er&etrated rendern+ that &o"er n$tle. 2(ommon"ealth e%. rel. El1n !.
Barnett) ,-- Pa. ,>,) @@ ;RA ??/ 2,-,<3
GGG //. 6r. 5aerlan s the o"ner of a @)... s#. m. &ar'el of land lo'ated n the 'ty lmts of San
9ernando (ty. Ae leased the &ro&erty for P@.)...... a year to a rel+o$s 'on+re+aton for a &erod of
ffteen 2,@3 years 2,--.-/..@3. The rel+o$s 'on+re+aton b$lt on a ,)... s#. m. &orton a semnary and
a 'ha&el "h'h t $sed n 'onne'ton "th ts rel+o$s a't!tes. It 'onstr$'ted a ten 2,.3 story b$ldn+
on the remann+ H)... s#. m. "h'h t rented o$t to !aro$s 'ommer'al establshments) the &ro'eeds of
"h'h +o to the s$&&ort of ts !aro$s semnares lo'ated thro$+ho$t the Phl&&nes. These semnares
are or+an8ed as non-&roft and non-sto'1 ed$'atonal nstt$tons.
Is 6r. 5aerlan e%em&t from the &ayment of real &ro&erty ta%es N What abo$t the rel+o$s
'on+re+aton N E%&lan. Is the rel+o$s 'on+re+aton e%em&t from the &ayment of n'ome ta%es on the
rental re'e&ts N E%&lan.
S455ESTED ANSWER:
6r. 5aerlan s e%em&t from the &ayment of real &ro&erty ta%es on the ,)... s#. m. &orton of hs
@)... s#. m. lot) as "ell as on the remann+ H)... s#.m. On the other hand the rel+o$s 'on+re+aton
sho$ld &ay real &ro&erty ta%es on the H)... s#. m. &ar'el of land and the ,.-story b$ldn+.
,,
6r. 5aerlan s e%em&t from real &ro&erty ta%aton) "hether on the ,)... s#.m. or on the H)...
s#. m. be'a$se the bass for ta%aton of real &ro&erty s $se and not o"nersh&. The rel+o$s 'on+re+aton
s e%em&t from real &ro&erty ta%es on the ,)... s#. m. &ar'el of land as "ell as on the m&ro!ements the
'ha&el and the semnary. Ths s so be 'a$se they are a't$ally) dre'tly and e%'l$s!ely $sed for rel+o$s
&$r&oses. The treatment s dfferent "th re+ard to the H)... s#. m. lot and ts m&ro!ement the ,. storey
b$ldn+. Whle t s tr$e that the &ro'eeds are $sed for the s$&&ort of ts semnares) ths s at the most
ndre't $se) hen'e not s$b0e't to the ta% e%em&ton.
The rel+o$s 'on+re+aton s s$b0e't to n'ome ta%aton. 29or reasons) refer to #$eston no. /<)
nfra3 Whle t s tr$e that all the semnares are or+an8ed as non-&roft non-sto'1 ed$'atonal
nstt$tons) t s not ther n'omes "h'h s the s$b0e't of the &roblem b$t that of the rel+o$s
'on+re+aton "h'h s not a non-&roft non-sto'1 ed$'atonal nstt$ton.
GGG /<. B6(A "as establshed as Da "elfare) ed$'atonal and 'hartable non-&roft 'or&oratonE
earned an n'ome of P>.. tho$sand from leasn+ o$t a &orton of ts &remses to small sho& o"ners) l1e
resta$rants an 'anteen o&erators) and PHH tho$sand from &ar1n+ fees 'olle'ted from non-members. It
"as s$b0e'ted to an assessment for non-&ayment of n'ome ta%es on the fore+on+ n'ome.
B6(A 'lams that t s ta% e%em&t 'lamn+ for the reason that the leasn+ to small sho& o"ners
and the o&eraton of the &ar1n+ lot are reasonably ne'essary for the a''om&lshment of ts ob0e't!es. It
&remses ts 'lam on the &ro!sons of the ,-?= (onstt$ton. Is the n'ome der!ed from rentals of the
real &ro&erty s$b0e't to n'ome ta% N Reason o$t yo$r ans"er.
S455ESTED ANSWER: Bes) the n'ome s s$b0e't to n'ome ta%. The NIR( re'o+n8es the
e%em&ton from ta% of the n'omes of '!' lea+$es or or+an8atons not or+an8ed for &roft b$t o&erated
e%'l$s!ely for the &romoton of so'al "elfare) as "ell as 'l$bs or+an8ed and o&erated e%'l$s!ely for
&leas$re) re'reaton) and other non-&roftable &$r&oses "here no &art of the net n'ome n$res to the
beneft of any &r!ate sto'1holder or member.
Ao"e!er) the ta% e%em&ton so re'o+n8ed does not flo" to n'ome of "hate!er 1nd and
'hara'ter of the fore+on+ or+an8atons from any of ther &ro&ertes) real or &ersonal) or from any of ther
a't!tes 'ond$'ted for &roft) re+ardless of the ds&oston made of s$'h n'ome) "h'h shall be s$b0e't to
n'ome ta%es.
9$rthermore) the 'onstt$tonal ta% e%em&tons refer only to real &ro&erty that are a't$ally)
dre'tly and e%'l$s!ely $sed for rel+o$s) 'hartable or ed$'atonal &$r&oses) and that the only
'onstt$tonally re'o+n8ed e%em&ton from ta%aton of re!en$es are those earned by non-&roft) non-sto'1
ed$'atonal nstt$tons "h'h are a't$ally) dre'tly and e%'l$s!ely $sed for ed$'atonal &$r&oses.
B6(A s not an ed$'atonal nstt$ton embra'ed $nder ths &art'$lar 'on'e&t. 2(ommssoner of
Internal Re!en$e !. (o$rt of A&&eals) et al.) /-? S(RA ?<3
GGG /H. Asean Kdde S'hool) In'.) s a non-&roft) non-sto'1 ed$'atonal nstt$ton. It o"ns a one
he'tare lot) one-half of "h'h s o''$&ed by the s'hool 'am&$s and the other half s leased to A+r-9arms)
In'.) for $se as a flo"er +arden to meet the e%&ort re#$rements of A+r-9arms) In'. The rentals 'olle'ted
from A+r-9arms are $sed by Asean to &ay for the salares of ts s'hool tea'hers. Ant'&atn+ h+her
e%&endt$res for o&eratn+ the s'hool d$rn+ the s'hool year ,--=--?) the s'hool n'reased ts t$ton fees
and started 'olle'tn+ the n'reased fees as early as A&rl ,--=. The ad!an'ed 'olle'tons "ere n the
meantme de&osted n a lo'al ban1 "here t earns nterest. An nternatonal or+an8aton donated
4SR,.)...... on the soltary 'ondton that t sho$ld be $sed to $&+rade the salares of the s'hool
admnstrators. The s'hool also "ants to m&ort some 'om&$ters for the $se of ts st$dents.
Bo$ are no" 'ons$lted to e%&lan the ta% m&l'atons of the abo!e and +!e yo$r ad!'e. What
shall yo$ say N
S455ESTED ANSWER:
a. The s'hool s e%em&t from the &ayment of real &ro&erty ta%es on the one-half &orton of ts
one he'tare lot "h'h s ben+ $sed as the s'hool 'am&$s.
Ths s so be'a$se the same s a't$ally) dre'tly and e%'l$s!ely $sed for ed$'atonal &$r&oses.
A+r-9arms s s$b0e't to the &ayment of real &ro&erty ta%es on the remann+ one-half that t
leases from Asean for the reason that the sad &orton s $sed for 'ommer'al &$r&oses and not a't$ally)
dre'tly and e%'l$s!ely for ed$'atonal &$r&oses. Asean*s ta% e%em&ton &r!le+e does not flo" to A+r-
9arms be'a$se real &ro&erty ta%aton s based on $se and not on o"nersh&. Whle t s tr$e that the rental
n'ome s de!oted to ed$'atonal &$r&oses) t has no bearn+ n the 'ase as t s the land that sho$ld the
a't$ally) dre'tly and e%'l$s!ely $sed for ed$'atonal &$r&oses.
b. The n'ome der!ed from the t$ton fees s e%em&t from the n'ome ta%es as these are to be
a't$ally) dre'tly and e%'l$s!ely $sed for ed$'atonal &$r&oses ben+ de!oted to meet the n'reased s'hool
o&eratonal e%&endt$res.
'. The &ass!e n'ome n the form of nterests on ban1 de&osts may be e%em&t from n'ome
ta%es and the "thholdn+ ta%es of /.L f they are refle'ted on the s'hool*s ann$al nformaton ret$rns
and d$ly a$dted fnan'al statements) s$&&orted by a 'ertf'aton from the de&ostory ban1 as to the
amo$nt of nterest n'ome earned from &ass!e n!estments not s$b0e't to the /.L fnal "thholdn+ ta%) a
resol$ton of the s'hool*s Board of Tr$stees on the &ro&osed &ro0e'ts to be f$nded o$t of the money
de&osted n the ban1) and a 'ertf'aton of a't$al $tl8aton of sad nterest n'ome for a't$al) dre't and
e%'l$s!e $se for ed$'atonal &$r&oses. 29nan'e De&artment Order No. ,H---@) ss$ed No!ember /H)
,--@ amendn+ De&artment Order No. ,<=-?= as amended by De&artment Order No. -/-??3.
d. Whle t s tr$e that the 4SR,.)...... s to be $tl8ed for admnstraton &$r&oses) and $nder
Se'. -H2A-<3 of the NIR() may be s$b0e't to ta%) t s to be noted that Re&$bl' A't No. ==-? "h'h
amended B.P. Bl+. /</ &ro!des that) DTa%es shall not be d$e on donatons to ed$'atonal nstt$tons.E It
,/
s to be noted that e%em&tons to ed$'atonal nstt$tons are not s$b0e't to the so-'alled str'tssm 0$rs
str't nter&retaton a+anst the ta%&ayer and lberally n fa!or of the +o!ernment.
e. The 'om&$ters 'o$ld be m&orted) e%em&t from the &ayment of '$stoms d$tes and !al$e-
added ta% as there s sho"n+ of ther a't$al) dre't and e%'l$s!e $se for ed$'atonal &$r&oses.
/@. Why s t m&ortant to 1no" the dstn'tons bet"een a ta% and a debt. What are the
dstn'tons bet"een a ta% and a debt N
S455ESTED ANSWER: It s m&ortant to 1no" the dstn'tons be'a$se non-&ayment of a ta%
2e%'e&t a &oll ta%3 'o$ld s$b0e't a &erson to m&rsonment "hle no &erson 'o$ld be m&rsoned for non-
&ayment of a debt. 9$rthermore) a debt 'o$ld be 'om&ensated by another debt) b$t a debt or another ta%
'o$ld not be 'om&ensated for a ta% n a''ordan'e "th the lfeblood do'trne.
GGG Dstn'tons bet"een a ta% and a debt:
a. BASIS. Ta% s based on la" WAI;E debt s based on 'ontra't or 0$d+ment.
b. 9AI;4RE TO PAB. 9al$re to &ay a ta% 2e%'e&t a &oll ta%3 may res$lt n m&rsonment
WAI;E there s no m&rsonment for fal$re to &ay a debt.
'. 6ODE O9 PAB6ENT. Ta% s +enerally &ayable n money WAI;E debt may be &ayable n
money) &ro&erty or ser!'es.
d. ASSI5NABI;ITB. A ta% s not ass+nable WAI;E a debt s ass+nable.
e. INTEREST. A ta% does not dra" nterest $nless deln#$ent WAI;E a debt dra"s nterest f
st&$lated or delayed.
f. A4TAORITB. Ta%es are m&osed by &$bl' a$thorty WAI;E debt 'an be m&osed by &r!ate
nd!d$als.
+. PRES(RIPTION. Pres'r&t!e &erods for ta% are determned $nder the NIR( WAI;E debt)
$nder the (!l (ode.
/>. Are there dstn'tons bet"een a ta% and a l'ense fee N Why s t m&ortant to 1no" the
dstn'tons N
S455ESTED ANSWERS: The follo"n+ are the dstn'tons bet"een a ta% and a l'ense fee:
a. P4RPOSE:A ta% s m&osed for re!en$e &$r&oses WAI;E a l'ense fee s m&osed for re+$latory
&$r&oses.
b. BASIS: A ta% s m&osed $nder the &o"er of ta%aton WAI;E a l'ense fee s m&osed $nder &ol'e
&o"er.
'. A6O4NT: There s no lmt as to the amo$nt of a ta% WAI;E the amo$nt of l'ense fee that 'o$ld be
'olle'ted s lmted to the 'ost of the l'ense and the e%&enses of &ol'e s$r!ellan'e and re+$laton.
d. TI6E O9 PAB6ENT: Ta%es are normally &ad after the start of a b$sness WAI;E a l'ense fee
before the 'ommen'ement of b$sness.
e. E99E(T O9 NON-PAB6ENT: 9al$re to &ay a ta% does not ma1e the b$sness lle+al WAI;E
fal$re to &ay a l'ense fee ma1es the b$sness lle+al.
f. S4RRENDER: Ta%es ben+ the lfeblood of the state) 'annot be s$rrendered e%'e&t for la"f$l
'onsderaton WAI;E a l'ense fee may be s$rrendered "th or "tho$t 'onsderaton.
It s m&ortant to 1no" the dstn'tons be'a$se the lmtatons for one may not be a&&led to the other
e%'e&t n the nstan'e "here re+$latory ta%es are m&osed th$s) the &o"er to ta% s e%er'sed 'o0ontly
"th the &ol'e &o"er. 9$rthermore) e%em&ton from ta%es does not n'l$de e%em&ton from the &ayment
of l'ense fees and !'e-!ersa.
NOTES AND (O66ENTS: Re'all the dstn'tons bet"een the &o"er of ta%aton and &ol'e
&o"er "th res&e't to: P$r&ose) amo$nt) 'om&ensaton) &ro&erty ta1en) "hat s done "th the &ro&erty
ta1en) relaton to the non-m&arment 'la$se.
TAE (O4RT O9 TAC APPEA;S AND TAC RE6EDIES
/=. What s the (o$rt of Ta% A&&eals N What s the nat$re of the (o$rt of Ta% A&&eals N Why
"as t 'reated N
S455ESTED ANSWER:
a. The (o$rt of Ta% A&&eals s the s&e'al ta% 'o$rt 'reated $nder Re&$bl' A't No. ,,/@
'om&osed of a Presdn+ K$d+e and T"o Asso'ate K$d+es) a&&onted by the Presdent of the Phl&&nes
from nomnees of the K$d'al and Bar (o$n'l.
b. It s not a mere admnstrat!e a+en'y or trb$nal b$t a re+$lar 'o$rt !ested "th e%'l$s!e
a&&ellate 0$rsd'ton o!er 'ases arsn+ $nder the Natonal Internal Re!en$e (ode and the Tarff and
($stoms (ode.
GGG '. The (o$rt of Ta% A&&eals "as 'reated:
,3 To &re!ent delay n the ds&oston of ta% 'ases by the then (o$rts of
9rst Instan'e 2no" RT(s3) n !e" of the ba'1lo+ of '!l) 'rmnal) and 'adast-
ral 'ases a''$m$latn+ n the do'1ets of s$'h 'o$rtsF and
/3 To ha!e a body "th s&e'al 1no"led+e "h'h ordnary K$d+es of the
then (o$rts of 9rst Instan'e 2no" RT(s3) are not l1ely to &ossess) th$s &ro-
!dn+ for an ade#$ate remedy for a s&eedy determnaton of ta% 'ases.
GGG /?. What s the 0$rsd'ton of the (o$rt of Ta% A&&eals N
S455ESTED ANSWER:
a. The (o$rt of Ta% A&&eals has 0$rsd'ton o!er de'sons of the (ommssoner of Internal
Re!en$e o!er:
,3 (ases n!ol!n+:
,<
a3 Ds&$ted assessmentsF
b3 Ref$nd of nternal re!en$e ta%es) fees or other 'har+esF
'3 Penaltes m&osed n relaton thereto.
/3 Other matters arsn+ $nder:
a3 The Natonal Internal Re!en$e (ode) or
b3 Other la" or &art of la" admnstered by the B$rea$ of Internal
Re!en$e.
The a&&eal to the (o$rt of Ta% A&&eals m$st be fled "thn <. days from re'e&t of the
(ommssoner*s ad!erse de'son. If there s no de'son) the a&&eal sho$ld be dsmssed for la'1 of
0$rsd'ton.
b. The (o$rt of Ta% A&&eals has 0$rsd'ton o!er de'sons of the (ommssoner of ($stoms
o!er:
,3 (ases n!ol!n+:
a3 ;ablty for '$stoms d$tes) fees or other money 'har+es)
b3 Se8$res) detenton or release of &ro&erty affe'ted)
'3 9nes) forfet$res and other &enaltes m&osed n relaton theretoF
/3 Other matters arsn+ $nder:
a3 the '$stoms la") or
b3 Other la" or &art of la" admnstered by the B$rea$ of ($stoms
The a&&eal to the (o$rt of Ta% A&&eals m$st be fled "thn <. days from re'e&t of the
(ommssoner*s ad!erse de'son. If there s no de'son) the a&&eal sho$ld be dsmssed for la'1 of
0$rsd'ton.
GGG '. Instan'es "here the (o$rt of Ta% A&&eals "o$ld ha!e 0$rsd'ton e!en f there s no de'son
yet of the (ommssoner of Internal Re!en$e:
,3 Where the (ommssoner has not a'ted on the ds&$ted assessment after a &erod of ,?. days from
s$bmsson of 'om&lete s$&&ortn+ do'$ments) the ta%&ayer has a &erod of <. days from the e%&raton of
the ,?. day &erod "thn "h'h to a&&eal to the (o$rt of Ta% A&&eals. 2last &ar.) Se'. //? 2e3) NIR( of
,--=3
/3 Where the (ommssoner has not a'ted on an a&&l'aton for ref$nd or 'redt and the t"o year &erod
from the tme of &ayment s abo$t to e%&re) the ta%&ayer has to fle hs a&&eal "th the (o$rt of Ta%
A&&eals before the e%&raton of t"o years from the tme the ta% "as &ad.
GGG d. Instan'es "here the (o$rt of Ta% A&&eals "o$ld ha!e 0$rsd'ton e!en f there s no de'son
of the (ommssoner of ($stoms:
,3 De'sons of the Se'retary of Trade and Ind$stry or the Se'retary of A+r'$lt$re n ant-d$m&n+ and
'o$nter!aln+ d$ty 'ases are a&&ealable to the (o$rt of Ta% A&&eals "thn thrty 2<.3 days from re'e&t
of s$'h de'sons.
/3 In 'ase of a$tomat' re!e" by the Se'retary of 9nan'e n se8$re or forfet$re 'ases "here the !al$e of
the m&ortaton e%'eeds P@ mllon or "here the de'son of the (olle'tor of ($stoms "h'h f$lly or
&artally releases the sh&ment se8ed s affrmed by the (ommssoner of ($stoms.
GGG /-. Only (ommssoner*s fnal de'son denyn+ the ds&$te s s$b0e't of a&&eal. Words to the
effe't that the matter "o$ld be referred to the (olle'ton Enfor'ement D!son for the ss$an'e of a
"arrant of le!y and dstrant s not a fnal de'son a&&ealable to (TA 2Sold (ement (or&oraton !s.
(o$rt of Ta% A&&eals) et al.) (A-5R SP No. <<@,>) 9ebr$ary /?) ,--@3. E!en the a't$al ss$an'e of a
"arrant of dstrant and le!y n 'ertan 'ases stll 'annot be 'onsdered a fnal de'son on a ds&$ted
assessment. 2(ommssoner of Internal Re!en$e !. 4non Sh&&n+ (or&.) ,?@ S(RA @H=3
NOTES AND (O66ENTS:
GGG a. A'ts of BIR (ommssoner 'onsdered as denal of &rotest "h'h ser!e as bass for a&&eal to
the (o$rt of Ta% A&&eals:
,3 9ln+ by the BIR of a '!l s$t for 'olle'ton of the def'en'y ta% s 'onsdered a denal of the re#$est
for re'onsderaton. 2(ommssoner of Internal Re!en$e !. 4non Sh&&n+ (or&oraton) ,?@ S(RA @H=3
/3 An nd'aton to the ta%&ayer by the (ommssoner Dn 'lear and $ne#$!o'al lan+$a+eE of hs fnal
denal not the ss$an'e of the "arrant of dstrant and le!y. What s the s$b0e't of the a&&eal s the fnal
de'son not the "arrant of dstrant. (ommssoner of Internal Re!en$e !. 4non Sh&&n+ (or&oraton)
,?@ S(RA @H=3
<3 A BIR demand letter sent to the ta%&ayer after hs &rotest of the assessment not'e s 'onsdered as the
fnal de'son of the (ommssoner on the &rotest. 2S$r+ao Ele'tr' (o.) In'. !. (o$rt of Ta% A&&eals) et
al.) @= S(RA @/<3
H3 A letter of the BIR (ommssoner reteratn+ to a ta%&ayer hs &re!o$s demand to &ay an assessment
s 'onsdered a denal of the re#$est for re'onsderaton or &rotest and s a&&ealable to the (o$rt of Ta%
A&&eals. 2(ommssoner !. Ayala Se'$rtes (or&oraton) =. S(RA /.H3
GGG b. Re#$stes for !aldty of the (ommssoner*s de'son on the ds&$te. The de'son of the
(ommssoner or hs d$ly a$thor8ed re&resentat!e shall 2a3 state the fa'ts) the a&&l'able la") r$les and
re+$latons) or 0$rs&r$den'e on "h'h s$'h de'son s based) other"se) the de'son shall be !od) n
"h'h 'ase the same shall not be 'onsdered a de'son on the ds&$ted assessmentF and 2b3 that the same
s hs fnal de'son. 2Se'. <.,.>) Re!. Re+s. ,/---3
GGG <.. The BIR (ommssoner ds'o!ered that a ta%&ayer 1ee&s no re'ords or that "hate!er re'ords
1e&t are nade#$ate) or that there s stron+ s$s&'on that the ta%&ayer has re'e!ed n'ome from
$nds'losed so$r'es) or that no ret$rn "as fled or the ret$rn fled "as false and fra$d$lent. What
methods ha!e been de!elo&ed by the BIR n order to determne the n'ome of the ta%&ayer "h'h sho$ld
be s$b0e't to ta% N E%&lan ea'h method brefly b$t 'om&rehens!ely.
,H
S455ESTED ANSWER: The follo"n+ are the +eneral methods de!elo&ed by the B$rea$ of
Internal Re!en$e for re'onstr$'tn+ a ta%&ayer*s n'ome:
a. Per'enta+e method. The 'om&$ted amo$nt of re!en$es based on the &er'enta+e 'om&$taton
s 'om&ared to the amo$nt of re!en$es refle'ted on the ret$rn. The &er'enta+es $sed may be obtaned
from the ta%&ayer) nd$stry &$bl'aton) &ror year*s a$dt res$lts) or thrd &artes. The 'om&arson "ll
&ro!de an nd'aton on the &ossblty of re!en$e ben+ $nderstated.
Amon+ the s+nf'ant ratos and trends to be analy8ed are the &er'enta+e mar1-$&) +ross &rofts
rato or +ross mar+n &er'enta+e) &roft mar+n) total assets t$rno!er) and n!entory t$rno!er.
b. Net "orth method. A method of re'onstr$'tn+ n'ome "h'h s based on the theory that f
the ta%&ayer*s net "orth has n'reased n a +!en year n an amo$nt lar+er than hs re&orted n'ome) he
has $nderstated hs n'ome for that year. The net "orth on a f%ed startn+ date s 'om&ared "th the net
"orth on a f%ed endn+ date. Any n'rease n net "orth s &res$med to be n'ome not de'lared for ta%
&$r&oses.
The dff'$lty of establshn+ the o&enn+ net "orth of a ta% &ayer has led to the D(ohan R$leE
"h'h means the $se estmates or a&&ro%matons of the amo$nt of 'ash and other asserts "here the
ta%&ayer la'1s ade#$ate re'ords.
'. Ban1 de&ost method. The ban1 re'ords of the ta%&ayer are analy8ed and the BIR estmates
n'ome on the bass of the total ban1 de&osts after elmnatn+ non-n'ome tems. Ths method stands on
the &remse that de&osts re&resent ta%able n'ome $nless other"se e%&laned as ben+ non-ta%able tems.
Ths method may be $sed only "here the BIR has been le+ally allo"ed a''ess to the ta%&ayer*s ban1
re'ords.
d. (ash e%&endt$re method. Ths method ass$mes that the e%'ess of a ta%&ayer*s e%&endt$res
d$rn+ the ta% &erod o!er hs re&orted n'ome for that &erod s ta%able to the e%tent not ds&ro!ed
other"se.
e. 4nt and !al$e method. The determnaton or !erf'aton of +ross re'e&ts may be 'om&$ted
by a&&lyn+ &r'e and &roft f+$res to the 1no"n as'ertanable #$alty of b$sness of the ta%&ayer. 9or
e%am&le) n order to determne the +ross re'e&ts of a &88a &arlor) m$lt&ly the &o$nds of flo$r $sed by
the n$mber of &88as &er &o$nd "h'h n t$rn "o$ld then be m$lt&led by the a!era+e &r'e &er &88a.
f. Thrd &arty nformaton or a''ess to re'ords method. The BIR may re#$re thrd &artes)
&$bl' or &r!ate to s$&&ly nformaton to the BIR.
+. S$r!ellan'e and assessment method. 2(ha&ter CIII. Indre't A&&roa'h to In!est+aton)
Aandboo1 on A$dt Pro'ed$res and Te'hn#$es O Vol$me I) &&. >?-=H3
GGG <,. The BIR ds'o!ered that El!e) a b$sness"oman) dd not fle her n'ome ta% ret$rns for the
ta%able years ,--? and ,---. A &re-assessment not'e for ba'1 ta%es "as then ss$ed n the amo$nt of P/
mllon "h'h $ltmately mat$red nto an assessment not'e. The BIR arr!ed at the addtonal ta% d$e
after $sn+ the Dnet "orthE method and a''ess to El!e*s &$r'hases from her s$&&lers of ra" materals.
She no" ds&$tes the assessment for la'1 of le+al bass be'a$se of the $se of the Dnet "orthE "h'h s not
a$thor8ed $nder the Ta% (ode) and for !olaton of her 'onstt$tonal r+hts "hen her &$r'hase re'ords
"ere a''essed from her s$&&lers. R$le on her ds&$te.
S455ESTED ANSWER: El!e*s 'ontentons are bereft of mert. Sn'e El!e dd not fle her
n'ome ta% ret$rns) "h'h re&orts are re#$red by la" as a bass for assessment) then the BIR
(ommssoner shall assess the ta% on the best e!den'e a!alable. The BIR (ommssoner s a$thor8ed to
se'$re re'ords from &$bl' or &r!ate enttes to assst hm n the assessment. 9$rrthermore) the BIR may
$se s$'h method as n the o&non of the (ommssoner 'learly refle'ts the n'ome.
NOTES AND (O66ENTS:
a. 5eneral R$le. DThe ta%able n'ome shall be 'om&$ted $&on the bass of the ta%&ayer*s ann$al
a''o$ntn+ &erod 2fs'al year or 'alendar year) as the 'ase may be3 n a''ordan'e "th the method of
a''o$ntn+ re+$larly em&loyed n 1ee&n+ the boo1s of s$'h ta%&ayerF b$t f no s$'h method of a''o$ntn+
has been so em&loyed) or f the method em&loyed does not 'learly refle't the n'ome) the 'om&$taton
shall be n a''ordan'e "th s$'h method as n the o&non of the (ommssoner 'learly refle'ts the
n'ome.E 2Se'. H<) NIR( of ,--=3
b. 9al$re to S$bmt Re#$red Ret$rns) Statements) Re&orts or Other Do'$ments.
DWhen a re&ort re#$red by la" as a bass for the assessment of any natonal nternal re!en$e ta% shall
not be forth'omn+ "thn the tme f%ed by la"s or r$les and re+$latons or "hen there s reason to
bele!e that any s$'h re&ort s false) n'om&lete or erroneo$s) the (ommssoner shall assess the &ro&er
ta% on the best e!den'e obtanable.
In 'ase a &erson fals to fle a re#$red ret$rn or other do'$ment at the tme &res'rbed by la") or
"llf$lly or other"se fles a false or fra$d$lent ret$rn or other do'$ment) the (ommssoner shall ma1e or
amend the ret$rn from hs o"n 1no"led+e and from s$'h nformaton as he 'an obtan thro$+h testmony
or other"se) "h'h shall be &rma fa'e 'orre't and s$ff'ent for all le+al &$r&oses.E SSe'. > 2B3) NIR(
of ,--=T
GGG '. Po"er of the (ommssoner to Obtan Informaton. DIn as'ertann+ the 'orre'tness of any
ret$rn) or n ma1n+ a ret$rn "hen none has been made) or n determnn+ the lablty of a &erson for any
nternal re!en$e ta%) or n 'olle'tn+ any s$'h lablty) or n e!al$atn+ ta% 'om&lan'e) the
(ommssoner s a$thor8ed: %%%
To obtan on a re+$lar bass from any &erson other than the &erson "hose nternal re!en$e ta%
lablty s s$b0e't to a$dt or n!est+aton) or from any off'e or off'er of the natonal and lo'al
+o!ernments) +o!ernment a+en'es and nstr$mentaltes n'l$dn+ the Ban+1o Sentral n+ Pl&nas and
+o!ernment-o"ned or O'ontrolled 'or&oratons) any nformaton s$'h as) b$t not lmted to) 'osts and
!ol$me of &rod$'ton) re'e&ts or sales and +ross n'omes of ta%&ayers) and the names ) addresses) and
fnan'al statements of 'or&oratons) m$t$al f$nd 'om&anes) ns$ran'e 'om&anes) re+onal o&eratn+
,@
head#$arters or m$ltnatonal 'om&anes) 0ont a''o$nts) asso'atons) 0ont !ent$res or 'onsorta and
re+stered &artnersh&s) and ther membersF %%%E SSe'. @ 2B3) NIR( of ,--=3
</. What s a &re-assessment not'e and "hat s ts m&ortan'e N
S455ESTED ANSWER: A &re-assessment not'e s a a letter sent by the B$rea$ of Internal
Re!en$e to a ta%&ayer as1n+ hm to e%&lan "thn a &erod of ffteen 2,@3 days from re'e&t "hy he
sho$ld not be the s$b0e't of an assessment not'e.
As a +eneral r$le) the BIR 'o$ld not ss$e an assessment not'e "tho$t frst ss$n+ a &re-
assessment not'e be'a$se t s &art of the d$e &ro'ess r+hts of a ta%&ayer to be +!en not'e n the form of
a &re-assessment not'e) and for hm to e%&lan "hy he sho$ld be the s$b0e't of an assessment not'e.
GGG NOTES AND (O66ENTS: Instan'es "here a &re-assessment not'e s not re#$red before a
not'e of assessment s sent to the ta%&ayer:
a. When the fndn+ for any def'en'y ta% s the res$lt of mathemat'al error n the 'om&$taton
of the ta% as a&&earn+ on the fa'e of the ret$rnF or
b. When a ds're&an'y has been determned bet"een the ta% "thheld and the amo$nt a't$ally
remtted by the "thholdn+ a+entF or
'. When a ta%&ayer o&ted to 'lam a ref$nd or ta% 'redt of e%'ess 'redtable "thholdn+ ta% for
a ta%able &erod "as determned to ha!e 'arred o!er and a$tomat'ally a&&led the same amo$nt 'lamed
a+anst the estmated ta% labltes for the ta%able #$arter or #$arters of the s$''eedn+ table yearF or
d. When the e%'ess ta% d$e on e%'sable art'les has not been &adF or
e. When an art'le lo'ally &$r'hased or m&orted by an e%em&t &erson) s$'h as) b$t not lmted
to !eh'les) 'a&tal e#$&ment) ma'hneres and s&are &arts) has been sold) trade or transferred to non-
e%em&t &ersons. 2Se'. //?) NIR( of ,--=3
<<. On the bass of a ;etter of A$thorty) for the e%amnaton of the boo1s of a''o$nts and other
a''o$ntn+ re'ords of Pas'or Realty and De!elo&ment (or&oraton 2PRD(3) BIR e%amners
re'ommended the ss$an'e of an assessment not'e n the amo$nts of P= mllon and P < mllon for the
years ,-?> and ,-?= res&e't!ely.
On 6ar'h ,) ,--@) the BIR fled a 'rmnal 'om&lant "th the De&artment of K$st'e a+anst
PRD() ts Presdent and Treas$rer alle+n+ e!ason of ta%es n the total amo$nt of P,. mllon. Ths "as
s$&&orted by an affda!t-re&ort of the e%amners detaln+ the 'om&$taton of the alle+ed ta% e!ason.
PRD() ts Presdent and Treas$rer fled an 4r+ent Re#$est for Re'onsderatonPRen!est+aton ds&$tn+
the ta% assessment and ta% lablty. On 6ar'h /<) ,--@) PRD( and ts Presdent and Treas$rer re'e!ed
a s$b&oena n 'onne'ton "th the 'rmnal 'om&lant fled by the BIR a+anst them.
In a letter dated 6ay ,=) ,--@) the (ommssoner dened the $r+ent re#$est for
re'onsderatonPren!est+aton fled by PRD( and ts off'ers on the +ro$nd that formal assessment has as
yet not been ss$ed by the (ommssoner.
Do yo$ a+ree "th the de'son of the (ommssoner N E%&lan brefly.
S455ESTED ANSWER: Bes) the affda!t-re&ort of the e%amners does not 'onstt$te an
assessment that may be the s$b0e't of a moton for re'onsderatonPren!est+aton. The affda!t-re&ort
merely 'ontaned a 'om&$taton of the labltes. It dd not state a demand or a &erod for &ayment. It "as
not addressed to the ta%&ayers b$t to the De&artment of K$st'e.
That the affda!t-re&ort 'ontaned detals of the ta% labltes does not &so fa'to ma1e the same an
assessment. Its &$r&ose "as merely to s$&&ort the 'rmnal 'om&lant for assessment. (learly) t "as not
meant to be a not'e of the ta% d$e and a demand for the &ayment thereof.
The fa't that the 'om&lant tself "as s&e'f'ally dre'ted and sent to the De&artment of K$st'e and not to
the ta%&ayer sho"s that the ntent of the BIR "as to fle a 'rmnal 'om&lant for ta% e!ason) not to ss$e
an assessment. Altho$+h the re!en$e off'ers re'ommended the ss$an'e of an assessment) the
'ommssoner nstead o&ted to fle a 'rmnal 'om&lant. What "as re'e!ed by the ta%&ayer "as not'e of
the fln+ of the 'rmnal 'ase not a not'e that the BIR had made an assessment. 2(ommssoner of
Internal Re!en$e !. Pas'or Realty and De!elo&ment (or&oraton) et al.) 5.R. No. ,/?<,@) &rom. K$ne /-)
,---3
NOTES AND (O66ENTS: The NIR( defnes the s&e'f' f$n'tons and effe'ts of an
assessment. To 'onsder the affda!t-re&ort atta'hed to the 'rmnal 'om&lant as a &ro&er assessment s
to s$b!ert the nat$re of an assessment and to set a bad &re'edent that "ll &re0$d'e nno'ent ta%&ayers.
Whle an assessment nforms the ta%&ayer that he or she has ta% labltes) not all do'$ments
'omn+ from the BIR 'ontann+ a 'om&$taton of the ta% lablty 'an be deemed assessments.
To start "th) an assessment m$st be sent to and re'e!ed by a ta%&ayer and m$st demand the
&ayment of the ta%es theren "thn a s&e'f' &erod. Th$s) the NIR( m&oses a /@L &enalty) n addton
to the ta% d$e) n 'ase the ta%&ayer fals to &ay the def'en'y ta% "thn the tme &res'rbed for ts
&ayment n the not'e of assessment. ;1e"se) an nterest of /.L &er ann$m) or s$'h h+her rate as may
be &res'rbed by r$les and re+$latons) s to be 'olle'ted from the date &res'rbed for ts &ayment $ntl f$ll
&ayment.
The ss$an'e of an assessment s !tal n determnn+ the &erod of lmtaton re+ardn+ ts &ro&er
ss$an'e and the &erod "thn "h'h to &rotest t. Ne'essarly) the ta%&ayer m$st be 'ertan that a
s&e'f' do'$ment 'onstt$tes an assessment. Other"se) 'onf$son "o$ld arse re+ardn+ the &erod
"thn "h'h to ma1e an assessment or to &rotest the sameF or "hether nterest and &enalty may a''r$e
thereon.
It sho$ld also be stressed that the sad do'$ment s a not'e d$ly sent to the ta%&ayer. Indeed) an
assessment s deemed made only "hen the BIR releases) mals or sends s$'h not'e to the ta%&ayer.
(ommssoner of Internal Re!en$e !. Pas'or Realty and De!elo&ment (or&oraton) et al.) 5.R. No.
,/?<,@) &rom. K$ne /-) ,---3
,>
Pas'or has also defned assessment as layn+ a ta%.
NOTES AND (O66ENTS: The "ord assessment "hen $sed n 'onne'ton "th ta%aton) may
ha!e more than one meann+. The $ltmate &$r&ose of an assessment to s$'h a 'onne'ton s to as'ertan
the amo$nt that ea'h ta%&ayer s to &ay. 6ore 'ommonly the "ord DassessmentE means the off'al
!al$aton of a ta%&ayer*s &ro&erty for &$r&ose of ta%aton. The abo!e defnton of assessment fnds
a&&l'aton $nder nternal re!en$e ta%aton) tarff and '$stoms ta%aton as "ell as lo'al +o!ernment
ta%aton.
9or real &ro&erty ta%aton) there may be a s&e'al meann+ to the b$rdens that are m&osed $&on
real &ro&ertes that ha!e been benefted by a &$bl' "or1s e%&endt$re of a lo'al +o!ernment. It s
sometmes 'alled a s&e'al assessment or a s&e'al le!y.
The &res'r&t!e &erods for ma1n+ assessments are three 2<3 years from the last day "thn "h'h to fle
a ret$rn or "hen the ret$rn "as a't$ally fled and ten years from ds'o!ery of the fal$re to fle the ta%
ret$rn or ds'o!ery of falsty or fra$d n the ret$rn.
GGG <H. What s meant by D0eo&ardy assessmentE N
S455ESTED ANSWER: A deln#$en'y ta% assessment "h'h "as assessed "tho$t the beneft
of 'om&lete or &artal a$dt by an a$thor8ed re!en$e off'er) "ho has reason to bele!e that the
assessment and 'olle'ton of a def'en'y ta% "ll be 0eo&ard8ed by delay be'a$se of the ta%&ayer*s fal$re
to 'om&ly "th the a$dt and n!est+aton re#$rements to &resent hs boo1s of a''o$nts andPor &ertnent
re'ords) or to s$bstantate all or any of the ded$'tons) e%em&tons) or 'redts 'lamed n hs ret$rn. SSe'.
<., 2a3) Re!. Re+s. No. >-/...3
NOTES AND (O66ENTS:
a. Keo&ardy assessment s an nd'aton of the do$btf$l !aldty of the assessment) hen'e t may
be s$b0e't to a 'om&romse. SSe'. <., 2a3) Re!. RE+s. No. >-/...T
GGG b. Re#$rements for !aldty of formal letter of demand and assessment not'e. The letter of
demand 'alln+ for &ayment of the ta%&ayer*s def'en'y ta% or ta%es shall state the fa'ts) the la") r$les
and re+$latons) or 0$rs&r$den'e on "h'h the assessment s based) other"se) the formal letter of demand
and assessment not'e shall be !od. 2Se'. <.,.H) Re!. Re+s. No. ,/---3
GGG <@. DCE (or&oraton fled ts n'ome ta% ret$rns n Kan$ary) ,--@ for ts n'ome for the year
,--H. In O'tober) ,--=) 6ar'h) ,--? and 6ay) ,--?) DCE thro$+h t*s a$thor8ed re&resentat!e s+ned
three 2<3 se&arate "a!ers of the DStat$te of ;mtatons $nder the NIR(.E The "a!ers "ere not s+ned
by the BIR (ommssoner or hs a+ents.
In ,---) the BIR ss$ed letters of demand) a''om&aned by assessment not'es as1n+ the
'or&oraton to &ay the def'en'y nternal re!en$e ta%es for ts n'ome for the year ,--H. DCE ds&$ted
the assessment and re#$ested a ren!est+aton. The BIR (ommssoner dened the &rotest. DCE a&&ealed
to the (o$rt of Ta% A&&eals) on the +ro$nd of &res'r&ton. De'de.
S455ESTED ANSWER: The BIR*s a$thorty to assess already &res'rbed. The three 2<3
"a!ers dd not s$s&end the r$nnn+ of the &res'r&t!e &erod.
The only a+reement that 'o$ld s$s&end the r$nnn+ of the &res'r&t!e &erod for the 'olle'ton of
the ta% n #$eston s a "rtten a+reement bet"een DCE 'or&oraton an the BIR entered nto before the
e%&raton of the three 2<3 year &res'r&t!e &erod. e%tendn+ the sad &erod.
Sn'e) "hat s re#$red s the s+nat$res of both the (ommssoner and the ta%&ayer) a $nlateral
"a!er on the &art of the ta%&ayer does not s$s&end the &res'r&t!e &erod. 2(ommssoner of Internal
Re!en$e !. (o$rt of A&&eals) et al.) 5.R. No. ,,@=,/) 9ebr$ary /@) ,--- 2(arnaton 'ase3
NOTES AND (O66ENTS: 5ro$nds for s$s&endn+ stat$te of lmtatons or &res'r&t!e
&erods for assessment) be+nnn+ or dstrant or le!y or &ro'eedn+ n 'o$rt.
The holdn+ n (ommssoner of Internal Re!en$e !. (o$rt of A&&eals) et al.) 5.R. No. ,,@=,/) 9ebr$ary
/@) ,--- 2(arnaton 'ase3 that the "a!er of the &erod for assessment m$st be n "rtn+ and ha!e the
"rtten 'onsent of the BIR (ommssoner s stll do'trnal be'a$se of the &ro!sons of Se'. //<) NIR( of
,--= "h'h &ro!des:
a. When the (ommssoner s &rohbted from ma1n+ the assessment) or be+nnn+ dstrant) or
le!y or &ro'eedn+ n 'o$rt and for s%ty 2>.3 days thereafterF
b. When the ta%&ayer re#$ests for and s +ranted a ren!est+aton by the 'ommssonerF
'. When the 'ommssoner 'o$ld not be lo'ated n the address +!en by hm n the ret$rn fled
$&on "h'h the ta% s ben+ assessed or 'olle'tedF
d. When the "arrant of dstrant and le!y s d$ly ser!ed $&on the ta%&ayer) hs a$thor8ed
re&resentat!e) or a member of hs ho$sehold "th s$ff'ent ds'reton) and no &ro&erty 'o$ld be lo'atedF
and
e. When the ta%&ayer s o$t of the Phl&&nes.
;a" on &res'r&ton sho$ld be lberally 'onstr$ed n fa!or of the ta%&ayer. 9or the &$r&ose of
safe+$ardn+ ta%&ayers from an $nreasonable e%amnaton) n!est+aton or assessment) o$r ta% la"
&ro!des a stat$te of lmtaton on the 'olle'ton of ta%es.
Th$s) the la" on &res'r&ton) ben+ a remedal meas$re) sho$ld be lberally 'onstr$ed n order
to afford s$'h &rote'ton. As a 'orollary) the e%'e&tons to the la" on &res'r&ton sho$ld &erfor'e be
str'tly 'onstr$ed. 2(ommssoner of Internal Re!en$e !. B.9. 5oodr'h Phls.) In'.) et al.) 5.R. No.
,.H,=,) 9ebr$ary /H) ,---3
Re#$rements for !aldty of ta%&ayer*s &rotest. The ta%&ayer shall state the fa'ts) the a&&l'able
la") r$les and re+$latons) or 0$rs&r$den'e on "h'h hs &rotest s based) other"se) hs &rotest shall be
'onsdered !od and "tho$t for'e and effe't. If therer are se!eral ss$es n!ol!ed n the ds&$ted
assessment and the ta%&ayer fals to state the fa'ts) the a&&l'able la") r$les and re+$latons) or
0$rs&r$den'e n s$&&ort of hs &rotest a+anst some of the se!eral ss$es on "h'h the assessment s based)
,=
the same shall be 'onsdered $nds&$ted ss$e or ss$es) n "h'h 'ase) the ta%&ayer shall be re#$red to
&ay the 'orres&ondn+ def'en'y ta% or ta%es attrb$table thereto. 2Se'. <.,.@) Re!. Re+s. ,/---3
<>. B.9. 5oodr'h a!aln+ of the Party Amendment to the (onstt$ton &$r'hased !aro$s
&ar'els of land. When the Party Amendment e%&red n ,-=H) t sold the &ar'els for P@..)...... &ayable
n nstallments and leased ba'1 the &ro&ertes for /@ years. It fled ts ,-=H ret$rn re&ortn+ the sale. A
BIR assessment on ts n'ome for ,-=H "as &ad. In ,-?. t "as assessed donor*s ta% be'a$se the BIR
'onsdered the 'onsderaton for the sale ns$ff'ent) and the dfferen'e bet"een the far mar1et !al$e and
the a't$al &$r'hase &r'e) a ta%able donaton. S$bse#$ently) on A&rl -) ,-?, the BIR n'reased the
assessment.
Was there a Dfalse and fra$d$lent ret$rnE "thn the 'onte%t of the Ta% (ode "h'h "o$ld allo"
assessment beyond the f!e year S$nder the &resent Ta% (ode) three 2<3 years N
S455ESTED ANSWER: No) the fa't that B.9. 5oodr'h sold the &ro&erty for a &r'e lo"er
than ts de'lared far mar1et !al$e dd not 'onstt$te a Dfalse ret$rnE "h'h 'ontans "ron+ nformaton
d$e to msta1e) 'arelessness or +noran'e. It s &ossble that real &ro&erty may be sold for less than
ade#$ate 'onsderaton for a bona fde b$sness &$r&ose) n s$'h e!ent) the sale remans an Darms len+thE
transa'ton. In the 'ase at bar) B.9. 5oodr'h "as tryn+ to mnm8e ts loss be'a$se of the e%&raton of
the Party Amendment. Besdes) the /@ year lease "as another 'onsderaton.
B.9. 5oodr'h de'lared the sale n ts ,-=H ret$rn s$bmtted to the BIR Wthn the &res'r&t!e
&erod) the BIR 'o$ld ha!e made the assessment be'a$se the de'lared far mar1et !al$e of sad &ro&erty
"as of &$bl' re'ord.
That &art of the sale transa'ton "as a't$ally a donaton) dd not erase the fa't that the n'ome
had already been re&orted. B.9. 5oodr'h already re&orted ts n'ome by fln+ an n'ome ta% ret$rn.
E!en tho$+h a donor*s ta% s dfferent from 'a&tal +ans ta%) a ta% on the +an from the sale of the
ta%&ayer*s &ro&erty formn+ &art of 'a&tal assets) the ta% ret$rn fled by B.9. 5oodr'h to re&ort ts
n'ome for the year ,-=H "as s$ff'ent 'om&lan'e "th the le+al re#$rement to fle a ret$rn.
The BIR*s o!ers+ht on the ss$e of &res'r&ton 'annot &re0$d'e the ta%&ayer. REASON: The
&res'r&t!e &erod "as &re'sely ntended to +!e the ta%&ayers &ea'e of mnd. 2(ommssoner of Internal
Re!en$e !. B.9. 5oodr'h Phls.) In'.) et al.) 5.R. No. ,.H,=,) 9ebr$ary /H) ,---3
<=. Assessment and ref$nd 'ases 'o$ld not be 'onsoldated. Reason: ;feblood do'trne. If there
a &endn+ assessment) ref$nd sho$ld not be +ranted.
GGG <?. H, non-lfe ns$ran'e 'or&oratons or+an8ed and e%stn+ $nder the la"s of the Phl&&nes
or+an8ed a &ool of ma'hnery ns$rers for the &$r&ose of entern+ nto a U$ota Share Rens$ran'e Treaty
and a S$r&l$s Rens$ran'e Treaty "th the 6$n'hener R$'1!ers'her$n+s-5essels'haft 26$n'h for
bre!ty3) a non-resdent fore+n ns$ran'e 'or&oraton.
On A&rl ,H) ,-=> the &ool s$bmtted a fnan'al statement and fled an DInformaton Ret$rn of
Or+an8aton E%em&t from In'ome Ta%E for the year endn+ ,-=@) on the bass of "h'h the &ool "as
assessed def'en'y 'or&orate n'ome ta% of P,.? mllon and "thholdn+ ta% n the amo$nt of P,.=
mllon and P?- tho$sand and to the &ool on d!dends &ad to 6$n'h and the &ool members
res&e't!ely.
The &ool rases the follo"n+ ss$es "hy they sho$ld not be s$b0e't to the def'en'y ta%es:
,. They ha!e not formed an $nre+stered &artnersh& to be treated as a 'or&oraton for ta%
&$r&osesF
/. There "o$ld be do$ble ta%aton f they "o$ld be made to &ay the def'en'y ta%esF and
<. The r+ht of the +o!ernment to 'olle't has already &res'rbed.
R$le on the ss$es rased ds'$ssn+ ea'h one of them.
S455ESTED ANSWERS:
,. They ha!e formed an asso'aton "h'h sho$ld be ta%able l1e a 'or&oraton. The Ta% (ode
has n'l$ded $nder the term D'or&oratonE &artnersh&s) no matter ho" 'reated or or+an8ed) 0ont-sto'1
'om&anes) 0ont a''o$nts 2'$entas en &art'&a'on3) asso'atons) or ns$ran'e 'om&anes. SSe'. /H no"
Se'. /H 2B3 of the NIR( of ,--=T.
In E!an+elsta !. (olle'tor) ,./ Phl. ,H.) the S$&reme (o$rt already held 'tn+ 6ertens that
the term &artnersh& n'l$des a synd'ate) +ro$&) &ool) 0ont !ent$re or other $nn'or&orated or+an8aton)
thro$+h or by means of "h'h any b$sness) fnan'al o&eraton) or !ent$re s 'arred on.
There s no #$eston that the H, non-lfe 'or&oratons entered nto a Pool A+reement or an asso'aton that
"o$ld handle all the ns$ran'e b$snesses 'o!ered $nder ther #$ota-share rens$ran'e treaty and s$r&l$s
rens$ran'e treaty "th 6$n'h. Ths $nmsta1ably nd'ates a &artnersh& or an asso'aton "h'h s
'onsdered $nder the Ta% (ode as a &artnersh& or asso'aton treated l1e a 'or&oraton.
/. There s no do$ble ta%aton "h'h means ta%n+ the same &ro&erty t"'e "hen t sho$ld be ta%ed only
on'e. The Pool s a ta%able entty se&arate and dstn't from the nd!d$al 'or&orate enttes of the Pool.
<. The &res'r&t!e &erod "as not s$s&ended be'a$se t may be s$s&ended only Df the ta%&ayer nforms
the (ommssoner of Internal Re!en$e of any 'han+e n the address.E The fa't that the Pool*s
nformaton ret$rn fled n ,-?. nd'ated theren ts D&resent addressE s not s$ff'ent 'om&lan'e "th
the le+al re#$rement.
GGGNOTES AND (O66ENTS: The Bar e%amnaton #$eston may be "th res&e't to the n'ome of
an estate that has not been &arttoned or to a 'ase "here there s 'o-o"nersh&.
(ertan b$sness or+an8atons do not fall $nder the 'ate+ory of D'or&oratonsE $nder the Ta% (ode) and
therefore not s$b0e't to ta% as 'or&oratons. They n'l$de:
,. 5eneral &rofessonal &artnersh&sF
,?
/. Kont !ent$re or 'onsort$m formed for the &$r&ose of $nderta1n+ 'onstr$'ton &ro0e'ts en+a+n+ n
&etrole$m) 'oal) +eothermal) and other ener+y o&eratons) &$rs$ant to an o&eraton or 'onsort$m
a+reement $nder a ser!'e 'ontra't "th the 5o!ernment. S,st senten'e) Se'. // 2B3) BIR( of ,--=T
<-. What s a &ayment order N
S455ESTED ANSWER: A &ayment order 'ontans the &art'$lar 1nd of ta% to be &ad and the
'orres&ondn+ TN( s ss$ed to a ta%&ayer to be &resented by hm to the ban1 "hen he &ays hs ta%es.
2E!an+elsta !. Peo&le of the Phl&&nes) et al.) 5.R. Nos. ,.?,<@-<>) &rom. Se&tember <.) ,---3
GGG H.. A+$stn ded n De'ember) ,--- lea!n+ to hs t"o sons) 9ernando and Kose) an a&artment
b$ldn+. After the settlement of A+$stn*s estate) hs t"o sons de'ded not to &artton the a&artment
b$ldn+ and 0$st d!ded the rentals amon+ themsel!es for the year /....
a. Was a &artnersh& formed "h'h s s$b0e't to 'or&orate n'ome ta%es for the year /... N Reason o$t
yo$r ans"er.
b. If) nstead of d!dn+ the rentals n /...) the brothers n!ested the same n the &$r'hase of a
ho$se to be rented o$t. Ao" shall the n'ome from the rentals of the ho$se be treated for ta% &$r&oses N
E%&lan brefly. Wo$ld yo$r ans"er be dfferent f the ho$se "as not &$r'hased for the &$r&ose of rentn+
o$t the same b$t "as later sold N E%&lan brefly.
S455ESTED ANSWERS:
a. No. (o-hers "ho o"n nherted &ro&ertes "h'h &rod$'e n'ome sho$ld not a$tomat'ally
be 'onsdered as &artners of an $nre+stered 'or&oraton s$b0e't to n'ome ta% for the follo"n+ reasons:
,. the sharn+ of +ross ret$rns does not of tself establsh a &artnersh&) "hether or not the &ersons
sharn+ them ha!e a 0ont or 'ommon r+ht or nterest n any &ro&erty from "h'h the ret$rns are der!ed.
There m$st be an $nmsta1able ntenton to form a &artnersh& or 0ont !ent$re. 2Obllos) Kr. !.
(ommssoner of Internal Re!en$e) ,<- S(RA H<>3
/. There s no 'ontrb$ton or n!estment of addtonal 'a&tal to n'rease or e%&and the nherted
&ro&ertes) merely 'ontn$n+ the ded'aton of the &ro&erty to the $se to "h'h t had been &$t by ther
forebears. 2Ibd.3
<. Persons "ho 'ontrb$te &ro&erty or f$nds to a 'ommon enter&rse and a+ree to share the +ross ret$rns
of that enter&rse n &ro&orton to ther 'ontrb$ton) b$t "ho se!erally retan the ttle to ther res&e't!e
'ontrb$ton) are not thereby rendered &artners. They ha!e no 'ommon sto'1 'a&tal) and no 'omm$nty
of nterest as &rn'&al &ro&retors n the b$sness tself from "h'h the &ro'eeds "ere der!ed. 2Elements
of the ;a" of Partnersh& by 9loyd R. 6e'hem) /nd Ed.) Se'. ?<) &. =H 'ted n Pas'$al !. (ommssoner
of Internal Re!en$e) ,>> S(RA @>.3
H. In order to 'onstt$te a &artnersh& nter sese there m$st be: 2a3 an ntent to form the sameF 2b3
+enerally &art'&atn+ n both &rofts and lossesF 2'3 and s$'h a 'omm$nty of nterest) as far as thrd
&ersons are 'on'erned as enables ea'h &arty to ma1e a 'ontra't) mana+e the b$sness) and ds&ose of the
"hole &ro&erty. 26$n'&alty Pa!n+ (o. !. Aerrn+) ,@. O. ,.>=) @. Ill. H=.) Ibd.3
@. The 'ommon o"nersh& of &ro&erty does not tself 'reate a &artnersh& bet"een the o"ners) tho$+h
they may $se t for &$r&ose of ma1n+ +ans) and they may) "tho$t be'omn+ &artners) are amon+
themsel!es as to the mana+ement and $se of s$'h &ro&erty and the a&&l'aton of the &ro'eeds therefrom..
2S&$rlo'1 !). Wlson) ,H/ S.W. <><) ,>. No. A&&. ,H) Ibd.3
b. The n'ome from the rental of the ho$se shall be treated as the n'ome of an $nre+stered
&artnersh& to be ta%able as a 'or&oraton be'a$se of the 'lear ntenton of the brothers to 0on to+ether n
a !ent$re for ma1n+ money o$t of rentals.
The ans"er "o$ld be dfferent be'a$se there "as no ntenton to enter nto a &roft ma1n+
!ent$re. They merely formed a 'o-o"nersh&. Ths s e!dent from the follo"n+ a$thortes:
Where the &lantff) hs brother and) and another a+reed to be'ome o"ners of a sn+le tra't of
realty holdn+ as tenants n 'ommon) and to d!de the &rofts of ds&osn+ of t) the brother and the other
not ben+ enttled to share n &lantff*s 'ommssons) no &artnersh& e%sted as bet"een the three &artes)
"hate!er ther relaton may ha!e been as to thrd &artes. 26a+ee !. 6a+ee) ,/< N.E. >=<) /<< 6ass. <H,
'ted n Pas'$al !. (ommssoner of Internal Re!en$e) ,>> S(RA @>.3
H,. ;boro s a &ra't'n+ la"yer "ho on ,@ A&rl ,--@ fled hs n'ome ta% ret$rn for the year
,--H. 4&on e%amnaton) the BIR fo$nd hs ret$rn def'ent of P,H)..-.?H. On <. Se&tember and <.
No!ember ,--@) ;boro "as notfed of hs ta% def'en'y. Ae res&onded "th a &rotest letter dated ,-
De'ember ,--@.
On ,, 6ay ,-->) the (ommssoner of Internal Re!en$e dened ;boro*s &rotest for la'1 of le+al
bass. Ae then seasonably fled a &etton for re!e" before the (o$rt of Ta% A&&eals. On /- 6ar'h ,--?)
the (TA rendered a de'son dsmssn+ the a&&eal "h'h ;boro re'e!ed on /- 6ay ,--?. Th$s) he had
$ntl ,< K$ne ,--? to fle a &etton for re!e" before the (o$rt of A&&eals.
On ,, K$ne ,--?) nstead of fln+ a &etton for re!e" "th the (o$rt of A&&eals) ;boro fled a
Not'e of A&&eal "th the (o$rt of A&&eals) and on ,< K$ne ,--?) a moton for an e%tenson of thrty
2<.3 days to fle a &etton for re!e" before the (o$rt of A&&eals.
6ay the (o$rt of A&&eals +rant ;boro an e%tenson of tme to fle the &etton for re!e"N
S455ESTED ANSWER: Bes. The &rohbton a+anst +rantn+ an e%tenson of tme a&&les
only n a 'ase "here ordnary a&&eal s re#$red to &erfe't an a&&eal and nothn+ more. Ao"e!er) t s
dfferent n a &etton for re!e" "here the &leadn+ s re#$red to be !erfed.
A &etton for re!e") $nl1e an ordnary a&&eal) re#$res 'aref$l &re&araton and resear'h n
order to &$t $& a &ers$as!e and formdable &oston. In other "ords) the draftn+ of a &etton for re!e"
entals more tme and effort than merely fln+ a not'e of a&&eal. 2;boro !. (o$rt of A&&eals) et al.) 5.R.
No. ,.,,</ and (ommssoner of Internal Re!en$e !. (o$rt of A&&eals) et al.) Kan$ary /-) ,--<3
,-
NOTES AND (O66ENTS:: Se'. H) R$le H< of the ,--= R$les of (!l Pro'ed$re &ro!des)
DThe a&&eal shall be ta1en "thn ffteen 2,@3 days from not'e of the ... 0$d+ment.... 4&on &ro&er moton
and the &ayment of the f$ll amo$nt of the do'1et fee before the e%&raton of the re+lementary &erod) the
(o$rt of A&&eals may +rant an addtonal &erod of ffteen 2,@3 days only "thn "h'h to fle the &etton
for re!e". No f$rther e%tenson shall be +ranted e%'e&t for the most 'om&elln+ reason and n no 'ase to
e%'eed ffteen 2,@3 days.E 2&ara&hrasn+ s$&&led3
GGG H/. Is there a ne'essty for an admnstrat!e determnaton that a ta% s d$e before ntaton of
'rmnal &rose'$ton for ta% e!ason N
S455ESTED ANSWER: No) be'a$se of the follo"n+ reasons) "h'h dstn+$shes a 'rmnal
'har+e from an assessment:
a. (rmnal 'har+e need only be s$&&orted by a &rma fa'e sho"n+ of fal$re to fle a re#$red
ret$rn WAI;E the fa't of fal$re to fle a ret$rn need not be &ro!en by an assessment.
b. Before an assessment s ss$ed) there s) by &ra't'e) a &re-assessment not'e sent to the
ta%&ayer WAI;E s$'h s not so "th a 'rmnal 'har+e. The 'har+e s fled dre'tly "th the De&artment
of K$st'e.
'. A 'rmnal 'om&lant s nstt$ted not to demand &ayment) b$t to &enal8e the ta%&ayer for
!olaton of the Ta% (ode WAI;E the &$r&ose of the ss$an'e of an assessment s to 'olle't the ta%.
2(ommssoner of Internal Re!en$e !. Pas'or Realty and De!elo&ment (or&oraton) et al.) 5.R. No.
,/?<,@) K$ne /-) ,---3
NOTES AND (O66ENTS: 9or Bar e%amnaton &$r&oses ta1e note of the dstn'ton bet"een
the 9ort$ne Toba''o 'ase 2(ommssoner of Internal Re!en$e !. (o$rt of A&&eals) et al.) 5.R. No.
,,-<//) K$ne H) ,-->3 on one hand "th the abo!e Pas'or 'ase and that of 4n+ab !. ($s) -= S(RA ?==
2,-?.3) "h'h allo"ed the ta% e!ason 'ase to &ro'eed not"thstandn+ no sho"n+ of an admnstrat!e
fndn+ that a ta% s d$e. In 4n+ab) there "as a &rma fa'e attem&t to e!ade ta%es be'a$se of the
ta%&ayer*s fal$re to de'lare n hs n'ome ta% ret$rn Dhs n'ome der!ed from banana sa&ln+s)E WAI;E
n the 9ort$ne Toba''o 'ase) the re+stered "holesale &r'e of the +oods) a&&ro!ed by the BIR s &res$med
to be the a't$al "holesale &r'e) therefore) not fra$d$lent and $nless and $ntl the BIR has made a fnal
determnaton of "hat s s$&&osed to be the 'orre't ta%es) the ta%&ayer sho$ld not be &la'ed n the 'r$'ble
of 'rmnal &rose'$ton
GGG H<. What are the ta% 'ases "h'h may be the s$b0e't of a 'om&romse settlement "th the BIR N
S455ESTED ANSWER: The follo"n+ may be the s$b0e't matter of 'om&romse settlement:
a. Deln#$ent a''o$ntsF
b. (ases $nder admnstrat!e &rotest &endn+ n the Re+onal Off'es) Re!en$e Dstr't Off'es)
;e+al Ser!'e) ;ar+e Ta%&ayer Ser!'e 2;TS3) Enfor'ement Ser!'e 2ES3) E%'se Ta%&ayer Ser!'e 2ETS3
and (olle'ton Ser!'e 2(S3F
'. (!l ta% 'ases ben+ ds&$ted before the 'o$rts) e.+. (TA) (A) S(F
d. (olle'ton 'ases fled n 'o$rtsF and
e. (rmnal !olatons) other than those already fled n 'o$rt) or those n!ol!n+ 'rmnal ta%
fra$d. 2Se'. /) Re!. Re+s. No. >-/...3
NOTES AND (O66ENTS:
a. Ta% 'ases "h'h 'o$ld not be the s$b0e't of 'om&romse:
,3 Wthholdn+ ta% 'asesF
/3 (rmnal ta% fra$d 'asesF
<3 (rmnal !olatons already fled n 'o$rtF and
H3 Deln#$ent a''o$nts "th d$ly a&&ro!ed s'hed$le of nstallment &ayments. 2Se'. /) Re!.
Re+s. No. >-/...3
GGG HH. On K$ne ,@) ,-->) 6r. 5rant O. Neal) &ad hs n'ome ta% for the year ,--@. On 6ar'h ,@)
,--?) he ds'o!ered that the BIR e%'ess!ely 'olle'ted from hs the amo$nt of P=@)....... Th$s) on the
same day he fled "th the (ommssoner of Internal Re!en$e a "rtten 'lam for ref$nd. On A$+$st ,@)
,--? he re'e!ed the (ommssoner*s letter denyn+ hs 'lam for ref$nd. On Se&tember ,) ,--?) or
"thn thrty 2<.3 days from re'e&t of the letter) he fled a &etton for re!e" "th the (o$rt of A&&eals
for the ref$nd of the P=@)....... In 'onforman'e "th the materal data r$le) he alle+ed that Se'ton ,,
of Re&$bl' A't No. ,,/@) &ro!des that a ta%&ayer ad!ersely affe'ted by a r$ln+ or de'son of the
(ommssoner of Internal Re!en$e may a&&eal to the (o$rt of Ta% A&&eals "thn thrty 2<.3 days from
re'e&t of the ad!erse de'son. De'de the 'ase.
S455ESTED ANSWER: The &etton sho$ld be dsmssed for ha!n+ been fled o$t of tme.
Se'. //-) NIR( of ,--= &ro!des that 'o$rt a'ton for the re'o!ery of nternal re!en$e ta% sho$ld be fled
"thn t"o 2/3 years from the date s$'h ta% "as &ad.
The &etton sho$ld ha!e been fled no later than K$ne ,>) ,--?. There "as as yet no de'son of
the (ommssoner to be a&&ealed b$t ths 'ontenton s bereft of mert) as t "o$ld lea!e the ta%&ayer at
the mer'y of the BIR (ommssoner "tho$t any &ost!e and e%&edent relef from the (o$rt. It s
dsheartenn+ eno$+h to a ta%&ayer to be 1e&t "atn+ for an ndefnte &erod for the r$ln+). It "o$ld
ma1e matters more e%as&eratn+ for the ta%&ayer f the doors of 0$st'e "o$ld be 'losed for s$'h a relef
$ntl after the (ommssoner) "o$ld ha!e) at hs &ersonal 'on!enen'e) +!en hs +o s+nal.
2(ommssoner of ($stoms) et al) !. (o$rt of Ta% A&&eals) et al.) 5.R. No. ?/>,?) &rom. 6ar'h ,>) ,-?-)
$nre&.3
GGG H@. Phl&&ne Ban1 of (omm$n'atons fled ts #$arterly n'ome ta% ret$rns for the frst and
se'ond #$arters of ,-?@) re&ortn+ &rofts and &ad the total n'ome ta% of P@ mllon. The ta%es d$e "ere
/.
settled by a&&lyn+ the Ban1*s ta% 'redt memos) and a''ordn+ly) the BIR ss$ed the a&&ro&rate Ta%
Debt 6emos.
S$bse#$ently) the Ban1 s$ffered losses so that "hen t fled ts Ann$al In'ome Ta% Ret$rns for
the year-ended De'ember <,) ,-?@) t de'lared a net loss of P/@ mllon) thereby sho"n+ no ta% lablty.
9or the s$''eedn+ year) endn+ De'ember <,) ,-?>) t l1e"se re&orted a net loss of P,H mllon and
th$s de'lared no n'ome ta% &ayable for the year.
D$rn+ ,-?@ and ,-?>) the Ban1 earned rental n'ome from leased &ro&ertes from "here the
lessees "thheld and remtted to the BIR "thholdn+ 'redtable ta%es of P/?/ tho$sand for ,-?@) and
P/<H tho$sand for ,-?>.
On A$+$st =) ,-?=) the Ban1 re#$ested the (ommssoner of Internal Re!en$e) amon+ others for
a ta% 'redt of P@ mllon re&resentn+ the o!er&ayment of ta%es n the frst and se'ond #$arters of ,-?@.
Thereafter) on K$ly /@) ,-??) the Ban1 fled a 'lam for ref$nd of 'redtable ta%es "thheld by ts lessees
from &ro&erty rentals n ,-?@ and n ,-?>. Both the re#$est and the 'lam "ere seasonably fled "thn
the ten 2,.3 year &erod for fln+ 'lams of e%'ess #$arterly n'ome ta% &ayments as &ro!ded for n R6(
=-?@ ss$ed by the then A't+. BIR (ommssoner.
On No!ember ,?) ,-?? the Ban1 nstt$ted a Petton for Re!e" before the (o$rt of Ta%
A&&eals. Wo$ld the &etton &ros&er N
S455ESTED ANSWER: No. It "as fled o$t of tme and sn'e the ta%&ayer de'ded to a!al of
the ta% 'redt t 'o$ld not anymore see1 a ref$nd.
The t"o 2/3 year &res'r&t!e &erod sho$ld be 'om&$ted from the tme of fln+ the Ad0$stment Ret$rn
and fnal &ayment of the ta% for the year. 2Phl&&ne Ban1 of (omm$n'atons !. (ommssoner of
Internal Re!en$e) et al.) 5.R. No. ,,/./H) Kan$ary /?) ,---3
The 'lam for ref$nd sho$ld be e%er'sed "thn the tme f%ed by la". REASON: The B$rea$
of Internal Re!en$e ben+ an admnstrat!e body enfor'ed to 'olle't ta%es) ts f$n'tons sho$ld not be
$nd$ly delayed or ham&ered by n'dental matters. 2Ibd.3
The ss$an'e of R6( =-?@ 'han+n+ the stat$tory &res'r&t!e &erod of t"o 2/3 years to ten 2,.3
years on 'lams of e%'ess #$arterly n'ome ta% &ayments dd not merely nter&ret the la") rather t
le+slated +$delnes 'ontrary to the stat$te &assed by (on+ress.
Re!en$e 6emorand$m (r'$lars are 'onsdered admnstrat!e r$ln+s 2n the sense of more
s&e'f' and less +eneral nter&retatons of ta% la"s3 "h'h are ss$ed from tme to tme by the
(ommssoner of Internal Re!en$e. It s "dely a''e&ted that the nter&retaton &la'ed $&on a stat$te by
the e%e'$t!e off'ers) "hose d$ty t s to enfor'e t) s enttled to +reat res&e't by the 'o$rts. Ne!ertheless)
s$'h nter&retaton s not 'on'l$s!e and "ll be +nored f 0$d'ally fo$nd to be erroneo$s. R$les and
re+$latons ss$ed by admnstrat!e off'als to m&lement a la" 'annot +o beyond the terms and
&ro!sons of the latter. 9$rther) f$ndamental s the r$le that the State 'annot be &$t n esto&&el by the
msta1es or errors of ts off'als or a+ents. 2s$&ra3
9nally) Se'. >- of the ,-== NIR( 2no" Se'. => of the ,--= NIR(3 &ro!des that any e%'ess of
the total #$arterly &ayments o!er the a't$al n'ome ta% 'om&$ted n the ad0$stment or fnal 'or&orate
n'ome ta% ret$rn) shall ether 2a3 be ref$nded to the 'or&oraton) or 2b3 may be 'redted a+anst the
estmated #$arterly n'ome ta% labltes for the #$arters of the s$''eedn+ ta%able year. To ease the
admnstraton of ta% 'olle'ton) these remedes are n the alternat!e and the 'ho'e of one &re'l$des the
other. Sn'e the Ban1 has 'hosen the ta% 'redt a&&roa'h t 'annot anymore a!al of the ta% ref$nd..
2s$&ra3
GGG H>. On K$ly ,?) ,-?>) the BIR ss$ed to Sal$d V. A8on a def'en'y n'ome ta% assessment.
Sn'e the assessment "as not 'ontested) the BIR on Kan$ary ,/) ,-?-) ser!ed "arrants of dstrant and
le!y to 'olle't the ta% def'en'y. 9or $n1no"n reasons) the BIR dd not &ro'eed to ds&ose of the atta'hed
&ro&ertes.
On No!ember <) ,--/) Sal$d "rote the BIR re#$estn+ a re'onsderaton of her ta% def'en'y
assessment. The BIR) n a letter dated A$+$st ,,) ,--H) dened. On Kan$ary ,) ,--=) the BIR
fled "th the RT( a 'ase to 'olle't the ta% def'en'y. The 'om&lant "as s+ned by the (hef of the
;e+al D!son of the Re+on and !erfed by the Re+onal Dre'tor.
Sal$d no" see1s the dsmssal of the 'ase on the follo"n+ +ro$nds:
a. The 'om&lant "as not fled $&on a$thorty of the BIR (ommssoner as re#$red $nder
Se'ton //. of the Ta% (odeF
b. The a'ton has already &res'rbed. Resol!e the ss$es rased.
S455ESTED ANSWERS:
a. Re!en$e Admnstrat!e Order No. ,.--@ s&e'f'ally a$thor8es the ;t+aton and
Prose'$ton Se'ton of the ;e+al D!son of the re+onal dstr't off'es to nstt$te the ne'essary '!l and
'rmnal a'tons for ta% 'olle'ton. As the 'om&lant fled n ths 'ase "as s+ned by the BIR*s (hef of
;e+al D!son for the re+on and !erfed by the Re+onal Dre'tor) there "as) therefore) 'om&lan'e "th
the la". Se'. = of the &resent Ta% (ode a$thor8es the BIR (ommssoner to dele+ate some of hs &o"ers.
b .Se'. //? of the NIR( of ,--= mandates that a re#$est for re'onsderaton m$st be made "thn
<. days from the ta%&ayer*s re'e&t of the ta% def'en'y assessment) other"se the assessment be'omes
fnal) $na&&ealable and) therefore demandable. The not'e "as re'e!ed by Sal$d on K$ly ,?) ,-?> and
she made her re#$est for re'onsderaton thereof only on No!ember <) ,--/. E!en ass$mn+ that she frst
learned of the not'e on the day the "arrants "ere ser!ed on Kan$ary ,/) ,-?-) her re#$est for
re'onsderaton "as stll fled beyond the <. day &erod. Aen'e) her re#$est for re'onsderaton dd not
s$s&end the r$nnn+ of the &res'r&t!e &erod. Altho$+h the (ommssoner a'ted on Sal$d*s re#$est)
e!ent$ally denyn+ t on A$+$st ,,) ,--H) ths s of no moment and does not detra't from the fa't that the
assessment had lon+ be'ome demandable. 2Re&$bl' of the Phl&&nes) et'. !. A8on) 5.R. No. ,<.H)
&rom. De'ember ,<) ,---3
/,
NOTES AND (O66ENTS:
a. Effe't of ser!'e of "arrant of dstrant or le!y. The tmely ser!'e of a "arrant of dstrant or le!y
s$s&ends the r$nnn+ of the &erod to 'olle't the ta% def'en'y n the sense that the ds&oston of the
atta'hed &ro&ertes m+ht "ell ta1e tme to a''om&lsh) e%tendn+ e!en after the la&se of the stat$tory
&erod for 'olle'tons. 2Ad!ertsn+ Asso'ates) In'.) !. (o$rt of A&&eals) ,<< S(RA =>@F Palan'a !.
(ommssoner of Internal Re!en$e) ,,H Phl. /.<3. In those 'ases) the BIR dd not fle any 'olle'ton 'ase
b$t merely reled on the s$mmary remedy of dstrant and le!y to 'olle't the ta% def'en'y.
Th$s) the enfor'ement of ta% 'olle'ton thro$+h s$mmary &ro'eedn+s may be 'arred o$t beyond
the stat$tory &erod. 2Re&$bl' of the Phl&&nes) et'. !. A8on) 5.R. No. ,<.H) &rom. De'ember ,<)
,---3 The stat$tory &erod for 'olle'ton a&&les only "here a 'o$rt s$t s a!aled of for 'olle'ton.
b. 9orm and 6ode of Pro'eedn+ n A'tons Arsn+ $nder the Ta% (ode. D(!l and 'rmnal
a'tons and &ro'eedn+s nstt$ted n behalf of the 5o!ernment $nder the a$thorty of ths (ode or other
la" enfor'ed by the B$rea$ of Internal Re!en$e shall be bro$+ht n the name of the 5o!ernment of the
Phl&&nes and shall be 'ond$'ted by le+al off'ers of the B$rea$ of Internal Re!en$e b$t no '!l or
'rmnal a'ton for the re'o!ery of ta%es or the enfor'ement of any fne) &enalty or forfet$re $nder ths
(ode shall be fled n 'o$rt "tho$t the a&&ro!al of the (ommssoner.M 2Se'. //.) NIR( of ,--=3
GGG H=. After dssol$ton of Paramo$nt on 6ar'h <,) ,-?>) BPI a'ted as l#$dator. On 6ay <.)
,-?@ Paramo$nt &ad P<.?)==-... n n'ome ta%es for the ,st #$arterF for the /nd #$arter) t &ad
P>/>)...... on A$+$st /-) ,-?@F for the <rd #$arter) t &ad P/?H),>,... on No!ember /-) ,-?@.
On A&rl /) ,-?>) Paramo$nt fled ts 'or&orate ann$al n'ome ta% ret$rn for the 'alendar year
endn+ De'ember <,) ,-?@. All n all) Paramo$nt &ad the total amo$nt of P,)/,?)-H.... thereby
sho"n+ a ref$ndable amo$nt of P>@)/@-....
On A&rl ,H) ,-??) BPI) as l#$dator of Paramo$nt) fled "th the (o$rt of Ta% A&&eals a letter
dated A&rl ,/) ,-?? reteratn+ ts 'lam for the ref$nd of P>@)/@-... as o!er&ad n'ome ta% for 'alendar
year ,-?@. On A&rl ,@) ,-??) the Paramo$nt re&resentat!e) fled "th the (o$rt of Ta% A&&eals a
&etton to toll the r$nnn+ of the &res'r&t!e &erod for fln+ a 'lam for ref$nd of o!er&ad n'ome
ta%es.
The (o$rt of Ta% A&&eals r$led that the t"o-year &res'r&t!e &erod 'ommen'ed to r$n from
A&rl ,@) ,-?>) the last day for fln+ the 'or&orate n'ome ta% ret$rn and +ranted the ref$nd. Was the
+rant of the ref$nd &ro&er N
S455ESTED ANSWER: No. The t"o-year &res'r&t!e &erod for a'tons for ref$nd of
'or&orate n'ome ta% sho$ld be 'om&$ted from the tme of a't$al fln+ of the 9nal Ad0$stment Ret$rn or
Ann$al In'ome Ta% Ret$rn. REASON: At That &ont) t 'an already be determned "hether there has
been an o!er&ayment made by the ta%&ayer. 6oreo!er) &ayment s made at the tme the ret$rn s fled.
Sn'e Paramo$nt fled ts 'or&orate ann$al n'ome ta% ret$rn on A&rl /) ,-?>) t had only t"o-
years from date "thn "h'h to fle ts "rtten 'lam for ref$nd. When t fled a "rtten 'lam for ref$nd
on A&rl ,H) ,-??) and a &etton for ref$nd only on A&rl ,@) ,-??) both 'lam and a'ton for ref$nd
"ere th$s barred by &res'r&ton. 2(ommssoner of Internal Re!en$e !. (o$rt of A&&eals) et al.) 5.R. No.
,,=/@H) Kan$ary /,) ,---3
NOTES AND (O66ENTS: 9or 'or&oratons) the t"o year &res'r&t!e &erod $nder Se'. /<.
2no" Se'. //-) NIR( of ,--=3) for nstt$tn+ ta% ref$nd 'ases n 'o$rt 'ommen'e to r$n only from the
tme the ref$nd s as'ertaned) "h'h 'an only be determned after a fnal ad0$stment ret$rn s
a''om&lshed. T"o years not 0$rsd'tonal and may be s$s&ended. 2 (ommssoner of Internal Re!en$e
!. The Phl&&ne ;fe Ins$ran'e (o.)et al. 5.R. No. ,.@/.?) 6ay /-) ,--@ reteratn+ the T6C 'ase3.
The t"o year &erod a&&les only to re'o!ery of ta%es or &enaltes NOT to ta% 'redts a!alment.
Absent a s&e'f' &ro!son n the Ta% (ode or s&e'al la"s) the &erod "o$ld be ,. years. 2K$st'e Vt$+)
'on'$rrn+ n the abo!e 'ase 3
A sm$ltaneo$s fln+ of the a&&l'aton "th the BIR for ref$ndP'redt and the nstt$ton of the 'o$rt s$t
"th the (TA s allo"ed. No need to "at for a BIR denal. REASONS:
a. The &ost!e re#$rement of Se'ton /<. NIR( 2no" Se'. //-) NIR( of ,--=3F
b. The do'trne that delay of the (ommssoner n rendern+ de'son does not e%tend the &erem&tory
&erod f%ed by the stat$teF
'. The la" f%ed the same &erod t"o years for fln+ a 'lam for ref$nd "th the (ommssoner $nder
Se'. /.H) &ar. <) NIR( 2no" Se'. /.H S(T) NIR( of ,--=3) and for fln+ s$t n 'o$rt $nder Se'. /<.)
NIR( 2no" Se'. //-) NIR( of ,--=3) $nl1e n &rotests of assessments $nder Se'. //- 2no" Se'. //?)
NIR( of ,--=3) "h'h f%ed the &erod 2thrty days from re'e&t of de'son3 for a&&ealn+ to the 'o$rt)
th$s 'learly m&lyn+ that the &ror de'son of the (ommssoner s ne'essary to ta1e 'o+n8an'e of the
'ase. 2(ommssoner of Internal Re!en$e !. Ban1 of Phl&&ne Islands) et'. et al.) (A-5.R. SP No.
<H,./) Se&tember -) ,--HF 5bbs !. (olle'tor of Internal Re!en$e and (o$rt of Ta% A&&eals) ,.= Phl)
/</F Kohnston ;$mber (o. !. (TA) ,., Phl. ,@,3
If the &rotest s dened n "hole or n &art or n the nstan'e "here the (ommssoner of Internal
Re!en$e does not a't "thn one h$ndred e+hty 2,?.3 days from s$bmsson of do'$ments) the ta%&ayer
ad!ersely affe'ted may a&&eal to the (o$rt of Ta% A&&eals "thn thrty 2<.3 days from re'e&t of the sad
de'son) or from the la&se of the one h$ndred e+hty 2,?.3 days) other"se the de'son shall be'ome
fnal) e%e'$tory and demandable. 2last &ar.) Se'. //?) NIR( of ,--=3
H?. Phl&&ne Aome Ass$ran'e (or&oraton &ad do'$mentary stam& ta%es on 'ertan non-lfe
ns$ran'e &ol'es t ss$ed. Ao"e!er) the &rem$ms "ere not &ad. The 'om&any on bass the &ro!sons
of Se'ton == of the Ins$ran'e (ode to the effe't that) DNot"thstandn+ any a+reement to the 'ontrary) no
&ol'y or 'ontra't of ns$ran'e ss$ed by an ns$ran'e 'om&any s !ald and bndn+ $nless and $ntl the
&rem$m thereof has been &ad %%%)E no" 'lams for a ref$nd of the do'$mentary stam&s t &ad be'a$se
//
the &ol'es ne!er be'ame effe't!e. Sho$ld the ref$nd be +ranted N Alternat!ely) 'o$ld there be a ref$nd
of do'$mentary stam& ta% &ayments N
S455ESTED ANSWER: No. Do'$mentary stam& ta%es are le!ed $&on the &r!le+e)
o&&ort$nty) or fa'lty to e%e'$te 'ertan nstr$ments rres&e't!e of "hether the 'ontra'ts are
s$bse#$ently de'lared to be res'ssble) !od) !odable or $nenfor'eable. The do'$mentary stam& ta%es are
m&osed on the mere ss$an'e of the &ol'es e!en f these &ol'es s$bse#$ently are 'onsdered as not
!ald or bndn+ $nder the la". 2Phl&&ne Aome Ass$ran'e (or&oraton) et al.) !. (o$rt of A&&eals) et
al.) 5.R. No. ,,-HH>) &rom. Kan$ary /,) ,---3
H-. Sho$ld nterest be &ad "here a ta% s ref$nded by the 5o!ernment to a ta%&ayer N
S455ESTED ANSWER: The r$le s that no nterest on ref$nd of ta% 'an be a"arded $nless
a$thor8ed by la" or the 'olle'ton of the ta% "as attended by arbtrarness. An a'ton s not arbtrary
"hen e%er'sed honestly and $&on d$e 'onsderaton "here there s room for t"o o&nons) ho"e!er
m$'h t may be bele!ed that an erroneo$s 'on'l$son "as rea'hed. Arbtrarness &res$&&oses
ne%'$sable or obstnate dsre+ard of le+al &ro!sons. 2Phle% 6nn+ (or&oraton !. (ommssoner of
Internal Re!en$e) et al.) 5.R. No. ,/.</H) &rom. A&rl /,) ,---3
@.. What s the nat$re of a ta% amnesty N
S455ESTED ANSWER: A ta% amnesty s a +eneral &ardon to ta%&ayers "ho "ant to start a
'lean slate. It also +!es the +o!ernment a 'han'e to 'olle't $n'olle'ted ta% from ta% e!aders "tho$t
ha!n+ to +o thro$+h the tedo$s &ro'ess of a ta% 'ase. To a!al of a ta% amnesty +ranted by the
+o!ernment) and to be mm$ne from s$t on ts deln#$en'es) the ta%&ayer m$st ha!e !ol$ntarly
ds'losed hs &re!o$sly $nta%ed n'ome and m$st ha!e &ad the 'orres&ondn+ ta% on s$'h &re!o$sly
$nta%ed n'ome.
A ta% amnesty) m$'h l1e a ta% e%em&ton) s ne!er fa!ored nor &res$med n la" and f +ranted
by stat$te) the terms of the amnesty l1e that of a ta% e%em&ton m$st be 'onstr$ed str'tly a+anst the
ta%&ayer and lberally n fa!or of the ta%n+ a$thorty. 2Banas) Kr. !. (o$rt of A&&eals) et al.) 5.R. No.
,./->=) &rom. 9ebr$ary ,.) /...3
NATIONA; INTERNA; REVEN4E (ODE
TAE B4REA4 O9 INTERNA; REVEN4E
@,. An nternal re!en$e off'er) ha!n+ been relably nformed by an $nm&ea'hable so$r'e) that
'+ars) 0e"elres) l#$or and other art'les s$b0e't to e%'se ta%es are 1e&t n the ho$se of 6r. Tomas)
entered sad ho$se) se8ed the art'les and arrested 6r. Tomas on the stren+th of a "arrant s+ned by the
(ommssoner of Internal Re!en$e.
a. 6r. Tomas deno$n'ed the sear'h) se8$re and hs arrest as !olat!e of the 'onstt$ton
be'a$se t "as effe'ted "tho$t a sear'h "arrant and "arrant of arrest ss$ed by the a&&ro&rate 'o$rt.
4nder the 'r'$mstan'es) s the a't$aton of the nternal re!en$e off'er san'toned by la"N WhyN
b. Wo$ld yo$r ans"er be the same f the sear'h) se8$re and arrest "as effe'ted by '$stoms
off'ers by !rt$e of a "arrant of se8$re and detenton s+ned by the 'olle'tor of '$stomsN E%&lan.
S455ESTED ANSWER:
a. Bes. Any nternal re!en$e off'er n the ds'har+e of hs off'al d$tes may enter any ho$se)
b$ldn+ or &la'e "here art'les s$b0e't to e%'se ta%es are &rod$'ed or 1e&t) or are bele!ed by hm $&on
reasonable +ro$nds to be &rod$'ed or 1e&t so far as may be ne'essary to e%amne) ds'o!er or se8e the
same. 2,st &ar.) Se'. ,=,) NIR( of ,--=3
Internal re!en$e off'ers shall ha!e a$thorty to ma1e arrests and se8$res for !olaton of any
&enal la" or re+$laton admnstered by the B$rea$ of Internal Re!en$e. Any &erson so arrested shall
forth"th be bro$+ht before a 'o$rt) there to be dealt "th a''ordn+ to la". 2Se'. ,<) NIR( of ,--=3
No sear'h "arrant or "arrant of arrest s re#$red $nder the do'trne of &rmary 0$rsd'ton
"h'h &osts that n te'hn'al matters "here the admnstrat!e bodes ha!e obtaned e%&ertse) the 'o$rts
"ll defer. Ths s l1e"se &remsed on the lfeblood theory "h'h mandates the mmedate 'olle'ton of
ta%es to ens$re the 'ontn$ed e%sten'e of the State.
b. 6y ans"er "o$ld be dfferent be'a$se '$stoms a$thortes may sear'h a d"elln+ &la'e only
$&on a "arrant ss$ed by a K$d+e of the a&&ro&rate 'o$rt $&on s"orn a&&l'aton sho"n+ &robable 'a$se
and &art'$larly des'rbn+ the &la'e to be sear'hed and &erson or thn+ to be se8ed. 2Se'. //.?) //.-)
Tarff Q ($stoms (ode3. The '$stoms a$thortes 'o$ld detan &ersons only f they are 'omn+ to the
Phl&&nes from fore+n 'o$ntres 2Se'. //,/) Ibd.3 not n the abo!e enttled &roblem "here they are
already n the Phl&&nes.
@/. E%&lan the r$le ma1n+ &o"er of BIR.
S455ESTED ANSWER:
a. There are t"o 1nds of r$ln+s the BIR may ss$e - nter&retat!e r$ln+s and le+slat!e
r$ln+s.
Inter&retat!e r$les are des+ned to &ro!de +$delnes to the la" "h'h the admnstrat!e a+en'y
s n 'har+e of enfor'n+. No not'e) hearn+ or &$bl'aton s re#$red) as they are ss$ed merely for the
+$dan'e of admnstrat!e off'ers. Ill$straton: Re!en$e 6emorand$m (r'$lar No. H=--, 'lassfyn+
'o&ra as an a+r'$lt$ral non-food tem de'larn+ t e%em&t from VAT only f the sale s made by the
&rmary &rod$'er. 26sams Orental Asso'aton of (o'o Traders) In'. !. De&artment of 9nan'e
Se'retary) et al.) /<? S(RA >< S,--HT.
/<
;e+slat!e r$les are n the nat$re of s$bordnate le+slaton) des+ned to m&lement a &rmary
le+slaton by &ro!dn+ the detals thereof. They are ss$ed $nder the #$as-le+slat!e a$thorty of the
BIR (ommssoner. There s a re#$rement for not'e) hearn+ and &$bl'aton. Ill$straton: Re!en$e
6emorand$m (r'$lar No. <=--< "h'h &la'ed Ao&e ;$%$ry) Prem$m 6ore and (ham&on '+arettes
"thn the s'o&e of the amendatory la" R.A. No. =>@H and s$b0e'ted them to the n'reased ta% rate
re#$res not'e) hearn+ and &$bl'aton. 2(ommssoner of Internal Re!en$e !. (o$rt of A&&eals) et al.)
/>, S(RA /<>3
NOTES AND (O66ENTS:
The r$ln+s and 'r'$lars &rom$l+ated by the (ommssoner do not ha!e retroa't!e a&&l'aton f the
re!o'aton) modf'aton) or re!ersal "o$ld be &re0$d'al to the ta%&ayers. 2Se'. /H>) NIR( of ,--=F
(ommssoner of Internal Re!en$e !. (o$rt of A&&eals) et al.) />= S(RA @@=3
E%'e&tons: Instan'es "hen re!en$e r$ln+s and re+$latons ha!e retroa't!e effe't e!en f
&re0$d'al to the ta%&ayer:
a. Where the ta%&ayer delberately msstates or omts materal fa'ts from hs ret$rn or n any do'$ment
re#$red of hm by the BIRF
b. Where the fa'ts s$bse#$ently +athered by the BIR are materally dfferent from the fa'ts on "h'h the
r$ln+ s based) or
'. Where the ta%&ayer a'ted n bad fath. 2Se'. /H>) NIR( of ,--=3
@<. In "hat nstan'es may the B$rea$ of Internal Re!en$e s$s&end or tem&orarly 'lose the
b$sness establshment of a ta%&ayer N Ao" lon+ does the s$s&enson last N
S455ESTED ANSWER: The (ommssoner or hs a$thor8ed re&resentat!e s em&o"ered to
s$s&end the b$sness o&eratons and tem&orarly 'lose the b$sness establshment of any &erson for any of
the follo"n+ !olatonsE
a. In 'ase of a VAT-re+stered &erson:
,3 9al$re to ss$e re'e&ts or n!o'esF
/3 9al$re to fle a VAT ret$rn as re#$red $nder the Ta% (odeF
<3 4nderstatement of ta%able sales or re'e&ts by <.L or more of hs 'orre't ta%able sales or
re'e&ts for the ta%able #$arter.
b. 9al$re to re+ster $nder the VAT &ro!sons of the Ta% (ode. The tem&orary 'los$re of the
establshment shall for the d$raton of not less than f!e 2@3 days and shall be lfted only $&on 'om&lan'e
"th "hate!er re#$rements &res'rbed by the (ommssoner n the 'los$re order. 2Atlas (onsoldated
6nn+ Q De!elo&ment (or&oraton !. (ommssoner of Internal Re!en$e) 5.R. No. ,<HH>=) &rom.
No!ember ,=) ,---3
GGG @H. The (ommssoner of Internal Re!en$e s a$thor8ed $nder the Ta% (ode to dele+ate the
&o"ers !ested n hm $nder the &ertnent &ro!sons of the Ta% (ode to any s$bordnate off'al "th the
ran1 e#$!alent to a d!son 'hef or h+her.
What are the e%'e&tons to ths r$le on dele+aton or alternat!ely s&ea1n+) "hat are the &o"ers
of the (ommssoner that he 'o$ld not dele+ate N
S455ESTED ANSWER: The follo"n+ are some of the &o"ers that he 'o$ld not dele+ate:
a. The &o"er to re'ommend the r$les and re+$latons by the Se'retary of 9nan'eF
b. The &o"er to ss$e r$ln+s of frst m&resson or to re!erse) re!o1e) or modfy any e%stn+
r$ln+ of the B$rea$F
'. The &o"er to 'om&romse or abate) any ta% def'en'y) Pro!ded) ho"e!er) that assessments
ss$ed by the Re+onal Off'es n!ol!n+ bas' def'en'y ta%es of P@..)...... or less) and mnor 'rmnal
!olatons as may be determned by r$les and re+$latons to be &rom$l+ated by the Se'retary of 9nan'e)
$&on the re'ommendaton of the (ommssoner) ds'o!ered by re+onal and dstr't off'als) may be
'om&romsed by a re+onal e!al$aton board "h'h shall be 'om&osed of the Re+onal Dre'tor as
(harman) the Assstant Re+onal Dre'tor) heads of the ;e+al) Assessment and (olle'ton D!sons and
the Re!en$e Dstr't Off'er ha!n+ 0$rsd'ton o!er the ta%&ayer) as membersF and
d. The &o"er to ass+n or reass+n nternal re!en$e off'ers to establshments "here art'les
s$b0e't to e%'se ta% are &rod$'ed or 1e&t. 2Se'. =) NIR( of ,--= 'ted n Re&$bl' of the Phl&&nes) et'.
!. A8on) 5.R. No. ,<.H<.) &rom. De'ember ,<) ,---3
IN(O6E TACATION
GGG @@. Defne n'ome n n'ome ta% la".
DAn amo$nt of money 'omn+ to a &erson "thn a s&e'fed tme) "hether as &ayment for
ser!'es) nterest) or &roft from n!estment.E It means 'ash or ts e#$!alent.
It s +an der!ed and se!ered from 'a&tal) from labor or from both 'ombned. 9or e%am&le) to
ta% a sto'1 d!dend "o$ld be to ta% a 'a&tal n'rease rather than the n'ome. 2(ommssoner of Internal
Re!en$e !. (o$rt of A&&eals) et al.) 5.R. No. ,.?@=>) Kan$ary /.) ,---3
NOTES AND (O66ENTS: In'ome dstn+$shed from 'a&tal:
a. (a&tal s "ealth or f$nd) WAI;E n'ome s &roft or +an from the flo" of "ealth.
2(ommssoner of Internal Re!en$e !. (o$rt of A&&eals) et al.) 5.R. No. ,.?@=>) Kan$ary /.) ,---3
(a&tal s a f$nd of &ro&erty e%stn+ at an nstant of tme WAI;E n'ome s that flo" of ser!'es
rendered by that 'a&tal by the &ayment of money from t or any other beneft rendered by a f$nd of 'a&tal
n relaton to s$'h f$nd thro$+h a &erod of tme.
b. (a&tal s "ealth WAI;E n'ome s the ser!'e of "ealthF and
'. (a&tal s the tree WAI;E n'ome s the fr$t. 26adr+al !. Rafferty) <? Phl. H,H3
/H
Real8aton s determnat!e of earnn+ &ro'ess res$ltn+ to n'ome. Wtho$t real8aton) there s
no n'ome.
The determnn+ fa'tor for the m&oston of n'ome ta% s "hether any +an or &roft "as der!ed
from the transa'ton. In the meta&hor of Esner !. 6a'omber) /@/ 4.S. H/>) n'ome s not deemed
Dreal8edE $ntl the fr$t has fallen
GGG @>. What are the +eneral &rn'&les of n'ome ta%aton n the Phl&&nes N
a. A 't8en of the Phl&&nes resdn+ theren s ta%able on all n'ome der!ed from so$r'es
"thn and "tho$t the Phl&&nes.
b. A nonresdent 't8en s ta%able only on n'ome der!ed from so$r'es "thn the Phl&&nes.
'. An nd!d$al 't8en of the Phl&&nes "ho s "or1n+ and der!n+ n'ome from abroad as
an o!erseas 'ontra't "or1er s ta%able only on n'ome from so$r'es "thn the Phl&&nes) Pro!ded) That
a seaman "ho s a 't8en of the Phl&&nes and "ho re'e!es 'om&ensaton for ser!'es rendered abroad
as a member of the 'om&lement of a !essel en+a+ed e%'l$s!ely n nternatonal trade shall be treated as
an o!erseas 'onta't "or1er.
d. An alen nd!d$al) "hether a resdent or not of the Phl&&nes) s ta%able only on n'ome
der!ed from so$r'es "thn the Phl&&nes.
e. A domest' 'or&oraton s ta%able on all n'ome der!ed from so$r'es "thn and "tho$t the
Phl&&nes.
f. A fore+n 'or&oraton) "hether en+a+ed or not n trade or b$sness n the Phl&&nes) s
ta%able only on n'ome der!ed from so$r'es "thn the Phl&&nes. 2Se'. /<) NIR( of ,--=3
@=. Are sto'1 d!dends s$b0e't to n'ome ta%aton N
S455ESTED ANSWER: Sto'1 d!dends are $nreal8ed +an and 'annot be s$b0e't to n'ome
ta% $ntl the +ans ha!e been real8ed.
Sto'1 d!dends re&resent 'a&tal and do not 'onstt$te n'ome to ts re'&ent. The mere
ss$an'e thereof s not s$b0e't to n'ome ta% as they are nothn+ b$t an Denr'hment thro$+h n'rease n
!al$e of 'a&tal n!estment.E
As 'a&tal) sto'1 d!dends &ost&one the real8aton of &rofts be'a$se the Df$nd re&resented by
the ne" sto'1 has been transferred from s$r&l$s to 'a&tal and no lon+er a!alable for a't$al dstrb$ton.E
Before real8aton) sto'1 d!dends are nothn+ b$t a re&resentaton of an nterest n the 'or&orate
&ro&ertes. As 'a&tal) t s not yet s$b0e't to n'ome ta%. 2(ommssoner of Internal Re!en$e !. (o$rt of
A&&eals) et al.) 5.R. No. ,.?@=>) Kan$ary /.) ,---3
@?. What s meant by redem&ton of shares of sto'1 N
S455ESTED ANSWER: Redem&ton s re&$r'hase) a rea'#$ston of sto'1 by a 'or&oraton
"h'h ss$ed the sto'1 n e%'han+e for &ro&erty) "hether or not the a'#$red sto'1 s 'an'elled) retred or
held n treas$ry.
Essentally) the 'or&oraton +ets ba'1 some of ts sto'1) dstrb$tes 'ash or &ro&erty to the shareholder n
&ayment for the sto'1) and 'ontn$es n b$sness as before. The redem&ton of sto'1 d!dends &re!o$sly
ss$ed s $sed as a !el for the 'onstr$'t!e dstrb$ton of 'ash d!dends. 2(ommssoner of Internal
Re!en$e !. (o$rt of A&&eals) et al.) 5.R. No. ,.?@=>) Kan$ary /.) ,---3
NOTES AND (O66ENT: Ta%ablty of redem&ton by ss$n+ 'or&oraton of shares of sto'1.
It s s$++ested that the Bar re!e"ee +nores the 'on'e&ts of ta%ablty of redem&ton of shares s sto'1 by
the ss$n+ 'or&oraton as ds'$ssed n (ommssoner of Internal Re!en$e !. (o$rt of A&&eals) et al.) 5.R.
No. ,.?@=>) Kan$ary /.) ,--- 2the ANS(OR 'ase3) "here the &resent &ro!sons of the Ta% (ode on
transa'ton ta% SSe'. ,/= 2A3) NIR( of ,--=T) and 'a&tal +ans ta% fnd a&&l'aton. The only 'on'e&ts
that sho$ld be retaned s the defnton of redem&ton) and the a&&l'ablty of the ANS(OR 'ase 'on'e&t
of redem&ton "here the shares of sto'1 that are redeemed are ordnary assets. The ta% treatment of
redem&ton of shares of sto'1) $nder the &resent &ro!sons of the Ta% (ode shall be ds'$ssed belo".
Ta% treatment of redem&ton by ss$n+ 'or&oraton of shares of sto'1 $nder the &resent
&ro!sons of the Ta% (ode) not $nder the former &ro!sons of the Ta% (ode as nter&reted n the
ANS(OR 'ase. The ta% treatment "o$ld be de&endent $&on the follo"n+ fa'tors:
a. The nat$re of the shares of sto'1 ben+ ds&osed of) "hether the shares are 'a&tal assets or
ordnary assetsF
b. Whether or not the shares of sto'1 are lsted and traded and lsted n the sto'1 e%'han+e.
Ta%ablty of sales) barter or e%'han+e of shares of sto'1s:
a. Shares of sto'1 are 'a&tal assets and not lsted and traded n the sto'1 e%'han+e. Where the
shares of sto'1 are 'a&tal assets be'a$se the seller s not en+a+ed n the b$sness of b$yn+ and selln+
shares of sto'1 2a dealer n se'$rtes3) and not lsted and traded n the sto'1 e%'han+e) the sale s s$b0e't
to a @L ta% on net 'a&tal +an not o!er P,..)...... "hle the net 'a&tal +an o!er P,..)...... s
s$b0e't to a ta% of ,.L. Note that the holdn+ &erod s not a&&led. The 'a&tal +ans ta% s an n'ome ta%
be'a$se the ta% falls $nder ttle II of the Ta% (ode) enttled) DIn'ome Ta%E
b. Shares of sto'1 "hether 'a&tal or ordnary assets b$t are lsted and traded n the sto'1
e%'han+e are s$b0e't to the transa'ton ta% of V of ,L of the +ross selln+ or transa'ton &r'e. The
holdn+ &erod s not a&&led and the transa'ton ta% s n le$ of all n'ome ta%es that may be 'olle'ted.
'. Shares of sto'1 ordnary assets b$t not lsted and traded n the sto'1 e%'han+e. If the shares of
sto'1 are ordnary assets be'a$se the seller s en+a+ed n the b$sness of b$yn+ and selln+ shares of sto'1
2dealer n se'$rtes3) the transa'ton shall be s$b0e't to n'l$son n the n'ome ta% ret$rn de&endn+ on
'ertan 'r'$mstan'es. See ds'$sson on ta% treatment of redem&ton of shares of so'1 "here the shares
that are redeemed are ordnary assets and not lsted and traded n the sto'1 e%'han+e.
/@
Ta% treatment of redem&ton of shares of sto'1 "here the shares that are redeemed are ordnary
assets and not lsted and traded n the sto'1 e%'han+e.
Whether the transa'ton s to be s$b0e't to n'ome ta%aton or not "o$ld be de&endent $&on the
nat$re and 'hara'ter of the shares of sto'1 that are the s$b0e't of redem&ton.
If the so$r'e s the or+nal 'a&tal s$bs'r&tons $&on the establshment of the 'or&oraton or
from ntal 'a&tal n!estment n an e%stn+ enter&rse) the redem&ton to the 'on'$rrent !al$e of
a'#$ston s not s$b0e't to n'ome ta%aton) as t s not n'ome b$t a mere ret$rn of 'a&tal.
On the 'ontrary) f the redeemed shares are from sto'1 d!dend de'laratons other than as ntal
'a&tal n!estment) the &ro'eeds of the redem&ton s addtonal "ealth) for t s not merely a ret$rn of
'a&tal b$t a +an therefrom.
The test for ta%ablty therefor) as "o$ld ma1e the redem&ton Dessentally e#$!alent to the dstrb$ton of
a ta%able d!dend)E s "hether the redem&ton res$lted nto a flo" of "ealth. If no "ealth s real8ed
from the redem&ton) there may not be a d!dend e#$!alen'e treatment. 2(ommssoner of Internal
Re!en$e !. (o$rt of A&&eals) et al.) 5.R. No. ,.?@=>) Kan$ary /.) ,---3
GGG @-. What are m&ro&erly a''$m$lated earnn+s N
S455ESTED ANSWER: These are the earnn+s or &rofts of a 'or&oraton "h'h are &ermtted
to a''$m$late nstead of ben+ d!ded by a 'or&oraton to ts shareholders for the &$r&ose of a!odn+ the
n'ome ta% "th res&e't to ts shareholders or the shareholders of another 'or&oraton. If the n'ome "ere
d!ded and dstrb$ted) they "o$ld ha!e been ta%ed as d!dends.
NOTES AND (O66ENTS:
a. Im&ro&erly a''$m$lated earnn+s ta%. In addton to other n'ome ta%es) there s m&osed for
ea'h ta%able year on the m&ro&erly a''$m$lated ta%able n'ome of ea'h 'or&oraton) an m&ro&erly
a''$m$lated earnn+s ta% e#$al to ten &er'ent of the m&ro&erly a''$m$lated ta%able n'ome. SSe'. /-
2A3) NIR( of ,--=T
b. (or&oratons lable for the m&ro&erly a''$m$lated earnn+s ta%. E!ery 'or&oraton formed
or a!aled for the &$r&ose of a!odn+ n'ome ta% "th res&e't to ts shareholders or the shareholders of
another 'or&oraton) by &ermttn+ earnn+s and &rofts to a''$m$late nstead of ben+ d!ded or
dstrb$ted. SSe'. /- 2B3 2,3) NIR( of ,--=T
GGG '. (or&oratons e%em&t from the m&ro&erly a''$m$lated earnn+s ta%:
,3 P$bl'ly-held 'or&oratonsF
/3 Ban1s and other nonban1 fnan'al ntermedaresF and
<3 Ins$ran'e 'om&anes. SSe'. /- 2B3 2/3) NIR( of ,--=T
d. E!den'e determnat!e of &$r&ose to a!od ta% $&on shareholders. The fa't that the earnn+s
or &rofts of a 'or&oraton are &ermtted to a''$m$lated beyond the reasonable needs of the b$sness shall
be determnat!e of the &$r&ose to a!od the ta% $&on ts shareholders or members $nless the 'or&oraton)
by 'lear &re&onderan'e of e!den'e) shall &ro!e the 'ontrary. SSe'. /- 2(3 2/3) NIR( of ,--=T
Reasonable needs of b$sness n'l$des the reasonably ant'&ated needs of the b$sness. SSe'. /-
2E3) NIR( of ,--=T
In order to determne "hether &rofts are a''$m$lated for the reasonable needs of the b$sness to
a!od the s$rta% $&on shareholders) t m$st be sho"n that the 'ontrolln+ ntenton of the ta%&ayer s
manfested at the tme of the a''$m$laton) not ntentons de'lared s$bse#$ently) "h'h are mere
aftertho$+hts. 9$rthermore) the a''$m$lated &rofts m$st be $sed "thn a reasonable tme after the 'lose
of the ta%able year. 2(yanamd Phl&&nes) In'. !. (o$rt of A&&eals) et al.) 5.R. No. ,.?.>=) &rom.
Kan$ary /.) /...3
GGG e. Tests to determne 0$stfed a''$m$laton not s$b0e't to ta%.
,3 Immeda'y Test. DReasonable needs of the b$snessE means the mmedate needs of the b$sness) and
t "as +enerally held that f the 'or&oraton dd not &ro!e an mmedate need for the a''$m$laton of the
earnn+s and &rofts) the a''$m$laton "as not for the reasonable needs of the b$sness and the &enalty
ta% "o$ld a&&ly. 2(yanamd Phl&&nes) In'. !. (o$rt of A&&eals) et al.) 5.R. No. ,.?.>=) &rom. Kan$ary
/.) /... 'tn+ 6anla Wne 6er'hants) In'. !. (ommssoner of Internal Re!en$e n t$rn 'tn+
6ertens3
/3 D/ to ,E R$le. The rato of '$rrent assets to '$rrent labltes and the ado&ton of the nd$stry
standard. The rato of '$rrent assets to '$rrent labltes s $sed to determne the s$ff'en'y of "or1n+
'a&tal. Ideally) the "or1n+ 'a&tal sho$ld e#$al the '$rrent labltes and there m$st be / $nts of
'$rrent assets for e!ery $nt of '$rrent lablty) hen'e the so-'alled D/ to ,E R$le. 2Ibd.3
<3 DBardahlE 9orm$la. Allo"s retenton as "or1n+ 'a&tal reser!e) s$ff'ent amo$nts of l#$d assets to
'arry the 'om&any thro$+h one o&eratn+ 'y'le. The form$la re#$res an e%amnaton of "hether the
ta%&ayer has s$ff'ent l#$d assets to &ay all ts '$rrent labltes and any e%traordnary e%&enses
reasonably ant'&ated) &l$s eno$+h to o&erate the b$sness d$rn+ one o&eratn+ 'y'le.
O&eratn+ 'y'le s the &erod of tme t ta1es to 'on!ert 'ash nto ra" materals) ra" materals nto
n!entory) and n!entory nto sales) n'l$dn+ the tme t ta1es to 'olle't &ayment for the sales. There are
!aratons n the a&&l'aton of the DBardahlE form$la) s$'h as a!era+e o&eratn+ 'y'le or &ea1 o&eratn+
'y'le. In tmes "hen there s no re'$rren'e of a b$sness 'y'le) the "or1n+ 'a&tal needs 'annnot be
&red'ted "th a''$ra'y.
Altho$+h the DBardahlE form$la s "ell-establshed and ro$tnely a&&led by the 'o$rts) t s not a &re'se
r$le. It s $sed only for admnstrat!e 'on!enen'e. 2Ibd.3
>.. What s meant by the a''r$al method of a''o$ntn+ N
S455ESTED ANSWER: In'ome s re&ortable "hen all the e!ents ha!e o''$rred that f% the
ta%&ayer*s r+ht to re'e!e the n'ome) and the amo$nt 'an be determned "th reasonable a''$ra'y. Th$s
/>
t s the r+ht to re'e!e n'ome) and not the a't$al re'e&t) that determnes "hen to n'l$de the amo$nt n
+ross n'ome.
(onse#$ently) the follo"n+ are the re#$stes:
,3 That the r+ht to re'e!e the n'ome m$st be !ald) $n'ondtonal and enfor'eable) .e. not 'ontn+ent
$&on f$t$re tmeF
/3 The amo$nt m$st be reasonably s$s'e&tble of a''$rate estmateF and
<3 There m$st be a reasonable e%&e'taton that the amo$nt "ll be &ad n d$e 'o$rse. 29l&nas 9ber
(or&oraton !. (o$rt of A&&eals) et al.) 5.R. Nos. ,,?H-? Q ,/H<==) &rom. O'tober ,/) ,---3
NOTES AND (O66ENTS:
a. The t"o 2/3 &rn'&al a''o$ntn+ methods for re'o+nton of n'ome are the ,3 a''r$al methodF and the
2/3 'ash method.
4nder the 'ash method n'ome s to be 'onstr$ed as n'ome for ta% &$r&oses only $&on a't$al re'e&t of
the 'ash &ayment. It s also referred to as the D'ash re'e&ts and dsb$rsements methodE be'a$se both the
re'e&t and dsb$rsements are 'onsdered. Th$s) n'ome s re'o+n8ed only $&on a't$al re'e&t of the 'ash
&ayment b$t no ded$'tons are allo"ed from the 'ash n'ome $nless a't$ally dsb$rsed thro$+h an a't$al
&ayment n 'ash.
E%am&le of the t"o methods. ;eon the o"ner of a b$ldn+ leased the same to 6+$el.for P@.)......
monthly) &ayable e!ery ,st day of the month. If ;eon $ses the a''r$al method of n'ome re'o+nton) he
"o$ld ha!e an n'ome of P@.)...... on the ,st day of ea'h month rres&e't!e of "hether he re'e!es the
rent from 6+$el. On the other hand) f ;eon $ses the 'ash method) he "o$ld ha!e n'ome only "hen he
&hys'ally re'e!es the 'ash from 6+$el.
b. Other methods of a''o$ntn+:
,3 (om&leton of (ontra't bass. 4nder ths method) +ross n'ome s to be re&orted n the ta%able year n
"h'h the 'ontra't s f$lly 'om&leted and a''e&ted by the 'ontra'tee f the ta%&ayer ele'ted t as a
'onsstent &ra't'e to treat s$'h n'ome) &ro!ded that s$'h method 'learly refle'ts the net n'ome. Ths
method s a&&l'able to 'ontra'tors n the 'onstr$'ton of b$ldn+) nstallaton of e#$&ment and other
f%ed assets) or other 'onstr$'ton "or1 'o!ern+ a &erod n e%'ess of one year. Ths s not re'o+n8ed
$nder the NIR( of ,--=.
/3 Per'enta+e of 'om&leton bass.
<3 Installment bass "h'h s a method 'onsdered "hen 'olle'tons e%tend o!er relat!ely lon+ &erods of
tme and there s a stron+ &ossblty that f$ll 'olle'ton "ll not be made. As '$stomers ma1e nstallment
&ayments) the seller re'o+n8es the +ross &roft on sale n &ro&orton to the 'ash 'olle'ted. 2(ha&ter II)
A''o$ntn+ 6ethods) Aandboo1 on A$dt Pro'ed$res and Te'hn#$es O Vol$me I) Re!son /...) &&. <-
H3
>,. What s a frn+e benefts ta% N
S455ESTED ANSWER: A fnal "thholdn+ ta% m&osed on the +rossed-$& monetary !al$e of
frn+e benefts f$rnshed) +ranted or &ad by the em&loyer to the em&loyee) e%'e&t ran1 and fle
em&loyees. 2,st &ar.) Se'. /.<< SAT) Re!. Re+s. No. <--?3
>/. What are 'onsdered as frn+e benefts for &$r&oses of ta%aton N
S455ESTED ANSWER: 9or &$r&oses of ta%aton) frn+e beneft means any +ood) ser!'e) or
other beneft f$rnshed or +ranted n 'ash or n 1nd by an em&loyer to an nd!d$al em&loyee 2e%'e&t
ran1 and fle em&loyees3) s$'h as b$t not lmted to:
a. Ao$sn+F
b. E%&ense a''o$ntF
'. Veh'le of any 1ndF
d. Ao$sehold &ersonnel) s$'h as mad) dr!er and othersF
e. Interest on loan at less than mar1et rate to the e%tent of the dfferen'e bet"een the mar1et rate
and a't$al rate +rantedF
f. 6embersh& fees) d$es and other e%&enses borne by the em&loyer for the em&loyee n so'al
and athlet' 'l$bs or other smlar or+an8atonsF
+. E%&enses for fore+n tra!elF
h. Aolday and !a'aton e%&ensesF
. Ed$'atonal assstan'e to the em&loyee or hs de&endentsF and
0. ;fe or health ns$ran'e and other non-lfe ns$ran'e &rem$ms or smlar amo$nts n e%'ess
of "hat the la" allo"s. SSe'. << 2B3) NIR( of ,--=F ,st &ar.) Se'. /.<< 2B3) Re!. Re+s. No. <--?T
GGG ><. What are the 1nds of frn+e benefts that are not s$b0e't to the frn+e benefts ta% N
S455ESTED ANSWER:
a. When the frn+e beneft s re#$red by the nat$re of) or ne'essary to the trade) b$sness or
&rofesson of the em&loyerF or
b. When the frn+e beneft s for the 'on!enen'e or ad!anta+e of the em&loyer. SSe'. </2A3)
NIR( of ,--=F ,st &ar.) Se'. /.<< 2A3) Re!. Re+s. No. <--?T
'. 9rn+e benefts "h'h are a$thor8ed and e%em&ted from n'ome ta% $nder the Ta% (ode or
$nder any s&e'al la"F
d. (ontrb$tons of the em&loyer for the beneft of the em&loyee to retrement) ns$ran'e and
hos&tal8aton beneft &lansF
e. Benefts +!en to the ran1 and fle em&loyees) "hether +ranted $nder a 'olle't!e bar+ann+
a+reement or notF and
/=
f. De mnms benefts as defned n the r$les and re+$latons to be &rom$l+ated by the Se'retary
of 9nan'e $&on re'ommendaton of the (ommssoner of Internal Re!en$e. S,st &ar.) Se'. </ 2(3) NIR(
of ,--=F Se'. /.<< 2(3) Re!. Re+s. No. <--?T
GGG >H. What are de mnms benefts N
S455ESTED ANSWER: 9a'ltes and &r!le+es 2s$'h as entertanment) med'al ser!'es) or
so-'alled D'o$rtesy ds'o$ntsE on &$r'hases3) f$rnshed or offered by an em&loyer to hs em&loyees. They
are not 'onsdered as 'om&ensaton s$b0e't to n'ome ta% and 'onse#$ently to "thholdn+ ta%) f s$'h
fa'ltes are offered or f$rnshed by the em&loyer merely as a means of &romotn+ the health) +ood"ll)
'ontentment) or eff'en'y of hs em&loyees. SSe'. /.=?), 2A3 2<3) Re!. Re+s. /--? as amended by Re!.
Re+s. No. ?-/...T
GGG >@. What are 'onsdered as de mnms benefts not s$b0e't to "thholdn+ ta% on 'om&ensaton
n'ome of both mana+eral and ran1 and fle em&loyees N
S455ESTED ANSWER: The follo"n+ shall be 'onsdered as de mnms benefts not s$b0e't
to "thholdn+ ta% on 'om&ensaton n'ome of both mana+eral and ran1 and fle em&loyees:
a. 6onet8ed $n$sed !a'aton lea!e 'redts of em&loyees not e%'eedn+ ten 2,.3 days d$rn+ the
yearF
b. 6ed'al 'ash allo"an'e to de&endents of em&loyees not e%'eedn+ P=@.... &er em&loyee &er
semester or P,/@ &er monthF
'. R'e s$bsdy of P,)...... or one 2,3 sa'1 of @.-1+. r'e &er month amo$ntn+ to not more
than P,)......F
d. 4nforms and 'lothn+ allo"an'e not e%'eedn+ P<)...... &er ann$mF
e. A't$al yearly med'al benefts not e%'eedn+ P,.)...... &er ann$mF
f. ;a$ndry allo"an'e not e%'eedn+ P<.. &er monthF
+. Em&loyees a'he!ement a"ards) e.+. for len+th of ser!'e or safety a'he!ement) "h'h m$st
be n the form of a tan+ble &ersona &ro&erty other than 'ash or +ft 'ertf'ate) "th an ann$al monetary
!al$e not e%'eedn+ P,.)...... re'e!ed by an em&loyee $nder an establshed "rtten &lan "h'h does not
ds'rmnate n fa!or of h+hly &ad em&loyeesF
h. 5fts +!en d$rn+ (hrstmas and ma0or ann!ersary 'elebratons not e%'eedn+ P@)... &er
em&loyee &er ann$mF
. 9lo"ers) fr$ts) boo1s) or smlar tems +!en to em&loyees $nder s&e'al 'r'$mstan'es) e.+.
on a''o$nt of llness) marra+e) brth of a baby) et'.F and
0. Daly meal allo"an'e for o!ertme "or1 not e%'eedn+ t"enty f!e &er'ent 2/@L3 of the bas'
mnm$m "a+e.
The amo$nt of de mnms benefts 'onformn+ to the 'eln+ heren &res'rbed shall not be
'onsdered n determnn+ the P<.)... 'eln+ of Dother beneftsE &ro!ded $nder Se'ton </ 2B32=32e3 of
the (ode. Ao"e!er) f the em&loyer &ays more than the 'eln+ &res'rbed by these re+$latons) the e%'ess
shall be ta%able to the em&loyee re'e!n+ the benefts only f s$'h e%'ess s beyond the P<.)......
'eln+) &ro!ded) f$rther) that any amo$nt +!en by the em&loyer as benefts to ts em&loyees) "hether
'lassfed as de mnms benefts or frn+e benefts) shall 'onstt$te as ded$'tble e%&ense $&on s$'h
em&loyer. SSe'. /.=?., 2A3 2<3) Re!. Re+s. /--? as amended by Re!. Re+s. No. ?-/...T
NOTES AND (O66ENTS: The abo!e &ro!son of Re!. Re+s. No. ?-/... l1e"se modfed
Se'. /.<< 2(3) Re!. Re+s. No. <--?) "h'h en$merates the de mnms benefts e%em&t from frn+e benefts
ta%es.
GGG >>. The follo"n+ "ere the e!ents and transa'tons of Rosalnda) a resdent alen) n /...:
a. Re'e!ed P=.. mllon as 'ommssons for ben+ the a+ent of a'tor 61ey and a'tress 6e++yF
b. Re'e!ed P/.. mllon as bla'1mal money for not e%&osn+ the nds'retons of mo!e a'tress
AlmaF
'. Sold her resdental 'ondomn$m at Ayala A!en$e for P<. mllon. She bo$+ht the same n
,--= for only P,. mllonF
d. 6ade a D1lln+E at the sto'1 mar1et "hen she sold for P@.. mllon Prm$s) In'. shares
"h'h "ere not traded n the sto'1 e%'han+e. She bo$+ht the shares n ,-?@ for only P@..)......F
e. D$rn+ her brthday) 6rs. Water ;ly) the famo$s &rod$'er +a!e her a ten 'arat damond rn+
"orth P=@.)......F
f. Re'e!ed P<>.)...... ann$al salary as P.R.O. of Re+al Prod$'tonsF
+. A"arded P,.@ mllon dama+es from the lbel s$t she fled a+anst a'tress NatalaF
h. Was sent by Re+al Prod$'tons to Aolly"ood) 4.S.A. to obser!e mo!e ma1n+ at !aro$s
st$dos. She tra!eled at Re+al *s e%&ense thro$+h 9rst (lass Arfare) and Re+al s&ent 4SR@..... a day
for her hotel and a''ommodatons "h'h "ere all remb$rsed to RosalndaF
. Re'e!ed P=@.)...... from Re+al Prod$'tons as se&araton &ay "hen she "as termnated
as the res$lt of her n!ol!ement n a "ell &$bl'8ed s'andalF
0. 4&on nomnaton of her frend) Rosalnda "as a"arded the best P.R.O. of the year "th the
a''om&anyn+ tro&hy "orth P@.)...... and 'ash &r'e of P,..).... She "as re#$red to del!er at least
,/ le't$res before P.R.O.sF
1. Won a brand ne" 6er'edes Ben8 (>..7 "orth P>)@..)...... d$rn+ a raffle 'ond$'ted by
a "ell-1no"n s$&ermar1etF
l. P/@.)...... &ro'eeds of a bo$n'n+ 'he'1 she ss$ed to her frend 6s. (rs Ty) "ho nstt$ted
a 'rmnal 'ase for !olaton of B.P. Bl+. //F and
m. P@..)...... "h'h 'onstt$ted the sales &ro'eeds of the 0e"elry she stole from mo!e
&rod$'er) Aln+ Pe&a.
/?
,3 What tems are to be n'l$ded as &art of Rosalnda*Is 'om&ensaton n'ome) or n'ome from
self-em&loymentN E%&lan.
/3 Why "ere the tems yo$ e%'l$ded not n'l$dble as &art of Rosalnda*s 'om&ensaton
n'ome or n'ome from self-em&loymentN E%&lan.
S455ESTED ANSWER:
a. The follo"n+ are the tems to be n'l$ded as &art of Rosalnda*s 'om&ensaton n'ome
be'a$se they "ere der!ed from em&loyer-em&loyee relatonsh& from Re+al Prod$'tons:
,.3 The P<>.)...... ann$al salary as P.R.O. of Re+al Prod$'tons.
/.3 The 'ost of the 9rst (lass Arfare T'1et e%'eedn+ the 'ost of a b$sness 'lass
t'1et for the tra!el to Aolly"ood n &$rs$t by Rosalnda of Re+alIs trade and b$sness s n'l$dble as
&art of Rosalnda*s 'om&ensaton n'ome. 2No. <) <.,) Re!en$e A$dt 6emorand$m No. ,-?=3.
<.3 The amo$nt remb$rsed to Rosalnda for meals and lod+n+ d$rn+ her stay n the
4.S.A. e%'eedn+ 4.S.R,@.... &er day or n the &roblem 4.S.R<@.... &er day forms &art of Rosalnda*s
'om&ensaton n'ome. 2No. <) <./) Ibd.3
The follo"n+ are the tems to be n'l$ded as &art of Rosalnda*s n'ome from self-em&loyment
en+a+ed n the b$sness of ben+ an a+ent for a'tors and a'tresses:
,3 The P=.. mllon 'ommssons for ben+ the a+ent of a'tor 61ey and a'tress 6e++yF
/3 The P/.. mllon bla'1mal money s 'onsdered as other n'ome 'omn+ from
so$r'es other than those mentoned n Se'. <2A3 of Re!en$e Re+$laton No. /--< as "ell as n'ome from
"hate!er so$r'e der!ed. 2Se'ton </ SAT) NIR( of ,--=3 The same s tr$e "th the P/@.)......
&ro'eeds of the bo$n'n+ 'he'1 and the P@..)...... sales &ro'eeds of the 0e"elry she stole. Th$s) all
n'omes) lle+al or le+al) are n'l$ded. 9or Phl&&ne ta% &$r&oses all n'ome not e%&ressly e%'l$ded or
e%em&ted from the 'lass of ta%able n'ome) rres&e't!e of the !ol$ntary or n!ol$ntary a'ton of the
ta%&ayer n &rod$'n+ the n'ome are s$b0e't to n'ome ta%aton.
NOTES AND (O66ENTS: The r$le s dfferent n the 4nted States. In (ommssoner of
Internal Re!en$e !. Wl'o%) /?> 4.S. H,=) the 4.S. S$&reme (o$rt held that a s"ndler) embe88ler) thef
or robber has an $n#$alfed d$ty and obl+aton to ret$rn the money. to 'olle't a ta% "o$ld +!e the
+o!ernment an $n0$stfed &referen'e as to the &art of the money "h'h r+htf$lly belon+s to the !'tm.
In 4.S. !. ;o8a) ,.H) ,.H 9. S$&&. 2D.(.K.D.N.B. ,-@/3) t "as held that the money or other
&ro'eeds of the sale or other ds&oston of stolen &ro&erty s s$b0e't to n'ome ta% be'a$se the felon has
an obl+aton to ret$rn the &ro&erty ta1en. The &ro'eeds "ere not the &ro&erty ta1en. The &ro'eeds may
not e!en be the e#$!alent of the &ro&erty ta1en.
<3 P,.@ mllon dama+es) be'a$se they are not 'om&ensaton arsn+ from $nder Se'. </
2B3 SHT of the NIR( of ,--=. These are not dama+es "h'h arose from &ersonal n0$res) hen'e s$b0e't to
n'ome ta%.
H3 The P@.)...... &r8e as Best P.R.O. Whle t s tr$e that Rosalnda "as sele'ted
"tho$t any a'ton on her &art to enter the 'ontest or &ro'eedn+) she s re#$red to del!er ,@ le't$res)
"h'h s 'onsdered as s$bstantal f$t$re ser!'es as a 'ondton to re'e!n+ the &r8e. 2Se'. </ SBT W=X
2'3 WX of the NIR( of ,--=3
b. The follo"n+ are the e%'l$ded tems and reasons for ther e%'l$son:
,3 P<. mllon &ro'eeds from the sale of her resdental 'ondomn$m be'a$se the same
s s$b0e't to fnal ta%es n the form &res$med 'a&tal +ans ta%es from the sale of real &ro&erty $nder Se'.
/H 2D3 of the NIR( of ,--=3.
/3 The +ans from the sale of Prm$s shares be'a$se the +ans are s$b0e't to fnal ta%es
for the 'a&tal +ans from sales of sto'1 not traded n the sto'1 e%'han+e $nder Se'. /H 2(3 of the NIR(
of ,--=.
<3 The P=@.)...... damond rn+ be'a$se t s a +ft e%'l$ded from +ross n'ome 2Se'.
</ SBT W<X of the NIR( of ,--=3 It s s$b0e't to +ft ta%es $nder Se'. -? of the NIR( of ,--=. The +!n+
of the +ft "as a &$re a't of lberalty and not n 'onsderaton of any ser!'e.
H3 P=@.)...... se&araton &ay as Rosalnda*s ser!'es "ere termnated for a 'a$se
beyond her 'ontrol n a''ordan'e "th Se'. </ 2B3 S>T WbX of the NIR( of ,--=) hen'e e%'l$ded from
+ross n'ome.
@3 The P>)@..)...... !al$e of the 6er'edes Ben8 she "on be'a$se t s s$b0e't to a fnal
ta% of /.L on &ass!e n'ome $nder the &ro!sons of Se'. /H 2B3 S,T of the NIR( of ,--=.
>=. In ,--?) 6an+ Koe ;by after thrty 2<.3 years e%&eren'e as a me'han' for 6er'edes Ben8
de'ded to establsh hs o"n a$to re&ar sho& "th t"o of hs former s$&er!sors as hs &artners. 9or the
year /...) the a$to re&ar sho& n'$rred the follo"n+:
a. Ad!ertsn+ e%&ensesF
b. Donatons to the Samahan+ R8alsta) a non-&roft) non-sto'1 rel+o$s 'or&oraton "h'h
!enerates as ts 5od) the hero Kose R8alF
'. Ta%es &ad on the m&ortaton of a$to re&ar e#$&mentF
d. ;osses "hen the a$to re&ar sho& "as b$rnedF
e. Ins$ran'e &rem$ms on the lfe of 6an+ Koe ;by &ayable to the &artnersh&F
f. Salares of me'han's.
6an+ Koe and hs &artners no" as1s yo$ ho" ther &artnersh& n'ome shall be ta%ed n the l+ht
of the &ro!sons of the NIR( of ,--=. What ad!se shall yo$ +!eN
S455ESTED ANSWER:
6an+ Koe and hs &artners shall be ta%ed l1e a 'or&oraton. As defned $nder Se'. // 2B3) of
the NIR( of ,--=) a 'or&oraton n'l$des &artnersh&s no matter ho" 'reated or or+an8ed) b$t does not
/-
n'l$de +eneral &rofessonal &artnersh&. Sn'e "hat "as formed by 6an+ Koe and hs &artners "as a
b$sness &artnersh&) they sho$ld be 'onsdered as ha!n+ formed a 'or&oraton for ta% &$r&oses.
Sn'e the &artnersh& "as or+an8ed and e%stn+ $nder Phl&&ne la") ts ta%able n'ome shall
be s$b0e't to the red$'ed rate of </L on ta%able n'ome effe't!e Kan$ary ,) /.... 2Se'. /= SAT) NIR( of
,--=3 To arr!e at ts ta%able n'ome) the &artnersh& s allo"ed to $se the allo"ed tem8ed ded$'ton
$nder Se'. <H also of the NIR( of ,--=. All of the abo!e e%&enses) e%'e&t the ns$ran'e &rem$m are all
ded$'tble.
The &artnersh& shall not be s$b0e't to the mnm$m 'or&orate n'ome ta% on domest'
'or&oratons) be'a$se t s only on ts se'ond ta%able year mmedately follo"n+ the 'ommen'ement of ts
b$sness o&eratons. The mnm$m 'or&orate n'ome ta% s 'om&$ted only be+nnn+ the fo$rth ta%able
year mmedately follo"n+ the year the ta%&ayer 'or&oraton 'ommen'ed b$sness. 2Se'. /= SET W,X)
NIR( of ,--=3
Sho$ld the &artnersh& dstrb$te ts net n'ome after ta% to 6an+ Koe and hs &artnersh&s) ther
nd!d$al shares n the dstrb$ton shall be s$b0e't to ta% on d!dends. 2Se'. /H SBT W/X) NIR( of ,--=3
>?. After ten 2,.3 years e%&eren'e "or1n+ as the 5eneral 6ana+er of a fastfood 'han) Wendy
de'ded to be'ome self em&loyed and o&ened an eatery "h'h she 'alled D6'Wendy*s P88a.E She
re+stered the eatery as a sn+le &ro&retorsh&.
In /...) Wendy had the follo"n+ n'ome tems:
a. 5ross re'e&ts from o&eraton of D6'Wendy*s P88aE amo$ntn+ to P@ mllon.
b. Pro'eeds from the sale of her ho$se and lot amo$ntn+ to P< mllon "h'h she n!ested n
D6'Wendy*s P88aE.
'. (ash &r8e of P,@)... "h'h she "on n a sn+n+ 'ontest.
d. (ash d!dends of P<@)...... "h'h she re'e!ed from 6ERA;(O) a domest' 'or&oraton.
e. ;fe ns$ran'e &ro'eeds "h'h she re'e!ed from the death of her &et do+ amo$ntn+ to
P,@).......
f. P/@)...... 'ash &r8e for ben+ the Best P88a Parlor n 6etro 6anla. The a"ard "as made
by an nde&endent body 'om&rsed of sele'ted &88a &arlor o&erators "h'h) "tho$t the 1no"led+e of
&88a &arlor o&erators) "ent aro$nd 6etro 6anla sam&ln+ the food) ratn+ the fa'ltes and &ersonnel.
There "ere no entres to the 'ontest as the "nners "ere 'hosen by the nde&endent body.
+. T"o ro$nd tr& t'1ets for the 4.S.A. !al$ed at 4.S. R<)@..... "th 4.S.R@)...... &o'1et
money "on from the ann$al raffle of her de&ostory ban1.
h. PH@)...... nterest earned from her tme de&ost "th a lo'al ban1.
I. PH.)...... do"ry from her &ros&e't!e mother-n-la") an Amer'an l!n+ n Ne" Bor1)
4.S.A.) as Wendy "as +ettn+ marred n ,---.
0. P@.)...... net &roft from the sale of Prm$s (or&oraton sto'1s "h'h "ere not traded at the
Phl. Sto'1 E%'han+e.
4&on the other hand) Wendy had the follo"n+ dsb$rsements:
a. P@.)...... le+al fees for the or+an8aton of D6'Wendy*s P88aFE
b. P,/.)...... for rado and TV tme to ad!ertse D6'Wendy*s P88aFE
'. P/@)...... as 'ontrb$ton to the 9rst ;ady*s DDo'tor for the PoorE Pro+ramsF
d. P<@)...... "orth of food "h'h Wendy &ersonally dstrb$ted to famles ds&la'ed by lahar
n Pam&an+a) a 'alamty-str'1en area de'lared by the PresdentF
e. P,.)...... donaton to her alma mater) the 4n!ersty of the Phl&&nesF
f. P,@.)...... !al$e of s&oled food res$ltn+ from a bro"n-o$tF
+. P/@)...... '$stoms d$tes and !al$e added ta%es on the m&ortaton of food heatersF
h. P,/)...... &ad to the nde&endent (PA "ho a$dted 6'Wendy*s Boo1s of A''o$ntsF
I. P<@)...... med'al e%&enses for one of her "aters "ho "as n0$red n a 0ob related a''dentF
0. P?@)...... &ad as nterest to her sster "ho lent her P@..)...... as &art of the ntal
'a&tal8aton for 6'Wendy*sF
1. P<@)...... nterest &ayments for the 'ar Wendy bo$+ht on nstallment bass "h'h 'ar "as
bo$+ht from a 'ar 'om&any b$t fnan'ed by (ITBTR4ST) a ban1 a$thor8ed to o&erate by the Ban+1o
Sentral n+ Pl&nasF and
l. P,@.)...... "h'h Wendy s&ent n obser!n+ trends n the fastfood b$sness n the 4nted
States and E$ro&e.
a. Wh'h of the abo!e n'ome tems sho$ld be re&orted by Wendy on her /... In'ome Ta%
Ret$rnN E%&lan.
b. Wh'h of the abo!e dsb$rsements are &ro&erly ded$'tble n 'om&$tn+ the ta%able n'ome of
WendyN E%&lan.
S455ESTED ANSWER:
a. The follo"n+ are the n'ome tems to be re&orted by Wendy n her /... n'ome ta% ret$rn:
,3 P@ mllon +ross re'e&ts from o&eraton of 6'Wendy*s P88a der!ed as n'ome
from self-em&loyment $nder se'. ,2,/3 Re!. Re+s. No. /--<.
/3 P,@)...... lfe ns$ran'e &ro'eeds der!ed from the death of her do+. The ta%
m&osed on n'ome from self-em&loyment s m&osed on n'ome re'e!ed from all so$r'es other than
'om&ensaton n'ome) 'ertan &ass!e n'omes) 'a&tal +ans from the sales of shares of sto'1 and 'a&tal
+ans from sales of real &ro&erty 2Se'. <2A3 Re!. Re+s. /--<3 Whle the P,@)...... s so$r'ed from lfe
ns$ran'e &ro'eeds) the same s not e%'l$ded $nder Se'. </ 2B3 S,T of the NIR( of ,--= be'a$se the
e%'l$son &res$&&oses lfe ns$ran'e &ro'eeds from the death of a &erson and not of anmals.
<3 P/@)...... 'ash &r8e as the Best P88a Parlor be'a$se ths s a &r8e "as not +!en
&rmarly n re'o+nton rel+o$s) 'hartable) s'entf') ed$'atonal) artst') lterary or '!' a'he!ement
b$t rather as &art of b$sness a't!ty. It does not matter that 6'Wendy*s P88a "as sele'ted "tho$t any
<.
a'ton on ts &art to enter the 'ontest or &ro'eedn+ and 6'Wendy*s P88a s not re#$red to render
s$bstantal f$t$re ser!'es as a 'ondton to re'e!n+ the &r8e. 2Se'. </ 2B3 W=X 2'3) NIR( of ,--=3
The follo"n+ tems are e%'l$ded from her n'ome re&ortable n her n'ome ta% ret$rns:
,3 P< mllon &ro'eeds from sale of ho$se and lot as s$b0e't to 'a&tal +ans from sale of
real &ro&erty "h'h s a fnal ta%. 2Se'. /H SDT) NIR( of ,--=3
/3 P<@)...... d!dends from 6ERA;(O) a domest' 'or&oraton s s$b0e't to a fnal
ta% on d!dends $nder Se'. /H 2B3 S/T) NIR( of ,--=.
<3 P,@)...... "on n a sn+n+ 'ontest as ths s a &r8e e%'eedn+ P,.)...... s$b0e't
to a fnal ta% on &ass!e n'ome n a''ordan'e "th Se'. /H 2B3 S,T) NIR( of ,--=.
H3 Val$e of the t'1ets and &o'1et money "on from the ann$al raffle of Wendy*s Ban1
for the same reason as abo!e.
@3 PH@)...... nterest n'ome for the same reason as abo!e.
>3 Net &roft from sale of Prm$s shares as these are s$b0e't to fnal ta% on the sales of
shares of sto'1 not traded n the sto'1 e%'han+e $nder Se'. /H 2(3 of the NIR( of ,--=.
=3 PH.)...... do"ry be'a$se t s a +ft. 2Se'. </ SBT W<X) NIR( of ,--=3
b. Only the P@.)...... donaton to the 4n!ersty of the Phl&&nes s allo"ed to be ded$'ted
from Wendy*s n'ome from self-em&loyment to arr!e at her ta%able n'ome. Ths s so) be'a$se t s a
donaton to the +o!ernment $nder Se'. <H 2A3 S/T WaX) NIR( of ,--=.
The +o!ernment as $sed here refers to the 5o!ernment of the Phl&&nes or any of ts a+en'es
or &olt'al s$bd!sons and n'l$des amon+ others state 'olle+es and $n!erstes. The 4n!ersty of the
Phl&&nes s a state $n!ersty 2Se'. <2b32f3 Re!. Re+s. No. /--<3.
'. The P@.)...... le+al fees) the P,/.)...... ad!ertsn+ e%&enses for rado and TV tmeF the
P,@.)...... !al$e of the s&oled food) the P/@)...... ta%es) the P,/)...... a$dt fee) the P<@)......
med'al e%&enses and the P,@.)...... e%&enses to obser!e trends n the fastfood b$sness are ded$'tble
as ordnary and ne'essary e%&enses n'$rred n 'onne'ton "th WendyIs trade and b$sness.
The follo"n+ are not ded$'tble from her +ross n'ome:
,. P/@)...... 'ontrb$ton to the DDo'tor for the Poor Pro+ramE be'a$se t s a 'ontrb$ton to a
&r!ate or+an8aton and not to the +o!ernment.
/. Whle t s tr$e that the P<@)...... "orth of food "as dstrb$ted to famles n a 'alamty
str'1en area de'lared by the Presdent) the same "as not donated to the +o!ernment or to a relef
or+an8aton d$ly a''redted as s$'h by the De&artment of So'al Welfare and the B$rea$ of Internal
Re!en$e.
<. The nterest &ad to her sster amo$ntn+ to P?@)...... be'a$se her sster s a related &arty.
H. The P<@)...... nterest &ayments to (ITBTR4ST be'a$se there s no sho"n+ n the
&roblem that t has been &ad or n'$rred n 'onne'ton "th the 'ond$'t of Wendy*s b$sness.
Sn'e she s a resdent) Wendy 'o$ld) nstead of a!aln+ of the tem8ed ded$'tons) 'hoose to
a!al of the o&tonal standard ded$'ton of ten &er'ent 2,.L3 of +ross n'ome.
>-. What s 'onsdered as 'on'l$s!e &roof of sero$s b$sness losses N
S455ESTED ANSWER: 9nan'al statements a$dted by n de&endent e%ternal a$dtors
'onstt$te the normal method of &roof of the &roft and loss &erforman'e of a 'om&any. A 'om&arat!e
statement of re!en$e and e%&enses for t"o years) by tself) s not 'on'l$s!e &roof of sero$s b$sness
losses. 2Bo+o-6edelln S$+ar'ane Planters Asso'aton) In'. !. N;R() et al.) /-> S(RA ,.?) ,/,3
NOTES AND (O66ENTS: The abo!e defnton "as for a labor 'ase. 9or ta% &$r&oses)
b$sness losses ha!e to be &ro!en by more strn+ent r$les than thro$+h mere a$dted fnan'al statements.
The a$thor bele!es that) there m$st be &roof to s$&&ort ea'h transa'ton "h'h 'ontrb$ted to a ma0or
e%tent to the b$sness losses.
=.. What are bad debts N
S455ESTED ANSWER: Those debts res$ltn+ from the "orthlessness or $n'olle'tblty) n
"hole or n &art) of amo$nts d$e the ta%&ayer by others) arsn+ from money lent or from $n'olle'tble
amo$nts of n'ome from +oods sold or ser!'es rendered. 2Se'. /.a) Re!. Re+s. @---3
GGG=,. Phl&&ne Refnn+ (om&any "as assessed by the B$rea$ of Internal Re!en$e def'en'y ta%es
be'a$se of dsallo"an'es of Dbad debtsE e%&ense. What are the re#$rements before Dbad debtsE e%&ense
are allo"ed to be ded$'tble N
S455ESTED ANSWER:
a. In +eneral) the re#$stes for ded$'tblty of bad debts are:
,3 There m$st be an e%stn+ ndebtedness d$e to the ta%&ayer "h'h m$st be !ald and le+ally
demandableF
/3 The same m$st be 'onne'ted "th the ta%&ayer*s trade) b$sness or &ra't'e of &rofessonF
<3 The same m$st not be s$staned n a transa'ton entered nto bet"een related &artes as en$merated
$nder the Ta% (ode of ,--=F
H3 The same m$st be a't$ally 'har+ed off the boo1s of a''o$nts of the ta%&ayer as of the end of the
ta%able yearF and
@3 The same m$st be a't$ally as'ertaned to be "orthless and $n'olle'tble as of the end of the ta%able
year. 2Se'. <) Re!. Re+s. @---3
b. The follo"n+ ste&s m$st be $nderta1en by the ta%&ayer to &ro!ed that t e%erted dl+ent
efforts to 'olle't the debts:
<,
,3 Sendn+ of statements of a''o$ntsF
/3 Sendn+ of 'olle'ton lettersF
<3 5!n+ the a''o$nt to a la"yer for 'olle'tonF
H3 9ln+ a 'olle'ton 'ase n 'o$rt. Whle t s not re#$red to fle s$t) a ta%&ayer s at least e%&e'ted by
the la" to &rod$'e reasonable &roof that the debts are $n'olle'tble altho$+h dl+ent efforts "ere e%erted
to 'olle't the same. 2Phl. Refnn+ (om&any) et'.) !. (o$rt of A&&eals) /@> S(RA >>=3
NOTES AND (O66ENTS: Related &artes.
a. 6embers of the same famly. The famly of an nd!d$al shall n'l$de only hs brothers and
ssters 2"hether by the "hole or half-blood3) s&o$se) an'estors) and lneal des'endantsF
b. An nd!d$al and a 'or&oraton more than ffty &er'ent 2@.L3 n !al$e of the o$tstandn+
sto'1 of "h'h s o"ned) dre'tly or ndre'tly) by or for s$'h nd!d$alF
'. T"o 'or&oratons more than ffty &er'ent 2@.L3 n !al$e of the o$tstandn+ sto'1 of "h'h s
o"ned) dre'tly or ndre'tly) by or for the same nd!d$alF
d. A +rantor and a fd$'ary of any tr$stF or
e. The fd$'ary of a tr$st and the fd$'ary of another tr$st f the same &erson s a +rantor "th
res&e't to ea'h tr$stF or
f. A fd$'ary of a tr$st and a benef'ary of s$'h. SSe'. <> 2B3) NIR( of ,--=T
=/. What s meant by the Dta% beneft r$leE N Ill$strate by e%am&le.
S455ESTED ANSWER: The re'o!ery of bad debts &re!o$sly allo"ed as ded$'ton n the
&re'edn+ year or years shall be n'l$ded as &art of the ta%&ayer*s +ross n'ome n the year of s$'h
re'o!ery to the e%tent of the n'ome ta% beneft of sad ded$'ton.
9or e%am&le: If n the year the ta%&ayer 'lamed ded$'ton of bad debts "rtten-off) he real8ed a
red$'ton of the n'ome ta% d$e from hm on a''o$nt of the sad ded$'ton) hs s$bse#$ent re'o!ery
thereof from hs debtor shall be treated as a re'e&t of real8ed ta%able n'ome. (on!ersely) f the sad
ta%&ayer dd not beneft from the ded$'ton of the sad bad debt "rtten-off be'a$se t dd not res$lt to any
red$'ton of hs n'ome ta% n the year of s$'h ded$'ton 2.e. "here the res$lt of hs b$sness o&eraton
"as a net loss e!en "tho$t ded$'ton of the bad debts "rtten-off3) then hs s$bse#$ent re'o!ery thereof
shall be treated as a mere re'o!ery or a ret$rn of 'a&tal) hen'e) not treated as re'e&t of real8ed ta%able
n'ome. 2Se'. H) Re!. Re+s. @---3
=<. What s meant by de&re'aton. What are the dfferent methods of de&re'aton allo"ed
$nder the la" N
S455ESTED ANSWER:
a. De&re'aton s the +rad$al dmn$ton n the $sef$l !al$e of tan+ble &ro&erty res$ltn+ from
ordnary "ear and tear and from normal obsoles'en'e. The term s also a&&led to amort8aton of the
!al$e of ntan+ble assets the $se of "h'h n the trade or b$sness s defntely lmted n d$raton.
b. The methods of de&re'aton are the follo"n+:
,3 Stra+ht lne methodF
/3 De'lnn+ balan'e methodF
<3 S$m of years d+ts methodF and
H3 Any other method &res'rbed by the Se'retary of 9nan'e $&on the
re'ommendaton of the (ommssoner of Internal Re!en$e:
a3 A&&ortonment to $nts of &rod$'tonF
b3 Ao$rs of &rod$'t!e $seF
'3 Re!al$aton methodF and
d3 sn1n+ f$nd method.
GGG =H. What are ordnary and ne'essary e%&enses for ta% &$r&oses. What are the re#$rements before
b$sness e%&enses may be ded$'ted from +ross n'ome N
S455ESTED ANSWER:
a. Ordnary e%&enses are those "h'h are 'ommon to n'$r n the trade or b$sness of the
ta%&ayer WAI;E 'a&tal e%&endt$res are those n'$rred to m&ro!e assets and benefts for more than one
ta%able year. Ordnary e%&enses are $s$ally n'$rred d$rn+ a ta%able year and benefts s$'h ta%able year.
Ne'essary e%&enses are those "h'h are a&&ro&rate or hel&f$l to the b$sness.
b. The follo"n+ are the re#$stes for ded$'tblty of b$sness e%&enses:
,3 (om&lan'e "th the b$sness test:
a3 6$st be ordnary and ne'essaryF
b3 6$st be &ad or n'$rred "thn the ta%able yearF
'3 6$st be &ad or n'$rred n 'arryn+ on a trade or b$sness.
d3 6$st not be brbes) 1'1ba'1s or other lle+al e%&endt$res
/3 (om&lan'e "th the s$bstantaton test. Proof by e!den'e or re'ords
the ded$'tons allo"ed by la" n'l$dn+ 'om&lan'e "th the b$sness test.
=@. In /...) 6ara) In'.) n'$rred P<@.)...... n order to &romote the sale of ts lne of lades
dresses "h'h "ere s&e'ally des+ned and tar+etted the Valentne*s day mar1et for that year. It l1e"se
n'$rred P@..)...... to &romote ts ma+e n the lo'al mar1et and another P/@.)...... to &romote the
sale of ts shares of sto'1 "h'h t "as offern+ to the +eneral &$bl' for sale.
It as1s yo$r ad!'e on ho" to treat these ad!ertsn+ e%&enses.
S455ESTED ANSWER:
a. It sho$ld ded$'t the P<@.)...... from ts /... +ross n'ome as ordnary and ne'essary
e%&enses be'a$se these are ad!ertsn+ e%&enses $sed to stm$late the '$rrent sale of mer'handse.
</
b. It sho$ld not ded$'t the P@..)...... ad!ertsn+ e%&ense from ts /... +ross n'ome as these
are ad!ertsn+ e%&enses des+ned to stm$late the f$t$re sale of mer'handse. These are e%&endt$res n
order to 'reate or mantan some form of +ood"ll for 6ara) In'.*s trade or b$sness. These e%&endt$res
are to be s&read o!er a reasonable &erod of tme be'a$se they are 'onsdered that a 'a&tal asset "h'h has
a determnable lfe has been a'#$red. 25eneral 9oods SPhls.T) In'. !. (ommssoner of Internal Re!en$e)
(TA (ase No. H<?>) &rom. 9ebr$ary ?) ,--H3
'. It sho$ld l1e"se s&read the P/@.)...... o!er a reasonable &erod of tme be'a$se these are
e%&enses n'$rred to 'reate a fa!orable ma+e for the 'or&oraton to +enerate sales of ts shares of sto'1.
These 'onstt$te 'a&tal n!estment be'a$se the &art'$lar ad!ertsn+ e%&ense "as n'$rred n relaton to
the 'a&tal asset or e#$ty of the 'om&any. 2Atlas (onsoldated 6nn+ and De!elo&ment (or&oraton !.
(ommssoner of Internal Re!en$e) ,./ S(RA /H>3
GG G=>. 61ey (or&oraton ss$ed &referred shares "th the follo"n+ 'ondton: DThe holders of
&referred shares shall be enttled to an ann$al =L nterest) and shall l1e"se &art'&ate n the +eneral
dstrb$ton of d!dends to 'ommon shares.E In /... 61ey (or&oraton &ad PH mllon to ts &referred
shareholders re&resentn+ the =L nterest. It see1s yo$r ad!se "hether t 'o$ld ded$'t the sad amo$nt
from ts +ross n'ome. What "o$ld yo$r ad!'e be N
S455ESTED ANSWER: It s not allo"ed to ded$'t sad nterests. Preferred shares are
'onsdered 'a&tal re+ardless of the 'ondtons $nder "h'h s$'h shares are ss$ed and d!dends or
DnterestsE &ad thereon are not allo"ed as ded$'tons from the +ross n'ome of 'or&oratons. 2Re!en$e
6emorand$m (r'$lar No. ,=-=,3
GGG ==. Ka'1) H@ years old "th ,. years ser!'e "th hs em&loyer) de'ded to a!al of the lberal early
!ol$ntary retrement &ro+ram offered by hs em&loyer. The &ro+ram "as &art of the &roft m&ro!ement
&ro+ram of the 'om&any. The &ostons of those "ho "o$ld a!al of the &ro+ram "o$ld not be flled $&
on'e they are !a'ated as a res$lt of the !ol$ntary early retrement. Are any amo$nts re'e!ed by Ka'1 as a
res$lt of hs a!alment of s$'h &ro+ram ta%-free N What sho$ld be done n order to ha!e hs retrement
&ay be e%em&t from ta%aton N E%&lan brefly.
S455ESTED ANSWER: Any amo$nt he shall re'e!e shall be s$b0e't to ta%) 'onsdern+ that
he s belo" @. years of a+e and that hs retrement s !ol$ntary n 'hara'ter.
9or Ka'1 to a!al of the ta% e%em&ton hs em&loyer sho$ld DfreE hm. Aen'e) any amo$nt he
"o$ld be re'e!n+ "o$ld be as a 'onse#$en'e of hs se&araton for a 'a$se beyond hs 'ontrol s$'h as
retren'hment. S,st &ar.) Se'. /.=?., 2B3 W,X WbX) Re!. Re+s. No. /--?T
NOTES AND (O66ENTS:
GGG a. (ondtons for e%'l$dn+ retrement benefts from +ross n'ome:
,3 Retrement benefts re'e!ed $nder Re&$bl' A't No. =>H, and those re'e!ed by off'als and
em&loyees of &r!ate frms) "hether nd!d$al or 'or&orate) n a''ordan'e "th the em&loyer*s reasonable
&r!ate beneft &lan a&&ro!ed by the BIR.
/3 Retrn+ off'al or em&loyee
a3 In the ser!'e of the same em&loyer for at least ten 2,.3 yearsF
b3 Not less than ffty 2@.3 years of a+e at tme of retrementF
'3 A!aled of the beneft of e%'l$son only on'e. SSe'. </ 2B3 W>X WaX) NIR( of ,--=T. The
retrn+ off'al or em&loyee sho$ld not ha!e &re!o$sly a!aled of the &r!le+e $nder the retrement &lan
of the same or another em&loyer. S,st &ar.) Se'. /.=? 2B3 W,X) Re!. Re+s. No. /--?T
GGG b. Se&araton 2retrement3 &ay e%'l$ded from +ross n'ome) hen'e ta%-e%em&t.
,3 Any amo$nt re'e!ed by an off'al) em&loyee or by hs hers)
/3 9rom the em&loyer
<3 As a 'onse#$en'e of se&araton of s$'h off'al or em&loyee from the ser!'e of the em&loyer
be'a$se of
a3 Death) s'1ness or other &hys'al dsabltyF or
b3 9or any 'a$se beyond the 'ontrol of sad off'al or em&loyee SSe'. </ 2B3 W>X WbX) NIR( of
,--=T) s$'h as retren'hment) red$ndan'y and 'essaton of b$sness. S,st &ar.) Se'. /.=? 2B3) W,X WbX) Re!.
Re+s. No. /--?T
=?) What are the &r8es that are e%'l$ded from +ross n'ome) hen'e not ta%able N
S455ESTED ANSWER:
a. Pr8es and a"ards made &rmarly n re'o+nton of rel+o$s) 'hartable) s'entf')
ed$'atonal) artst') lterary) or '!' a'he!ement b$t only f
,3 The re'&ent "as sele'ted "tho$t any a'ton on hs &art to enter the 'ontest or &ro'eedn+F and
/3 The re'&ent s not re#$red to render s$bstantal f$t$re ser!'es as a 'ondton to re'e!n+ the &r8e
or a"ard. SSe'. </ 2B3 W=X W'X) NIR( of ,--=T
b. All &r8es and a"ards
,3 5ranted to athletes
/3 In lo'al and nternatonal s&orts to$rnaments and 'om&ettons
<3 Whether held n the Phl&&nes or abroad) and
H3 San'toned by ther natonal s&orts asso'atons SSe'. </2B3 W=X WdX) NIR( of ,--=T) "h'h
&er BIR r$ln+ s a''redtaton "th the Phl&&ne Olym&' (ommttee. Note that the e%em&ton refers
only to amate$r s&orts. 9or &rofessonal bo%n+) a s&e'al la" +rants the e%em&ton not the NIR(.
GGG =-. DAE "as sero$sly n0$red n a !eh'$lar a''dent. As a res$lt of hs n0$res) he "as able to
re'o!er P, mllon re&resentn+ $nearned n'ome) and P@ mllon for moral and e%em&lary dama+es. Are
the amo$nts s$b0e't to ta% N
<<
S455ESTED ANSWER: No. E%'l$ded from +ross n'ome) hen'e e%em&t from n'ome ta% are
amo$nts re'e!ed as 'om&ensaton for &ersonal n0$res &l$s the amo$nts of any dama+es re'e!ed
"hether by s$t or a+reement on a''o$nt of s$'h n0$res. SSe'. </ WBX WHX) NIR( of ,--=F Se'. /.=? 2B3
W-X) Re!. Re+s. No. /--?T
NOTES AND (O66ENTS: The abo!e s the &re!aln+ !e". The a$thor s$bmts that the
amo$nt of P, mllon) ben+ n the nat$re of re&la'ement of n'ome lost s ta%able. Ths s so) be'a$se
e%'l$sons are n the nat$re of ta% e%em&tons) hen'e they m$st be str'tly 'onstr$ed a+anst the ta%&ayer.
GGG ?.. In ,-?> Bella &$r'hased a &ar'el) of land ad0onn+ the (ty (am& ;a+oon n Ba+$o (ty
for P/.@ mllon. She ntended to b$ld her famly home on the sad &ar'el of land. 4nfort$nately for her)
the emban1ment "as destroyed d$rn+ the K$ly >) /.., flash floods 'a$sn+ eroson "h'h led to a
deteroraton of the mar1et !al$e to only P,.@ mllon. The (ty Assessor assessed the &ro&erty for ta%
&$r&oses at P,./ mllon "hle the BIR 8onal !al$aton s P,.H mllon.
a. S$&&osn+ that on A$+$st <,) /..,) the o"ner of the ad0onn+ &ro&erty b$ys the &ro&erty at
P,.< mllon) "hat "o$ld be the ta% 'onse#$en'es to Bella 'onsdern+ that she s$ffered a lossN E%&lan.
b. Wo$ld yo$r ans"er be the same f the +o!ernment e%&ro&rated the &ro&erty at ts &resent
mar1et !al$e of P,.@ mllonN WhyN
S455ESTED ANSWERS:
a. The &ar'el of land s a 'a&tal asset of Bella. Ths s so be'a$se t s not her sto'1 n trade) or
&ro&erty n'l$dble as &art of her n!entory at the end of the ta%able year) or &ro&erty &rmarly held by
her for sale to '$stomers n the ordnary 'o$rse of trade or b$sness) or &ro&erty $sed n trade or b$sness
s$b0e't to de&re'aton) or real &ro&erty $sed by Bella n her trade or b$sness. 2Se'. << SAT W,X) NIR( of
,--=3
(onse#$ently) rres&e't!e of the holdn+ &erod $nder the &ro!sons of Se'. <- 2B3 of the NIR(
of ,--=) the 'a&tal +ans &res$med to ha!e been real8ed from the sale shall be ta%ed at the rate of >L
based on the +ross selln+ &r'e or the far mar1et !al$e at the tme of the sale "h'he!er s h+her. 2Se'.
/H SDT) NIR( of ,--=3 Sn'e the mar1et !al$e of P,.@ mllon s h+her than the +ross selln+ &r'e of
P,.< mllon) then the &res$med 'a&tal +ans ta% of >L sho$ld be based on P,.@ mllon not P,.< mllon.
The ta% s denomnated as a &res$med 'a&tal +ans ta% hen'e t s m&osed e!en f there "as a
loss.
b. No. The ta%&ayer) n ths 'ase Bella) has the o&ton of re&ortn+ her a't$al +ans from the
e%&ro&raton as &art of her n'ome s$b0e't to the rates for 'om&ensaton n'ome $nder Se' /,2a3 of the
Natonal Internal Re!en$e (ode or to &ay a >L &res$med 'a&tal +ans ta% based on the far mar1et !al$e
of P,.@ mllon. 2Se'. /H 2D3 S,T) NIR( of ,--=3 Sn'e she s$ffered a loss and there s no +an) she
sho$ld 'hoose the frst o&tonF she sho$ld not be s$b0e'ted to any ta%.
?,. In ,--H) a domest' 'or&oraton en+a+ed n the man$fa't$re of sem-'ond$'tor de!'es
bo$+ht a &ar'el of land for P/.. mllon. On A$+$st /=) /..,) t sold the &ar'el of land for P@.@ mllon.
The far mar1et !al$e at the tme "as P@.= mllon) the assessed !al$e "as PH.@ mllon and the BIR
8onal !al$aton "as P@.> mllon. The 'or&oraton real8ed a net &roft of P<.@ mllon on the transa'ton.
The land "as not &art of the 'or&oraton*s sto'1 n trade) or &ro&erty n'l$dble as &art of ts
n!entory at the end of the ta%able year) or &ro&erty &rmarly held by t for sale to '$stomers n the
ordnary 'o$rse of trade or b$sness or &ro&erty $sed n trade or b$sness s$b0e't to de&re'aton) or real
&ro&erty $sed by the 'or&oraton n ts trade or b$sness.
To "hat ta% sho$ld the 'or&oraton be s$b0e't to and "hyN
S455ESTED ANSWER:
A fnal ta% of s% &er'ent 2>L3 based on the +ross selln+ &r'e or far mar1et !al$e as determned
by the (ommssoner of Internal Re!en$e or as sho"n n the s'hed$le of !al$es of the Pro!n'al and (ty
Assessors. 2Se'. /= SDT W@X) NIR( of ,--= n relaton to Se'. > SET3
?/. Defne net loss 'arry-o!er and net o&eratn+ loss 'arry-o!er. Dstn+$sh the t"o 'on'e&ts
and ds'$ss ta% m&l'atons of ea'h.
S455ESTED ANSWER:
a. Net loss 'arry-o!er means the ded$'ton from net 'a&tal +ans of a s$''eedn+ year the net
'a&tal loss s$ffered d$rn+ the &ror year. Net o&eratn+ loss 'arry-o!er s the ded$'ton from +ross
n'ome for the ne%t three 2<3 'onse'$t!e ta%able years follo"n+ the year of s$'h loss) the e%'ess of
allo"able ded$'ton o!er the +ross n'ome .
b. Dstn'tons bet"een net loss 'arry-o!er and net o&eratn+ loss 'arry-o!er. So$r'e: The
so$r'e of net loss 'arry-o!er are 'a&tal losses only WAI;E the so$r'e of net o&eratn+ loss 'arry-o!er are
from the ordnary trade and b$sness of the ta%&ayer. Who may en0oy the 'arry-o!er: Only ta%&ayers
other than 'or&oratons may en0oy net loss 'arry-o!er WAI;E only 'or&oratons may en0oy the net
o&eratn+ loss 'arry-o!er.
'. Any ta%&ayer) other than a 'or&oraton 2nd!d$als n'l$dn+ tr$sts and estates3) "ho s$stans
n any ta%able year a net 'a&tal loss from 'a&tal transa'tons n!ol!n+ 'a&tal assets 2other than real
&ro&erty or shares of sto'1 not lsted or traded n the sto'1 e%han+e3) s allo"ed to treat d$rn+ the
s$''eedn+ year s$'h net 'a&tal loss as a loss from the sale or e%'han+e of a 'a&tal asset 2other than real
&ro&erty or shares of sto'1 not lsted and traded n the sto'1 e%'han+e3) held for more than t"el!e
months. 2Se'. <- SDT) NIR( of ,--=3
?<. In ,--@) 6s. 6a 5anda bo$+ht a damond rn+ "orth P=@)...... for $se d$rn+ her deb$t.
On Se&tember @) /..,) ha!n+ no f$rther $se for the rn+) she de'ded to sell t to 6rs. 6. Ayaman for
<H
P<@.)....... Wtho$t +on+ nto arthmet'al 'om&$tatons) ho" sho$ld 6s. 5anda be ta%ed on the sale
of her rn+.
S455ESTED ANSWER:
The rn+ s 6s. 5anda*s 'a&tal asset be'a$se she s not n the b$sness of b$yn+ and selln+
0e"elry. She bo$+ht the rn+ for her &ersonal $se and not for trade or b$sness. (onse#$ently) she sho$ld
determne the net &roft from the sales of the rn+ and a&&lyn+ the holdn+ &erod sho$ld re&ort ffty
&er'ent 2@.L3 of s$'h net &roft n her n'ome ta% ret$rn for ,--- as &art of ordnary n'ome. The
holdn+ &erod sho$ld be a&&led be'a$se she held the damond rn+) her 'a&tal asset) for more than
t"el!e 2,/3 months.
GGG ?H. In ,-?.) (hna Ban1n+ (or&oraton made a @<L e#$ty n!estment n the 9rst (B( (a&tal
2Asa3 ;td.) a Aon+1on+ s$bsdary en+a+ed n fnan'n+ and n!estment "th Dde&ost-ta1n+E f$n'ton.
The n!estment amo$nted to P,>)//=)?@,.?.) 'onsstn+ of ,.>)... shares "th a &ar !al$e of P,.. &er
share.
S$bse#$ently) 9rst (B( (a&tal 2Asa3) ;td.) has be'ome nsol!ent. (hna Ban1n+ treated the
n!estment n ts ,-?= In'ome Ta% Ret$rn as a bad debt or as an ordnary loss ded$'tble from ts +ross
n'ome. The BIR dsallo"ed the ded$'ton be'a$se the n!estment sho$ld not be 'lassfed as
D"orthless.E R$le on the dsallo"an'e.
S455ESTED ANSWER: BIR "as 'orre't. The e#$ty n!estment s 'a&tal n 'hara'ter) the
loss of "h'h 'o$ld be ded$'tble only from 'a&tal +ans) and not from any other n'ome of the ta%&ayer.
9rst (B( (a&tal 2Asa3) ;td.) the n!estee 'or&oraton) s a s$bssdary 'or&oraton of (hna Ban1n+
"hose shares n sad n!estee 'or&oraton are not ntended for &$r'hase or sale b$t an n!estment. 2(hna
Ban1n+ (or&oraton !. (o$rt of A&&eals) et al.) 5.R. No. ,/@.?) &rom. K$ly ,-) /...3
NOTES AND (O66ENTS:
GGG a. When se'$rtes be'ome "orthless) the la" deems the loss to be a loss from the sale or
e%'han+e of 'a&tal assets. An e#$ty n!estment s a 'a&tal) not ordnary) asset of the n!estor) the sale
or e%'han+e of "h'h res$lts n ether a 'a&tal +an or a 'a&tal loss. The +an or the loss s ordnary
"hen the &ro&erty sold or e%'han+ed s not a 'a&tal asset.
The loss s$staned by the holder of the se'$rtes) "h'h are 'a&tal assets 2to hm3) s to be
treated as a 'a&tal loss as f n'$rred from a sale or e%'han+e transa'ton. A 'a&tal +an or a 'a&tal loss
normally re#$res the 'on'$rren'e of t"o 'ondtons for t to res$lt:
,3 There s a sale or e%'han+eF and
/3 The thn+ sold or e%'han+ed s a 'a&tal asset.
When se'$rtes be'ome "orthless there s str'tly no sale or e%'han+e b$t the la" deems the loss
any"ay to be Da loss from the sale or e%'han+e of 'a&tal assets.E 2(hna Ban1n+ (or&oraton !. (o$rt of
A&&eals) et al.) 5.R. No. ,/@.?) &rom. K$ly ,-) /...3
b. Se'$rtes) defned for ded$'tblty of bad debts. Shares of sto'1 n a 'or&oraton and r+hts
to s$bs'rbe for or to re'e!e s$'h shares. The term n'l$des bonds) debent$res) notes or 'ertf'ates) or
other e!den'e of ndebtedness) ss$ed by any 'or&oraton) n'l$dn+ those ss$ed by a +o!ernment or
&olt'al s$bd!son thereof) "th nterest 'o$&ons or n re+stered form. 2Se'. /.b) Re!. Re+s. No. @---3
GGG '. Ta% treatment of se'$rtes be'omn+ "orthless. If se'$rtes) as defned $nder Se'. / 2b3
hereof) held as 'a&tal asset) are as'ertaned to be "orthless and 'har+ed off "thn the ta%able year) the
loss res$ltn+ therefrom shall be 'onsdered as a loss from the sale or e%'han+e of 'a&tal asset made on
the last day of s$'h ta%able year. The ta%&ayer) ho"e!er) has to &ro!e thro$+h 'lear and 'on!n'n+
e!den'e that the se'$rtes are n fa't "orthless.
Ths r$le) ho"e!er) s not tr$e n the 'ase of ban1s or tr$st 'om&anes n'or&orated $nder the
la"s of the Phl&&nes) a s$bstantal &art of "hose b$sness s the re'e&t of de&osts. 2Se'. @) Re!. Re+s.
No. @---3
GGG?@. CB7 (or&oraton has an a$thor8ed 'a&tal sto'1 of P@ mllon d!ded nto @.)... shares
"th &ar !al$e of P,..... &er share. P/ mllon of the a$thor8ed 'a&tal sto'1 "ere s$bs'rbed) by
!aro$s sto'1holders n'l$dn+ 6r. 9lores "ho s$bs'rbed for sto'1s "th &ar !al$e of P,.@ mllon. To
f$lly &ay for hs s$bs'r&ton) 6r. 9lores transferred n /... to CB7 (or&oraton a &ar'el of land. It "as
s$bse#$ently ds'o!ered by the B$rea$ of Internal Re!en$e that the &ar'el of land had a far mar1et !al$e
of only P, mllon.
a. Sn'e the !al$e of the &ar'el of land "as only P, mllon "hle 6r. 9lores re'e!ed shares of
sto'1 "orth P,.@ mllon dd 6r. 9lores earn n'ome amo$ntn+ to P@..)...... "h'h sho$ld be s$b0e't
to n'ome ta% N On the other hand) sho$ld the 'or&oraton be allo"ed to ded$'t a loss amo$ntn+ to
P@..)...... N
b. What "o$ld be the ta% treatment) f n /..,) 6r. 9lores sold the shares of sto'1 n CB7
(or&oraton "h'h are not lsted or traded n the sto'1 e%'han+e for P,./ mllon N
'. S$&&osn+ that n /.., CB7 (or&oraton sold the &ar'el of land for P, mllon "h'h s ts
8onal !al$aton n /..,. CB7 s not en+a+ed n the real estate b$sness. What "o$ld be the ta%
treatment for s$'h a sale N
S455ESTED ANSWER:
a. 6r. 9lores dd not earn any n'ome s$b0e't to ta% nether dd CB7 n'$r a loss "h'h t 'o$ld
ded$'t from ts /... +ross n'ome.
The transa'ton s 1no"n as a ta%-free e%'han+e solely n 1nd) hen'e no +an or loss s
re'o+n8ed. It s an e%'han+e solely n 1nd be'a$se &ro&erty 2land3 "as e%'han+ed for another &ro&erty
2shares of sto'13. It s a ta%- free e%'han+e be'a$se as a res$lt of the e%'han+e) 6r. 9lores by hmself "as
able to obtan 'ontrol of the 'or&oraton.
<@
b. If n /..,) 6r. 9lores sold the shares of sto'1 for P,./ mllon) the bass for the shares of
sto'1 "o$ld be the !al$e of the &ar'el of land. In ths 'ase) t "o$ld be 'onsdered as f 6r. 9lores
a'#$red the shares of sto'1 for P, mllon the !al$e of the &ro&erty he has e%'han+ed for the shares of
sto'1. Sn'e there s no sho"n+ n the &roblem that 6r. 9lores s en+a+ed n the b$sness of b$yn+ and
selln+ shares of sto'1) then the net +an sho$ld be 'om&$ted) by ded$'tn+ the a'#$ston &r'e 2P,
mllon3 from the selln+ &r'e 2P,./ mllon3. Th$s) the net +an s P/..)....... On the frst
P,..)...... net +an the ta% sho$ld be @L and on the amo$nt e%'eedn+ the frst P,..)...... net +an
then the ta% sho$ld be ,.L. It s to be noted that the holdn+ &erod s not a&&led.
'. A 'or&oraton s no" s$b0e't to 'a&tal +ans ta%es and all &ro'eeds from sales of real &ro&erty
o"ned by a 'or&oraton "h'h are not $sed n trade or b$sness s s$b0e't to the >L &res$med 'a&tal
+ans ta%.
NOTES AND (O66ENTS: Remember that the frst transa'ton s ta%-free b$t the se'ond
transa'ton s ta%able. The &roblem that may be +!en may n!ol!e a mer+er or 'onsoldaton n "h'h
'ase the abo!e &rn'&les also fnd a&&l'aton. ;1e"se) f there are more &artes n!ol!ed than 6r.
9lores) then 6r. 9lores to+ether "th others not more than fo$r sho$ld obtan 'ontrol of the 'or&oraton.
If the e%'han+e s not solely n 1nd 2for e%am&le) money &l$s &ro&erty "as e%'han+ed or shares of sto'1
or !'e-!ersa3) then there s no ta%-free e%'han+e be'a$se the +an s ta%ed b$t the loss s not allo"ed to be
ded$'tble.
?>. In ta%-free e%'han+es solely n 1nd) "hat s meant by boot N What abo$t bass N
S455ESTED ANSWER:
Boot s the &ro&erty e%'han+ed for sto'1s or se'$rtes. 9or e%am&le) 6r. ;eon e%'han+es hs
&ar'el of land for shares of sto'1 n 6'1ey) In'. The boot s the &ar'el of land. Bass s the !al$e
ass+ned to the land or the shares of sto'1.
TRANS9ER TACES
GGG ?=. Don (esar Sorano) a S&ansh natonal) ded on Se&tember @) /... n hs !lla at ;$'erne)
S"t8erland. Ae e%e'$ted a "ll before hs death lea!n+ all of hs &ro&ertes to hs +rl frend 6ar'el
6ontano) a 9l&no resdn+ n Br$+e) Bel+$m. The +rl frend de'ded to brn+ the remans of Don
(esar) "ho "as a resdent of the Phl&&nes from ,-<@ $& to ,--= to the Phl&&nes for b$ral be'a$se
that "as hs "sh as most of hs frends are stll l!n+ n the Phl&&nes. She s&ent abo$t P=@.)......
for f$neral e%&enses. On Se&tember ,=) /... 6ar'el met yo$ n Aon+1on+ and en+a+ed yo$r ser!'es n
order to settle the estate of Don (esar n a''ordan'e "th the "ll "h'h "as &ro&erly &robated n
S"t8erland. She &resents to yo$ an n!entory of the &ro&ertes left by Don (esar "th ther
'orres&ondn+ !al$es as of Se&tember @) /...) Don (esar*s date of death. The !lla n S"t8erland 4SR,
mllonF an a&artment b$ldn+ lo'ated n Ne" Bor1) 4SR@ mllonF a ha'enda n Da!ao P/@ mllon b$t
the &resent !al$aton s no" PH. mllon be'a$se of road 'onstr$'tons "h'h enhan'ed the !al$e of the
&ro&ertyF 4SR,@ mllon the !al$e of lfe ns$ran'e &ro'eeds from an ns$ran'e ta1en o$t by Don (esar
on hs o"n lfe des+natn+ hs estate as benef'ary from the (anton S"ss Ins$ran'e at (anton)
S"t8erlandF P/@ mllon &ro'eeds of lfe ns$ran'e ta1en by Don (esar on hs o"n lfe from Phlamlfe
Ins$ran'e n the Phl&&nes &ayable to 6ar'el as rre!o'able benef'aryF o$tstandn+ ban1 balan'e "th
Phl&&ne Ban1 of (ommer'e n the amo$nt of P@ mllon "th Nanette as hs andPor 'o-de&ostor.
Shares of sto'1 of a Aon+1on+ 'om&any b$t mana+ed from the Phl&&nes and a P,@ mllon a&artment
lo'ated n 6anla) Phl&&nes "h'h he donated to hs 'lose frend on A&rl /@) ,-?- s$b0e't to the
'ondton that the frend remts to Don (essar all the rentals of the &ro&erty d$rn+ the lfetme of Don
(esar.
a. What sho$ld be re&orted as &art of Don (esar*s +ross estate and "hat ded$'tons are
allo"able to determne hs net estateN E%&lan.
b. Are the &ro'eeds of the P/@ mllon lfe ns$ran'e to be 'onsdered as &art of the +ross estate
of Don (esar or 6ar'el*s n'omeN WhyN
'. S$&&osn+ 6ar'el "ants to "thdra" the P@ mllon from the ban1) "hat ad!se sho$ld yo$
+!e herN
d. Is 6ar'el ben+ the sole benef'ary lable for the &ayment of the estate ta%esN
S455ESTED ANSWER:
a. Sn'e Don (esar "as a Dnon-resdent de'edent "ho at the tme of hs death "as not a 't8en
of the Phl&&nes) only that &art of the entre +ross estate "h'h s st$ated n the Phl&&nes) shall be
n'l$ded n hs ta%able estate.E 2Se'. ?@) NIR( of ,--=3 The &roblem s 'lear that Don (esar resded n
the Phl&&nes only from ,-<@ to ,--=.
S&e'f'ally) the &art of hs +ross estate "h'h are st$ated o$tsde of the Phl&&nes and
e%'l$ded from the ta%able estate are the 4SR, mllon !lla n S"t8erland) the 4SR@ mllon a&artment
b$ldn+ n Ne" Bor1) 4.S.A.) and the &ro'eeds of the 4SR,@ mllon lfe ns$ran'e from the (anton
S"ss Ins$ran'e.
The follo"n+ &ro&ertes are &art of hs +ross estate be'a$se they are st$ated n the Phl&&nes.
The P/@ mllon Da!ao Aa'enda) the P@ mllon ban1 balan'e "th the Phl&&ne Ban1 of (ommer'e)
the shares of sto'1 n the Aon+1on+ 'or&oraton and the P,@ mllon a&artment.
The shares of sto'1 ha!e a'#$red a b$sness st$s n the Phl&&nes be'a$se the fore+n
'or&oraton s mana+ed from the Phl&&nes hen'e) n'l$dble as &art of Don (esar*s*s +ross estate.
The P,@ mllon a&artment s &art of the +ross estate be'a$se t "as transferred n 'ontem&laton
of death. Don (esar has retaned for hs lfe the en0oyment of the fr$ts of the &ro&erty. 2Se'. ?@ 2B3)
NIR( of ,-=3
<>
b. The &ro'eeds of the P/@ mllon lfe ns$ran'e s nether &art of the +ross estate nor n'ome to
6ar'el. The &ro'eeds are not &art of the estate be'a$se the benef'ary s not the estate of Don (esar) hs
e%e'$tor or admnstrator and the des+naton of the benef'ary s rre!o'able. 2Se'. ?@ 2E3) NIR( of
,--=3 The P/@ mllon s not also n'ome to 6ar'el be'a$se lfe ns$ran'e &ro'eeds &ad to benef'ares
$&on the death of the ns$red are e%'l$sons from +ross n'ome. 2Se'. </ SBT W,X) NIR( of ,--=3
'. I "o$ld ad!se 6ar'el to frst se'$re a 'ertf'aton from the (ommssoner of Internal
Re!en$e that the a&&ro&rate estate ta%es "ere already &ad. If the amo$nt to be "thdra"n does not
e%'eed P/.)......) she sho$ld se'$re an a$thor8aton from the (ommssoner e!en f sad ta%es ha!e not
yet been &ad. 2/nd &ar.) Se'. -=) NIR( of ,--=3
d. If 6ar'el s at the same tme the e%e'$tor or admnstrator of the estate) then she s &rmarly
lable. If she s not the e%e'$tor or admnstrator) then ben+ the benef'ary) she s s$bsdary lable to the
sad e%e'$tor or admnstrator. 2Se'. -, S(X) NIR( of ,--=3
NOTES AND (O66ENTS: The !al$aton to be $sed s the !al$aton at the tme of the
de'edent*s death NOT at the tme of fln+ ret$rn or &ayment of estate ta%.
GGG ??. The NIR( of ,--= allo"s as a ded$'ton from the +ross estate of a 't8en or resdent of the
Phl&&nes D0$d'al e%&enses of the testamentary or ntestate &ro'eedn+sE n order to arr!e at the net
estate s$b0e't to estate ta%es. SSe'. ?> 2A3 2b3T. Are notaral fees &ad for the e%tra0$d'al settlement of
the estate as "ell as attorneys fees for the +$ardan ded$'tble from the +ross estate as D0$d'al e%&ensesE
N E%&lan brefly.
S455ESTED ANSWER: Bes. The notaral fee &ad for the e%tra0$d'al settlement s 'learly a
ded$'tble e%&ense sn'e s$'h settlement effe'ted a dstrb$ton of the estate to hs la"f$l hers) Smlarly)
the attorney*s fees for a +$ardan of the &ro&erty d$rn+ the de'edent*s lfetme sho$ld also be 'onsdered
as a ded$'tble admnstraton e%&ense. The +$ardan +!es a detaled a''o$ntn+ of de'edent*s &ro&erty
and +!es ad!'e as to the &ro&er settlement of the estate) a'ts "h'h 'ontrb$ted to"ards the 'olle'ton of
de'edent*s assets and the s$bse#$ent settlement of the 'ase. 2(ommssoner of Internal Re!en$e !. (o$rt
of A&&eals) et al.) 5.R. No. ,/</.>) &rom. 6ar'h //) /...3
NOTES AND (O66ENTS: K$d'al e%&enses are e%&enses of admnstraton. Admnstraton
e%&enses) as an allo"able ded$'ton from +ross estate of the de'edent for &$r&oses of arr!n+ at the !al$e
of the net estate) ha!e been 'onstr$ed to n'l$de all e%&enses Dessental to the 'olle'ton of the assets)
&ayment of debts or the dstrb$ton of the &ro&erty to the &ersons enttled to t.E In other "ords) the
e%&enses m$st be essental to the &ro&er settlement of the estate.
Not ded$'tble are e%&endt$res n'$rred for the nd!d$al beneft of the hers) de!sees or
le+atees. Th$s) n ;oren8o !. Posadas) the (o$rt 'onstr$ed the &hrase D0$d'al e%&enses of the
testamentary or ntestate &ro'eedn+sE as not n'l$dn+ the 'om&ensaton &ad to a tr$stee of the
de'edent*s estate "hen t a&&eared that s$'h tr$stee "as a&&onted for the &$r&ose of mana+n+ the
de'edent*s real &ro&erty for the beneft of the testamentary her. In another 'ase) the (o$rt dsallo"ed the
&rem$ms &ad on the bond fled by the admnstrator as an e%&ense of admnstraton sn'e the +!n+ of
a bond s n the nat$re of a #$alf'aton for the off'e) and not ne'essary n the settlement of the estate.
Nether may attorney*s fees n'dent to lt+aton n'$rred by the hers n assertn+ ther res&e't!e r+hts
be 'lamed as a ded$'ton from the +ross estate. 2(ommssoner of Internal Re!en$e !. (o$rt of A&&eals)
et al.) 5.R. No. ,/</.>) &rom. 6ar'h //) /...3
?-. In ,--- Atty. (har T. Able made the follo"n+ donatons:
a. P /@.)...... al$mn asso'aton of her alma mater) the 4n!ersty of the
Phl&&nesF
b. P<@.)...... to U$e8on (ty A+h S'hool) a &$bl' s'hool lo'ated n Kam$nn+)
U$e8on (tyF
'. P@..)...... as &r8e to 6. Ala1as) a 9l&no athlete "ho +arnered the +old medal n an nternatonal
"e+ht lftn+ 'ontest held n 6os'o" "h'h 'ontest "as san'toned by the Phl&&ne We+htlftn+
Asso'aton) the natonal "e+htlftn+ asso'atonF
d. P@.)...... to a frend she has not seen for a lon+ tmeF
e. On De'ember <,) ,--? she donated one-half of her &ar'el of land
"orth P/.@ mllon to her son) and on Kan$ary /) ,---) she donated the re-
mann+ one-half of the same &ar'el of land to the same sonF and
f. P=@.)...... to the Aoly Order of 9rars) a rel+o$s 'on+re+aton
to be $sed for the 'onstr$'ton of a 'h$r'h.
Atty. (har T. Able der!es her n'ome solely from the &ra't'e of her &rofesson. a3 Sho$ld she
be s$b0e't to donor*s ta%es on the abo!e donatons N b3 Is she enttled to any e%em&tons N '3 Sho$ld the
donaton made to her son be treated as a sn+le donaton be'a$se only t"o days se&arate the donatons N
d3 Sho$ld she be allo"ed to ded$'t the donatons from her n'ome der!ed from the e%er'se of her
&rofesson N
S455ESTED ANSWER:
a. Atty. Able s s$b0e't to the &ayment of donor*s ta%es on the follo"n+ donatons: ,3
P/@.)...... donaton to the al$mn asso'aton of the 4n!ersty of the Phl&&nes be'a$se the al$mn
asso'aton s not a s'hoolF /3 The P@.)...... donaton to a frend 2not related to Atty. Able by
'onsan+$nty "thn the fo$rth de+ree3 "h'h s 'onsdered as a donaton to a stran+er hen'e s$b0e't to
a donor*s ta% of thrty &er'ent 2<.L3 of the net +ftF and <3 the donaton to her son.
b. She s enttled to an e%em&ton on the frst P,..)...... of the ,--- net donatons.
9$rthermore) the follo"n+ donatons are e%em&t from donor*s ta%es: ,3 P/@.)...... donaton to U$e8on
(ty A+h S'hool as the same s 'onsdered as a donaton to the +o!ernmentF /3 the donaton to 6.A.
;a1as $nder the &ro!sons of Re&$bl' A't No. =@H-) as t s 'lear that the 'ondtons n the sad la" are
<=
metF and <3 the donaton to the rel+o$s 'on+re+aton be'a$se t s e!dent that the "hole amo$nt s not
to be $sed for admnstraton &$r&oses.
'. The donaton to the son sho$ld be treated as se&arate donatons be'a$se donor*s ta%es are
'om&$ted on the bass of net +fts made d$rn+ a 'alendar year.
d. The donaton to 6.A. ;a1as s allo"ed as a ded$'ton be'a$se t s a &r8e to an athlete n an
nternatonal s&orts to$rnament held abroad and san'toned by the natonal s&orts asso'aton. 2Se'. ,)
R.A. No. =@H-3 Also allo"ed as a ded$'ton s the donaton to U$e8on (ty A+h S'hool.
-.. On Se&tember /-) ,-?-) former Presdent 6ar'os ded n Aa"a) 4.S.A. A s&e'al a$dt
team 'reated to 'ond$'t n!est+atons and e%amnatons of the ta% lablty of the late &resdent ds'losed
that the 6ar'oses faled to fle a "rtten not'e of death of the de'edent and an estate ta% ret$rn n
!olaton of the NIR(.
The (ommssoner of Internal Re!en$e thereby 'a$sed the &re&araton and fln+ of the Estate
Ta% Ret$rn for the estate of the late &resdent. On K$ly />) ,--,) the BIR ss$ed a def'en'y ta%
assessment a+anst the estate "h'h "ere ser!ed 'onstr$'t!ely $&on 6s. Imelda 6ar'os 2thro$+h her
'areta1er 6r. 6artne83 at her last 1no"n address at No. /.H Orte+a St.) San K$an) 6 .6.
The def'en'y ta% assessment "as not &rotested admnstrat!ely by 6rs. 6ar'os and the other
hers of the late &resdent. On 9ebr$ary //) ,--<) the BIR (ommssoner ss$ed t"enty-t"o not'es of
le!y on real &ro&erty a+anst 'ertan &ar'els of land o"ned by the 6ar'oses - to satsfy the alle+ed estate
ta%) amon+ others.
Other not'es of le!y "ere made $ntl the &ro&ertes "ere sold at &$bl' a$'ton) "th the lots
ben+ forfeted n fa!or of the +o!ernment for la'1 of bdders.
The !aldty of the BIRIs a'tons s no" rased.
S455ESTED ANSWER: The a&&ro!al of the 'o$rt sttn+ n &robate) or as a settlement
trb$nal o!er the estate of the de'eased s not a mandatory re#$rement for the 'olle'ton of the estate.
The &robate 'o$rt s determnn+ ss$es "h'h are not a+anst the &ro&erty of the de'edent) or a 'lam
a+anst the estate as s$'h) b$t s a+anst the nterest or &ro&erty r+ht "h'h the her) le+atee) de!see) et'.
has n the &ro&erty formerly held by the de'edent.
The not'es of le!y "ere re+$larly ss$ed "thn the &res'r&t!e &erod.
The ta% assessment ha!n+ be'ome fnal) e%e'$tory and enfor'eable) the same 'an no lon+er be
'ontested by means of a ds+$sed &rotest. 26ar'os) II !. (o$rt of A&&eals) et al.) /=< S(RA H=3
-,. 6r. 9l I. Pno) a (anadan 't8en and a resdent of Ontaro) (anada) sends a +ft of
4SR/.)...... to hs f$t$re da$+hter-n-la" "ho s to be marred to hs only son n the Phl&&nes. The
marra+e a't$ally too1 &la'e on the date the +ft "as re'e!ed.
a. Is the donaton by 6r. Pno s$b0e't to ta% N E%&lan. Wo$ld yo$r ans"er be the same f 6r.
Pno s a 9l&no 't8en b$t s a non-resdent N
b. What s the ta% 'onse#$en'e) f any) to the 6r. Pno*s da$+hter-n-la" N
S455ESTED ANSWER:
a. Bes) be'a$se a non-resdent alen s e%em&t only from the &ayment of donor*s ta%es f hs +fts
are made to or for the $se of the Natonal 5o!ernment or any entty 'reated by any of ts a+en'es "h'h
s not 'ond$'ted for &roft) or to any &olt'al s$bd!son of the sad 5o!ernment.
Ae s s$b0e't to ta% be'a$se the +ft "as not made n fa!or of an ed$'atonal andPor 'hartable)
rel+o$s) '$lt$ral or so'al "elfare 'or&oraton) nstt$ton) fo$ndaton) tr$st or &hlanthro&' or+an8aton
or resear'h nstt$ton or 'or&oraton "h'h does not $se more than <.L of the donaton for
admnstraton &$r&oses.
If 6r. Pno "as a non-resdent 9l&no my ans"er "o$ld stll be the same.
b. None. the amo$nt sho$ld not be 'onsdered as &art of her n'ome as the same s one of the
e%'l$sons) Nether s there any donor*s ta% d$e from her be'a$se the ta% s to be &ad by the donor and
not the re'&ent.

RET4RNS
-/. What s the &robat!e !al$e of n'ome ta% ret$rns as e!den'e N
S455ESTED ANSWER: In'ome ta% ret$rns ben+ &$bl' do'$ments) $ntl 'ontro!erted by
'om&etent e!den'e) are 'om&etent e!den'e) are &rma fa'e 'orre't "th res&e't to the entres theren.
2Ro&al Tradn+ !. N;R() et al.) /-> S(RA <.-) <,=3
NOTES AND (O66ENTS: Whle the abo!e 'ted 'ase s a labor 'ase) the a$thor s$++ests that
the same 'o$ld fnd a&&l'aton n ta%aton as "ell.
-<. Bll and Allary are marred to ea'h other. Bll s em&loyed as a +o!ernment em&loyee
der!n+ ann$al +ross 'om&ensaton n'ome amo$ntn+ to P,/.)...... "hle Allary der!es n'ome from
selln+ baby dresses. Aer monthly n'ome fl$'t$ates) b$t for the year /...) she +rossed P@..).......
The 'o$&le ha!e no 'hldren. Are they allo"ed to fle se&arate n'ome ta% ret$rns N Why N
S455ESTED ANSWER: No. As a +eneral r$le) they are not allo"ed to fle se&arate ret$rns as
only marred nd!d$als "ho are both earnn+ &$rely 'om&ensaton n'ome are allo"ed to fle se&arate
n'ome ta% ret$rns.
Se'ton @, 2D3 of the NIR( of ,--= &ro!des that) D6arred nd!d$als) "hether 't8ens)
resdent or non-resdent alens) "ho do not der!e n'ome &$rely from 'om&ensaton shall fle a ret$rn for
the ta%able year to n'l$de the n'ome of both s&o$ses) b$t "here t s m&ra't'able for the s&o$ses to fle
one ret$rn) ea'h s&o$se may fle a se&arate ret$rn of n'ome b$t the ret$rns so fled shall be 'onsoldated
<?
by the B$rea$ for &$r&oses of !erf'atonE There s no sho"n+ n the &roblem that t s m&ra't'able
for Bll and Allary to fle one ret$rn) hen'e they sho$ld fle a sn+le ret$rn.
GGG -H. Who are the nd!d$als re#$red to fle an n'ome ta% ret$rn N
S455ESTED ANSWER:
a. E!ery 9l&no 't8en resdn+ n the Phl&&nesF
b. E!ery 9l&no 't8en resdn+ o$tsde the Phl&&nes on hs n'ome from so$r'es "thn the
Phl&&nesF
'. E!ery alen resdn+ n the Phl&&nes on n'ome der!ed from so$r'es "thn the Phl&&nesF
and
d. E!ery nonresdent alen en+a+ed n trade or b$sness or n the e%er'se of &rofesson n the
Phl&&nes. 2Se'. @, SAT W,X) NIR( of ,--=3
GGG-@. Who are the nd!d$als "ho are not re#$red to fle an n'ome ta% ret$rn N
S455ESTED ANSWER:
a. An nd!d$al "hose +ross n'ome does not e%'eed hs total &ersonal and addtonal
e%em&tons for de&endents) Pro!ded) That a 't8en of the Phl&&nes and any alen nd!d$al en+a+ed
n b$sness or &ra't'e of &rofesson "thn the Phl&&nes shall fle an n'ome ta% ret$rn re+ardless of the
amo$nt of +ross n'omeF
b. An nd!d$al "th res&e't to &$re 'om&ensaton n'ome for ser!'es n "hate!er form &ad)
n'l$dn+) b$t not lmted to fees) salares) "a+es) 'ommssons) and smlar tems) der!ed from so$r'es
"thn the Phl&&nes) the n'ome ta% on "h'h has been 'orre'tly "thheld) Pro!ded) That an nd!d$al
der!n+ 'om&ensaton 'on'$rrently from t"o or more em&loyers at any tme d$rn+ the ta%able year shall
fle an n'ome ta% ret$rn: Pro!ded) f$rther) That an nd!d$al "hose &$re 'om&ensaton n'ome der!ed
from so$r'es "thn the Phl&&nes e%'eeds S%ty tho$sand &esos 2P>.)......3) shall also fle an n'ome
ta% ret$rnF
'. An nd!d$al "hose sole n'ome has been s$b0e't to fnal "thholdn+ ta%F
d. An nd!d$al "ho s e%em&t from n'ome ta% &$rs$ant to the &ro!sons of the NIR( of ,--=)
and other la"s) +eneral or s&e'al. 2Se'. @, SAT W/X) NIR( of ,--=3
NOTES AND (O66ENTS: An nd!d$al "ho s not re#$red to fle an n'ome ta% ret$rn may
ne!ertheless be re#$red to fle an nformaton ret$rn. 2Se'. @, SAT W<X) NIR( of ,--=3
->. D9E (or&oraton bro$+ht to 'o$rt the ss$e of "hether t sho$ld be made lable for the
&ayment of the "thholdn+ ta% at so$r'e sn'e t s merely an a+ent and not the ta% &ayer. R$le on the
ss$e "th reasons.
S455ESTED ANSWER: D9E (or&oraton as the "thholdn+ a+ent s e%&l'tly made
&ersonally lable $nder the Ta% (ode for the &ayment of the ta% re#$red to be "thheld.
Reason: The la" sets no 'ondton for the &ersonal lablty of the "thholdn+ a+ent to atta'h.
Ths s n order to 'om&el the "thholdn+ a+ent to "thhold the ta% $nder any and all 'r'$mstan'es. In
effe't) the res&onsblty for the 'olle'ton of the ta% as "ell as the &ayment thereof s 'on'entrated $&on
the &erson o!er "hom the 5o!ernment has 0$rsd'ton.
Th$s) the "thholdn+ a+ent s the 'onstt$ted a+ent both of the +o!ernment and the ta%&ayer. Wth
res&e't to the 'olle'ton andPor "thholdn+ of the ta%) he s the 5o!ernment*s a+ent. In re+ard to the
fln+ of the ne'essary n'ome ta% ret$rn and the &ayment to the 5o!ernment) he s the a+ent of the
ta%&ayer. The "thholdn+ a+ent) therefore) s no ordnary +o!ernment a+ent es&e'ally be'a$se $nder the
Ta% (ode he s &ersonally lable for the ta% he s d$ty bo$nd to "thholdF "hereas) the (ommssoner of
Internal Re!en$e and hs de&$tes are not made lable $nder the la". 29l&nas Synthet' 9ber
(or&oraton !. (o$rt of A&&eals) et al.) 5.R. Nos. ,,?H-? Q ,/H<==) &rom. O'tober ,/) ,---3
NOTES AND (O66ENTS: Do not 'onf$se the abo!e holdn+ "th #$eston no. -=) nfra. The ss$e n
ths #$eston s the lablty of the "thholdn+ a+ent for the $n&ad ta%es WAI;E $nder #$eston no. -=
the ss$e s "hether a "thholdn+ a+ent s "thn le+al 'ontem&laton a ta%&ayer "ho 'o$ld a!al of the
ta% amnesty.
The t"o 2/3 ty&es of "thholdn+ at so$r'e are the ,3 fnal "thholdn+ ta%F and /3 'redtable
"thholdn+ ta%.
4nder the fnal "thholdn+ ta% system the amo$nt of n'ome ta% "thheld by the "thholdn+ a+ent s
'onstt$ted as a f$ll and fnal &ayment of the n'ome d$e from the &ayee on the sad n'ome. S,st
senten'e) ,st &ar.) Se'. /.@= 2A3) Re!. Re+s. No. /--?T
The lablty for &ayment of the ta% rests &rmarly on the &ayor or the "thholdn+ a+ent.. Th$s) n 'ase
of hs fal$re to "thhold the ta% or n 'ase of $nder "thholdn+) the def'en'y ta% shall be 'olle'ted from
the &ayor "thholdn+ a+ent. The &ayee s not re#$red to fle an n'ome ta% ret$rn for the &art'$lar
n'ome.
E%am&le: 6ara "on P/..)...... from the Pera or Bayon+ 'ontest. It sho$ld be the s&onsor-&ayor "ho s
re#$red to ded$'t the a&&ro&rate "thholdn+ ta% from the P/..)...... &r8e before t s +!en to 6ara.
6ara) the &ayee s not re#$red to fle an n'ome ta% ret$rn for the P/..)....... 9al$re to "thhold
s$b0e'ts the s&onsor-&ayee to the ta%.
4nder the 'redtable "thholdn+ ta% system) ta%es "thheld on 'ertan n'ome &ayments are
ntended to e#$al or at least a&&ro%mate he ta% d$e from the &ayee on the sad n'ome. The n'ome
re'&ent s stll re#$red to fle an n'ome ta% ret$rn andPor &ay the dfferen'e bet"een the ta% "thheld
and the ta% d$e on the n'ome. S,st and /nd senten'es) Se'. /@=2B3) Re!. Re+s. No. /--?T
The t"o 1nds of 'redtable "thholdn+ ta%es are ,3 ta%es "thheld on n'ome &ayments 'o!ered
by the e%&anded "thholdn+ ta%F and /3 ta%es "thheld on 'om&ensaton n'ome.
<-
E%em&tons from the re#$rement of "thholdn+ or "hen no "thholdn+ ta%es re#$red:
Payments to the follo"n+:
,. Natonal 5o!ernment and ts nstr$mentaltes n'l$dn+ &ro!n'al) 'ty) or m$n'&al
+o!ernmentsF
/. Persons en0oyn+ e%em&ton from &ayment of n'ome ta%es &$rs$ant to the &ro!sons of any
la") +eneral or s&e'al) s$'h as b$t not lmted to the follo"n+:
a. Sales of real &ro&erty by a 'or&oraton "h'h s re+stered "th and 'ertfed by the A;4RB or A4D((
as en+a+ed n so'al8ed ho$sn+ &ro0e't "here the selln+ &r'e of the ho$se and lot or only the lot does
not e%'eed P,?.)...... n 6etro 6anla and other h+hly $rban8ed areas and P,@.)...... n other
areas or s$'h ad0$sted amo$nt of selln+ &r'e for so'al8ed ho$sn+ as may later be determned and
ado&ted by the A;4RBF
b. (or&oratons re+stered "th the Board of In!estments and en0oyn+ e%em&tons from n'ome $nder
the Omnb$s In!estment (ode of ,--=F
'. (or&oratons e%em&t from n'ome ta% $nder Se'. <.) of the Ta% (ode) l1e the SSS) 5SIS) the P(SO)
et'. Ao"e!er) n'ome &ayments arsn+ from any a't!ty "h'h s 'ond$'ted for &roft or n'ome der!ed
from real or &ersonal &ro&erty shall be s$b0e't to a "thholdn+ ta%. 2Se'. @=.@) Re!. Re+s. No. /--?3
-=. Andres Sorano) a 4.S. 't8en and resdent) formed DA. Sorano B (a)E "h'h "as
s$bse#$ently renamed ANS(OR. Ae o"ned or+nally ss$ed 'ommon shares "h'h s$bse#$ently earned
sto'1 d!dends. When he ded) &art of the shares &assed on to hs "do" and another &art to hs estate.
Sto'1 d!dends "ere a+an de'lared. S$bse#$ently) ANS(OR re'lassfed ts e%stn+ 'ommon shares
nto 'ommon and &referred shares. The "do" and the estate e%'han+ed ther 'ommon sto'1holdn+s for
&referred shares) "th the estate retann+ some 'ommon shares.
ANS(OR then redeemed the 'ommon shares belon+n+ to the estate after "h'h the BIR assessed
ANS(OR for def'en'y "thholdn+ ta%-at so$r'e on the transa'tons of e%'han+e and redem&ton of
sto'1s.
6ay ANS(OR) as the "thholdn+ a+ent a!al of the benef'ent &ro!sons of P.D. No. >=) "h'h
'ondones) Dthe 'olle'ton of all nternal re!en$e ta%es n'l$dn+ the n'rements of &enaltes on a''o$nt of
non-&ayment as "ell as all '!l) 'rmnal or admnstrat!e labltes arsn+ from or n'dent toE
2!ol$ntary3 ds'los$res $nder the NIR( of &re!o$sly $nta%ed n'ome andPor "ealth Dreal8ed here or
abroad by any ta%&ayer) nat$ral or 0$rd'al.E N
S455ESTED ANSWER: No. In the o&eraton of the "thholdn+ ta% system) the "thholdn+
a+ent s the &ayor) a se&arate entty a'tn+ no more than an a+ent of the +o!ernment for the 'olle'ton of
the ta% n order to ens$re ts &ayments. The &ayor of the ta% s the ta%&ayer) he s the &erson s$b0e't to ta%
m&osed by la"F and the &ayee s the ta%n+ a$thorty.
In other "ords) the "thholdn+ a+ent s merely a ta% 'olle'tor) not a ta%&ayer.
4nder the "thholdn+ system) ho"e!er) the a+ent-&ayor be'omes a &ayee by f'ton of la". As
2a+ent3 lablty s dre't and nde&endent from the ta%&ayer) be'a$se the n'ome ta% s stll m&osed on
and d$e from the latter. The a+ent s not lable for the ta% as no "ealth flo"ed nto hm) he earned no
n'ome. The Ta% (ode only ma1es the a+ent &ersonally lable for the ta% arsn+ from the brea'h of ts
le+al d$ty to "thhold as dstn+$shed from ts d$ty to &ay ta% sn'e) the +o!ernment 'a$se of a'ton
a+anst the "thholdn+ a+ent s not for the 'olle'ton of n'ome ta%) b$t for the enfor'ement of the
"thholdn+ &ro!sons of the Ta% (ode) 'om&lan'e "th "h'h s m&osed on the "thholdn+ a+ent and
not $&on the ta%&ayer.
A "thholdn+ a+ent) not ben+ a ta%&ayer s not 'o!ered by the &rote't!e embra'e of a ta%
amnesty be'a$se the &ro!sons of the m&lementn+ r$les of P.D. No. <=. "h'h e%&anded amnesty on
&re!o$sly $nta%ed n'ome s e%&l't n e%'l$dn+ ta% labltes on "thholdn+ ta% at so$r'e.
2(ommssoner of Internal Re!en$e !. (o$rt of A&&eals) et al.) 5.R. No. ,.?@=>) Kan$ary /.) ,---3
NOTES AND (O66ENTS:
The abo!e (ommssoner of Internal Re!en$e !. (o$rt of A&&eals) et al.) 2ANS(OR3) 'ase may ha!e an
m&a't on the do'trne en$n'ated n (ommssoner of Internal Re!en$e !. Pro'ter Q 5amble Phl&&ne
6an$fa't$rn+ (or&oraton) /.H S(RA <==) <?<-<?>.
Pro'ter Q 5amble held that a ta%&ayer s defned $nder the NIR( as Dany &erson
s$b0e't to ta%.E Sn'e) the "thholdn+ a+ent "ho s Dre#$red to ded$'t and "thhold any ta%E s made
D&ersonally lable for s$'h ta%)E s$b0e't to and lable for def'en'y assessments) s$r'har+es and &enaltes
sho$ld the amo$nt of the ta% be fnally determned to be less than that re#$red to he "thheld by la")
then he s a ta%&ayer. Ae has s$ff'ent le+al nterest to brn+ a s$t for ref$nd of ta%es he bele!es "ere
lle+ally 'olle'ted from hm. 2'tn+ Phl&&ne 5$aranty (om&any) In'. !. (ommssoner of Internal
Re!en$e) ,@ S(RA ,3
The reader sho$ld ta1e note that) n 'ase of do$bt) ta% amnestes are to be str'tly 'onstr$ed
a+anst the +o!ernment. Ta% stat$tes ben+ b$rdens are not to be &res$med beyond "hat the ta% amnesty
e%&ressly and 'learly de'lares. 2Re&$bl' !. Intermedate A&&ellate (o$rt) ,-> S(RA <<@3
To s$mmar8e) f the ss$e s a&&l'aton for ref$nd) the "thholdn+ a+ent s a ta%&ayer 2Pro'ter
Q 5amble3) b$t for ta% amnesty &$r&oses) he s not. 2Ans'or3
TARI99 AND (4STO6S (ODE
-?. When does m&ortaton be+n and "hen does t end N
S455ESTED ANSWER: Im&ortaton be+ns "hen the 'on!eyn+ !essel or ar'raft enters the
0$rsd'ton of the Phl&&nes "th ntenton to $nlade theren.
H.
Im&ortaton s deemed termnated $&on &ayment of the d$tes) ta%es and other 'har+es d$e $&on
the a+en'es) or se'$red to be &ad) at the &ort of entry and the le+al &ermt for "thdra"al shall ha!e been
+ranted.
In 'ase the art'les are free of d$tes) ta%es and other 'har+es) $ntl they ha!e le+ally left the
0$rsd'ton of the '$stoms. 2Se'. ,/./) T((P3
--. What s meant by the fle%ble tarff 'la$se N
S455ESTED ANSWER: Ths s a &ro!son n the Tarff and ($stoms (ode) "h'h
m&lements the 'onstt$tonally dele+ated &o"er of the Presdent of the Phl&&nes) n the nterest of
natonal e'onomy) +eneral "elfare andPor natonal se'$rty $&on re'ommendaton of the NEDA to
n'rease) red$'e or remo!e e%stn+ &rote't!e rates of m&ort d$ty) PROVIDED TAAT) the n'rease
sho$ld not be h+her than ,..L ad !aloremF to establsh m&ort #$ota or to ban m&orts of any
'ommodty) to m&ose addtonal d$ty on all m&orts not e%'eedn+ ,.L ad !alorem.
GGG ,... The Tarff and ($stoms (ode &ro!des for the m&oston of s&e'al '$stoms d$tes. What
are these d$tes and "hat s ther nat$re and &$r&ose N
S455ESTED ANSWER: S&e'al '$stoms d$tes are addtonal m&ort d$tes m&osed on
s&e'f' 1nds of m&orted art'les $nder 'ertan 'ondtons.
The s&e'al '$stoms d$tes are the ant-d$m&n+ d$ty) the 'o$nter!aln+ d$ty) the ds'rmnatory
d$ty and the mar1n+ d$ty.
The s&e'al '$stoms d$tes are m&osed for the &rote'ton of 'ons$mers and man$fa't$rers) as
"ell as Phl&&ne &rod$'ts.
GGG ,.,. E%&lan brefly "hat s meant by ant-d$m&n+ d$ty and "hen s t m&osed N
S455ESTED ANSWERS: A s&e'al d$ty m&osed on the m&ortaton of a &rod$'t) 'ommodty or art'le
of 'ommer'e nto the Phl&&nes at less than ts normal !al$e "hen destned for domest' 'ons$m&ton n
the e%&ort 'o$ntry) "h'h s the dfferen'e bet"een the e%&ort &r'e and the normal !al$e of s$'h &rod$'t)
'ommodty or art'le. 2Se'. <., 2s3 2,3) T(() as amended by R.A. No. ?=@/) DAnt-D$m&n+ A't of
,---.E3
The ant-d$m&n+ d$ty s m&osed "here the m&ortaton of the &rod$'t) 'ommodty or art'le of
'ommer'e des'rbed abo!e s 'a$sn+ or s threatenn+ to 'a$se materal n0$ry to a domest' nd$stry) or
materally retards the establshment of a domest' nd$stry &rod$'n+ the l1e &rod$'t. 2Se'. <., 2a3)
T(() Ibd.E3
NOTES AND (O66ENTS:
The defnton $nder the R.A. No. ?=@/) the DAnt-D$m&n+ A't of ,---)E s s$bstantally the
defnton &ro!ded for $nder R.A. No. =?H<) the DAnt-D$m&n+ A't of ,--H.E
,./. E%&lan the meann+ of normal !al$e for &$r&oses of m&osn+ the ant-d$m&n+ d$ty.
S455ESTED ANSWER: It s the 'om&arable &r'e at the date of sale of l1e &rod$'t)
'ommodty) or art'le n the ordnary 'o$rse of trade "hen destned for 'ons$m&ton n the 'o$ntry of
e%&ort. 2Se'. <., 2s3 2< 3) T(() as amended by R.A. No. ?=@/) DAnt-D$m&n+ A't of ,---.E3
,.<. What s meant by d$m&ed m&ortP&rod$'t N
S455ESTED ANSWER: Any &rod$'t) 'ommodty or art'le of 'ommer'e ntrod$'ed nto the Phl&&nes
at an e%&ort &r'e less than ts normal !al$e n the ordnary 'o$rse of trade) for the l1e &rod$'t)
'ommodty or art'le destned for 'ons$m&ton n the e%&ortn+ 'o$ntry) "h'h s 'a$sn+ or s
threatenn+ to 'a$se materal n0$ry to a domest' nd$stry) or materally retardn+ the establshment of a
domest' nd$stry &rod$'n+ the l1e &rod$'t. 2Se'. <., 2s3 2@3) T(() as amended by R.A. No. ?=@/)
DAnt-D$m&n+ A't of ,---.E3
GGG ,.H. Who m&oses the ant-d$m&n+ d$ty.
S455ESTED ANSWER: The Se'retary of Trade and Ind$stry n the 'ase of non-a+r'$lt$ral &rod$'t)
'ommodty) or art'le or the Se'retary of A+r'$lt$re) n the 'ase of a+r'$lt$ral &rod$'t) 'ommodty or
art'le) after formal n!est+aton and affrmat!e fndn+ of the Tarff (ommsson.
E!en "hen all the re#$rements for the m&oston ha!e been f$lflled) the de'son on "hether or
not to m&ose a defnt!e ant-d$m&n+ d$ty remans the &rero+at!e of the Tarff (ommsson. 2Se'. <.,
2a3) T(() as amended by R.A. No. ?=@/) DAnt-D$m&n+ A't of ,---.E3
NOTES AND (O66ENTS: R.A. No. ?=@/) DAnt-D$m&n+ A't of ,---E abolshed the S&e'al
(ommttee on Ant-D$m&n+ 'reated $nder R.A. No. =?H<) the DAnt-D$m&n+ A't of ,--HE.
(rtera $sed by the Tarff (ommsson "hether or not to m&ose the ant-d$m&n+ d$ty. It may 'onsder
amon+ others) the effe't of m&osn+ an ant-d$m&n+ d$ty on the "elfare of the 'ons$mers andPor the
+eneral &$bl') and other related lo'al nd$stres. 2Se'. <., 2a3) T(() as amended by R.A. No. ?=@/)
DAnt-D$m&n+ A't of ,---.E3
GGG ,.@. What s the amo$nt of ant-d$m&n+ d$ty that may be m&osed N
S455ESTED ANSWER: The dfferen'e bet"een the e%&ort &r'e and the normal !al$e of s$'h &rod$'t)
'ommodty or art'le. 2Se'. <., 2s3 2,3) T(() as amended by R.A. No. ?=@/) DAnt-D$m&n+ A't of
,---.E3
The ant-d$m&n+ d$ty shall be e#$al to the mar+n of d$m&n+ on s$'h &rod$'t) 'ommodty or art'le
thereafter m&orted to the Phl&&nes $nder smlar 'r'$mstan'es) n addton to ordnary d$tes) ta%es
and 'har+es m&osed by la" on the m&orted &rod$'t) 'ommodty or art'le)
H,
GGG ,.>. What are 'o$nter!aln+ d$tes N
S455ESTED ANSWER: Addtonal '$stoms d$tes m&osed on any &rod$'t) 'ommodty or art'le of
'ommer'e "h'h s +ranted dre'tly or ndre'tly by the +o!ernment n the 'o$ntry of or+n or
e%&ortaton) any 1nd or form of s&e'f' s$bsdy $&on the &rod$'ton) man$fa't$re or e%&ortaton of s$'h
&rod$'t 'ommodty or art'le) and the m&ortaton of s$'h s$bsd8ed &rod$'t) 'ommodty) or art'le has
'a$sed or threatens to 'a$se materal n0$ry to a domest' nd$stry or has materally retarded the +ro"th
or &re!ents the establshment of a domest' nd$stry. 2Se'. <./) T((P as amended by Se'ton ,) R.A. No.
?=@,3
GGG ,.=. What are mar1n+ d$tes N
S455ESTED ANSWER: Addtonal '$stoms d$tes m&osed on fore+n art'les 2or ts
'ontaners f the art'le tself 'annot be mar1ed3) not mar1ed n any off'al lan+$a+e n the Phl&&nes) n
a 'ons&'$o$s &la'e as le+bly) ndelbly and &ermanently n s$'h manner as to nd'ate to an $ltmate
&$r'haser n the Phl&&nes the name of the 'o$ntry of or+n.
GGG ,.?. What s a ds'rmnatory d$ty N
S455ESTED ANSWER: Ne" and addtonal '$stoms d$ty m&osed $&on
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H
/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/H/
H/H/H/H/H/H/H/H/ No. There s no #$eston that RT(*s are de!od of any 'om&eten'e to &ass $&on the
!aldty or re+$larty of se8$re and forfet$re &ro'eedn+s 'ond$'ted by the B$rea$ of ($stoms and to
en0on or other"se nterfere "th these &ro'eedn+s. The (olle'tor of ($stoms sttn+ n se8$re and
forfet$re &ro'eedn+s has e%'l$s!e 0$rsd'ton to hear and determne all #$estons to$'hn+ on the
se8$re and forfet$re of d$table +oods. RT(s are &re'l$ded from ass$mn+ 'o+n8an'e o!er s$'h matters
e!en thro$+h &ettons of 'ertorar) &rohbton or mandam$s. 2The B$rea$ of ($stoms) et al.) !. O+aro)
et al.) 5.R. No. ,<?.?,) &rom. 6ar'h /.) /...3
NOTES AND (O66ENTS:
H/
a. The Tarff and ($stoms (ode and the A't (reatn+ the (o$rt of Ta% A&&eals s&e'fy the
&ro&er fora and &ro'ed$re for the !entlaton of ant le+al ob0e'tons or ss$es rased 'on'ernn+ se8$re
and forfet$re &ro'eedn+s. Th$s) a'tons of the (olle'tor of ($stoms are a&&ealable to the (ommssoner
of ($stoms) "hose de'son) n t$rn) s s$b0e't to the e%'l$s!e a&&ellate 0$rsd'ton of the (o$rt of Ta%
A&&eals and from there to the (o$rt f A&&eals.
The r$le that RT(s ha!e no re!e" &o"ers o!er s$'h &ro'eedn+s s an'hored $&on the &ol'y of
&la'n+ no $nne'essary hndran'e on the +o!ernment*s dr!e) not only to &re!ent sm$++ln+ and other
fra$ds $&on ($stoms) b$t more m&ortantly) to render effe't!e and eff'ent the 'olle'ton of m&ort and
e%&ort d$tes d$e the State) "h'h enables the +o!ernment to 'arry o$t the f$n'tons t has been nstt$ted
to &erform.
b. The '$stoms a$thortes do not ha!e to &ro!e to the satsfa'ton of the 'o$rt that the art'les on
board a !essel "ere m&orted from abroad or are ntended to be sh&&ed abroad before they may e%er'se
the &o"er to effe't '$stoms sear'hes) se8$res) or arrests &ro!ded by la" and 'ontn$e "th the
admnstrat!e hearn+s. 2The B$rea$ of ($stoms) et al.) !. O+aro) et al.) 5.R. No. ,<?.?,) &rom. 6ar'h
/.) /...3
,,,. A'tn+ on nformaton that a sh&ment from Aon+1on+ on board the SPS Sa Dra+on
!olated the Tarff and ($stoms (ode) as amended) a+ents of the EIIB se8ed the sh&ment. It "as fo$nd
that the H. ft. !an "as made to a&&ear as a 'onsoldaton sh&ment 'onsstn+ of /</ &a'1a+es "th
Transln1 Int*l. 9re+ht 9or"arded as sh&&er and Trans+lobe Int*l. In'.) as 'ons+neeF that there "ere
e+ht 2?3 sh&&ers and e+ht 2?3 'ons+nees de'lared as 'o-loaders and 'o-o"ners of the 'ontents of the
!an) "hen n tr$th the entre sh&ment belon+s only to one enttyF that the tems as de'lared 2!aro$s
nd$stral tems3 "ere fo$nd n the !an) nstead t "as fo$nd to be f$lly st$ffed "th te%tle &e'e +oods.
As a res$lt of the abo!e) the a&&ro&rate "arrant of se8$re "as ss$ed and the +oods forfeted n
fa!or of the +o!ernment.
The 'ons+nee fled a &etton for redem&ton of the sh&ment and the hearn+ off'er
re'ommended the release of the sh&ment $&on the &ayment of ts domest' !al$e as Dthe sh&ment
'onssts of +oods "h'h are n le+al 'ontem&laton not &rohbted) nor the release thereof to the 'lamant
'ontrary to la".E
The (ommssoner of ($stoms dened the offer of redem&ton on the +ro$nds 2,3 that the
sh&ment "as made to a&&ear an nno'$o$s 'onsoldaton sh&ment destned for sh&ment o$tsde of the
(B-(9S n order to 'on'eal the te%tle fabr'sF 2/3 the e+ht 'o-loadersP'ons+nes of the sh&ment are all
f'tto$sF and 2<3 (6O ?=--/ &ro!des for a denal of an offer of redem&ton "hen the se8ed sh&ment s
'ons+ned to a f'tto$s &erson.
Wo$ld yo$ allo" the redem&ton N Why N
S455ESTED ANSWER: Bes. There s absent the follo"n+ 'r'$mstan'es hen'e) t "o$ld be
&ro&er to allo" the redem&ton of forfeted &ro&erty $&on &ayment of ts 'om&$ted domest' mar1et !al$e.
2Trans+lobe Internatonal) In'. !. (o$rt of A&&eals) et al.) 5.R. No. ,/>><H) Kan$ary /@) ,---3
a. There s fra$dF
b. The m&ortaton s absol$tely &rohbted) or
'. The release of the &ro&erty "o$ld be 'ontrary to la". 2Ibd.3
6sde'laratons n manfest and rder 'annot be as'rbed to a 'ons+nee sn'e t "as not the one
that &re&ared them. As sad n 9arolan) f at all) the "ron+f$l ma1n+ or falsty of the do'$ments 'an only
be attrb$ted to the fore+n s$&&lers or sh&&ers. .2Ibd.3
NOTES AND (O66ENTS: 9ra$d as defned n Se'. ,) &ar. ,.a.) (6O-?=--/ m$st be a't$al) not
'onstr$'t!e.
Se'. ,.a.) (6O-?=--/ s of the same tenor as Se'. /@<.) &ars.) 2f3 and 2m3) s$b&ars. <) H and @)
"h'h deals "th falstes 'ommtted by the o"ner) m&orter) e%&orter or 'ons+nee or
m&ortatonPe%&ortaton thro$+h any other &ra't'e or de!'e.
In A8nar !. (o$rt of Ta% A&&eals) @? S(RA @,-) reterated n 9arolan) Kr. !. (o$rt of Ta%
a&&eals) et al.) /,= S(RA /-?) the S$&reme 'o$rt 'larfed that the fra$d 'ontem&lated by la" m$st be
a't$al and not 'onstr$'t!e. It m$st be ntentonal) 'onsstn+ of de'e&ton) "llf$lly and delberately done
or resorted to n order to nd$'e another to +!e $& some r+ht.
GGG 9orfet$re &ro'eedn+s are n the nat$re of &ro'eedn+s n rem.
9orfet$re of se8ed +oods n the B$rea$ of ($stoms s a &ro'eedn+ a+anst the +oods and not
a+anst the o"ner.
It s n the nat$re of a &ro'eedn+ n rem) .e. dre'ted a+anst the res or m&orted +oods and
entals a determnaton of the le+alty of ther m&ortaton. In ths &ro'eedn+) t s n le+al 'ontem&laton
the &ro&erty tself "h'h 'ommts the !olaton and s treated as the offender) "tho$t referen'e
"hatsoe!er to the 'hara'ter or 'ond$'t of the o"ner.
The ss$e s lmted to "hether the m&orted +oods sho$ld be forfeted and ds&osed of n
a''ordan'e "th la" for !olaton of the Tarff and ($stoms (ode. .2Trans+lobe Internatonal) In'. !.
(o$rt of A&&eals) et al.) 5.R. No. ,/>><H) Kan$ary /@) ,---3
The one-year &res'r&t!e &erod for forfet$re &ro'eedn+s a&&les only n the absen'e of fra$d.
2(ommssoner of ($stoms !. (l$rt of Ta% A&&eals) et al.) 5.R. No. ,</-/-) &rom. 6ar'h /=) /...3
,,/. On A&rl ,.) ,--=) the (olle'tor of ($stoms 'ond$'ted a &$bl' a$'ton sale of ;ot No. ,@
'onsstn+ of !aro$s marble &ro'essn+ ma'hne and +rndn+ ma'hne "h'h n'l$ded a S&e'al (r'$lar
Sa" and a Damond Sa"n+ 6a'hne. The a"ard "as made to En+r. 9ran1ln Pol'ar&o) the h+hest
bdder. After En+r. Pol'ar&o s+ned the 5ate Pass e!den'n+ "thdra"al of ;ot No. ,@ from '$stoms
'$stody) he fo$nd that the t"o sa"s "ere mssn+ and $&on hs n!est+aton fo$nd that the tems "ere
nstalled n the 'om&o$nd of (arrara 6arble Phl&&nes) In'.
H<
(onse#$ently) for alle+ed !olatons of Se'ton /@<> 2non-&ayment of d$tes and ta%es3 and
Se'ton /@<. SeT 2lle+al remo!al of art'les from "areho$se3 of the Tarff and ($stoms (ode 2T((3 the
sa"s "ere se8ed by a$thorty of a Warrant of Se8$re and Detenton dated 6ay /-) ,--,) from the
'om&o$nd of (arrara 6arble.
(arrara 6arble faled to &resent e!den'e of &ayment of d$tes and ta%es and ts defense s an
alle+ed lo'al sale e!den'ed by notar8ed Deeds of Sale. In the meantme) En+r. Pol'ar&o nter!ened
and 'lamed o"nersh& of the sa"s. (arrara 6arble then offered to settle the 'ase n a''ordan'e "th the
&ro!sons of the T((. Ao"e!er) the offer "as ref$sed by the B$rea$ of ($stoms) "h'h then de'lared
the art'les forfeted n fa!or of the 5o!ernment. Resol!e the follo"n+ ss$es e%&lann+ brefly the
reasons for yo$r ans"er:
a. Is t !ald to forfet an art'le fo$nd n the &ossesson of a thrd &arty after the sale at &$bl'
a$'ton N
b. Aas the m&ortaton been termnated N
'. Who has the r+ht to retan &ossesson o!er the t"o 2/3 sa"s N
S455ESTED ANSWERS:
a. Bes) be'a$se there s sho"n+ that the m&orted sa"s "ere a'#$red by (arrara 6arble "hle
they "ere n '$stoms '$stody "tho$t sho"n+ that the 'orre't d$tes and ta%es "ere &ad thereon.
The T(( s$b0e'ts to forefet$re any art'le "h'h s remo!ed 'ontrary to la" from any &$bl' or
&r!ate "areho$se $nder '$stoms s$&er!son) or released rre+$larly from '$stoms '$stody. Before
forfet$re &ro'eedn+s are nstt$ted) the la" re#$res the &resen'e of &robable 'a$se. On'e establshed the
b$rden of &roof s shfted to the 'lamant. ($stoms off'ers "th &ro&er a$thor8aton from the
(ommssoner n "rtn+) may demand e!den'e of &ayment of d$tes and ta%es on fore+n art'les o&enly
offered for sale or 1e&t n stora+eF and f no s$'h e!den'e 'an be &rod$'ed) s$'h art'les may be se8ed
and s$b0e'ted to forfet$re &ro'eedn+F &ro!ded ho"e!er) that d$rn+ s$'h &ro'eedn+s the &erson or
entty from "hom s$'h art'les "ere se8ed shall be +!en an o&&ort$nty to &ro!e or sho" the so$r'e of
s$'h art'les and the &ayment of d$tes and ta%es thereon. 4nder the 'r'$mstan'es) t s 'lear that before
the del!ery of the tems to En+r. Pol'ar&o) the B$rea$ of ($stoms had '$stody of sad sa"s. It "as only
"hen the "hole "as handed o!er to En+r. Pol'ar&o that t "as ds'o!ered that the t"o sa"s "ere
mssn+.
In ths 'ase the forfet$re ta1es effe't mmedately $&on the 'ommsson of the offense. The
forfet$re of the s$b0e't ma'hneres) retroa'ted to the date they "ere lle+ally "thdra"n from '$stoms
'$stody. The +o!ernment*s r+ht to re'o!er the ma'hneres &ro'eeds from ts r+ht as la"f$l o"ner and
&ossessor thereof $&on abandonment by the m&orter. S$'h r+ht may be asserted no matter n "hose
hands the &ro&erty may ha!e 'ome) and the 'ondemnaton "hen obtaned a!ods all ntermedate
alenatons.
The forfet$re of the sa"s rests on a dfferent stat$tory bass from Pol'ar&o*s r+ht to re'e!e the
&ro&erty as the "nnn+ bdder n the a$'ton sale. It "as based $&on the +o!ernment*s r+ht to re'o!er
&ro&erty lle+ally "thdra"n from ts '$stody.
b. Im&ortaton "as already termnated after En+r. Pol'ar&o has s+ned the 5ate Pass
e!den'n+ "thdra"al of ;ot ,@ from '$stoms '$stody.
Im&ortaton s deemed termnated $&on &ayment of d$tes) ta%es and other 'har+es d$e or
se'$red to be &ad $&on the art'les at a &ort of entry) and $&on the +rant of a le+al &ermt for "thdra"alF
or n 'ase sad art'les are free of d$tes) ta%es and other 'har+es) $ntl they ha!e le+ally left the
0$rsd'ton of the '$stoms. The forfet$re of the s$b0e't sa"s ho"e!er) s not de&endent on "hether or
not the m&ortaton "as termnatedF rather t s &remsed on the lle+al "thdra"al of +oods from '$stoms
'$stody.
Th$s) re+ardless of the termnaton of m&ortaton) '$stoms a$thortes may !aldly se8e +oods
"h'h) for all ntents and &$r&oses) stll belon+ to the +o!ernment.
'. (om&romse 'o$ld not be allo"ed anymore sn'e the s$b0e't ma'hneres had already been
a"arded to Pol'ar&o) ben+ the h+hest bdder n the &$bl' a$'ton. The +o!ernment has the r+htf$l
&ossesson of the sa"s b$t t sho$ld t$rno!er the same to Pol'ar&o. 2(arrara 6arble Phl&&nes) In'.) !.
(ommssoner of ($stoms) 5.R. No. ,/->?.) &rom. Se&tember ,) ,---3
NOTES AND (O66ENTS: Admnstrat!e and 0$d'al &ro'ed$res relat!e to '$stoms
sear'hes) se8$res and forfet$res:
a. Determnaton of &robable 'a$se and ss$an'e of "arrant. The (olle'tor of ($stoms $&on
&robable 'a$se that the art'les are m&orted or e%&orted) or are attem&ted to be m&orted or e%&orted) n
!olaton of the tarff and '$stoms la"s shall ss$e a "arrant of se8$re. 2Se'. >) Ttle III) (AO No. ---<3
If the sear'h and se8$re s to be 'ond$'ted n a d"elln+ &la'e) then a sear'h "arrant sho$ld be
ss$ed by the re+$lar 'o$rts not the B$rea$ of ($stoms.
There may be nstan'es "here no "arrants ss$ed by the B$rea$ of ($stoms or the re+$lar 'o$rts
s re#$red) as n sear'h and se8$res of motor !eh'les and !essels.
b. A't$al se8$re of the art'les. 6aster ths &ro'ed$re.
Re#$rements for release $nder bond of se8ed art'les: Ths s a &robable area so master.
Settlement of se8$re 'ase by &ayment of fne or redem&ton of forfeted &ro&erty.
Ths s another &robable area.
;O(A; TACATION
GGG ,,<. What are the f$ndamental &rn'&les of lo'al ta%aton N
S455ESTED ANSWER: The f$ndamental &rn'&les of lo'al ta%aton are:
a. 4nformtyF
HH
b. Ta%es) fees) 'har+es and other m&ostons shall be e#$table and based on ablty to &ay) for
&$bl' &$r&oses) not $n0$st) e%'ess!e) o&&ress!e or 'onfs'atory) not 'ontrary to la") &$bl' &ol'y)
natonal e'onom' &ol'y or n restrant of tradeF
'. The le!y and 'olle'ton shall not be let to any &r!ate &ersonF
d. In$res solely to the lo'al +o!ernment $nt le!yn+ the ta%F
e. The &ro+ress!ty &rn'&le m$st be obser!ed.
GGG ,,H. On K$ne />) ,--/) the San++$nan+ Panlala"+an of B$la'an &assed Pro!n'al Ordnan'e
No. <) to ta1e effe't on K$ly ,) ,--/) "h'h le!es a ta% of ,.L of the far mar1et !al$e n the lo'alty &er
'$b' meter of ordnary stones) +ra!el) sand) earth and other #$arry reso$r'es e%tra'ted from areas of
&$bl' land "thn ts terrtoral 0$rsd'ton.
It no" 'olle'ts the sad ta% $&on #$arry reso$r'es e%tra'ted from &r!ate lands by Re&$bl'
(ement. It 'lams a$thorty to do so $nder the &ro!sons of the ;o'al 5o!ernment (ode as "ell as $nder
the Re+alan theory of State o"nersh& o!er all nat$ral reso$r'es. Is the 'olle'ton 'orre't N
S455ESTED ANSWER: No) be'a$se the a$thorty $nder the ;o'al 5o!ernment (ode to
'olle't ta%es on #$arry reso$r'es a&&les only to those e%tra'ted from &$bl' lands. 2Se'. ,<H n relaton to
Se'. ,<?) ;o'al 5o!ernment (ode3
9$rthermore) the ;o'al 5o!ernment (ode &rohbts lo'al +o!ernment $nts from 'olle'tn+ e%'se ta%es
on art'les en$merated $nder the NIR() and ta%es) fees or 'har+es on &etrole$m &rod$'ts. 2Se'. ,<< ShT)
;o'al 5o!ernment (ode n relaton to the Ta% (ode3 The ta% m&osed s an e%'se ta% $&on the
&erforman'e) 'arryn+ on) or the e%er'se of an a't!ty. Whle the Ta% (ode le!es a ta% on all #$arry
reso$r'es) re+ardless of or+n) "hether e%tra'ted from &$bl' or &r!ate lands) the ;o'al 5o!ernment
(ode a$thor8es the lo'al +o!ernment $nt to m&ose s$'h ta%es on those ta1en from &$bl' lands. Th$s)
those e%tra'ted from &r!ate lands are ta%able $nder the NIR( and not by lo'al +o!ernment $nts.
The Re+alan do'trne may not be a&&led be'a$se ta%es) ben+ b$rdens) are not to be &res$med beyond
"hat the a&&l'able stat$te e%&ressly and 'learly de'lares) ta% stat$tes ben+ 'onstr$ed str'tssm 0$rs
a+anst the +o!ernment. 2The Pro!n'e of B$la'an) et al.) !. The (o$rt of A&&eals) et'.) et al.) /-- S(RA
HH/3
GGG ,,@. Phl&&ne Bas1etball Asso'aton 'ontested the def'en'y am$sement ta% assessed a+anst
t by the BIR for 'ond$'tn+ the &rofessonal bas1etball +ames and for the 'esson of ad!ertsn+ and
streamer s&a'es to Vnta+e Enter&rses) In'. a3 Sho$ld the am$sement ta%es be &ad to the lo'al
+o!ernment nstead of the BIR N
b3 Is the 'esson of ad!ertsn+ and streamer s&a'es to Vnta+e Enter&rses) In'. s$b0e't to the
&ayment of am$sement ta%es N
S455ESTED ANSWER:
a. No. Professonal bas1etball +ames sho$ld &ay the am$sement ta%es 'olle'ted by the BIR and not the
am$sement ta%es 'olle'ted by the lo'al +o!ernments. The am$sement ta% "h'h &ro!n'es and 'tes are
allo"ed to 'olle't $nder Se'. ,H. of the ;o'al 5o!ernment (ode) refers to Dan am$sement ta% to be
'olle'ted from &ro&retors) lessees) or o&erators of theaters) 'nemas) 'on'ert halls) 'r'$ses) bo%n+ stada)
and other &la'es of am$sement.E The a$thorty to ta% &rofessonal bas1etball +ames s not n'l$ded
theren be'a$se t s a natonal ta% &ro!ded for $nder Se'. ,/@ of the ,--= Ta% (ode "h'h &ro!des that)
DThere shall be 'olle'ted from the &ro&retor) lessee or o&erator of 'o'1&ts) 'abarets) n+ht or day 'l$bs)
bo%n+ e%hbtons) &rofessonal bas1etball +ames) Ka-Ala and ra'etra'1s) a ta% e#$!alent to: %%%% 2d3
9fteen &er'ent 2,@L3 n the 'ase of &rofessonal bas1etball +ames en!soned n Presdental De'ree No.
-=,: Pro!ded) ho"e!er) That the ta% heren shall be n le$ of all other &er'enta+e ta%es of "hate!er
nat$re and des'r&tonF %%%E
b3 Bes. The se'ond to the last &ara+ra&h of Se'. ,/@ of the ,--= Ta% (ode &ro!des that) the
term D+ross re'e&ts embra'es all the re'e&ts of the &ro&retor) lessee or o&erator of the am$sement &la'e..
Ths term s broad eno$+h to embra'e the 'esson of ad!ertsn+ and streamer s&a'es as the same
embra'es all the re'e&ts of the &ro&retor) lessee or o&erator of the am$sement &la'e. It s th$s) a natonal
ta% not a lo'al ta%.
The re'o+nton by the BIR of s$'h n'ome from 'esson as a lo'al ta% s of no moment be'a$se
the 5o!ernment s ne!er esto&&ed by the msta1e or error on the &art of ts a+ents) s&e'ally on the matter
of ta%es. 2Phl&&ne Bas1etball Asso'aton !. (o$rt of A&&eals) et al.) 5.R. No. ,,-,//) &rom. A$+$st
?) /...3
,,>. The (ty Treas$rer ds'o!ered that the Kne'hts faled to &ay ther real &ro&erty ta%es on
ther &ro&erty 'onsstn+ of a &ar'el of land "th an area of ?),./ s#.m. The &ro&erty "as s$bse#$ently
sold at &$bl' a$'ton for the ta% deln#$en'y. Ao"e!er) the Kne'hts dd not re'e!e any not'e of ther
ta% deln#$en'y and that the R+ster of Deeds dd not order them to s$rrender ther o"ner*s d$&l'ate for
annotaton of the ta% len &ror to the sale. Nether dd they ha!e not'e of the a$'ton sale nor "as the
'ertf'ate of sale annotated on ther ttle nor "th the ttle n the &ossesson of the Re+ster of Deeds.
Is the ta% sale !ald N Reason o$t yo$r ans"er.
S455ESTED ANSWER: No. It has been r$led that the not'e and &$bl'aton) as "ell as the
le+al re#$rements for a ta% deln#$en'y sale) are mandatory) and the fal$re to 'om&ly there"th 'an
n!aldate the sale. The &res'rbed not'es m$st be sent to 'om&ly "th the re#$rements of d$e &ro'ess.
2De Kne'ht) et al). !. (o$rt of A&&ealsF De Kne'ht) et al.) !. Aonorable Sayo) /-. S(RA //<)/<>3
The reason behnd the not'e re#$rement s that ta% sales are admnstrat!e &ro'eedn+s "h'h
are n &ersonam n nat$re. 2P$8on !. Abbellera) ,>- S(RA =?-) =-@F De Ass !. I.A. (.) ,>- S(RA <,H3
H@
NOTES AND (O66ENTS: All of the abo!e 'ases "ere de'ded nter&retn+ the &ro!sons of
(.A. No. H=.) the old Assessment ;a") and P.D. No. H>H) the Real Pro&erty Ta% (ode) both of "h'h
re#$red &ersonal not'e to the ta%&ayer n addton to the re#$ste ad!ertsement.
The &ro!sons of Se'. />. of the ;o'al 5o!ernment (ode on DAd!ertsement and SaleE does not
re#$re &ersonal not'e to the deln#$ent ta%&ayer.
In !e" of the abo!e) the a$thor bele!es that &ersonal not'e of the a$'ton sale s not re#$red
anymore $nder the &ro!sons of the ;o'al 5o!ernment (ode of ,-- "h'h re&ealed (.A. No. H=. and
P.D. No. H>H3
REA; PROPERTB TACATION
GGG,,=. What are the f$ndamental &rn'&les of real &ro&erty ta%aton N
a. A&&rasal at '$rrent and far mar1et !al$eF
b. (lassf'aton for assessment on the bass of a't$al $seF
'. Assessment on the bass of $nform 'lassf'atonF
d. A&&rasal) assessment) le!y and 'olle'ton shall not be let to a &r!ate &ersonF
e. A&&rasal and assessment shall be e#$table.
,,?. Determnaton of !aro$s tems:
a. The reasonable mar1et !al$e s determned by the assessor n the form of a s'hed$le of far
mar1et !al$es. The s'hed$le s then ena'ted by the lo'al san++$nan.
b. The assessment le!el s f%ed by ordnan'es of the a&&ro&rate san++$nan.
'. The ta% rate s also f%ed by ordnan'es of the a&&ro&rate san++$nan.
,,-. Pro&erty e%em&t from the &ayment of real &ro&erty ta%:
a. Real &ro&erty o"ned by the Re&$bl' of the Phl&&nes or any of ts &olt'al s$bd!sons
e%'e&t "hen the benef'al $se thereof has been +ranted to a ta%able &erson for a 'onsderaton or
other"seF
b. (hartable nstt$tons) 'h$r'hes) &arsona+es or 'on!ents a&&$rtenant thereto) mos#$es) non-
&roft or rel+o$s 'emeteres) and all lands) b$ldn+s and m&ro!ements a't$ally) dre'tly and e%'l$s!ely
$sed for rel+o$s) 'hartable and ed$'atonal &$r&osesF
'. 6a'hneres and e#$&ment) a't$ally) dre'tly and e%'l$s!ely $sed by lo'al "ater dstr'tsF
and +o!ernment o"ned and 'ontrolled 'or&oratons en+a+ed n the s$&&ly and dstrb$ton of "ater and
+eneraton and transmsson of ele'tr' &o"erF
d. Real &ro&erty o"ned by d$ly re+stered 'oo&erat!esF
e. 6a'hnery and e#$&ment $sed for &oll$ton 'ontrol and en!ronmental &rote'ton.
,/.. The &rotest
'ontem&latH
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H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H
>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>
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>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>
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H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H
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H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H
>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>H>
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=H=H=H=H=H=H=H=n+ for &$r&oses of determnn+ ts assessed !al$e.M Ae #$estoned the ne" assessment
before the ;o'al Board of Assessment A&&eals of (eb$ (ty) "h'h dsmssed hs a&&eal on Kan$ary ,,)
,--=. Ra$l ele!ated hs 'ase to the (entral Board of Assessment A&&eals.
On Se&tember ,=) ,--?) the (BAA rendered a de'son ordern+ the (eb$ (ty Assessor to ss$e
a ne" Ta% De'laraton n the amo$nt of P/?,)@??.... Ra$l then fled a moton for the re'onsderaton of
the (BAAIs de'son. Ra$l and the (ty Assessor 0ontly a+reed that the re!sed !al$aton of the &ro&erty
s P=?)<<.... as assessed !al$e) 'lassfyn+ the &ro&erty at P,),,. &er s#. m.) the b$ldn+ ha!n+ been
'om&leted and o''$&ed n ,-@= or forty-t"o 2H/3 years a+o.
The (BAA then r$led that for &$r&oses of determnn+ the ba'1 ta%es d$e on the e%'ess area of
s$b0e't b$ldn+ from ,-?? to ,-->) the (eb$ (ty Assessor sho$ld ss$e n a''ordan'e "th Se'. /// of
the ;o'al 5o!ernment (ode:
a. Ta% De'laraton effe't!e ,-?? to K$ne <.) ,-->) based on the mnm$m rate &er s#. m. for the
ty&e of b$ldn+ n a''ordan'e "th the ,-?@-,-?> S'hed$le of Val$esF
b. Ta% De'laraton to s$&ersede Ta% De'laraton No. , to be effe't!e from K$ly ,) ,--H to the
year ,--@) based on the mnm$m rate &er s#. m. for the ty&e of b$ldn+) n a''ordan'e "th the ,-??-
,--, S'hed$le of Val$esF and
'. Ta% De'laraton to s$&ersede Ta% De'laraton No. / to ta1e effe't n ,-->) based on the
re!sed !al$aton of the &ro&erty as a+reed $&on by the &artes.
Ra$l dsa+rees "th the abo!e fndn+s) based on the follo"n+:
a3 The (BAA erred n resol!n+ the ss$e of ba'1 ta%es from ,-?? to ,--@) des&te the fa't that
s$'h ss$e "as not rased n the a&&eal to t) $nder ts &rete%t that t s a&&lyn+ Se'. /// of the ;o'al
5o!ernment (ode.
b3 The (BAA erred n not str'tly a&&lyn+ &ar. 2l3) Se'. ,-- of the ;o'al 5o!ernment (ode)
defnn+ M9ar 6ar1et Val$eM as bass for 'om&$tn+ the Massessed !al$e.M
'3 The (BAAIs r$ln+ s ds'rmnatory) $n0$st) 'onfs'atory and $n'onstt$tonal.
To "hat 'o$rt sho$ld Ra$l ele!ate the ad!erse de'son of the (BAA N Wo$ld hs a&&eal &ros&er
N
S455ESTED ANSWER:
Ra$l sho$ld a&&eal the de'son of the (BAA to the (o$rt of A&&eals) $nder R$le H< of the ,--=
R$les of (!l Pro'ed$re) by fln+ a &etton for re!e" "thn a &erod of ffteen 2,@3 days from re'e&t of
the ad!erse (BAA de'son.
Ra$lIs a&&eal "o$ld not &ros&er for the follo"n+ reasons:
a. The fa'ts of the 'ase do not sho" that Ra$l has &ad $nder &rotest the ta% assessed a+anst hs
&ro&erty. Ths s a mandatory re#$rement $nder Se'. /@/ of the ;o'al 5o!ernment (ode. Ths s so)
be'a$se the ss$e s reasonableness of the amo$nt assessed and not on the !ery a$thorty and &o"er of the
assessor to m&ose the assessment and of the treas$rer to 'olle't the ta%. 2Ty !. Tram&e) /@. S(RA @..3
b. A&&ellate 'o$rts as "ell as a&&ellate admnstrat!e a+en'es) ha!e nherent a$thorty to
re!e" $nass+ned errors 2,3 "h'h are 'losely related to an error &ro&erly rased) or 2/3 $&on "h'h the
determnaton of the error &ro&erly ass+ned s de&endent) or 2<3 "here the 'o$rt or admnstrat!e a+en'y
fnds that 'onsderaton of them s ne'essary n arr!n+ at a 0$st de'son of the 'ase. There "as no error)
be'a$se Ra$l hmself s assaln+ the s$b0e't assessment as Me%'ess!e and $n'ons'onable.M Th$s) (BAA
"as d$ty-bo$nd to re!e" the fa't$al ante'edents of the 'ase and to a&&ly hereon the &ertnent &ro!sons
of la". In the &ro'ess) (BAA has to a&&ly Se'. /// of the ;o'al 5o!ernment (ode "h'h a$thor8es the
'olle'ton of ba'1 ta%es.
'. The e%'ess areas res$ltn+ from the re!son m$st be $nderstood as ne!er ha!n+ been
de'lared before. Ths s e!dent from the &ro!sons of Se'. /// of the ;o'al 5o!ernment (ode "h'h
reads:
MSe'. ///. Assessment of Pro&erty S$b0e't to Ba'1 Ta%es. -Real &ro&erty de'lared for the frst
tme shall be assessed for ta%es for the &erod d$rn+ "h'h t "o$ld ha!e been lable b$t n no 'ase for
more than ten 2,.3 years &ror to the date of ntal assessment: Pro!ded) ho"e!er) That s$'h ta%es shall
be 'om&$ted on the bass of the a&&l'able s'hed$le of !al$es n for'e d$rn+ the 'orres&ondn+ &erod.M
It s nether 0$st that a lando"ner sho$ld be &ermtted by an n!ol$ntary msta1e or thro$+h other
'a$ses) not to say bad fath) to state an area far less than that a't$ally 'ontaned n hs land and &ay a ta%
to the State a ta% far belo" that "h'h he sho$ld really &ay.
d. Ra$lIs 'ontenton on the $se of mar1et !al$e for the 'om&$taton of the assessed !al$e s
erroneo$s. Par. 2l3 Se'. ,-- of the ;o'al 5o!ernment (ode merely defnes M9ar 6ar1et Val$e.M It does
not n any "ay dre't that the M9ar 6ar1et Val$eM sho$ld be $sed as a bass for &$r&oses of real &ro&erty
H=
ta%aton. On the other hand) &ar. 2a3) Se'. ,-? of the same (ode &ro!des $ne#$!o'ally that) MReal
&ro&erty shall be a&&rased at ts '$rrent and far mar1et !al$e.M The '$rrent !al$e of l1e &ro&ertes and
ther a't$al or &otental $ses) amon+ others) are also 'onsdered.
4ns'r$&$lo$s sellers of real estate often $nderstate the selln+ &r'e n the deed of sale to
mnm8e ther ta% lablty. 6oreo!er) the !al$e of real &ro&erty does not reman sta+nant) t s
$nrealst' to e%&e't that the '$rrent mar1et !al$e of a &ro&erty s the same as ts 'ost of a'#$ston ten
years a+o. In ths l+ht) a +eneral re!son of real &ro&erty assessment s re#$red by la" "thn t"o 2/3
years after the effe't!ty of the ;o'al 5o!ernment (ode and e!ery three 2<3 years thereafter. 2Se'. /,-)
;o'al 5o!ernment (ode3
e. When ba'1 ta%es "ere m&osed on Ra$lIs &ro&erty) there "as no !olaton of the r$le that la"s
shall ha!e only &ros&e't!e a&&l'ablty. The &ro!sons of Se'. /@ of P.D. No. H>H) The Real Pro&erty
Ta% (ode 2no" Se'. /// of the ;o'al 5o!ernment (ode3 s not &enal n 'hara'ter) hen'e t may not be
'onsdered as an e% &ost fa'to la". 2Sesbreno !. (entral Board of Assessment A&&eals) et al.) 5.R. No.
,.>@??) 6ar'h /H) ,--=3
,//. What are the admnstrat!e remedes that are &ro!ded for $nder the &ro!sons of R.A. No.
=,>.) the ;o'al 5o!ernment (ode) before resort to 'o$rts s made relat!e to real &ro&erty ta%es N
S455ESTED ANSWER: A ta%&ayer may #$eston the 'onstt$tonalty or le+alty of a ta%
ordnan'e on a&&eal "thn thrty 2<.3 days from effe't!ty thereof) to the Se'retary of K$st'e. The
ta%&ayer after fndn+ that hs assessment s $n0$st) 'onfs'atory) or e%'ess!e) m$st brn+ the 'ase before
the Se'retary of K$st'e for #$estons of le+alty or 'onstt$tonalty of a 'ty ordnan'e.
An o"ner of real &ro&erty "ho s not satsfed "th the assessment of hs &ro&erty may) "thn
s%ty 2>.3 days from not'e of assessment) a&&eal to the ;o'al Board of Assessment A&&eals.
Sho$ld the ta%&ayer #$eston the e%'ess!eness of the amo$nt of ta%) he m$st frst &ay the
amo$nt d$e. Then) he m$st re#$est the annotaton of the &hrase D&ad $nder &rotestE and a''ordn+ly
a&&eal to the ;o'al Board of Assessment A&&eals by fln+ a &etton $nder oath to+ether "th 'o&es of
the ta% de'laratons and affda!ts or do'$ments to s$&&ort hs a&&eal. 2;o&e8 !. (ty of 6anla) et al.)
5.R. No. ,/=,<-) 9ebr$ary ,-) ,---3
NOTES AND (O66ENTS:
Remedes of real &ro&erty o"ner "ho #$estons !aldty of ta% ordnan'e:
Se'retary of K$st'e 'an ta1e 'o+n8an'e of a 'ase n!ol!n+ the 'onstt$tonalty or le+alty of ta%
ordnan'es "here there are fa't$al ss$es n!ol!ed. 29+$erres !. (o$rt of A&&eals) et al.) 5.R. No.
,,-,=/) 6ar'h /@) ,---3
U$estons on !aldty or le+alty of a ta% ordnan'e. Ta%&ayer fles a&&eal to the Se'retary of
K$st'e) "thn <. days from effe't!ty thereof. In 'ase the Se'retary de'des the a&&eal) a &erod also of
<. days s allo"ed for an a++re!ed &arty to +o to 'o$rt. B$t f the Se'retary does not a't thereon) after the
la&se of >. days) a &arty 'o$ld already see1 relef n 'o$rt.
These three se&arate &erods are 'learly +!en for 'om&lan'e as a &rere#$ste before see1n+
redress n a 'om&etent 'o$rt. S$'h stat$tory &erods are set to &re!ent delays as "ell as enhan'e he
orderly and s&eedy ds'har+e of 0$d'al f$n'tons. 9or ths reason the 'o$rts 'onstr$e these &ro!sons of
stat$tes as mandatory. 2Reyes) et al.) !. (o$rt of A&&eals) et al.) 5.R. No. ,,?/<<) &rom. De'ember ,.)
,---3
P$bl' hearn+s are mandatory &ror to a&&ro!al of ta% ordnan'e) b$t ths stll re#$res the
ta%&ayer to add$'e e!den'e to sho" that no &$bl' hearn+s e!er too1 &la'e. 2Ibd.3
,/<. What are the ste&s to be follo"ed for the mandatory 'ond$'t of 5eneral Re!son of Real
Pro&erty Assessments N
a. Pre&araton of S'hed$le of 9ar 6ar1et Val$esF
b . Ena'tment of Ordnan'esF
,3 le!yn+ an ann$al Dad !aloremE ta% on real &ro&erty and an
addtonal ta% a''r$n+ to the S&e'al Ed$'aton 9$ndF
/3 9%n+ the assessment le!els to be a&&led to the mar1et !al$es of real &ro&ertesF
<3 Pro!dn+ the ne'essary a&&ro&ratons to defray e%&enses n'dent to +eneral re!son of real &ro&erty
assessments)F and
H3 Ado&tn+ the S'hed$le of 9ar 6ar1et Val$es &re&ared by the assessors. 2;o&e8 !. (ty of 6anla) et
al.) 5.R. No. ,/=,<-) 9ebr$ary ,-) ,---3
NOTES AND (O66ENTS:
P$bl' hearn+s are re#$red to be 'ond$'ted &ror to the ena'tment of an ordnan'e m&osn+
real &ro&erty ta%es. 29+$erres !. (o$rt of A&&eals) et al.) 5.R. No. ,,-,=/) 6ar'h /@) ,---3
,/H. What are the ste&s to be follo"ed n the &re&araton of far mar1et !al$es N
a. The 'ty or m$n'&al assessor shall &re&are a s'hed$le of far mar1et !al$es for the dfferent
'lasses of real &ro&erty st$ated n ther res&e't!e ;o'al 5o!ernment 4nts for the ena'tment of an
ordnan'e by the san++$nan 'on'ernedF and
b. The s'hed$le of far mar1et !al$es shall be &$blshed n a ne"s&a&er of +eneral 'r'$laton n
the &ro!n'e) 'ty or m$n'&alty 'on'erned or the &ostn+ n the &ro!n'al 'a&tol or other &la'es as
re#$red by la". 2;o&e8 !. (ty of 6anla) et al.) 5.R. No. ,/=,<-) 9ebr$ary ,-) ,---3
NOTES AND (O66ENTS: Pro&osed far mar1et !al$es of real &ro&erty n a lo'al +o!ernment
$nt as "ell as the ordnan'e 'ontann+ the s'hed$le m$st be &$blshed n f$ll for three 2<3 'onse'$t!e
days n a ne"s&a&er of lo'al 'r'$laton) "here a!alable) "thn ten 2,.3 days of ts a&&ro!al) and &osted
n at lease t"o 2/3 &romnent &la'es n the &ro!n'al 'a&tol) 'ty) m$n'&al or baran+ay hall for a
H?
mnm$m of three 2<3 'onse'$t!e "ee1s. 29+$erres !. (o$rt of A&&eals) et al). 5.R. No. ,,-,=/) 6ar'h
/@) ,---3
,/@. What s the &ro'ed$re to be follo"ed n 'om&$tn+ real &ro&erty ta%es N
S455ESTED ANSWER:
a. As'ertan the assessment le!el of the &ro&ertyF
b. 6$lt&ly the mar1et !al$e by the a&&l'able assessment le!el of the &ro&ertyF and
'. 9nd the ta% rate "h'h 'orres&onds to the 'lass 2$se3 of the &ro&erty and m$lt&ly the assessed
!al$e by the a&&l'able ta% rate. 9or easy referen'e) the 'om&$taton of real &ro&erty ta% s 'ted belo":
6ar1et !al$e P % % %
6$lt&led by Assessment ;e!el 2 % L3
Assessed !al$e P % % %
6$lt&led by Rate of Ta% 2 % L3
Real Pro&erty Ta% P % % % 2;o&e8 !. (ty of 6anla) et al.)
5.R. No. ,/=,<-) &rom. 9ebr$ary ,-) ,---3
NOTES AND (O66ENTS: It s farfet'hed that the abo!e #$eston "o$ld be +!en. It "as
n'l$ded only for ll$strat!e &$r&oses. Ao"e!er the follo"n+ 'on'e&t relat!e to the determnaton of
real &ro&erty ta%es n order to ease the &red'ament of the lo" and mddle-n'ome +ro$&s of ta%&ayers)
may be as1ed:
Wth the ntrod$'ton of assessment le!els) ta% rates 'o$ld be mantaned) altho$+h ta% &ayments
'an be made ether h+her or lo"er de&endn+ on ther &er'enta+e 2assessment le!el3 a&&led to the far
mar1et !al$e of &ro&erty to der!e ts assessed !al$e "h'h s s$b0e't to ta%. 6oreo!er) 'lasses and !al$es
of real &ro&ertes 'an be +!en &ro&er 'onsderaton) l1e ass+nn+ lo"er assessment le!els to resdental
&ro&ertes and h+her le!els to &ro&ertes $sed n b$sness. 2;o&e8 !. (ty of 6anla) et al.) 5.R. No.
,/=,<-) &rom. 9ebr$ary ,-) ,---3
5OOD ;4(K AND PRABERS 9OR BO4R PASSIN5 TAE BAR.
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