April 2013 Philippine Supreme Court Decisions on Tax Law

National Internal Revenue Code; Revenue Regulations No. 12-86; withholding taxes; imposition
thereof dependent upon the nature of work performed. For taxation purposes, a director is
considered an employee under Section 5 of Revenue Regulations No. 12-86. An individual
performing services for a corporation, whether as an officer and director or merely as a director
whose duties are confined to attendance at and participation in the meetings of the Board of
Directors, is an employee. The non-inclusion of the names of some of petitioners directors in the
companys Alpha List does not ipso facto create a presumption that they are not employees of
the corporation, because the imposition of withholding tax on compensation hinges upon the
nature of work performed by such individuals in the company. Revenue Regulations No. 2-98
does not apply to this case as the latter is a later regulation while the accounting books examined
were for taxable years 1997. First Lepanto Taisho Insurance Corporation vs. Commissioner of
Internal Revenue, G.R. No. 197117. April 10, 2013.
Local Government Code; taxing power of local government units. The power to tax is an
attribute of sovereignty, and as such, inheres in the State. Such, however, is not true for
provinces, cities, municipalities and barangays as they are not the sovereign; rather, they are
mere territorial and political subdivisions of the Republic of the Philippines. The power of a
province to tax is limited to the extent that such power is delegated to it either by the
Constitution or by statute. Book II of the Local Government Code establishes the parameters of
the taxing powers of local government units. Pelizloy Realty Corporation vs. The Province of
Benguet, G.R. No. 183137. April 10, 2013.
Local Government Code; limitations on taxing power of local government units; percentage tax.
Section 133 (i) of the Local Government Code (LGC) prohibits the levy by local government
units (LGUs) of percentage tax except as otherwise provided by the LGC. Percentage Tax is a
tax measured by a certain percentage of the gross selling price or gross value in money of goods
sold, bartered or imported; or of the gross receipts or earnings derived by any person engaged in
the sale of services. Since amusement taxes are fixed at a certain percentage of the gross receipts
incurred by certain specified establishments, they are actually percentage taxes. However,
provinces are not barred from levying amusement taxes even if amusement taxes are a form of
percentage taxes. Section 140 of the LGC carves a clear exception to the general rule in Section
133 (i). Pelizloy Realty Corporation vs. The Province of Benguet. G.R. No. 183137. April 10,
2013.
Local Government Code; limitations on taxing power of local government units; amusement tax.
Section 140 of the Local Government Code (LGC) expressly allows for the imposition by
provinces of amusement taxes on the proprietors, lessees, or operators of theaters, cinemas,
concert halls, circuses, boxing stadia, and other places of amusement. Pelizloy Realty
Corporation vs. The Province of Benguet. G.R. No. 183137. April 10, 2013.
Theaters, cinemas, concert halls, circuses, and boxing stadia are bound by a common typifying
characteristic in that they are all venues primarily for the staging of spectacles or the holding of
public shows, exhibitions, performances, and other events meant to be viewed by an audience.
Accordingly, other places of amusement must be interpreted in light of the typifying
characteristic of being venues where one seeks admission to entertain oneself by seeing or
viewing the show or performances or being venues primarily used to stage spectacles or hold
public shows, exhibitions, performances, and other events meant to be viewed by an audience.
Considering that resorts, swimming pools, bath houses, hot springs and tourist spots do not
belong to the same category or class as theaters, cinemas, concert halls, circuses, and boxing
stadia, it follows that they cannot be considered as among the other places of amusement
contemplated by Section 140 of the LGC and which may properly be subject to amusement
taxes. Pelizloy Realty Corporation vs. The Province of Benguet. G.R. No. 183137. April 10,
2013.