Tax Law

TAXATION LAW REVIEW
OUTLINE FOR 2ND SEMESTER SY 2014-2015

JUDGE MERVIN JOVITO SAMADAN
Grading:
Class standing 40%; Mid-terms 30%; Finals 30%
INCOME TAXATION
Reference:
Hector de Leon Jr., Fundamentals of Taxation
Part
CONCEPT AND CHARACTERISTICS OF TAXATION
I.
TAXATION/ TAX DEFINED PURPOSE OF TAXATION Primary Purpose: Revenue Generation

Incidental Purpose :
Implement of Police Power
NPC v. City of Cabanatuan, GR No. 149110, April 9, 2003, 259 SCRA 401
Progressive Devt. v. QC 172 SCRA 629
ESSENTIAL ELEMENTS OF TAXATION Republic v. COCOFED, GR Nos. 147062-64, December 14, 2001; 372 SCRA 462
THEORY AND RATIONALE OF TAXATION NPC v. City of Cabanatuan, supra

CIR v. Algue, G.R. No. L-28896. February 17, 1988
BENEFIT DERIVED FROM TAXATION Gomez v. Palomar, G.R. No. L-23645. October 29, 1968; 25 SCRA 827
BASIC PRINCIPLES OF A SOUND TAX SYSTEM
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Chavez v. Ongpin, GR No. 76778, June 6, 1990; 186 SCRA 331
ASPECTS OF TAXATION 1.
2.
Levy
Collection
CLASSIFICATION OF TAXES
1.
As to scope
2.
As to its purpose
Sec 29 (3), Article IV, Constitution

3.
As to who bears the economic burden of taxation
CIR v. Gotamco, No. L-31092, February 27, 1987; 148 SCRA 36
4.
As to the subject of taxation
Iloilo Bottlers, Inc. v. City of Iloilo, 164 SCRA 607, 615 [1988]
Sec. 156-158, Local Government Code
5.
As to the basis of the tax
We Wa Yu v. City of Lipa 99 Phil. 575

6.
As to graduation of rate
TAX DISTINGUISHED FROM OTHER EXACTIONS 1.
License fee; Inspection fee
Progressive Devt. V. Quezon City, supra
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Cost of licensing/inspection Manila Electric Co. v. El Auditor General, G.R. No. 47368. August 25, 1941; 73 Phil. 128
2.
Levies
Republic of the Phil. v. COCOFED, supra

Special Assessment or Special Levy Section 240, Local Government Code
3.
Toll fees
Sec 155 Local Government Code

4.
Penalty
6.
Tariff and Customs Duties
7.
Subsidies
8.
Debt
Republic v. Mambulao Lumber Co., 4 SCRA 622
Part II. NATURE OF THE POWER OF TAXATION

INHERENT POWER OF THE STATE; ESSENTIAL AND INHERENT ATTRIBUTE OF SOVEREIGNTY Pepsi Cola Bottling Co. v. Tanauan, G.R. No. L-31156. February 27, 1976
a.
Police power
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TAXATION LAW REVIEW

LTO v. Butuan, G.R. No. 131512. January 20, 2000

b.
Eminent domain
LEGISLATIVE IN NATUREWee Poco & Co. v. Posadas, GR No. 43142, August 26, 1937
Cannot be delegated
De la Llana v. Alba, G.R. No. 57883. March 12, 1982
Exceptions to restriction on delegation
1.
Delegation to the local government
Article X, Sections 3 & 5 of the 1987 Constitution

Mactan Cebu Intl. Airport v. Marcos, G.R. No. 120082. September 11, 1996
2.
Delegation to the President
Sec. 28 (2) Art. VI, Constitution

Sections 401 & 402 of the Tariff and Customs Code of the Philippines
3.
Delegation to Administrative Agencies
CIR v. CA and Fortune Tobacco Corp., G.R. No. 119761. August 29, 1996 (see Bellosillo separate opinion)
Part III. LIMITATION TO THE POWER OF TAXATION

GENERAL PRINCIPLE Sison v. Ancheta, G.R. No. L-59431. July 25, 1984
LIMITATIONS -
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1.
Due Process of Law
Section 1 Art. III, Constitution

Instances when due process is considered violated:
a.
When taxation is not for public purpose
Pascual v. Sec. of Public Works, G.R. No. L-10405. December 29, 1960
b.
When levied beyond territorial limits (extraterritorial)
Manila Gas Corp. v. CIR, G.R. No. 42780. January 17, 1936
c.
d.
Arbitrary methods used in assessing and collecting taxes; Presumption of regularity

Law is so arbitrary that it finds no support in Constitution; presumption of Constitutionality
Marcos II v. CA, G.R. No. 120880. June 5, 1997

Figuerres vs. Court of Appeals, G.R. No. 119172, March 25, 1999
2.
Equal protection of laws
Section 1 Art. III of the Constitution

3.
Uniformity and equity
Section 28(1) Art. VI, Constitution

4.
Directive to evolve a progressive system of taxation
Section 28(1) Art. VI, Constitution

5.
International Law
Sec. 2, Article II, Constitution

6.
Prohibition against imprisonment for non-payment of poll tax
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Sec. 20, Art. III, Constitution
7.
Non-impairment of contract
Sec. 10, Art. 111, Constitution

Grant of Franchise
Article XII, Section 11, of the 1987 Constitution
8.
Religion Clauses
Sec. 5 Art. III Constitution

Sec. 29(2), Article VI, id
Sec. 28(3), Art. VI, id
Estrada v. Escritor, A.M. No. P-02-1651, August 4, 2003
Free exercise of religion
Sec. 5 Art. III Constitution
Estrada v. Escritor, supra
American Bible Society v. City of Manila, 101 Phil. 386
Non-establishment of religion
Sec. 29(2), Article VI, Constitution
Estrada v. Escritor, supra
Exemption of lands, buildings and improvements, actually, directly and exclusively used for religious, charitable
or educational purposes
Sec. 28(3), Art. VI, Constitution
CIR v. CA, G.R. No. 124043. October 14, 1998
Exemption of property from taxation; taxation of income from use or transfer of property
See Sec. 30 (E)(H) & (K) par. 2, NIRC
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9.
Exemption of non-stock, non-profit educational institutions; proprietary educational institutions
Sec. 4(3)&(4) Art. XIV Constitution

Non stock non profit educational institution
CIR v. CA and YMCA, G.R. No. 124043. October 14, 1998
Proprietary educational institutions
Difference between the tax exemption of religious organizations and educational institutions
See Sec. 30 (E)(H) & (K) par. 2, NIRC
10.
Infringement of press freedom
Sec. 4, Article III Constitution

Tolentino v. Sec. of Finance, supra
11.
Voting requirement for grant of tax exemption
Sec 28 (4) Art. VI Constitution
12.
Taxes levied for a special purpose treated as a special fund
Sec 29 (3), Article IV, Constitution
13.
Veto of appropriation revenue and tariff bills by the President; item veto
Sec. 27 (2), Art. VI Constitution

Gonzales v. Macaraig, 191 SCRA 452
14.
Revenue Bills shall originate from the House of Representatives
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TAXATION LAW REVIEW

Sections 24, Articles VI, Constitution

Tolentino v. Sec. of Finance, supra
15.
Non-impairment of the jurisdiction of the Supreme Court
Secs. 2 & 5(2)(b), Article VIII of the Constitution

San Miguel Corp. v. Avelino, 89 SCRA 70
Part IV.
TAX LAWS
SOURCES OF TAX LAWS

1.
2.
3.
4.
5.
6.
Constitution
Statutes
Executive Orders and Presidential Decrees
International Agreements
Administrative Issuances
Jurisprudence
NATURE OF TAX LAWS

Hillado v. CTA, 100 Phil. 288
Republic v. Gancayco, G.R. No. L-18307. June 30, 1965
CONSTRUCTIONOF TAX LAWS
CIR v. CA, G.R. No. 115349. April 18, 1997

Luzon Stevedoring Co. vs. Trinidad, 43 Phil., 803
CIR v. CA and Atlas Consolidated Mining and Devt. Corp, G.R. No. 104151. March 10, 1995
Mandatory and directory provision of tax laws
Roxas v. Rafferty, 37 Phil 957 (1918)
CIR v. CA and Atlas Consolidated Mining and Devt. Corp, supra
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Legislative approval by re-enactment; Contemporaneous interpretation

China Banking Corp. v. CA, G.R. No. 146749. June 10, 2003
EXECUTIVE (INTERNATIONAL) AGREEMENTS

CIR v. Gotamco, G.R. No. L-31092. February 27, 1987
RETROACTIVITY OF TAX STATUTES

Lorenzo v. Posadas, G.R. No. 43082. June 18, 1937
POWER OF COMMISSIONER OF INTERNAL REVENUE TO INTERPRET TAX LAWS AND DECIDE TAX CASES; WEIGHT OF OPINION OF
COMMISSIONER OF INTERNAL REVENUE
Section 4, NIRC
Joebon Marketing Corporation v. Court of Appeals, the Commissioner of Internal Revenue, GR No. 125070, July 17, 1996
NON-RETROACTIVITY OF RULINGS OF THE COMMIISSIONER OF INTERNAL REVENUE
CIR v. CA and Alhambra Industries, Inc., G.R. No. 117982. February 6, 1997
Sec. 246, NIRC
ADMINISTRATIVE ISSUANCES MUST BE CONSISTENT WITH THE LAW; JUDICIAL REVOCATION OF ADMINISTRATIVE ISSUANCES:
Phil. Bank of Communications v. CIR & CA, G.R. No. 112024. January 28, 1999
Sec. 244, NIRC
JURISDICTION OF THE COURT OF TAX APPEALS
Republic Act No. 9228
Part V.
TAX EXEMPTION
NATURE OF THE POWER TO GRANT TAX EXEMPTION
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Sec 28 (4) Art. VI Constitution

RATIONALE FOR TAX EXEMPTION
CIR v. Bothelo Shipping, 29 June 1967
LAWS GRANTING TAX EXEMPTION

1.
Constitution
Section 28 (3), Article VI

Section 4 (3,4), Article XIV
2.
Tax Statutes
a.
National Internal Revenue Code

See Sections 30, 32, 87, 109
b.
Local Government Code

See Section 159 and 234
c.
Customs Code
See Section 105
d.
Special Laws
e.
Treaties/ International Conventions
CONSTRUCTION OF TAX EXEMPTION

Cyanamid Phils., Inc. v. CA, G.R. No. 108067. January 20, 2000
Exception:
Mactan Cebu Intl. Airport v. Marcos, supra
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Part VI.
OTHER MODES OF ESCAPE FROM TAXATION
SHIFTING OF TAX BURDEN

PICOP v. CA, G.R. Nos. 106949-50. December 1, 1995
Impact and incidence of taxation
Types of Shifting
TAX EVASION
Tax Fraud
Aznar v. CTA, G.R. No. L-20569. August 23, 1974, 58 SCRA 519
a.
Evidence of Fraud
Republic v. Gonzales, G.R. No. L-17962. April 30, 1965

Avelino v. Collector, G.R. No. L-17715. July 31, 1963
b.
Prosecution for Tax Fraud
Commissioner of Internal Revenue v. Court of Appeals and Fortune Tobacco, et.al, G.R. No. 119322. June 4, 1996
TAX AVOIDANCE
Delpher Traders Corporation v. IAC, 157 SCRA 349
TAX REMISSION; TAX CONDONATION; TAX AMNESTY
Republic v. Intermediate Appellate Court, 196 SCRA 335, 340 [1991]
CIR v. Marubeni, G.R. No. 137377. December 18, 2001
ZERO
RATING
See Secs. 106(A)(2) & 108(B), National Internal Revenue Code
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TAXATION LAW REVIEW

DEDUCTION
COMPENSATION/SET-OFF OF TAXES
Republic v. Mambulao Lumber Co., 4 SCRA 622
Exception:
Domingo v. Garlitos, G.R. No. L-18994. June 29, 1963
COMPROMISE / ABATEMENT
See Sec. 204 (A), National Internal Revenue Code
TAX DEFERMENT
Deferment of payment of taxes that have already accrued
See Sec. 91(B), NIRC
Deferring recognition of taxability

See Section 40(c)(2) of the NIRC
Part VII.
SITUS; PRINCIPLE OF TERRITORIALITY; DOUBLE TAXATION
Manila Gas Corp. v. CIR, G.R. No. 42780. January 17, 1936
Allied Thread Co., Inc. vs. Mayor of Manila, 133 SCRA 343
Wells Fargo Bank & Union Trust Co. v. CIR, G.R. No. 46720. June 28, 1940
CIR v. British Overseas Airways Corp, 149 SCRA 395
CIR v. Marubeni Corp., G.R. No. 137377. December 18, 2001
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TAXATION LAW REVIEW

POWER OF LEGISLATURE TO FIX SITUS

Tan v. Del Rosario, G.R. No. 109289. October 3, 1994
MULTIPLICITY OF SITUS
Collector v. Lara 102 SCRA 813
Wells Fargo v. Collector, 70 Phil. 325
MEANING OF DOUBLE TAXATION

Victorias Milling Co., Inc. v. Municipality of Victorias, Negros Occidental, 25 SCRA 192
DIRECT DUPLICATE TAXATION AND INDIRECT DUPLICATE TAXATION

Pepsi-Cola Bottling Co. of the Phil., Inc. vs. Mun. of Tanauan, Leyte, 69 SCRA 460 [1976]
CONSTITUTIONALITY OF DOUBLE TAXATION
Villanueva v. City of Iloilo, G.R. No. L-26521. December 28, 1968
AVOIDANCE OF DOUBLE TAXATION
Tax Treaties
CIR v. Procter & Gamble, G.R. No. 66838. December 2, 1991
CIR v. Johnson & Son, G.R. No. 127105. June 25, 1999)
Tax Credit or item of Deduction

see Sec. 34 (C)(1)(b) and 34(C)(2) &(3), NIRC
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TAXATION LAW REVIEW

Tax Sparing
CIR v. Proctor & Gamble, supra
CIR v. SC Johnson, supra
See Sec. 29(B)(5)(b), NIRC
Part VIII. OTHER ASPECTS OF TAXATION
NATURE OF TAXPAYERS LIABILITY FOR TAXES

Yutivo sons Hardware Company vs. CTA and Collector, G.R. No. L-13203, January 28, 1961
Koppel [Phil.], Inc. vs. Yatco, 77 Phil. 496
PRESCRIPTION OF THE RIGHT TO ASSESS AND COLLECT TAXES; CONSTRUCTION

CIR v. Ayala Securities, G.R. No. L-29485. November 21, 1980
RIGHT TO REFUND OF TAXES

Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332
ESTOPPEL AGAINST GOVERNMENT
ABS CBN v. CTA, 108 SCRA 143
INJUNCTION IN COLLECTION OF TAXES
Sarasola vs. Trinidad, 40 Phil. 252
TAXPAYERS SUIT
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Gonzales vs. Marcos, 65 SCRA 624 [1975].)
INFORMERS REWARD
Penid v. Virata, G.R. No. L-44004. March 25, 1983
* * * * * * * *
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INCOME TAXATION
Reference: Victorino Mamalateo, Income Taxation
DEFINITION OF INCOME
Net income/Taxable Income, in general
Sec. 31, Tax Code
Sec. 36 - 38, Revenue Regulations No. 2-40 (RR 2)
Differentiated from capital
GROSS INCOME
In general
Sec. 32 (A), Tax Code
i.
Compensation
Sec. 2.78.1 (A), RR 2-98
ii.
Gross income from the conduct of trade, business or exercise of profession

Sec. 43, RR2
iii.
Gains derived from dealings in property

In general
- basis for determining gain or loss from sale or disposition of property
Sec. 40(B), Tax Code
- exchange of property
Sec. 40(1), (3) and (4), id.
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- Exception; Tax free exchange

Sec 40(C) (2), id
RR 18-01
iii.
Interest
v.
Rent
-Improvements by lessees
Sec. 49, RR2
vi.
Royalties
vii.
Dividends
Sec. 250 - 252, RR 2
viii.
Annuities
Sec. 48, RR2
ix.
Prizes and winnings
x.
Pensions
xi.
Partners distributive share from the net income of a general professional partnership
Sec. 73 (D), Tax Code
xii.
Others
-
Condonation of indebtedness
Sec. 50, RR2
Exclusions from gross income

Sec. 32 (B), Tax Code
Sec. 61-64, RR 2
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SOURCES OF INCOME
Sec. 42(A) & (C), Tax Code
REALIZATION OF INCOME
Sec. 43-44, id
Sec. 51-53 RR 2
CLASSIFICATION OF TAXPAYERS
1.
Corporate Taxpayers
a.
Definition of corporation under the Tax Code

Sec. 22, Tax Code
i.
Partnership as corporate taxpayer
ii.
Joint venture as corporate taxpayer; exceptions

BIR Ruling 018-99
b.
Classification of corporate taxpayers

i.
Domestic
ii.
Foreign
Resident Foreign
Comm. v. BOAC, supra
2.
Non-resident Foreign
Non-corporate taxpayers
a.
Estates and Trusts
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Sec. 60, Tax Code
b.
Individual Taxpayers
Sec. 1-5 Art. IV, Constitution
Sec. 2, 5 8, RR 2
Sec. 25(A)(1), Tax Code
i.
Citizens
ii.
Resident
Non-resident
Aliens
Resident
Non-resident
- Engaged in trade or business in the Philippines
- Not engaged in trade or business in the Philippines
Aliens employed by regional headquarters, regional

operating headquarters of multinationals, offshore banking
units and petroleum service contractors
CLASSIFICATION OF ASSETS
Sec. 39 (A)(1), Tax Code;
Revenue Regulations No. 7-2003
GENERAL PRINCIPLES OF INCOME TAXATION

Sec.23, Tax Code
INCOME TAXATION OF INDIVIDUALS

1.
Resident Citizens
a.
Income Tax, in general
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Section 24 (A), Tax Code

i.
Capital gains, in general; limitations

Section 39 (B) and (C)
b.
Income tax on certain passive income

Section 24 (B), Tax Code
i. Interest on deposits and deposit substitutes
Peso
Foreign Currency
Sec. 2.22 to 2.24 (A) (1) & (2), Revenue Regulations No. 10-98
-
Interest income from long term deposit and investment
ii. Royalties
Revenue Memorandum Circular No. 77-2003
BIR Ruling No. 058-00
iii. Prizes and other winnings

- In general
-Exceptions:
Sec. 24 (A), Tax Code
Sec. 32 (B)(7)(c) & (d), id.
iv. Dividends
Sec. 73(A), (C) and (D), Tax Code
- Cash
- Property
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Sec. 251, RR2; valuation of property dividends

- Stock
Sec. 73(B), Tax Code
Sec. 252, RR2
- Liquidating dividends
c.
Capital gains from sale of shares of stock not traded in the stock exchange
Share of stock defined Sec. 22(L) Tax Code
Sec. 24(C), Tax Code
d.
Capital gains from sale of real property

Sec. 24(D), Tax Code
i. In general
Exception
- RR 14-00, Purchase of principal residence
e.
Special treatment of fringe benefits; Fringe benefits tax

Article 212 (m), Labor Code
Revenue Regulations 3-98
i.
2.
De Minimis Benefits
Resident aliens and non-resident citizens

a.
In general
Sec. 24(A)(1)(b)&(c)
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TAXATION LAW REVIEW

b.
On certain passive income

RR 10-98
3.
Non resident aliens

a.
Engaged in trade or business in the Philippines

i. In general
Sec. 25 (A)(1), Tax Code
ii. Dividends, Interest, Royalties, Prizes and other winnings
Sec. 25 (A)(2), id.
RR 10-98
iii. Capital gains
Sec. 25 (A)(3)
iv.
Fringe benefits tax

b.
Not engaged in trade or business in the Philippines

i. In general
Sec. 25 (B), id
ii. Aliens employed by RHQs, ROHQs and Petroleum Service Contractors and
Subcontractors
Sec. 22 (DD) & (EE), Tax Code
Sec. 25 (C) to (E); id.
Taxation of members of general professional partnerships

Sec. 22 (B), Tax Code
Sec. 26, id.
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TAXATION LAW REVIEW

4.
Income tax on estates and trusts

Sec. 60 64, Tax Code
INCOME TAX ON CORPORATIONS

1.
Corporations exempt from Income Tax

Sec. 30, Tax Code
2.
Domestic Corporation
a.
Corporate Income Tax, in general

Sec. 27 (A), id.
b.
Minimum Corporate Income Tax

Sec. 27 (E), id.
Revenue Regulation No. 9-98
c.
Income Tax on Certain Passive Income

iii. Interest from deposits
1. Peso
-long term deposits
2.
Expanded foreign currency deposit system
iv. Royalties
Sec. 27 (D)(1)
iii.
Capital gains on sale of shares of stock not traded in the stock exchange
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Sec. 27 (D) (2)

iv.
Income from foreign currency deposit system
Sec. 27 (D)(3), Tax Code

v.
Inter-corporate dividends
cash, property & stock dividends
o
liquidating dividends
BIR Ruling 36-2002

vi.
Capital gains on sale of real property

Sec. 27 (D)(5)
d.
Improperly accumulated earnings tax

Sec. 29, Tax Code
e.
Special corporations
-
3.
Proprietary Educational Institutions

Government Owned and Controlled Corporations
Foreign corporations; Resident

a.
In general
Sec. 28 (A)(1), Tax Code
b.
Minimum Corporate Income Tax

Sec. 28(A)(2), id.
Revenue Memorandum Circular 4-2003
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c.
Tax on branch profit remittance

d.
Tax on certain passive income

i.
ii.
iii.
iv.
v.
Interest on deposits
Royalties
Income derived under the expanded foreign currency deposit system
Capital gains from sale of shares of stock
Intercorporate dividends
Sec. 28 (A)(7), id.

e.
Income derived by:

i.
ii.
International carrier
RHQ and ROHQ
Sec. 28 (A) (3) & (6), id

4.
Foreign corporations; Non-resident

a.
In general
Sec. 28 (B)(1), id.
b.
Cinematographic film lessors

Sec. 28 (B)(2), id.
c.
Owner or lessor of vessels chartered by Philippine nationals

Sec. 28 (B)(3), id.
d.
Owner or lessor of aircraft, machineries and other equipment

Sec. 28 (B)(4), id.
e.
Interest on foreign loans

Sec. 28 (B)(5)(a), id.
f.
Intercorporate dividends
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Sec. 28 (B)(5)(b), id.

g.
Capital gains from sale of shares of stock

Sec. 28 (B)(5)(c), id.
I.
Deductions from Gross Income

1.
Types of deductions from gross income

a.
Itemized
- persons entitled to claim itemized deductions from gross income
Sec. 34; 24(A); 25(A); 26(A), (B) and (C), id
b.
Optional standard deductions

- persons entitled to claim optional standard deduction
Sec. 34 (L), id
Personal exemption for individual taxpayers; additional exemption for dependents; Premium
payments on health and hospitalization insurance
Sec. 34 (M), id
Sec. 35, id
2.
When charges are deductible

Sec. 45, Tax Code
Sec. 76, RR2
3.
Allowable deductions
a.
Expenses; in general
Ordinary and necessary expenses;
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TAXATION LAW REVIEW

Difference between Revenue Expenditure and Capital Expenditure

Sec. 34 (A) (1), Tax Code
Sec. 65 - 74, RR 2
o
b.
Expenses allowed to private educational institutions

Interest
i.
ii.
iii.
In general; limitation
Interest expense not allowed as deduction from gross income
Optional treatment of interest expense
Sec. 34 (B), id.

Sec. 36 (B), supra
c.
Taxes
Sec. 34 (C), Tax Code
i.
Taxes as deduction from gross income

i.
ii.
iii.
iv.
in general
Limitations on taxes deductible
Refund or credit of taxes already claimed as deduction
taxes not allowed as deduction from gross income
Sec. 80 83, 85, RR 2
ii.
Taxes paid to foreign countries; option to credit against Philippine income tax
v. persons who may exercise the option
vi. limitations on credit
vii. proof of credits
Sec. 84 par. 1, 85 & 92, RR2
d.
Losses
i.
In general
Sec. 93, 94, 96 - 99, RR2
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ii.
Net operating loss carry over

iii.
Capital loss
Definition of capital asset
Limitation on capital losses
Sec. 39(A)(2) & (3), Tax Code
Sec. 39(B)&(C), id
Net capital loss carry over
Sec. 39(D)(3), id
iv.
Securities becoming worthless

Sec. 99, RR2
Sec. 34(D)(4)(b), Tax Code
v.
Losses from wash sales of stock

Sec. 38, RR2
Sec. 34(D)(5), Tax Code
vi.
Loss from short sale of property; failure to exercise option

Sec. 39 (F), id
vii.
Wagering loss
Sec. 34(D)(6), Tax Code
viii.
Abandonment loss
Sec. 34(D)(7), id
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TAXATION LAW REVIEW

f.
Bad Debts
Sec. 34 (E), id
g.
Depreciation
Sec. 34 (F), Tax Code
Sec. 105 113, RR2
h.
Charitable and other contributions

i.
In general, limitations on deductions

Sec. 34 (H)(1), Tax Code
ii.
Contributions deductible in full

Sec. 34(H)(2), id
i.
Research and development

Sec. 34 (I), Tax Code
3.
Additional requirements for deductibility of certain payments; withholding

Sec. 34 (K), Tax Code
a.
Creditable withholding tax

-
b.
Withholding tax on compensation

Expanded withholding tax/ creditable withholding tax at source
Final withholding tax
4.
Items not deductible
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TAXATION LAW REVIEW

Sec. 36, id.
ACCOUNTING PERIODS AND METHODS OF ACCOUNTING

Sec. 43 46, id.
RETURNS AND PAYMENT OF TAXES
1.
Registration
2.
Returns and payment of taxes

i.
Individuals
Sec. 51, id.
i. Who are required to file returns
ii. Where to file
iii. When to file
ii.
Corporations
Sec. 52, id.
i. who are required to file returns
ii. Where to file
When to file
Page 30 of 30

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TAXATION LAW REVIEW

OUTLINE FOR 2ND SEMESTER SY 2014-2015

Class standing 40%; Mid-terms 30%; Finals 30%

Hector de Leon Jr., Fundamentals of Taxation

CONCEPT AND CHARACTERISTICS OF TAXATION

TAXATION/ TAX DEFINED PURPOSE OF TAXATION Primary Purpose: Revenue Generation

THEORY AND RATIONALE OF TAXATION NPC v. City of Cabanatuan, supra

BASIC PRINCIPLES OF A SOUND TAX SYSTEM

TAXATION LAW REVIEW

Chavez v. Ongpin, GR No. 76778, June 6, 1990; 186 SCRA 331

Sec 29 (3), Article IV, Constitution

As to who bears the economic burden of taxation

CIR v. Gotamco, No. L-31092, February 27, 1987; 148 SCRA 36

As to the subject of taxation

As to the basis of the tax

We Wa Yu v. City of Lipa 99 Phil. 575

TAX DISTINGUISHED FROM OTHER EXACTIONS 1.

License fee; Inspection fee

Progressive Devt. V. Quezon City, supra

TAXATION LAW REVIEW

Republic of the Phil. v. COCOFED, supra

Sec 155 Local Government Code

Tariff and Customs Duties

Republic v. Mambulao Lumber Co., 4 SCRA 622

Part II. NATURE OF THE POWER OF TAXATION

TAXATION LAW REVIEW

LTO v. Butuan, G.R. No. 131512. January 20, 2000

Delegation to the local government

Article X, Sections 3 & 5 of the 1987 Constitution

Delegation to the President

Sec. 28 (2) Art. VI, Constitution

Delegation to Administrative Agencies

Part III. LIMITATION TO THE POWER OF TAXATION

TAXATION LAW REVIEW

Due Process of Law

Section 1 Art. III, Constitution

When taxation is not for public purpose

When levied beyond territorial limits (extraterritorial)

Arbitrary methods used in assessing and collecting taxes; Presumption of regularity

Marcos II v. CA, G.R. No. 120880. June 5, 1997

Equal protection of laws

Section 1 Art. III of the Constitution

Uniformity and equity

Section 28(1) Art. VI, Constitution

Directive to evolve a progressive system of taxation

Section 28(1) Art. VI, Constitution

Sec. 2, Article II, Constitution

Prohibition against imprisonment for non-payment of poll tax

TAXATION LAW REVIEW

Sec. 20, Art. III, Constitution

Sec. 10, Art. 111, Constitution

Sec. 5 Art. III Constitution

See Sec. 30 (E)(H) & (K) par. 2, NIRC

TAXATION LAW REVIEW

Exemption of non-stock, non-profit educational institutions; proprietary educational institutions

Sec. 4(3)&(4) Art. XIV Constitution

Infringement of press freedom

Sec. 4, Article III Constitution

Voting requirement for grant of tax exemption

Sec 28 (4) Art. VI Constitution

Taxes levied for a special purpose treated as a special fund

Sec 29 (3), Article IV, Constitution

Sec. 27 (2), Art. VI Constitution