TAX - Memory Aid

General Principles

Tax inherent and legislative power

o Enforced contributions from persons and property, levied by government through legislature
by virtue of sovereignty for support and sustenance.
o Diff from PP, ED authority exercising, purpose, persons affected, effect, benefits received,
amount, relationship to consti

Revenue raising or sumptuary (purpose, amount, designation)

TAX MAY BE BOTH REVENUE AND REGULATORY. IT MAY BE IMPLEMENT OF

EMINENT DOMAIN.
Tax credit for senior citizen discounts may be just compensation for taking of property.

FACT THAT REVENUE IS INCIDENTALLY RAISED DOES NOT MAKE IT A TAX. LOOK
AT PURPOSE, RELATION TO ACTIVITY, AND AMOUNT.

Tax increases MAY convert regulatory fees to tax.

Basic Principles of sound tax system fiscal adequacy, theoretical justice, administrative feasibility (for
puspoes of determining constitutionality, not basis, although with exceptions)
Theory (necessity) and Basis (why it may)
1. Lifeblood lifeblood of government (must be balanced with arbitrariness; mut be collected despite
contest; CTA may issue injuction in appellate jurisdiction)
2. Necessity
3. Benefits protection (what we pay for support and protection of Gvot; based on symbiosis)
4. Jurisdiction state that gives protection is one entitled to tax
5. Power to tax is power to destroy interference with rights so due care must be taken to kill the hen
that lays the golden egg
Doctrines
1. Prospectivity
2. Imprescriptability
3. Double taxation
a. Strict direct, same property, purpose, authority, jurisdiction, period, kind of tax
(OPPRESSIVE)
b. Broad some elements are missing (VALID)

Tax on quarry resources: NG already imposes tax on resources on both public and private,
so LGU may not impose the same. Pursuant to LGU though, it can still tax those from
public lands.

How to eliminate: reciprocity, tax credit, deduction for those paid abroad, reduce rates

4. Escape (avoidance and evasion)

Shifting (transfer of burden from statutory taxpayer to final taxpayer), impact (original
point), incidence (final resting place of tax haha)
o Impact & incidence = direct. Otherwise, indirect.
o shifting burden to someone else in context of direct and indirect taxation mabigat,
pero pwede mo bawiin pag pinasa mo sa iba (indirect). Sa yo lang yan (direct).
o Only impact can refund. He shifts burden, not liability.
o

THE PROPER PARTY TO CLAIM THE REFUND OF AN INDIRECT TAX IS

THE STATUTORY TAXPAYER.

The statutory tax payer cannot claim an exemption on indirect taxes when it
sells its products to tax exempt entities. They must bear the burden of tax.

Indirect vs. withholding:

In withholding, incidence and burden = one person
WHA is merely collector but no burden. significant in claim for
tax amnesty (WHA cannot claim amnesty; VAT deficiency
assessments)
In Indirect, incidence and burden = diff persons (refund: when buyer is
exempt, ST cannot claim exemption. Claim of refund is with ST. )

Avoidance (lawful method, GF, arms length, totality, step transaction, business
purpose); Evasion (end = evil+n unlawful method, bad faith, piercing veil)
o
o

In case spouses incorporate to mitigate taxes: lawful. Effect is that no transfer and estate taxes
TODA: corporate to natural to corporate what were they trying to avoid? (ABC A XYZ =
transfer from A to XYZ only 6% CGT and not corporate income tax)

5. Exemption
a. Congress except: flexible tariff clause, tax amnesty, locgov
b. No exemption based on equity.
c. Revocable at will EXCEPT when granted to private party for consideration.
6. Compensation and set off
No compensation and set off beca no debtor creditor relationship.
: both claims DUE, LIQUIDATED and DEMANDABLE; or
: local government taxes
: solution indebiti equitable recoupment erroneously/illegally paid taxes which have
prescribed may be set off against a refund. NOT APLICABLE TO PHIL COURTS. LIFEBLOOD
THEORY
7. Compromise (doubtful validity of assessment or financial incapacity)
8. Amnesty Vs exemption: immunity from ALL civ, crim, admin liabilityes from non-payment and only
past tax periods; tax exemptions prospective and civil only
9. Construction force and effect of law, must be within statue
a. Laws according to meaning. When vague, taxpayer. Predecessor construction not binding
on successor if convinced diff should be given

b. Exemptions strcit against TP; includes amnesty and condonation

i. Legislative grace tax relief granted by congress should be strictly construed
ii. Determine first who are covered before who are exempted.
iii. : statue provides liberal, public property, charitable and educational, special classes
political subdivisions
c. Rules and regulations
d. Penal provisions
e. Nonretroactivity May be retroactive if not prejudicial to TP
i. Exceptions;
1. (may mali sa material facts: Taxpayer materially misrepresents, acted in bad
faith, ruling on based on facts materially different from that collected by BIR
2. Rule is issued by courts not bir
3. Ruling is patent nullity for being contrary to law
Scope and limitations:
Generally: does not violate EPC, due process and religious freedom, uniform (GEES), equitable, for
public purpose, within jurisdiction, constitutional, non-delegable

Constitutional
o Uniform (GEES, reasonable classification), equitable, progressive
Police power, EPC, religious freedom, nonimpairment
Public purpose, uniformity, within jurisdiction, notice and hearing for
assessment and collection
o Territorial uniformity not necessary. SEZ can have diff taxes, gross
income vs net income system for salaried and professionals, not
point to singular person, cannot tax bibles
May be unilaterally withdrawn (grant, not contractual), except in
CONTRACTUAL TAX EXEMPTIONS (debentures bonds) private
capacity, shed cloak of governmental immunity
o Majority vote before exemption from congress, prohibition of use of tax for special purpose,
presidents veto power , SC power to review legality of tax, grant of power to LGU to create
sources of revenue subject to limitations as Congress may provide, no appropriation for
religious purposes
o

RPT, revenues and assets

RPT
o ADE applied to purpose (necessary or incidental) for which the charitable/
educational institution is organized does not matter if there are paying
patients, provided that the money collected is applied for the purpose of
hospital as charity.
o Those used ADE for charitable, religious, educational are EXEMPT from RPT
o Those premises not ADE are subject to tax.
Revenues and assets
o If operated exclusively for educational or charitable, then exempt from income
tax.
Non-stock, organized AND operated exclusively for charity, no part of
income or asset inures to any member
o If it conducts profit making (like admission of paying patients) activities
Up to 50% 10% PRT on taxable income
Exceeding 50% 30% regular tax rate on taxable income

Inherent
o Public purpose, legislative (loc gov not inherent, but granted by consti), territorial, comity,
govt exemptions
Non delegable except to Pres re: tariff, emergency, treaty || locgov (limited to statute.
Municipalities cannot impose transfer taxes per LGC)
Territorial (must operate only within its jurisdiction; except: law operate outside or
do not operate within treaties or tax of RC from abroad)
o Situs place/ authority with right to impose tax
Income
property: real (situs), personal tangible (where found), personal intangible (domicile
of owner)
sale RP- where located
sale personal - consummated
excise: transaction
estate: anywhere if citizens and resident, if NRA only on those in phils
VAT: transaction
o Comity exchange of benefits so if no benefit, no comity.
o Govt may tax itself. LGU may not tax national

Stages of Taxation
Levy (legislature), assessment and collection (administration and enforcement), payment (compliance)
Tax vs:
Definition

Amount

Authority

Tax

Enforced contribution
Demand of sovereignty
For revenue purposes

No limit

Sovereign

Tarriff

Cost

Proprietor

License

Tax on internationally traded

articles
Tax on imported or exported
commodities
Money for use of property;
demand of proprietorship
Regulatory purpose (PP not Tax)

Cost

Sovereign

Special
Assessment
Debt

Amount for the benefits received

from some public improvement
Contractual, assignable,

Sovereign

Penalty

Sanction

Benefits
received
Contractual
amount
Usually
proportionate
to damage

Customs
Toll

Private
Public or
private

Effect of Nonpayment
Imprisonment
if poll tax

Scope

Non-allowance
or illegality

General

General

Land only
No
imprisonment
Imprisonment
for crime

Debt , specific
General

Other kinds of classifications

Personal no regard to property or occupation vs property property of a certain class vs privilege
excise, manufacture, sale, consumption, occupation privileges

BURDEN : Direct, indirect | RATES: Specific, ad valorem, mixed | PURPOSE: general, special |
SCOPE: national, local | graduation: progressive, regressive, proportionate

Income Tax

Flow of wealth other than return of capital

Kinds
Global, schedular, semi schedular, semi global (lump or differentiate kinds of income)
Tax payers
Individuals
RC
NRC (permanent stay or 183 days if working only)
RA (length of stay and definitive period)
NRA-ETB (180days aggregate)
NRA-NETB

Corporations
DC
RFC (ETB/with office)
NRFC (NETB/ no office/isolated)

A. Individuals
Residents
1. RC (Filipino residing) w/in and w/out
2. NRC within (NO PARTICULAR NUMBER OF DAYS with intent to permanently reside or
work requires him to be there)
a. (nandun na) establish to satisfaction of CIR the fact of his physical presence abroad with
intent of permanently residing
b. (paalis pa lang) leaving the Philippines with intention of permanently residing in foreign
country or permanently working there
c. (kailangan magtrabaho doon) work requires them to be physically present abroad most of
the time (183 days)
d. (bumalik na) previously NRC, with respect to income from abroad
Determining residency of alien (to know rates, deductions, exemptions):
Physical presence and length of stay (not intent) definite NOT extended NRA, definite
EXTENDED RA, indefinite RA
Determining ETB of NRA: 180days
3. RA (definite and extended; indefinite) within
NON-Resident Aliens
4. NRAETB within
a. Stay in Philippines is at least 180 days (aggregate)
5. NRANETB within BUT GROSS income @ 25% final tax ON EVERY
TRANSACTION
a. Stay for less than 180days (foreign artist, tourists)

b. Final tax: Payor of income is required to hold the tax. Payor withholds it to remit
to government (WHA)
Special Category
6. Minimum wage earners special concessions such as NOT subject to income tax
B. Corporations (citizenship depends on incorporation)
- Any aggregation of persons combining capital and industry to a common fund with intent to
divide profit among themselves. Therefore, for purposes of the Corporation Code,
partnership are also corporations, except joint venture and general professional partnerships
1. Domestic within and without
2. Foreign within
a. RFC licensed or has place of business
i. Casual transactions not indicative of being ETB
b. NRFC GROSS income at 30%, withheld by payor
C. Special Groups
- Partnerships: taxable as corp.
o Coownership: common fund does not by and in itself make for a corporation. Intent to
divide profits is necessary.
- GPP not income tax payer. Partners will pay individual income tax rates.
- Joint ventures (partnerships of corporations)
o GR: subject to tax as if corporation. There will be three taxpayers: Corp 1, Corp 2, and
JV.
o Construction, infrastructure, service contracts with government JV will NOT be
subject to income tax except if JV is a separately registered entity.
AVIDA: When the agreement is to contribute property and industry and divide
the houses constructed, the allocation of said housing units is not a taxable event
as no income is realized.
Requirements for construction to be exempt:
Licensed contractors and both engaged in construction
JV itself is licensed by PCAB,
Foreign contractors allowed as long as they get license from PCAB and
construction is certified.
D. Estate
- GR: Heirs will be liable for income in individual capacities upon distribution.
o Prior to division: Estate is taxpayer in its own right, though there may have been profits
from preservation. Taxed as individual. No corporate income tax.
o After partition: When heirs decide to pursue partnership from their inheritance, then coownership is corporation liable for corporate income tax.
Otherwise, they will just be liable individually.
E.
-

Trusts
Person imposes personal obligation upon his personal properties
Revocable (Trustor maintains control over income): trustor liable
Irrevocable (Trustor relinquishes control to fiduciary) fiduciary
o THERE IS A SEPARATE TAXPAYER KNOWN AS TRUST (who will pay).

Taxable income
- GR: Gain + Realized + NOT excluded by law
o Realized gain: actual or constructive (income is already subject to control and
disposition) or presumptive realization (law will presume existence of income)
You can declare income on one time basis or you can declare on INSTALMENT
BASIS.
1. Initial payment does NOT EXCEED 25% of contract price (received
during year of transaction)
2. Initial payment does NOT include evidence of indebtedness (checks,
notes etc.)
3. A deferred payment scheme will be considered as cash based transaction.
Long term construction projects
Declaration must be based on percentage of completion
o Realization Test income is recognized as soon as realized or received.
o Claim of right doctrine --> within his disposal + no other claim
Attacked in concept of control, and must thus declare income for tax purposes
(control test).
Compare advance vs. deposit: when another person has claim over deposit,
then TP may not declare income yet because someone has a claim over it.
o Economic benefit test he gains something which is of value, there is income.
o Severance test TP must be able to sever himself with that of his property before he can
recognize income
o All events test reasonable certainty of realizing income or expense by applying all
relevant circumstance
Not Income:
1. Stock dividends unless redeemed for distribution
2. Compensatory for physical injuries not income. If emotional and mental anguish or exemplary
income
Determining Income
Gross
Net

Individual (estate, trust)

Income EXCLUSIONS
Gross DEDUCTIONS

Corporate (partnership)
Income - EXCLUSIONS
Gross DEDUCTIONS

*deductions are not allowed in compensation

ER-EE income

Taxable Net
Tax Due

Net Exemptions
Taxable Net x Tax Rate

NET = GROSS (NO EXEMPTIONS)

Taxable Net x Tax Rate

Not included: Those against which FINAL TAX is imposed/ GROSS INCOME compensation
system applies

Interest
Dividends
Services

Sources activity, property or service giving rise to the income

Residence of payor
Residence of corporation RFC
Performance
It is enough that the activity
which generates the income takes

place in philippines
Rents and Royalties
Where used or located
Sale of RP
Location
Sale of PP
** constructive trading is considered activity from within philippines
GROSS - Trade, business or practice of profession + compensation + income from dealings with
properties + income from passive sources + all other sources of income
[COMP, Prof, Biz, Prop + AP3IR2D]
1. COMPENSATION based on ER-EE; if services basis is where rendered
- EG: A works for FilCorp who sends him abroad for 9months to work on a project with
MotherForeignCorp. A is NRC, deriving income from abroad because services were rendered
abroad.
- Fringe Benefits Tax (32% of GUMV) HEV HIM FHEL
o Para hindi magulo, basta isipin mo na bigtim benefit ito. Benefit ito, hindi dapat para sa
employer pero para sa employee.
o The moment the mnager actually receives the FB, it will already be considered as taxed
(final tax kasi ang fbt, so payor withholds). Thats why the base amount is GUMV.
o Housing if mainly for EE
Excluded: for ER, AFP, temporary 3 months lang
o Expense if not for ER, vehicle (purchased, leased, maintained, partially paid for EE by
ER), Househild help provided to EE,
o Interest less than market rate is the rate of interest below legal interest (12% lumang
rate pero finix ng DOF to)
o Educational benefits granted to dependents of employee
E: competition, will directly benefit ER, condition imposed upon benefit
o Membership in clubs, Foreign travel (if for work, nope!), Vacation, Life insurance
GSIS, SSS, Medicare, Pagibis
o Excluded:
Employers benefit rule Maybe claimed partially if partially for EE, partially
for ER
Rank and file
By law (exces of 82K)
De minimis
o De minimis maliit lang kaya hindi na pinatulan.
o New threshold: 82K. If govt EE, 13th month pay and other benefits upt o 82K. If private,
13th month and other months and other benefis up to 82 K.
- Includes living allowances except:
o Agri labor paid for in farm products
o Casual labor (unless casual labor in the usual trade or business)
o Household help (if bed and breakfast, regular)
o Foreign government
2. Income from profession - NO ER-EE. But essentially the same. Subject to deductions
3. Income from Business (same as profession).
4. Dealings in property
a. Capital vs Ordinary

i. Ordinary asset enumeration exclusive: stock in trade, held for sale in OCTB, used in
TB subject to Dep, RP used in TB. Everything else is capital.
ii. RULE: ordinary may be capital EXCEPT if REAL estate (2 year non-use in TB).
Capital may always be ordinary.
iii. Notable differences:
1. NELCO, deductible from ordinary gain, final tax or rit, deductions
b. Real, Stock, Personal REAL location; Personal transaction. If manufactured and sold
in two different places partially within, partially without.
i. Ordinary assets will generate regular income tax.
ii. Capital RP tax base is entire SP
1. 6% CGT: GSP or FMV (zonal/ assessed)
2. Situated here CGT. What about if abroad?
3. Loss limitation rules (ind/corp) NCL may be deducted from NCG
a. NCL may not be deducted from NOG.
b. OCL may be deducted from NCG. (so hindi sla fair kay NCL)
c. OCL may be deducted from NOG.
4. Holding period (ind only):
a. STCG/ STHP: 100% G/L recognized (up to 12mos)
b. LTCG/LTHP: 50% G/L recognized (more than 12 mos)
5. NELCO (ind only):
a. Carry over NELCO to next year, up to exetent of gain in the year in
which it was incurred ( remember not to offset with OL/G)
6. Foreclosure: not taxable if redeemed. Taxable otherwise, from final certifical
of sale.
7. If transfer to wife due to separation: not taxable
8. BTO taxable
iii. Capital Stocks (tax base is gain)
1. Traded in SE of 1 of sale price
2. Not traded in SE (listed or otherwise) = CGT 5% up to 100K, 10% above
100K
3. Non-payment is non-registration of change in STB
4. Not subject to CGT
a. Dealers, investors in mutual fund stocks, law
iv. Not subject to CGT:
1. Principal residence rule (18 months, apply within 30days, once every 10
years)
2. Government sale: 6% CGT or Regular income tax
3. Tax-free exchanges:
a. Property for stock, stock for stock, security for stock, control
b. In the control test, what must first be established is that the persons
claiming control are the same persons (5 below) are the same people
as are in the transaction alleged to be taxfree.
c. Bonafide business purpose, step transaction test
d. Effect if not solely in kind:
5. Passive Income (consider SOURCE) RWIP (20% FT) D vs rentals, annuities
- Royalties , unless LW, B, MC = 10%
o If sold abroad, income will be GI. If sold here, income will be FT.
- Prizes (as a result of effort or talent)
o 10K below like barangay singing contest = part of GI

o 10K above like national singing contest = 20% FT

Winnings (luck which I will have now)
o Always FT except PCSO winnings (EXEMPT completely) and corporations (gross
income)
Interest (bank deposit or deposit substitutes)
o Consider residence of debtor who will pay interest (source/situs)
o Generally subject to tax as income, unless exempt or subject to FT.
o Deposit substitutes alternative form of borrowing from the public, which should be
from 20 or more persons at any given point in time
o Debtor must withhold 20% FT on interest payments on BD/DS
Compare with bond exemption
o EXEMPTIONS
FCDU 7.5% imposed only on RESIDENTS
LT investments (5 years)
Pretermination: 5,4,3 4, 12 20 (dapat 5years term yung agreement
talaga)
Dividends
o Cash/property
o Determining situs

Look at income within past three years immediately preceding dividend

declaration. if Philippine income is at least 50% of total income, then entire
income is considered Philippine sourced income
If less than 50% treated as partially sourced form within but only to extent of
Phil income versus worldwide income.

DC declares dividends

RFC declared dividends

RC
NRC
RA
NRA-ETB
NRA-NETB

10% FT
Same
Same
20% FT
25% RIT (gross system)

DC
RFC
NRFC

Exempt, intracorp. Div.

Exempt, intracorp. Div.
30% RCIT (gross)
TAX SPARING:
As a way to mitigate the tax
liability, the Philippines is willing
to waive the 15% provided the
other country allows the same
amount as tax credit.
GI
Determine nationality of income
source (50% in the past three
years vs global income)

RC
NRC
RA
NRA-ETB
NRANETB
DC
RFC

GI
Determine nationality

NRFC declared dividends

NRFC
RC
NRC
RA
NRAETB
NRANETB

30% Gross income

GI
Exempt (source is abroad)
Exempt
Exempt
Exempt

DC
RFC
NRFC

GI
Exempt
Exempt

Stock not normally subject to tax because no income. EXCEPT

Declaration affects proportional ownership
Cancellation of previously declared stock dividends amounts to declaration of
cash dividends
Recipient is NOT SH
Distribution of T/S
Liquidating dividends
Different stocks were issued

Rentals
o If rental for use of property, then considered TB and subject tor egular income tax
o Leasehold improvements
Maybe declared outright or spread over
Annuities paid instalments during thelife of a person for a fixed period of time in consideration
of capital
o If dies before period, return premium is not taxable. If able to collect and finish period,
income and mustbe declared
Pensions & separation pay
o Separation pay is NOT taxable is INVOLUNTARY cause.
Other causes
o Forgiveness of debts yes if not purely gratuitous. If pure liberality, not income tax BUT
DONORs tax
o Recovery of previously written off accounts (tax benefit rule) written off amounts
not declared or written off shall beincluded as income in the year of recovery.
o Tax refunds or credit
o Income from whatever source

Exclusions, Deductions, Credits

Differences: exclusion to determine gross, deduction to determine net, credit to determine payable
Exclusions
to determine GROSS income, not considered part of income because either indemnity, Consti
dictates, or taxed somewhere else
What are excluded PAGALiT PA (premiums, accident, gifts, awards, life insurance, Treaty,
pensions)
Revenue of NSNP educational institutions (consti)
Income of governments, from exercise of govt functions

Return of premiums paid return of capital

When beneficiary receives it, excluded. If principal receives it, excess is income.
Gifts bequests and devises taxed under donor or estate tax
Amount through accident or health insurance
AHI/WCA/PERA + unearned income + suit or voluntary settlement
Life insurance proceeds - not income. Indemnity for purposes of tax.
Not interests, used merely to compensat for losses of partnership/corporation
If there is profit realized, the profit is taxable as income
Income exempt under treaty (TTRA does not defeat your right to exemption)
Pension (reasonable private benefit plan)
10 year service, 50 years old, availed of only once
Benefits from employees trust are non-taxable
Involuntary separation pay (like terminal leave pay) NON TAXABLE
Awards and winnings
Awards in sports competitong must be recognized by national sports associations
No positive past, present of future act on the part of winner/awardee
PERA accounts will be free from income, redemption taxes

Deductions BITE DeDe Loss CPR

to determine NET income
Mostly for businesses and professions, EXCEPT for premiums on health and insurance)
Congress may remove deductions and it will be valid. Deductions are in the nature of exemptions,
and are such products of legislative grace.
General Rules:
o Personal expenses are NEVER deductible. They are most likely subject to EXEMPTIONS.
o There must be substantiation
o Deductions not waived
o Show withholding (like engagement of professionals) withholding must be done at time of
transacting
Choose one between ISD/OSD: cannot be quarterly itemized then OSD sa yearly
o OSD RC, NRC, RA, DC, RFC
RC, NRC, RA
Compensation
PHI
Exemptions

Noncompensation
ISD/OSD
PHI
Exemptions

NRAETB

NRA-NETB

DC, RFC

NRFC

ISD only
PHI
Exemptions

GROSS

ISD/ OSD

GROSS

Itemized SD substantiation
o Expenses ordinary and necessary during taxable year
RULE: match income and expense. If the gastos will pertain to capital, then
capitalize, not expense. COSTS are NOT EXPENSES (costs are deducted to
determine gross because return of capital. Deductions are expenses). Therefore, if the
benefit will last for more than 1 year, then it is capital expenditure (like for litigation/
advertising).
Samples:
1. Salaries, reasonable and not excessive, not bonuses (except remuneratory
bonuses)

2. Travel, cost, rentals (no title or equity), necessary repairs, leases,

entertainment and representation (reasonable, not illegal or immoral. Now at
5% if goods and 10% for services)
3. Raw materials are COSTS-ASSETS, not expenses.
4. Political contributions must be fully utilized
COHAN principle when it is shown that expenses are incurred, but the amount
cannot be ascertained due to absence of evidence, taxpayer will bear cost of in
exactitude and the BIR is allowed to make an estimate.
Interests
The proceeds of the loan must be used in furtherance of business.
1. Proceeds of loan used to capitalize shall be taken as part of cost.
Actual interest expense shall still be subject to 33% of the interest income that is
subject to final tax. BABABAAN MO YUGN TAX BASE NG TAXABLE
INTEREST MO. (plugging th tax arbitrage scheme. Effectively lowers taxable base
so as to lower the tax saving from deduction of interest expense)
1. Tax arbitrage is when tax payers take advantage of a favourable interest to
save on taxes.
Taxes they must be in accordance to TB.
EXCEPT: Income tax, estate tax, donors tax, special assessments,
1. foreign taxes (may either be taken as credit here. Or if credit not exercised,
then payable here as income tax).
o Foreign tax credit limit: (tax from foreign/ tax worldwide x phil tax
rate)
Tax as a deduction vs credit
1. Credit is a peso for peso deduction where as a deduction pertains only to
percentage of amount granted as discount.
Bad debts those that arise from worthlessness of debts. It is distinguishable from loss
through the element of worthlessness. must be WORTHLESS (remember tax benefit rule
which applies if there is a corresponding tax benefit)
Must be worthless, connected with business, must not be between related parties,
uncollectible despite diligent efforts
Tax benefit rule: Written off debts recognized as losses and which resulted to tax
benefits must be considered as income in the year collected to the extent of the gain
therefrom.
Depreciation and Depletion
Depreciation estimated value of normal wear and tear of asset. (straight line,
declining balance, sum of the years)
Depletion businesses involved in extraction of wasting assets
Amortization refers to depreciation of intangibles
LOSSES
Ordinary asset gross income and deduction (ordinary loss)
1. Ordinary, theft, embezzlement, casualty, NOLCO
o File declaration of loss and proof with BIR
Capital asset capital gain (CGT, CGT-stocks, loss limitation, holding period,
NELCO) and capital loss.
Other losses
1. Operating loss (when allowable deductions exceed gross income)
o NOLCO (3 years carry over) deduction may be carried over for
next three succeeding taxable years ; 75% SUBSTANTIAL

CHANGE IN OWNERSHIP OF BUSINESS RULE

(MERGERS)
1. Individual business, professional practitioners, and corps
(DC, RFC)
2. Losses from tax exempt lines cannot be deducted from nonexempt lines. (as when there are two lines of businesses)
3. NOLCO vs. mergers/consolidation: not allowed. Gaining
corporations must not take advantage of net operating loss of
losing corporations. Losing corp should not be allowed to
peddle its losses.
a. Except: compliance with 75% interest retention rule
NOLCO of losing corp may be carried over
PROVIDED owners of corp 2 maintain 75%
interest/ownership in corp 1
b. NOLCO vs MCIT: NOLCO is taken into
consideration in computing for the RCIT. As such it
excludes the application of the MCIT.
i. Perios will continue to run regardless.
4. Foreign exchange losses are not taxable until realized
5. Wagering losses deductible up to gains. It has to be legal form of gambling
muna ah. Hindi pwedeng yugn sa katabi mo lang.
6. Non-deductible: illegal activities, losses between related taxpayers (nagbenta
ka sa kapatid mo tapos nalugi ka. Wala kang mababawi don kasi related
kayo).
2. Wash sales (Does not apply to dealers) : 30 SUBSTANTIALLY SAME KIND OF
SHARES 30
GAINS ARE TAXABLE BUT LOSSES ARE NON DEDUCTIBLE.
(sequence: purchase, sale, purchase: must be completed)
Charitable contributions (5-10% limits)
Limit: 10%/ 5% of taxable income prior to charitable contribution to accredited
institutions EXCEPT
1. Government
2. International Orgs organized under phil law.
3. Accredited NGOzs
Notice of donation should be made to the BIR.
Pension trusts

OSD (Ind/Corp) see effect on partnerships

o Ind: 40% of GS
o Corp: 40% of GI

EXEMPTIONS
Individual: BPATE (ONLY FOR RC, NRC AND RA. If NRA-ETB, reciprocity)
o Uniform exemption: P50,000 (single, married or head of family)
o Married spouses: maybe claimed by both if BOTH are earning. If only, then yun lang
kumikita.
If legally separated, then yung kumikita lang.
Dependents do not include parents, senior citizes, siblings. ANAK lang.
o Additional:

Qualified dependent children: P25K/child, maximum of 5 (P100K)

GENERAL: Living with him + dependent upon him for chief support
Up to 21: Not married, not gainfully employed,
If over 21: but mental and physical condition makes him unable to support
Favourable change: consider them na lang the year after. As if the change
happened at the end of the year.
o However, if change is in LW or Chief support immediately
consider. Whatever status at end of the year, that will prevail.
Disallowed: personal expenses. New buildings or permanent improvements, restoration
expenses, related parties, beneficiary is boss wash sales, lugio sa gambling etc
TRANSFER PRICING situation whereby a corporation utilizes the tax exemption of
another corporation by allocating incomeor expenses away from its income declaration with
the purpose of mitigating tax liabilities. In such cases, the BIR is allowed to allocate such
portion of income as to prevent tax evasion.
arms length comparison of standards adopted by certain parties to standards
adopted bys miliarly situated independent parties to determine if there is an intent to
reallocate income or expenses for purposes of mitigating tax liabilities.
However, BIR maynot unilaterally impose tax rates.

o
o

o
o

Minimum wage earners are EXEMPT from income tax.

Senior citizen. Comity.

Corporations
o Apply individual computations here too: GI-AD=NI x 30 = NITP. BUT. There are others.
o MCIT (2% of GI, 3 years, DC and RFC only) compare with RCIT. Pay whichever is
higher.
Do NOT ever compare with PREFERENTIAL TAX RATE. MCIT is only for those
with RCIT.
Carry forward of excess MCIT excess of MCIT over RCIT maybe carried forward
as credit for the next three succeeding taxable years.
Pwede mo iaccumulate yugn MCIT mo basta nasa applicable period.
Suspend: Prolinged labor dispute, legit business reverses, FM
o IAET (10% of Improperly accumulated earnings)
Reasonableness and immediacy
Accumulating profits beyond the reasonable needs of the business
Reasonableness: URE exceed 100% of PIC = prima facie evidence of
accumulation. REBUT:
o Debt payments, reasonable needs of expansion, contingencies
board resolution to this effect may help. RESERVE THEM for what
you need.
Immediate, not merely imagined. Intent to use must be at the TIME OF
ACCUMULATION, and not an afterthought.
Exempt: publicly held, SEZ, GPPP, insurance, banks
o Preferential tax rates
Proprietary (private) educational institutions and NP hospitals = 10% after
compliance with predominance test
Predominance test: Is the school related income greater? PTR.
St lukes case:

St Lukes was NP, but some of its income from pay patients were
channelled to charity. None inured to the benefit of persons such as
stockholder. Considering that no benefit inured, then it is non-profit.
However, since it is NOT operating exclusively for charitable
purposes, then it is NOT a charitable hospital and may only avail of
PTR.
o Private schools exempt from VAT
In re: bak deposits and deposit substitutes: interest income therefomr may be
exempt from income tax if utilized ADE for educ/charity.
SSS, GSIS, Philhealth, PCSO, LWD income tax exempt, BUT
Notwithstanding their tax exempt character, they shall be subject to every
income earned from profit related activities, regardless of the disposition of
such income.
o

Partnerships CONTROL TEST KAYA MAY CONSTRUCTIVE RECEIPT

o Business partnerships The partnership entity shall be taxed like a corporation. Its net
income after taax shall be distributed to partners, which will then be further subject to income
tax AS IF THEY WERE DIVIDENDS (dividends tax of 10%).
As such, FINAL TAX of 10% of the share received per partner.
The income of the partnership shall be deemed to be constructively received,
regardless of agreement between and among partners.
After that, do not include in GI income anymore.
o GPP GPP itself NOT subject to corporate income tax. Then each partner shall be liable for
the income. Constructive recognition rule again.
o In re: OSD
If GPP avails of OSD, then partner can no longer use ISD.
If GPP avails of ISD, partner can avail of ISD.

Credit To determine income tax PAYABLE

Withholding Tax
Final Tax full settlement
Royalties, prize,s winnings, dividends (AT SOURCE. Payor must withhold taxes na)
Creditable withholding tax partial settlement/ advance payment

TRANSFER TAXATION

1. Estate Tax (200K, 20% 10Mio) is more expensive than Donors Tax (100K, 15% 10mio)
2. Tax liability accrues @moment of death so valuation also at that time, although payment will be when
return is filed
3. Theories: Benefits Received, distribution of wealth, ability to pay, state partnership
4. Only applies to NATURAL PERSONS. Differentiate between residents and non-residents.
5. How to classify: Nationality of decedent, nature and location or property, valuation and rates applied.
a. Rule on intangibles: follows domicile except franchises in Phils, shares of DC or RFC.
Does NOT apply to NRA whose country of domicile manifests TOTAL reciprocity with Phil
transfer taxation.
6. GROSS ESTATE: TRIGLiC

a. Transfers in contemplation of death indicator: family member, timing

b. Recovable transfers
c. Interest (like in a partnership)
d. GPOA
e. Life insurance proceeds with estate as beneficiary and must have been irrevocable
f. Insufficient consideration
7. NET ESTATE:
a. Ordinary [CELIT TV]
i. Funeral expenses: 5% of GE, or AV or P200K
ii. Judicial expenses: those necessary for settlement of estate. No ceiling.
iii. Unpaid mortgage indebtedness. when the property is burdened with mortgage
idebtdness, it may be deducted. If property of guarantor, pwede basta receivable.
iv. Claims against the estate: forever barred, except if TAXES. Proven by notarized
documents. If obtained 3 years before, there must be accounting of three years of
loan.
v. Taxes: post-death development cannot be burdened by taxes.
vi. Losses (not compensable, necessary for settlement, due to casualties , not claimed as
deductions)
vii. Transfer for EXCLUSIVELY PUBLIC USE
viii. Vanishing deductions (5 years, 100-20%,)
1. Property was already subject of previous transfer tax. There was prior
payment. Kahit zero yung transfer Tax, may payment yon.
2. Identifiable.
3. Death/Donation 1 and Death 2 should take place within 5 years or less.
4. Prior decedent should not have claimed VD.
b. Special [FSMA]
i. Family home up to 1MIO or interest in property
ii. Standard P1,000,000
iii. Medical P500K incurred within 1 year prior from death
iv. Amounts received by heir
8. File notice of death within 60 days from death. Then file the estate tax return within 6 months from
death. Payment of tax extendible to 2years or 5 years. Ground: payment of tax will cause undue
hardship on part of the estate.
9. DONORS TAX gratuitous transfers, there has to be DONATIVE INTENT
a. Direct or indirect gifts
b. 2-15% for relatives (ascendants/ descendants, siblings, spouse, collateral within 4 th
consanguinity), 30% for strangers
i. Aggregate gift made during a calendar year so pag nagdonate ka last month, yung
next base mo will take that into consideration. Credit na lang yung nabayad mo na.
c. Sale for insufficient consideration may give rise to donors tax, but consider the donative
intent. EXCEPT for sales of capital assets, because you will be liable for CGT then based on
fair market value or gross selling price,, whichever is higher.
VAT

VAT is tax assessed on every sale barter or exchange of goods and services in the course of trade or
business in the Philippines, or on every importation of goods though not in the course of trade or
business

Includes sales of real estate by those engaged in the sale of the same: cap 1,919,500 or
3,199,200 and Lease of 12,800
DESTINATION PRINCIPLE: ergo, exports are zero-rated.
Isolated transactions are not subject to VAT except when they are imports
Output vat versus input vat and tax credit method. Remedy of those without output vat: refund or
credit (please confirm if meron pang tax credit ngayon)
Zero rated vs effectively zero rated
o Exports (IF GONE) international shipping, foreign country, gold,oic, non resident buyer,
export oriented enterprise
o Effectively Zero rated zero rated because of treaties and international agreements
Rule on PEZA registered enterprises
o VAT-registered: 0%
o Non-VAT registered: exempt
o EZ exports: 0%
o EZ sells to customs territory: 12 %
o Sale or lease of service in customs: 12%
o (same) but inside customer: 0%
Consider sale, barter or exchange. But there are transactions where there is no actual sale but
deemed sale by law such as:
o Sale of goods and services originally intended for TB (inallocate mo for yourself)
o Property dividends property of corporation distributed to SH
o Consignee does not sell goods consigned within 6 months
o Retirement from business as to inventoriable goods
o ** electricity can be sale.
Change from VAT registered to non-VAT VAT-able?
o VAT-taxable to VAT exempt
o Cancellation for registration approved die to reversion to VAT-exempt
o VAT exempt person registers anyway but after three years decides na VAT-exempt pala
o NON-VAT-able
Mergers (input tax may be utilized)
Change in trade name
Change in control but no exchange in properties etc
Presumptive input VAT = 4% (sardines, mackerel, noodles, cooking oil, refined sugar)
Transitional Input VAT = 2% of beginning inventory (when suddenly nagging VAT taxpayer na)
Ordinary Refunds:
o Grounds: erroneously paid (overpays, erroneously pays, illegally pays a penalty) without
authority of law
o Timing: file with CIR 2 years from payment(kasabay ng filing) regardless of supervening
event.
o File a written claim within 2 years. Make sure that you assert this right by filing with CTA
before the 2-year period lapses.
180 days, inaction? NOPE. This is for protesting assessments, not refunds.
So wait. 2 years. Naissue before 2 years lapse. Appeal to CTA-DIV PETREV42.
When denied, MR within 15D.
Then Go to CTA-EB Petrev 43 within 15D
Either MR, or SC PetRev under 45.
When no action, appeal with the INACTION before the 2 year period lapses.
o

VAT REFUNDS (SEC 112)

o File a refund within 2 years from the close of the taxable quarter from which relevant sales
were made. 120D period MANDATORY.
Relevant sale is that sale which gives rise to the claim (zero rated sale).
Moreover, upon fling of written claim, the BIR has 120 days to act on the claim.
Inaction is DENIAL WITH FINALITY. (walang 120D sa ordinary refund, basta
within2year period)
If denial or inaction within 120D: Appeal to CTA div, 30D rule 42.
What if the decision/inaction will lampas the 2year period? You WAIT.
Hinga lang teh, may time pa si BIR. The BIR is given 120D to act or not to
act on your claim. (versus the mandate to file the refund within two years in
ordinary refund cases).
Tax Remedies

Generally.
1. Remedies by the Government Assessment and Collection
2. Remedies by the Taxpayers DEAR
a. Before payment and
b. After payment of tax
GOVERNMENT REMEDIES
Administrative Remedies Before Payment
1. Assessment process or document (notice and demand + process) manner of determining the
liability of a taxpayer
a. PRINCIPLES:
i. Prescriptive period: 3 years from last day of filing. If out of time, then from day
of filing of return.
1. What if amendment? Determine if substantial or formal. If it will affect the
tax liability, it is substantial.
2. Exceptions to 3 years:
a. False/fraudulent: 10 years from discovery (assess or collect
without assessment)
b. Omission to file a return: from time of discovery
c. Agreement in writing: waiver of right to be assessed
i. Waiver must contain definite period within which govt
should assess. Hindi pwede blank.
ii. The one who signs waiver for corporation must be duly
authorized.
iii. Must be in WRITING and must contain AN AGREEMENT.
Not merely acquiescence. There is NO IMPLIED
ACCEPTANCE.
iv. Who can sign for govt? CIR. But the function can be
delegated to RDOs if the period of assessment is about to
expire.
v. Must be accomplished within the original period.
ii. An affidavit complaint is merely a unilateral statement of facts, but absent a demand
to pay, it is NOT an assessment.

b.

c.
d.

e.

1. Must contain facts and law upon which the assessment is based. It must be
the ASSESSMENT which contains it, otherwise any document containing it
is VOID.
iii. Jeopardy assessment one made without the benefit of complete or partial
assessment
iv. Best evidence obtainable rule there must be basis and basis should be best evidence
obtainable by BIR.
1. Not the same as best evidence rule. It DOES dictate however that when origs
are available then the origs are the BEST evidence obtainable..
v. Due information about the subject of examination
vi. Effects of delay: Basic Tax and additions
1. Deficiency vs. Delinquency
a. Def: notice and demand
b. Del: liability begins at moment tax becomes due
2. Surcharge
a. Ordinary 25% basic tax assessed : failure to pay on time 25% of
basic tax assessed (either by law or notice) + filing return with wrong
BIR office
i. One time imposition, peor pwede patong patong
b. Fraud penalty 50% of basic tax assessed
3. Interest 20% PA tumatakbo from due date or date prescribed for payment
4. Penalties - Compromise
a. Bar to future criminal or civil prosecution concerning a particular tax
liability
AUDIT LOA:
i. unverified number of years The purpose of the LOA is to inform the taxpayer
about the subject of investigation. It will defeat the purpose of LOA and will violate
right of taxpayer to due process.
ii. third party verification rule information can come from third parties with or to
whom party transacts or reports.
iii. Bank deposits exceptions: waiver (compromise based on financial inability to pay
taxes), subject matter is estate tax liability of a depositor; pwede rin kahit joint
account; Exchange of Tax Information Act (ETIA) BIR can examine pursuant to
request of foreign tax agency (reciprocity)
Notice of Informal Conference
Pre-assessment notice (PAN)
i. Failure to issue PAN is denial to due process because PAN is required by the NIRC.
The only ecxceptions to PAN are: (MAWEE)
1. Mathematical error on face of return
2. Actual discrepancy between tax withheld and amount actually remitted
3. When a claimant of refund or credit is deemed to have applied the same
against previous taxable quarters
4. Excise tax due on excisable articles not paid
5. Locally purchased article by exempt person sold to non-exempt persons
FINAL ASSESSMENT NOTICE (ASSESSMENT)
i. FAN PROTEST (w/in 30D) non protest will make amount in FAN conclusive.
(pero issues concerning the amount lang)
1. Protest forms
a. Reconsideraton (wala reconsider mo lang) will not suspend period
to collect

f.

ii.
WAIT.
i.

ii.

b. Reinvestigation (additional docs for new investigation) + GRANT

then suspended yung period to collect tax
Submission of supporting documents (60D)
(180Days)
Decision
1. DENIED: Remedy Appeal to CTA Div PetRev42 30D
2. BIR must indicate that it is final decision on disputed assessment (FDDA)
3. Then file MR with CTA Div (15D)
4. Then to CTA EB (43 15d)
5. Either MR or appeal to SC (PetRev 45 15D)
Inaction MUTUALLY EXCLUSIVE.
1. Appeal
a. Within 30D from lapse of 180D period (implied denial) Otherwise
the DECISION becomes F&E.
b. What about inaction? Failure to appeal after 180D means.
2. WAIT.
a. Then after receiving the decision, go sa appeal through a decision.
3. Bir Collects while there is appending protest . It doesnt matter what form it
takes. But the BIR must have FDDA and that taxpayer can treat that as an
implied denial.

Collection of Taxes
3 years from the ISSUANCE of the assessment. Except
o 10 years (with or without assessment) false fraudulent/ omission (FFO)
o 5 YEARS Collection of taxes assessed pursuant to FFO or period agreed upon in writing
o IAET imprescriptible
o Yung mangyayari here is, the period to collect is not tolled by a reconsideration protest (a
reinvestigation does). So when the BIR does not act, the period consitnues to run. By the time
the BIR acts on the case, the taxpayer maybe held liable, but the period to collect has lapsed.
o However, when the matter finally reaches the court before lapse of 3/5/10 years, then the
period is tolled.
Only two instances when you can collect without assessment: fraud/ omission
NO INJUNCTION: Courts (E: CTA/SC) cannot issue injunctions against BIR in collection.
o Pending case before CTA
o Post a bond not less than tax to be collected
o Prove that collection is prejudicial
ADMINISTRATIVE COLLECTION
o Distraint actual or constructive
Constructive does not take property but notifies taxpayer that he cannot dispose of
the same without authority of government (concealment with intention of evading
taxes, leaving with intent to evade, obstructing proceedings, removing properties with
intent ot evade,r etiring from business)
o Levy remedy: redemption 1 year from moment of sale
o Garnishment
o Tax lien taxpayer refuses to pay tax obligation
o Abate forego some or all collection of taxes
Cost of collection will exceed tax to be collected
Tax appears to have been unjustly/excessively assessed

If notpower of compromise, no need to refer to NEBoard. SO abatements do not need

etc.
o Compromise of tax liabilities SOLE PREROGATIVE OF CIR
Non-delegable power of CIR
1. Power to recommend to SOF issuance of RR
2. Issue rulings of first impression or to modify existing ones
3. Station of tax officials
4. Abate or enter into compromise
o National evaluation board acting together if more than 1million
pesos
o Financial inability or reasonable doubt on validity lower than
minimum
o Regional evaluation Board if basic tax does not exceed 500K. +
discovered by bureau
All EXCEPT: fraud (WHT liabilities), criminal violations of NIRC already filed with
courts
Grounds:
1. Financial inability on part of taxpayer act of asking for extansion of time ot
pay after decision has been rendered is an admission of capacity to pay
o 10% of basic taxes minimum
o Waiver of bank secrecy laws
2. Reasonable doubt regarding liability of taxpayer cannot be invoked when
SC issues decision
o 40% of basic taxes
JUDICIAL COLLECTION
o Civil
CTA div - exceeding 1million
RTC - 300-400K
MTC - less than 300/400K
o Criminal (5 year period from discovery AND institution of proceedings. Period seems to be
imprescriptible. And it is. It should be interpreted to mean that when the case is dismissed, it
may be refilled within the specified period as long as there is no double jeopardy).
Courts
1. CTA amount is more than 1mio
2. RTC 6 years and above
3. MTC below 6 years
No need to issue assessment. Criminal prosecution may arise because taxpayers
knows already.

Administrative Remedies After Payment (Refunds)

File WRITTEN claim of refund unless on its face, clear overpayment, then that return is equivalent to
written claim.
2 years from payment, regardless of any supervening event. (pay as you file, so date of filing). Final
Adjustment return ang reckoning sa period, not quarterly returns.
o What if amended? Count from filig of original. Then the period for the amended one starts
from the time you file that. So ihiwalay mo yung orig sa amended.

COMPARE WITH: VAT REFUNDS (SEC 112)

o File a refund within 2 years from the close of the taxable quarter from which relevant sales
were made. 120D period MANDATORY.
Relevant sale is that sale which gives rise to the claim (zero rated sale).
Moreover, upon fling of written claim, the BIR has 120 days to act on the claim.
Inaction is DENIAL WITH FINALITY. (walang 120D sa ordinary refund, basta
within2year period)
If denial or inaction within 120D: Appeal to CTA div, 30D rule 42.
What if the decision/inaction will lampas the 2year period? You WAIT.
Hinga lang teh, may time pa si BIR. The BIR is given 120D to act or not to
act on your claim. (versus the mandate to file the refund within two years in
ordinary refund cases).

Other principles
Standing to sue - Withholding agent, regardless of interest, can file claim for refund, and he will be
holding the amount in trust for the statutory taxpayer.
Protest (prepayment) and Refund (postpayment) are mutually exclusive remedies. The moment
the amount subject of assessment becomes final, you cannot use refund as a remedy. Even if you
failed to file a protest.
o However, when the assesment lapsed without finality then refund should be allowed.
BIR functions and organization
Non-delegable powers (recommend, rule, abate and compromise, station)
Power to recommend to SOF issuance of RR.
Issue rulings of first impression or to modify existing ones. All rulings must be retroactive except:
o Fraud, Material difference of basis, bad faith.
Station of tax officials
Abate or enter into compromise
o National evaluation board acting together if more than 1million pesos
o Financial inability or reasonable doubt on validity lower than minimum
o Regional evaluation Board if basic tax does not exceed 500K. + discovered by bureau
Tax periods
Significance of period: individual may not avail of fiscal period.
Always calendar except if BIR grants fiscal. When no books or records, GPP, trust = calendar.
Short period happens (5 situations) when:
1. TP dies.
2. TP changes accounting period.
3. Corp dies
4. Corp new
5. When BIR cancels period due to: intent to evade, removal/concealment with intent to evade,
leaves to evade, obstruction of proceedings for collection

One time transactions: sale of real property etc

Local Taxation

Local Taxing power merely statutory, but not delegated. Congress may not remove it, but may limit
and provide guidelines by law. Local governments will determine who, what and how much should be
taxed. NGs role is to guide and limit, not dictate. The guide is LGC, Book 2.
o Local Sanggunian exercises that power.
The LGC do not justify collection of taxes. The only way to enact it is through an ordinance issued by
the LGU.
Fundamental principles:
o Uniform , equitable, not contrary to law etc not unjust, progressive, for public purpose
Requirements for enacting TAX ordinance:
o Prior public consultations and hearings are NECESSARY.
What may or may not be taxed:
o Residual power to tax when the LGC does not contain a prohibition against taxing an
activity or object, then it may do so.
LGC can adjust rates but once every 5 years and amount not exceeding 10% under LGC.
Blanket revocation of prior tax exemptions by any provision of law.
There is no prohibitin against indirect double btaxation. BUT. Congress imposed that limitation
the rule on pre-emption: if imposed by national govt, cannto be imposed by LGC UNLESS it is
authorized to do so.
o NIRC income, estate, donor, VAT, % excise, DST
o T& C import taxes (mere entry of goods cannot be taxed by locgov)
o National Taxes: road users tax, MV registration fee, alcohol, petrol
o Businesses enjoying exemptions due to economic and public policies
o National Govt, agents and instrumentalities
Provinces:
o Transfer of real property ownership
o Printing and publication
o Franchise Tax (public utilities) in lieu of all taxes means in lieu of all NATIONAL
taxes
o Sand and gravel taxes cannot be imposed on private properties
o Professional Tax where you have your principal office
o Amusement Tax
Cities may impose taxes 50% higher than that of provinces
Municipalities
o Business tax = GS/GR previous fiscal year
o Sales outlets pay tax in all units. If none, register sales in principal office situs.
o Principal office and plant + factory are in diff location: Prorated: 30% - 70% of GS
o All three are in different locations: 30% - 60 of 70% for factory 40% of 70 plant
Barangay
o Less than 50K, Secure barangay clearance
o Fighting cocks, signages etc

Collecting Taxes:
When - 5 years from the date tax becomes due
o Administrative
o Judicial Means
Taxpayer remedies

DOJ: Appeal to the DOJ regarding newly enacted tax ordinance constitutionality or
legality 30D from effectivity of ordinance
DOJ 60D to act/not act Court (RTC with LGU)

PROTEST AN ASSESSMENT: 5 years 60-60 30 etc

Local Treasurer (5years from due, then 5 years from assessment then collect) File
protest (60D) incorporate all docs Treasurer will decide/ not act in 60D
Appeal to Court (RTC) CTA Div (42 30D) MR CTA EB SC

REFUND: (basta within 2 years. Cosider jrusidiction of RTC & MTC)

Local treasurer (2 years from date of payment or entitlement thereto, supervening
events considered) DECIDE or WAIT but make sure to appeal within 2 year
period Consider amount involved (because now the amount is being recovered)
MTC/RTC Then CTA EB (when RTC acting appellate 30D) OR CTA Div (when
RTC acting original 30D)
Real Property Tax

RP anything with character of permanence will be considered as real property in RPT

Real property local tax, so local government (local sanggunian province or city) needs to enact its
own ordinance
ADE for C,E,R purposes
ADE by national government
ADE by GOCC are exempt from RPT. The benefit granted to GOCC cannot be expaned to include
those with whom it contracts.
Environmental protection

Principles:

o
o

VALUED AT Current FMV

TAXED AT ACTUAL USE

Process:
o
o

Ordinance 1: Assessor is obliged to revalue properties (Preparation of values of FMV).

Ordinance 2: Levy of RPT
FMV * Assessment level (taxable percentage based on use: res, agri, com, industrial, min, tim, spl)
We get Assessed value/ Taxable value * RPT (P 1%, C 2%) = RPT may be paid
even on instalment

Remedies Government
Admin by Levy
o Collect 5 years from tax becomes due (E: FFO 10 years)
Judicial Action
Remedies Taxpayer
Appeal to DOJ

 Protest against action by assessor:

o Assessor Appeal to LBAA CBAA CTA EB
(local/CENTRAL board of assessment appeals): Appeals from actions taken by
the assessor and treasurer
Members of LBAA: Register of Deeds + Prosecutor +City Engineer
Protest against assessment by treasurer
o File protest before treasurer LBAA CBAA CTA EB
PAYMENT UNDER PROTEST

Refund (2 years from payment or entitlement thereto)

o File claim LBAA CBAA CTA EB
Tariff and Customs

Importation from the moment from the moment craft enters Phil jurisdiction with intent to unload.
Intent is sufficient, actual unloading not necessary
Every import must pass through customs houses because all are subject to duties. Otherwise
smuggled
Obligations:
o Cargo manifest stating contents of vessel upon time of entry
o Importer must declare through import entry declaration.
Kinds of importation
Dutiable taxable
o Importation ends after: Pays to get permit for release + bring out goods from customs
jurisdiction
o BOC cannot seize goods from you after the importation process ends.
o The only remedy is judicial.
What if there is misdeclaration and fraud? Permit was not lawfully obtained. So
BOC can still seize articles.
o Persons who settled duties is required to keep record for 3 years.
Prohibited not allowed, will be destroyed
Conditionally Free personal effects of returning residents; goods donated to DSWD for charity
etc
Duties
Regular ad valorem (transaction value) or specific
o Transaction value of identical goods. Then similar. Or deductive value. Computed value.
o Soecific duty
Special
o Dumping LESS THAN FAIR MARKET VALUE: sold here for price less than fair market
value (tinatapon dito)
o Countervailing SUBSIDY counteracting the effect of subsidies being enjoyed by imported
articles from their country of origin
o Marking MARKING incorrectly marked or declared
o Discriminatory LINTIK LANG ANG WALANG GANTI DUTY: goods which discriminate
on our goods

Remedies
1. Customs protest cases lawful forms of importation
Protest with collector of customs (pay under protest) Grant automatic review by CoC
Protest with collector of customs (pay under protest) Deny appeal to CoC
From Coc Grant auto review by DOF Grant (DONE!) ||| but if deny CTA Div.
From Coc Deny CTA Div
2. Seizure and forfeiture cases

Collector of customs has primary jurisdiction (courts should NOT interfere) over Seizure and
forfeiture cases
Search warrants are not necessary in seizure and forfeiture proceedings. if residential dwelling.
Judicial Remedies

Regular Court equivalent to CA. Decisions of the CTA are now appealable to the SC.
Division
o CIR: D/ R/P/O (disputed assessments, refunds, payment of penalties/ other matters by CIR)
o Inactions of the BIR: D/R/P/O
o TCC: SOF
o DTI or DOA: dumping or countervailing duties
o RTc decisions (original jurisdiction)
General:
PetRev:42 (30D) MR 15D (mandatory) PatRev43 CTA EB either MR or SC (PetRev45
15D)

Criminal Cases
RTCgreater 6 CTA div
MTC up to 6
IRT or TCC exceeds 1Mio (CTA EB, exclusive orig criminal)

Civil for collection (300/400K)

300/400 = MTC/RTC
1Mio (NIRC/TCC) CTA Div

En Banc
o CTA division
o RTC appellate
o CBAA

Taxpayer suit identify yourself as someone injured or adversely affected by public funds
disbursements
o Ripeness, Exhaustion, Lis Mota of case (if constitutionality)