-

More question on remedies and income

10 or more income tax and remedies, tax
principles 4-5 vat 4-5 all the rest 1 or 2
landmark cases and new jurisprudence are very
probable to appear

!!!
BDO,
RCBC
vs.
Republic:
construed the meaning of DEPOSIT
SUBSTITUTES. What does this mean?
it is an alternative form of obtaining
funds from the public other than
deposits. Public means Borrowing
from 20 or more individual or
corporate lenders at any time.
Instruments involved or covered by
deposit
substitutes:
bankers
acceptance,
promissory
notes,
instruments with recourse.

Interest income, maintained under

foreign currency deposit system,
taxable or tax exempt? It depends.
24, 25, 27 and 28. If depositor is nonresident individual or corporate,
EXEMPT. If resident individual or
corporate: TAXABLE, 7.5% FINAL TAX.

Shares of stock are considered as

CAPITAL TRANSACTION. Tax rates are
capital gains tax. This may be
subject to income tax if not listed
nor traded in local establishments.
Rate: 5%/10% final tax rate. 5% net
capital gain not more than 100k.
10% net capital gain in excess of
100k. Subject to percentage tax if
listed and traded of 1% Of gross
selling price apply to individual and
corporate.

Capital gains tax of 6%, (expect to

know rate) final tax. Sec 24D
(individual seller), 27D5(domestic
corporation). The tax base of the 6%
capital gains tax based on these two
sections the word is HIGHER
between gross selling price and
zonal value. Question: exceptions
to these: supreme transliner vs. BPI
savings bank: done apply rule if it
involves
EXTRAJUDICIAL
FORECLOSURE OF REAL ESTATE
MORTGAGE. It is the amount paid
by the highest bidder which is
the basis of the 6% CGT. Second
exception: REVENUE MEMORANDUM
ORDER 41-91: sale of lots by the
NATIONAL HOUSING AUTHORITY
underprivileged or low income tax.
THE CONSIDERATION PAID IS
SUBJECT TO CGT.

27D5: Lands and buildings 6%. If the

subject of sale is machineries and
equipment
what
is
the
tax
treatment? Dont apply 6% INCOME
DERIVED IS SUBJECT TO THE

INCOME TAX
Aichi doctrine: 26 decisions of the SC. Note. Very
important.
Taxpayer: categorized into 3 (individual, corporate,
estate/trust) estate and trust are seldom asked in
the bar exam.
Taxpayer answers the question, does this person
have the legal personality to file a written claim for
refund. (5 times asked) sec 22N. know distinction
between taxpayer and withholding agent. Define
sec 22K. withholding agent is liable for tax. But
does this necessarily mean that he can claim for
refund? A person liable for tax is necessarily
subject to tax. Thus withholding agent has legal
capacity to file for a refund. Withholding is
technically considered as a taxpayer, therefore,
withholding agent has legal personality to file for
claim of refund.
Taxable estate Is the one subject to judicial
settlement. Income may be derived during
settlement of estate, thus it will be subject to tax.
Irrevocable trust is taxable not the revocable trust..
Section 63. Becomes irrevocable in two situations:
(1) title to corpus is vested in the grantor or (2) any
person not having substantial adverse interest in
the disposition of the corpus. (check the provisions,
mejo Malabo kung ano yung 2nd)
Income question is taxable or not. San Beda
College? Test of taxable income: Severance test.
Separation from capital which is of existing value.
Control test. Its the power to procure the payment
of income and enjoy the benefit thereof.
Application: Solutio indebity general rule: not
taxable for the simple reason that you have
obligation to return, exception:
application of
control test, if you may use the same without
restrictions then it is taxable.
Trustor and trustee: no income, but if trustee has
free disposable, taxable as applied in control test.
Claim of right test Racken vs. US. Sec 28 (a)
derived from whatever source. Means that the
source is immaterial, whether illegal or legal, still
taxable.
COMMON RULES that apply individual and
corporate taxpayers

CORPORATE RATE OF 30% or regular

income tax rate..
6% may be legally avoided by tax
payers. 24D2.
(MARK
IT) 5
Requisites so individual seller may
avoid
6%
CGT
as
regards
construction of RESIDENCE!!! Note
the following dates:
18 MONTHS
30 DAY PERIOD NOTICE
ONCE IN 10 YEARS

39A1. Meaning of ordinary asset,

distinguished from capital asset. 5
ordinary assets: (1) Stock in trade (2)
Inventoriable assets remains in the
inventory at the end of taxable year
(3) property primarily held for sale to
customers
(4)
Allowance
for
depreciation - Depreciable assets
used in trade or business (5) Real
property used in trade or business.
Asset
not
one
of
these
5,
automatically capital asset thus
subject to CGT. Everything else
except SIPAR.
Calazans vs. Commissioner;
Tuazon vs. Lina conversion
of capital asset into ordinary
asset (both cases involved
inherited lands. Conversion
from capital asset to ordinary
assets).
TEST
OF
SUBSTANTIAL IMPROVEMENT:
these inherited parcels of land
has improved substantially.
Lands were transformed into
subdivisions.

CAPITAL LOSS LIMITATION you can

only deduct capital loss from capital
gain. Rationale: sec 34. Basic rule:
only those expenses that are
business related are deductible. You
cannot deduct capital loss from
ordinary loss because it is not a
business collected expense. This is
pursuant to matching of cost against
revenues. You can only deduct
business connected expenses.

Sec 34 allowable deductions.

Optional Standard Deduction 34L.
substantially amended by RA 9504
new rate 40% applies to both
individual and corporate. Individual
from gross income to gross sales or
receipts 40%. Corporate rate new
rule gross income 40% OSD. If this
availed of, that option is irrevocable
during the taxable year.

Test of taxability of income:

All events test deductible if
2 conditions concur: (1)
liability to pay must be fixed
(2) principle of reasonable
accuracy

reasonable
amount. Not required that
amount be accurate or exact.
What it allows is reasonable
amount. (CIR vs. Isabela)
Pilipinas
Synthetic
fibre case it is the
right to receive and
not
the
actual
receiving
that
determines taxability
of
income.
Requirements
(1)
unconditional valid and
enforceable
(2)
susceptible of accurate
estimate principle of
reasonable
accuracy
(3)
reasonable
expectation that the
amount will be paid in
due course.
Test of Production: Margin fee
paid to banko sentral ng
pilipinas. Is this a deductible
expense? No. why? Because
such an amount was paid or
incurred in the disposition of
income. The income has
already been incurred. To be
deductible, it should be in the
production of income not the
disposition of income.
Capital expenditure test non
deductible, amount amortized
in a reasonable amount of
time. General food Philippines
vs. commissioner. To protect
brand
franchise,
capital
expenditure, therefore not
deductible on year when paid
or incurred.
To promote sale of
capital stock, treated
as capital expenditure.

TAX BENEFIT RULE sec 34

(deductions) applies 2 items (1)tax
refund (2) recovery of bad debts
written off. It is taxable if taxpayer
receives TAX BENEFIT. Tax benefit
may partake in the nature of
reduction of taxpayers taxable
income in the preceding taxable
year, then this must be claimed as a

deduction. Non-deductible taxes (no

benefit received) (1) special
assessment tax (2) income tax (3)
donors tax (4) estate tax
o

Asked 35 years ago. Involves income

situs of interest income. Sec 42.
Common income tax situs is place in
case of compensation income. It is
the place of service rendered, of
sale. But when it comes to INTEREST
INCOME involves construction of 12
ocean going vessels, all elements of
transaction
occurred
in
japan
including the letter of credit. Is it
subject to Philippine income tax, the
answer is yes because it is not the
place, it is the RESIDENCE OF
DEBTOR when it comes to INTEREST
INCOME.

Ona vs. Commissioner defines

UNREGISTERED
TAXABLE
PARTNERSHIP heirs made no formal
partnership but . New case OFiSCO
no formal partnership formed. Pool
.. (check memaid nalang)

YMCA last paragraph of sec 30 in

relation to 30e. from any of their
properties, real or personal. Rent
income received by the charitable
religious org is subject to income tax.
If argument states that will not be
used in business purporse, tax code
is
clear
and
unequivocal.
Regardless of the disposition
made of such income (st lukes
case)

be entitled to this, its income from

unrelated trade or business should
not be more than 50% of declared
income. (St Lukes case)
o

Buac
case

28A1,
offline
international airlines no landing
rights. How to tax them? In
accordance with 28A1. Tax as
resident foreign corporation is taxed
at 30% corporate rate. Thus can
claim deductions. There is an activity
undertaken
in
the
Philippines
specifically to the sale of airline
tickets. Performed an activity in the
Philippines. PROTECTION THEORY it
is taxable as resident foreign
corporation therefore it can claim
deductions. Though no property here
in the Philippines and rendered no
services, it can still be taxed because
the flow of wealth occurred within or
preceded form the Philippine territory
enjoying the protection of the
Philippine
government.
In
consideration of such protection, the
flow of wealth must share the burden
of the expenses of the government.
Thus subject tax.

27C removal of exemption of

PAGCOR. No longer exempt from
Income Tax. PAGCOR is still EXEMPT
as regards income from GAMING
OPERATIONS. PD 1869 vs. RA 9337.
Special law will prevail, 1869 will
prevail. Pagcor is TAXABLE as regards
income
from
OTHER
RELATED
SERVICES.
MCIT 2% of gross income. Use MCIT if
2% of gross income is higher than
normal corporate tax. Creva vs.
Romula. Sustained constitutionality
of MCIT, its a tax on income not a
tax on capital although base is gross
income.

o
o

Tax exempt charitable hospital

exempt from corp income tax? Held:
the requisites for exemption of
charitable institution under 30E (1) it
msut be non-stock corporation of
assoc (2) it must be organized
EXCLUSIVELY for charitable purposes
(3) it must be operated EXCLUSVIELY
for charitable purposes (4) no part of
its income or asset shall inure to the
benefit of a particular member or
individual. Saint lukes is not qualified
as tax exempt charitable hosp
because it lacks requisites number 3.
They have the so called paying
patients. It does not operate
exclusively for charitable purposes.
How do you tax saint lukes now? Sec
27B applies it may qualify as nonprofit private hospital, applicable
corp rate ie 10% preferential rate. To

IAET
10%
of
the
imporopery
accumulated earnings. Imposed by
way of penalty. This does not apply
to bank and non bank intermediary,
public. Check codal. IMMEDIACY
TEST sec 29E: immediate is the
same as reasonable. If income is
used for REASONABLE MEANS, 10%
will not apply.

Tax Sparing Credit cash or property

dividend that received non-resident
foreign corporation from domestic
corporation subject to 15% final tax.

Conditions (1) foreign government

shall allow such tax credit. if no tax
credit is allowed, we will be
compelled to apply 30% corp rate.
o

!!!On DIVIDENDS
Dividend income may be
subject to
Regular Income tax
(1) indirect dividend,
(2) Scrip dividend (3)
42A2B source is a
foreign
corporation.
Note: in (3) Regular
Income if 50% of its
world income comes
from Phil sources in
the
last
3
year
preceeding
taxable
years.
Final tax (1) an
individual tax payer
receive
CASH
or
PROPERTY
dividend
sec 24 and 25. Need
not be reported as
income.
(2)
when
recipient
is
non
resident
foreign
corporation
from
domestic corp. must
be CASH and PROP
dividend also provided
there is tax credit
allowed
in
foreign
government.
Exempt (1) DC-DC;
received by Domestic
from another Domestic
[intercorporate
dividend] (2) RFC from
DC
(3)
STOCK
DIVIDEND because no
realized gain or profit.
Exception
to
the
exempt
numner
3:
second sentence of
73B redemption of
shares of stock issued
as stock dividend MAY
or MAY NOT result in
taxable gain. Look for
source. To be taxable,
It must come from
stocks SUBSEUQENTLY
issued.
But if the
source is the ORIGINAL
capital
subscription
this is just a return of
capital.
LIQUIDATING
dividend
is
not

taxable, mere return of

capital.
INDIVIDUAL TAX PAYERS
-

Compensation Income In whatever form of

payment. (1) Cancellation/forgiveness of
indebtedness. employer must be the
creditor., (2) Life insurance premiums 32A1
and 32B10. Tax treatment depends if rank
and file, taxable as compensation income. If
MANAGER or SUPERVISOR, taxable as
FRINGE BENEFIT

De Minimis Benefits (1) Jan 1, 2015

declared as tax exempt 10,000 per year
from (a) cba benefits and (b) productivity
incentive scheme benefits. Total amount
should not exceed 10,000. (2) Rice Subsidy
1,500 a month. (3) uniform clothing
benefit 5,000 a year (4) books flowers and
fruits is now taxable. Why Minimis are
exempt? Normally of small value. Because
to promote contentment, health, efficiency
and goodwill.

Interest income from long term deposit

RMC 18-2011. Meaning of long term deposit
under 22FF (1)Five years (2)depositor
must be individual except not all can claim
because NRANETB cannot claim exemption
(3) Bank must be depositary (4) Account
there must be account, savings etc.

Net capital loss carry over. Only INDIVIDUAL

TAX PAYERS cans carry over net capital loss
in the succeeding taxable year. Under 34D
CORPORATE TAXPAYER, can carry over
NOLCO but not NCLC. Note: Holding period
Rule beyond 12 months, subject to tax.

35C last paragraph. New rules on change of

status. Marriage of dependent during
taxable year or gainful employment. Can
still claim personal deduction 25,000. End of
the taxable year status. By legal fiction/in
contemplation of law, no marriage took
place during the taxable year.

32B Exclusions. Separation Pay beyond the

control of the employee. (case 1) within the
concept of beyond the control of the
employee,
compulsory
retirement
is
exempt. Terminal Leave Pay includes
commuted value of vacation and sick leave
benefits. Exempt because it is beyond the
control of employee. (case 2) 32B7
exemptions from income tax of foreign
government, financial institution finance
controlled
by
foreign
govt,
regional
international

Moral/Exemplary Damages taxable? TAX

EXEMPT because the amounts do not
constitute flow of wealth. No realized gain or
profit. Note that provision on exclusion is
not exclusive. As long as it does not amount
to realized gain, then it is not taxable.

32B6A Requisites for exemption of

RETIREMENT
BENEFITS
received
from
PRIVATE EMPLOYER. If from GSIS, EXEMPT
(1) Fifty years of age (2) 10 years of service
(3) retirement plan approved by BIR (4)
availed of once. (FORT)

Exemption of Prize: of scientific charitable

artistic literary education civic achievement.
Cultural is not there. Requirement: No action
on his part to enter. Unconditional, no
substantial service.

Received
in
sports
tournaments
or
competitions: Venue is immaterial whether
Philippine or abroad. Recipient is exempt
from income tax. Contributor is exempt from
donors tax. Contributor or donor can claim
it as deductible contribution. Not under the
Tax code but under RA 7549.

Sec 235 Examination of tax records and

books of accounts of taxpayer can only be
examined once. Except: (1) Fraud (2)
irregularities (3) when taxpayer requests for
reinvestigation

246. Circular or regulations may be revoked

or reversed. The revocation or modification
shall not be given RETROACTIVE APPLICTION
if it is prejudicial to the tax payer EXCEPT:
(1) if he acted in bad faith, (2) deliberately
misstates or omits material facts, (3) facts
subsequently
gathered
are
materially
different.

REMEDIES
97-100% on questions on remedies: title 8 NIRC; RA
9282 expanded jurisdiction of CTA; revised rules of
CTA;
1% collector of customs
1% section 52 real prop. Payment under protest.
Section 260 levy on real property. Personal notice
indispensable because it is an action in persona
1% local government taxation constitutionality of
tax ordinance filed to Secretary of Justice appeal
to RTC
Remedies: either administrative or judicial
Administrative Remedies

Administrative Remedies: (1) enforcement

of tax lien, (2) distrain of personal property;
(3) levy on real property.
Jurisprudence on enforcement of tax lien
o Commissioner vs. Pineda the BIR
has discretion to either avail admin
or judicial remedies. Enforcement of
lien considered as most convenient
because no judicial proceedings.
o Maritime Company - claimant over 2
barges,
judgment
creditor
vs.
government. The government has
preferential claim over the barges
because it is predicated on tax lien.
Tax lien is preferred to that of
judgment of court. Tax lien attaches
to property from the moment the tax
becomes due and payable. It arises
from time when taxpayer fails to pay.

Constructive Distraint
o Instances
when
constructive
distraint, no actual distraint, required
to sign undertaking to not dispose
property: (1)Conceals his property;
(2) Any act which will obstruct (3)
Retires from business (4) Leaves the
Philippines [CARL]

Levy on real property available under 3

major tax codes. Question: how do you
describe public sale? Commong requisite of
all three is PUBLICATION. Notice of sale is
not enough. There should be PUBLICATION
of NOTIC OF SALE. In taxation law, under tan
vs. bantigui, the court said that the
proceedings are IN PERSONA, not in rem,
thus,
NOTICE
TO
THE
DELINQUENT
TAXPAYER
is
ESSENTIAL
AND
INDISPENSABLE.
o Sec 213 nirc
o Sec 178 loc gov
o Sec 260 real property tax

!!! Prescription Period:

o NIRC 203 3 year period to make an
assessment. neither false nor
fraudulent return o NIRC 222 2 periods for assessment:
5 or 10 years fraudulent return,
false return, failure to file return
o NIRC 223 grounds for suspension of
prescription period
BPI vs. Commissioner NIRC
203 3 year period also
applies to collection not the 5
year period under NIRS 222.
Phoenix Doctrine 203 is
silent on amendments. If
return is amended? How do
you apply? Do not apply 203.

If
the
amendment
is
substantial, count the 3 year
period from the filing of the
amended
return.
This
supersedes
the
original
return. If the amended is not
substantial, count the 3 year
period from the filing of the
original return.
Application of 222:
5 year period applies
to COLLECTION ONLY.
With or without prior
assessment.
10 year period - The
BIR has 2 options (1)
prior assessment has
been made or (2) no
prior assessment. If
prior assessment, the
10 year period starts
from
discovery
of
fraud, false or failure
then apply 5 year
collection period. No
prior
assessment,
collection
may
be
resulted
to
from
discovery.
Relate to section 48:
o Fraud
cannot
be
presumed.
Exception
in
Tax code: prima
facie evidence
of
fraudulent
return

(1)
under
statement/decl
aration of or
revenue
or
income sales or
receipts
(2)
over
statement/decl
aration
of
expenses
or
deductions.
Both more than
30%
of
the
income.
!!! Section 223
Prohibited. Read in
relation to RA 9282
section 11 par 4.
Exception
to
218
regarding no injunction
order. The no injuction
rule does not apply to
Court of Tax Appeals.
CTA has authority to

enjoy
collection
of
taxes. Effect, suspends
running of prescription
period. Injunction will
issue if collection of
taxes will prejudice the
interest
of
the
taxpayer
or
government,
bond
must be posted. Bond
is either cash or surety
bond. If it is in the
nature of surety bond,
it should not be double
the
value
of
the
property subject to
collection
(levy
or
distraint as the case
may be).
Agreement
of
extension of time
o RMO2090 to
suspend
running
prescriptive
period
conditions: (1)
must
be
in
writing,
(2)
must
be
approved
by
the
BIR
commissioner,
(3) signed by
the
taxpayer
(4)
if
corporation, the
one
signing
must be duly
authorized (5)
made
before
the expiration
of
the
prescriptive
period.
Case:
Accountant
is
not authorized.
Request
for
reinvestigation
o RR
18-2013.
Reinvestigation
defined a
plea
for
reevaluation
of
an assessment
on the basis of
NEWLY
DISCOVERED
EVIDENCE. It
intends
an
addition

evidence. if it is
based
on
EXISTING
RECORD,
will
not
suspend
the period of
prescription
NIRC 281 criminal action 5 year
prescriptive period.
Failure to file or pay taxes
the 5 year period commences
to run from the RECEIPT OF
THE
FINAL
NOTICE
OF
DEMAND.
Fraudulent/ false return the
5 year period commences to
run from DISCOVERY of such
violation
AND
THE
INSTITUTION
OF
THE
CRIMINAL PROCEEDINGS for
its
investigation
and
punishment. In effect it is
imprescriptible.

!!! Compromise 204

- Financial Incapacity - Minimum compromise
rate is 10 %
- Doubtful validity minimum compromise
rate is 40%
o Jeopardy assessment no partial or
complete audit. Delay on the part of
the taxpayer to submit pertinent
records or documents will not be
allowed to jeopardize the collection
of taxes in the government.
o BEO (Best Evidence Obtainable)
sec 6B NIRC. Assessment may be
made by resorting to other evidence
which makes it doubtful because it is
not the records of the taxpayer. BEO
is just a disputable presumption.
- 7 cases which cannot be compromised (AFP
CREW):
o Already filed in court
o Final judgment
o Payment
schedule
is
already
approved by the BIR
o Criminal fraud cases contrary to
public policy
o Report on investigation is final
o Estate tax cases if the request is
based on financial capacity
o Withholding taxes
!!! 228, 229 !!!
- 228: Protest or Dispute Assessment
o RR 18-2013:
informal notice of conference
deleted by RR 18-2013

First Notice: Pre-Assessment

Notice
(PAN).
This
is
indispensable and mandatory,
required by procedural due
process. Cannot be dispensed
with EXCEPT: (1)Mathematical
error (2)Actually credited and
tax withheld has discrepancy
(3)Credit of tax (4)Excise
taxes have not been paid
(5)Nonexempt
person
transfer [MACEN]
Formal Letter of Demand/Final
Assessment Notice THIS IS
THE ONE TO BE PROTESTED.
NOT THE PAN.
o PAN FAN Bir cta in division
cta en banc SC
o 60 day period to submit relevant and
supporting document. 180 days
period. if a decision has been
rendered within the 180 day period,
remedy is to appeal to CTA DIVISION
within 30 days from receipt of the
decision of the BIR.
o RCBC/Lascona doctrine: : If no
decision rendered within 180 day
period.
2
mutually
exclusive
remedies: (1) appeal inaction of the
BIR within 30 days from the lapse of
the 180 day period or (2) await the
decision of the BIR, even after the
180 day period, then appeal within
30 days from receipt to CTA division.
o Remedy if CTA division denies
Petition for Review: Motion for
Reconsideration or New Trial first.
This is mandatory and indispensable.
Within 15 days from receipt of denial
of cta division denial
o Remedy when MR and MNT is denied
again appeal the denial of the
MR/MNT of cta division to cta en
banc. 15 days from receipt of such
denial of MR/MNT. Petition for Review
Rule 43
o If cta en banc denies again, petition
for review on certiorari rule 45, 15
days
o Clarifications:
By reason of COMMISSIONER
OF CUSTOMS VS. MARINA
SALES
INCORPORATED
(November 2010) CTA
decision to CTA en banc:
MANDATORY MT/MNT
CTA en Banc to SC Optional
BIR
to
CTA
division

prohibited
229: Refund

o
o

o
o

o
o

Partakes the nature of solution

indebiti
Where to file: BIR. Writing must
contain categorical demand for
reimbursement and within the 2 year
period
If CORPORATION 2 year period
starts from the FINAL ADJUSTED
RETURN. There is only payment in
contemplation of law when such final
return has been filed.
If VAT 2 years from the CLOSE OF
THE TAXABLE QUARTER WHEN SUCH
SALES WERE MADE. This only applies
to VAT!
If leap year intervenes Prime Town
Property Group Case: Admin code
defines 1 year as 12 calendar
months, disregard the number of
days.
The 2 year period may not be
suspended by supervening events.
Except: Jurisprudence holds that on
equitable grounds or considerations,
assurance from the BIR that the
refund will be granted and in order to
await decision of the SC involving the
issue of the subject of the tax refund
may suspend 2 year period.
!!! Note the 2 year period and 30 day
difference to collect refund between
VAT and other income taxes.
112C -- 120 day period mandatory.
Must await the end of 120 day
period. Except: when there is a BIR
ruling which does not make it
mandatory or jurisdictional.
Decision rendered within 120
30 days from receipt appeal.
No decision after 120 days
you may perfect an appeal to
the CTA under any of these
two: (1) appeal inaction within
30 days from the lapse of the
120 day period (2) do not
apply the Lascona case. You
cannot await the decision!!!!
Mandatory to appeal it for
inaction after 120 days.
When you appeal BIR tax refund
decision CTA: judicial claim already.
Petition for review under rule 42
Appealable to CTA

BIR Commissioner
Regional trial courts involving
tax cases
Custom commissioner
Secretary
of
trade
and
industry

Secretary of agriculture
Central board of assessment
appeals
Decision of secretary Finance
involving automatic review
cases

GENERAL PRINCIPLES
- P Protect local industry against foreigners
e.g. Countervailing and dumping duties
I implementation of police power.
E encourage growth of local industries
through exemptions, condonation or tax
amensties
R reduce social inequalities, social justice.
-

Central Luzon Drug Corporation power to

tax may be used as an implement of the
power of eminent domain. But this has been
abandoned in 2013. Manila Memorial Park vs
DSWD 20% senior citizen discount. This is
made in the police power of the state. Not
anymore as a power of eminent domain.
Court has abandoned old ruling.

What are the inherent limitations of the

exercise of taxation
o Public purpose
o International comity
o Non delegation of power to tax.
Exceptions
to
nondelegability: (1)
Art 6 Sec 28 Par 2:
Tariff Power of the
President Flexible
Tariff
Clause
Conditions:
o In the interest
of
general
welfare
o Interest
of
national
economy
o Interest
of
national
security

Art
10
Sec
5:
Constitutionally
delegated power of
local government units
o Territoriality
o Exception
from
taxation
of
government
agencies,
instrumentalities
of
national
government
Forecast:
Real
Property
Taxation. Manila International
Airport
Authority
vs.
Paranaque City (landmark
case). Conflict with Mactan

Cebu (1996) case not

exempt.
But
in
Manila
International Airport Authority
the following are considered
as instrumentalities of the
government

BSP,
UP,
Mactan Cebu, Philippine Port
Authority.
De
Castro
Doctrine:
Mactan
Cebu
International Airport Authority
is an instrumentality of the
government, is EXEMPT FROM
REAL PROPERTY TAX.
Other instrumentalities of the
government exempt from real
property

GSIS,
PEZA,
Philippine
Reclamation
Authority, Manila International
Airport Authority.

Tolentino vs. Secretary in Finance (landmark

case) there is no violation of the
constitution regarding EVAT. Why? (1)
senate can make a different version of that
of the house. (2) coequality of legislative
powers to insist that the revenue bill
should be the same as house bill will make
the house superior to the senate. This will
violate coequality.

Constitutional Exemptions
o Religious, Charitable, Educational
Lands buildings actual and
exclusively used
Lung Center of the Philippines
(landmark) Exclusively =
solely.
o Non-stock
non-profit
educational
institution (FREQUENTLY ASKED)
Interest from bank deposit of
nonstock non-profit educ insti
automatically exempted from
the 20% final tax? No. Consti
requires that it must be
actually
directly
and
exclusively used for educ
purposes. Requirements: (1)
certification that the nonstock
non-profit has deposited with
the bank; (2) certification
regarding actual use of the
income; (3) Use to fund
education programs

Tax vs. License

o Coconut Levy Funds? Is this tax or
license? Partakes the nature of taxes.
o Building permits? Tax or regulatory?
Regulatory measures because it
requires inspection of such building

and necessitates approval by other

agencies of government.
-

Tax Evasion
o 3 factors that may constitute tax
evasion:
(1)Unlawful
course
of
actions (2)State of mind must be
evil, bad faith, deliberate or wilful,
(3)End to be achieved is either to not
pay tax or to pay lesser tax liability.
o Prior assessment is not required
before filing criminal case of tax
evasion. Purpose of tax evasion is to
criminalize the act of non-payment.
The crime is complete when a
taxpayer wilfully files fraudulent
return. Criminal proceedings may be
done
simultaneously
with
administrative remedies.

Double Taxation
o Right to set off direct double
taxation.
o Same purpose, authority, jurisdiction,
subject
matter,
kind/character,
taxable year.
o If
there
is
absence
of
any
requirement, indirect double taxation
then it is allowed.
E.g.
international
juridical
taxation allowed.
o (forecast) Example direct double
taxation: Telecommunications vs.
Pasig City. Tax base of local
government tax is gross sales or
receipts. But LGU used gross
revenue. This amounted to direct
double taxation. Gross revenue is
bigger it includes gross receipts or
sales. This has already been paid,
thus direct double taxation. Not
allowed.

Taxpayers Suit (marcos vs. Gonzales)

o 2
indispensable
requisites:
(1)
illegal/unlawful
disbursement
of
public fund and (2) public fund must
be derived from taxes.

VALUE ADDED TAX

-

What is the tax situs? Place of sale of goods

or services. DESTINATION PRINCIPLE: only
impose VAT on goods or services destined
for consumption here in the Philippines.

Cross Border Doctrine VAT cannot be

applied outside the Philippines. Clarification:
SBMA, Clark, etc.. these are effectively zerorated because they are considered as
separate territories from the Philippines

An indirect tax. Imposed on the seller. But

tax is shifted to buyer as PRICE OF SELLING
PRICE not as a TAX.

In tax Refund: the seller can file the written

claim for refund being he is the statutory
taxpayer.

Transactions covered: 12%: (1) sale of goods

properties (2) importation of goods (3)sale
of services. Read section 105. Requisites to
be subject to VAT: in the course of trade or
business: (1) regularity of such transaction
(2) for economic or commercial purpose/ for
profit.

including transactions incidental thereto

Mindanao Oil: Nissan patrol no longer used
in business. If this will be eventually sold, it
is an isolated transaction BUT AN
INCIDENTAL thus subject to VAT. Why?
Because court said it was prior used in the
business.

Isolated transactions not subject to VAT.

Tax Base:
o Sale of goods or properties gross
selling price. But dont apply to
deemed sales transaction!
Deemed sale transaction by
legal fiction or contemplation
of law, sale has been made.
Transferred to nonbusiness purpose
Consignment of goods.
60 day period no sale,
considered sold

Retirement
from
business
Transferred
to
shareholder
or
investor.
In
effect
property dividend
Transferred to creditor
for payment of debt.
o TAX
BASE:
market value of
goods.
o Except
retirement from
business
tax
base: is lower
amount
between
the
acquisition cost
of inventory of
goods
and

current market
price.
Importation of goods depends upon
bases used by BOC: (forecast)
Based on ad Valorem vat is
based on transaction value.
Ra 8181: transaction
value
defined:
the
price actually paid or
payable for the goods
when sold for export to
the Philippines
Based on Specific Duties
Landed cost + other excise
taxes.
Sale of Services gross receipts

Landmark cases (Diaz vs. Commissioner)

Toll fees? YES subject to VAT. Tollway
operation is considered as sale of services.
Not one of the exempt transactions. Not an
exempt franchise holder

Lease of motion picture films, tapes and

disks. Issue: can this be subject to VAT?
Held: No, when you go to the movie house,
it is an exhibition of films! Not a lease. Then
not vatable

Zero rated transactions = 0%

o Foreign currency accounted for in
rules of BSP
o International shipping or air transport
o The buyer is non-resident, the
payment must be accepted foreign
currency
o Export oriented industry. More than
70% of its total production.

Section 109
o Exempt by international agreement/
special law.
Pagcor
vs.
commissioner.
Exempt from VAT ang Pagcor
o Item Q: in relation to item v: lease of
real properties the purpose for
residential. Threshold amount is
1919500 vs. 12800 a month

Concept of transitional input tax Sec 111A.

to be entitled to tax refund or tax credit, is
prior payment required? NO. prior payment
is not required in transitional input tax
because it is treated as a tax credit not tax
refund. It is not required. Prior payment only
in refund.

ESTATE TAX
-

Transfer in contemplation of death roces

case concurrent making of a will

Dizon vs. Posadas donation inter vivos, he

died after 12 days. Because the time
interval made in contemplation of death,
subject to estate tax.

Vitug vs. Court Appeals survivorship

agreement. Will you include this in conjugal
or exclusive property. Exclude it in gross
estate, it is considered as exclusive
property. Subject to a valid agreement.

85E proceeds of life insurance poliy

(favourite bar question) who may be the
benificary
designated
therein:
estate/executor or admin included in gross
estate. Beneficiary is third person qualify.
If recovable, part of gross estate. Exclude it
if it is irrevocable

Family Home allowable deduction. Include

it in gross estate first. Up to 1M.

Funeral expenses subject to limitation.

Note the numbers.

Vanishing Deduction (1) Death must have

occurred in 5 year period (2) Inclusion of
property in prior estate (3) Previous taxation
(4) Identity in such property/same property
(5) No previous vanishing deduction. Can
only be availed of once. Vanishing deduction
is an exclusive deduction designed to
mitigate the harshness of double taxation

Tax exempt transfers: (1) merger of usufruct

in owner of naked title. (2) Transfer of
fideciomissary. (3) Transfer to another
beneficiary in accordance with the desire of
predecessor. (4) When it is transferred to a
social welfare org charitable org or cultural
org. [OFKS]

Section 87D. donation mortis causa

charitable, social welfare, cultural, exempt
from estate tax or 2 conditions (1) no part of
its income shall inure to benefit of individual
(2) the donation, not more than 30% of such
donation shall be used administration
purposes.

DONORS TAX
-

RR 2-2003: amplifies definition of stranger:

legally adopted child not considered as
stranger, therefore dont apply the 30%.
Donation between individual and business
organization considered as stranger apply
30%.

Renunciation of inheritance. Qualified: (1)

renunciation
share
to
conjugal
property/absolute community subject to
donors tax (2) general renunciation not
subject to donors tax except if it is
categorically stated that it will belong to a
specific person, subject to donors tax

Election donations 99C in relation to

RA9176: contributions to a candidate
political party or collation in cash or kind for
campaign purposes shall NOT be subject to
donors tax. Condition: must comply with
STATEMENT OF CONTRIBUTIONS. If no
statement filed, subject to donors tax.

Section
100

presumed
donations:
donations
for
insufficient/inadequate
inconsideration. Less than the fair market
value of the property. If agree price is 300k,
fmv is 500k, the 200k is presumed as
donation. Exceptions: if it involves sale of
REAL PROPERTY CLASSIFIED AS CAPITAL
ASSET do not apply this. What is applicable
is 6%. Ordinary asset. If personal property
as capital asset or personal/real property as
ordinary asset subject to presumed
donations

Splitting of Donation section 99a. Exempt

donation is 100,000. Split it 100,000 a year
because donor tax is collectible for every
CALENDAR YEAR

101K3
(frequently
asked)

exempt
donations (qualified donees): CARTIER CPS
o Charitable institution
o Accredited ngo
o Religious organization
o Trust foundation
o Nonstock non-profit educ institution
o Research organization
o Cultural organization
o Philanthropic org
o Social welfare organization

LOCAL GOVERNMENT TAXATION

-

Section 130: fundamental principles of local

government
taxation.
Whether
local
ordinance is valid or not. [PUNNANIP]
o Public purpose
o Uniform taxation
o Not be let to a public person
(collection)
o Not be unjust, excessive, oppressive
or confiscatory
o Not contrary to law, public policy.
o Ability to pay principle [equitable
taxation]

o
o
-

Progressive system
Inure solely to the benefit of the
particular local government unit.

Section 133: limitations: cannot be subject

to local tax because subject to national tax
already
o Agricultural, aquatic products that
may be sold by marginalized farmers
o Philippine products exported
o Excise taxes on petroleum products
o On
the
national
government,
agencies
or
instrumentalities
(doctrine of supremacy of national
government over local governments;
but national govt may impose on
locgov)

137: Franchise tax - in lieu of other taxes

193: 4 exempt institutions exempt from

local tax
o Cooperatives
o Non profit hospitals
o Non stock non profit education
institution
o Local water districs.

TARIFF AND CUSTOMS

- DAP chevron Philippines (potentional bar
question) meaning of word ENTRY
documents
filed
at
customs
house;
submission and acceptance of documents;
Procedure for the passing of goods through
the custom house.
-

Aggrix Corporation: Jurisdiction of the BOC

over ceasure and protest cases is ORIGINAL
AND EXCLUSIVE.

Need
not
observe
Exhaustion
of
Administrative
Remedies
if
customs
commissioner himself denies the protest.

Meaning of Importation when does it begin

from the time the carrying vessel or
aircraft enters the jurisdiction of the republic
of the Philippines with intent to unload the
goods therein. When does it cease or end
upon the payment of duties taxes and other
charge

Basis of dutiable value imported. Method of

valuation. Follow the order:
o Transaction Value
o Identical goods
o Similar goods
o Deductive value
o Computed value
o Fall back value

Trophies received by the boxer, is this

subject to custom duties? 105E. exempt
from customs duties: duty-free: medals,
badges, cups, bestowed on prizes and
trophies.

To be effects, personal effects must be

brought
in
the
Philippines
by
the
RETURNING RESIDENT. Returning residents
are nationals/ citizens who have stayed in a
foreign country for a period of AT LEAST 6
MONTHS.

Berthing Fees national. To be subject to

berthing fees it must moor at NATIONAL
ports. If private port, cannot be subject to
berthing fees.

Automatic Review procedure

LOCAL PROPERTY TAX

-

198: Assessment is valid when it conforms

to the following:
o Appraised at current market value
o Actual use
o Uniform
o No let principle (not to private
person)
o Equitable
234: Exempt from real property tax
o Local water districts, machineries,
equipment actually exclusively used
o Government owned and controlled
corp
Supply and distribution of
water
Generation and transmission
of power
o Cooperatives. Test of ownership
o Pollution control and environmental
protection
o Real property owned by the Republic
of the Philippines except if beneficial
use is transferred to taxable person

Charitable religious and educational

institutions