Pre-Week Tax 2013 Dimaampao Lecture

2013 Dimaampao Lecture I
Taxation Law
PART I In assessment under the Tariff and Customs Code a
decided case Pilipinas Shell vs CIR, and the Supreme
Its my hope that after this lecture you will develop Court said it is akin or similar to the assessment
self-confidence to answer any question. It is my first under the NIRC but here there are additional or
time to do this. Yes almost every year I do this but special requisites.
last night I had to device a certain method that will
cover all these tax laws. Income tax, estate tax, 1. NOTICE
donors tax, Valued-added tax, Local tax, Real
Property Tax, and Customs duties. And with this 2. FINAL COMPUTATION/ascertainment of the
Holistic method, you can easily visualize the tax rules duties on merchandise,
laid down in these 8 tax laws.
3. it must be based on OFFICIAL REPORTS as
to the quality, quantity and character of the
Levy
goods
Let us start with Levy. Well we all know that Levy is
4. It must also contain the collectors finding as
legislative in character. Such being the case, it
to the appropriate rate of duty.
cannot be delegated and this applies to all but take
note of Local Government Taxation. Sec 132 of
Collection
RA7160, it is the Sanggunian that has the power to
impose local tax pursuant to an ordinance. That
Collection need or need not be delegated. Collection
came out during the bar exams. Take note also of
of internal revenue taxes of Income tax, estate tax,
Sec. 232 of Real Property Taxation. Outside of Metro
donors tax, value-added tax, based on Section 7 of
Manila, only provinces and cities have the power to
the NIRC that may be delegated. Expression unius
impose the so-called real property tax. In
est exclusion alterius in a question on this whether
Metropolitan Manila yes, municipalities also have this
collection may be delegated. These are the following
power so thats the trick there. That was question
cases which cannot be delegated: (RICA)
number 1 in the last bar exams. Note also that
income tax, estate tax, donors tax, value-added tax 1. To recommend the promulgation of needful
and customs duties are national taxes. rules and regulations to the Secretary of
Finance
Assessment
2. To issue rulings of first impression
There are different rules on the same. You are going
to assess income tax, donors tax, estate tax, or 3. To compromise Tax liability not more than
value-added tax. There are two requisites of P500,000
assessment and that is of (1) NOTICE and (2)
DEMAND you are all familiar with this. Written notice 4. Assign/Re-assign BIR officers to the places
and demand for the payment of unpaid tax, this where articles subject to excise taxes are
applies to Income tax, Donors tax, Estate tax and kept.
Value-added tax. Assessment under Local
As provided by Section 12 (c) that collection
Government Taxation as provided for under Section
of Internal Revenue Taxes may be delegated but
195 of RA 7160 that is the special requisite imposed
when it comes to collection of Local taxes and Real
therein that is such assessment must clearly indicate
Property Taxes, it is clearly provided for. In the case
the nature of local tax, charge fee or other imposition.
of Local Tax (Section 130) it cannot be delegated as
So there is that special requisite regarding local
regards Real Property Tax under Section 198 of RA
assessment. In Real Property Taxation based on the
7160 likewise it cannot be delegated so thats the
case of Meralco vs Barlis that it has a different
rule when it comes to Local Tax and Real Property
concept of assessment and it must be a notice of
Tax. With respect to Customs Duties, just like regular
collection so here it requires, this is the Barlis-
taxes as there may be bank authorized to collect all
Meralco Doctrine. To be a valid assessment under
those customs duties.
Real Property Taxation it must indicate the: (KAMLA)
1. Kind of property Payment of Taxes
2. Assessed Value This is now the emerging trend in the bar exam lets
all emphasize this Payment of Taxes. Pay-as-you-
3. Market Value file, is this applicable to all these? Internal Revenue
taxes, Yes; Local Tax, Yes; Customs duties, yes;
4. Level of assessment except that of Real Property Tax. You read section
202 and 204 there is what we call the voluntary
5. Actual use.
declaration of the value of the real property. So it is
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TRANSCRIBERS: Miguel Justin Rigor | Samuel Bernardo | Stefan Elise Bernardo | Isabelle de Guzman | Antoinette Duque |
Francis Derek Grimares | Mary Elizabeth Rodriguez | Jenina Roque | Denn Reed Tuvera | Ysabel Ubana
Over-all Chairperson: Kathleen May Clareza | Vice Chairperson for Academics: Loralyn Anne Lazaro
| Vice Chairperson for Operations: Joshua Bautista | Vice Chairperson for Secretariat: Adrian Louie Hilario
| Vice Chairperson for Finance: Christine Marie Patron | Vice Chairperson for Communications: Ma. Rufa Theresa Gauna |
Vice Chairperson for Marketing: Adhara Celerian | Vice Chairperson for Electronic Data Processing: Ryan Suaco
Taxation Law
only in Real Property Taxation where such system is period applies to extra-judicial settlement of the
inapplicable. estate. When it comes to Donors tax, X, no
extension is allowed. The 30-day period is
In income tax the individual this is now the inextendible. Value-added tax, there is likewise no
trend, you ought to know this such that as regards provision on extension, so X. Local tax, yes there is.
income tax, you are required to submit on April 15. In Thats the one asked in the bar exam. There is that
regard to corporate taxpayers it really depends on provision on extension and it must not be more than
the accounting period adopted. If it has adopted the 6-months. Real Property Tax, there is no provision on
calendar year period, you are all familiar that the extension, X. Customs duties it is clearly provided for
deadline is April 15. Now the one that has yet to be in this recent jurisprudence as it uses the words
asked in the bar exams is this: Suppose the inextendible period of 30-days, likewise there is no
corporate taxpayer has adopted the fiscal year period of extension. So take note that there are only
period, remember this, the 15 day of the 4th month
th
3 cases for the filing or payment may be allowed.

following the close of that fiscal year. Again, National and Income tax, Estate Tax and Local
Tax.
When it comes to Estate Tax, recall this,
Section 90(b) 6 months from the death of the
Doctrine of Imprescriptibility of Taxes
decedent. Donors tax, check what you have read, 30
days from the date of donation. Value-added Tax,
At this juncture, we cannot avoid discussing this
there are 2 periods there that you must remember
principle of taxation and that is the Doctrine of
25-day period and 20-day period. The one asked in
Imprescriptibility of Taxes. Lets try to find out
the last bar exam is this 25-day period and take note
whether this applies to these 8 different kinds of
that the system is peculiar because the filing is
taxes. Now Income Tax, Estate Tax, Donors tax,
quarterly, the payment is monthly. What about
Value-added tax, these are National Internal Revenue
payment? 20 days following the end of every month,
Taxes. This does not apply to these because there
that is the period laid down for this.
are prescriptive periods set forth under the NIRC
Sections 203 and 222 provide for these 3-year period
Local Tax, lets be guided by the provision
for assessment, 5-year period for collection and 10-
of Section 167, within 20 days following the end of
year period for assessment and collection. Indeed,
every quarter or exactly 20 days starting from
Internal Revenue Taxes are prescriptible. This
January. Real Property Tax, Section 250 RA 7160,
Doctrine does not also apply to Local Tax and Real
you have to be familiar this and remember this
Property tax because as regards Local Tax under
Quarterly Payment of that Real Property Tax. It
Sec. 194, it provides for these 5-year and 3-year
must start on March 31, June 30, September 30, and
period, therefore prescriptible. In regard to Real
December 31. These are the periods for the payment
Property Tax under Sec. 270 of RA7160, it also
of Real Property Tax under the Real Property
provides for 5-year and 3-year period therefore Real
Taxation. In a recent case regarding Customs Duties,
Property Taxes also prescribe. Customs duties
you must have read an old book of this, the old
RA9135 Section 4 if you are reading an old tax book
provision of the Tariff and Customs Code is 30 days
you will not find this and the 1-year period has been
of pay-as-you-file. What must be filed? Chevron
increased to a 3-year period, indeed Customs Duties
case, it is an Import Entry and Internal Revenue
are prescriptible.
Declaration (IEIRD) that should be filed. Thats
equivalent to the ITR under the NIRC. IEIRDS must
be filed within 30 days from the discharge of the last Tax Situs
package from a vessel and that is the time you pay
for the same so pay-as-you-file within the 30-day Lets have this tax situs. It simply means
period. according to Blacks dictionary: it is the place of
taxation. Now in regard to revenue taxes just
remember this (RPN), it applies to Income tax, estate
Extension for Payment of Taxes
tax and donors tax. Recall these criteria; consider
the Res, the place where the income is earned, and
Is extension allowed? In regard to income tax it is
where the property is located or the nationality or
clear under Sec.53 of the NIRC. The word used is
citizenship. That is why you can recall that Resident
Reasonable Period. Reasonable period is a question
Citizens and Domestic Corporations can be taxed on
of fact and it depends upon the circumstances of the
their income without, we use therein their citizenship.
case. Extension under Sec. 90(c) of not more than 30
In Estate tax you will recall the 2 kinds of estate
days so yes there is such provision on extension in
taxpayers: Resident decedent and Non-resident
regard to payment of Estate tax, it can be the subject
Decedent. So Citizens of the Philippines can be
of extension provided that there is that ground of
taxed on such properties he left outside the
where the 6-month period would impose undue
Phillippines. Here we apply also Citizenship or
hardships on the heirs. Take note of the 5-year and
Nationality.
the 2-year period. The 5-year period applies to the
judicial settlement of estate, the 2-year extension
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Taxation Law
The same criteria have been employed in choice. In regard to income tax, ! individual tax rate
Donors tax. Recall that there are 2 kinds of donors: the description is progressive rates that is 5-32% that
the Resident donor and the Non-resident Donor. For must be the description of individual tax rates. When
Non-resident alien it can only be applied for we say the Corporate rate, that is the word there is
properties situated here in the Philippines. But in Uniform corporate rate of 30%. Description of
regard to Value-added Tax apply the destination Estate Tax Rates under Sec 54 Progressive Rates
principle. It is the place where such transaction is of 5-20% of estate tax rate these are progressive in
made and according to Jurisprudence Destination character. Description of Donors tax rates under
Principle under this rule, we can impose Value- Section 99 point that 2-15% of progressive Donors
added Tax on goods that are destined for tax rates. Description of Value-added tax 0% or 12%.
consumption here in the Philippines except that Yes this may be treated and considered as indirect
Cross-border Doctrine. Cross-border doctrine tax but that is not the question. This may be in the
states that there are places here in the Philippines nature of percentage tax because the nature is gross
where sales made will not be imposed Value-added sales or gross receipts as the case may be 0% or
Tax, these are what we call the Export Processing 12%. Description of Local Taxes under Book 2 Title 1
Zones, Economic Zones you can only impose 0%. It of RA7610 it ranges from 50% of 1% of Gross Selling
is as if no Value-added tax is imposed. Cross-border Price to 30% so how do you consider this? These are
doctrine; Insofar as the Subic Bay Metropolitan in the nature of percentage taxes and; except that of
Authority (SBMA) it is considered as separate amusement taxes because the maximum rate is
customs territory and thats the duty applied because 30%; except that of Professional tax under sec. 139
of the Cross-border doctrine. that P300 because that is a fixed tax; Except that tax
on delivery van used, (Sec.) 141, those are the fixed
Now Local Tax, take note of Sec. 150, we annual taxes. The Professional tax, once payment is
have been waiting for this for quite a long time. Recall made to a particular LGU you need not pay additional
the 70%-30% allocation rule, as amended. Even if professional tax, you can practice the profession in
the taxpayer has no branch or outlet in that particular any part of the Philippines. In other words, one
LGU, as amended we can still impose tax on the payment of professional tax will suffice, that is the
same. And if it has a factory or plantation, apply the fixed tax of P300/year.
30%-70%. The 30% of the proceeds of the tax shall
go to the LGU where the Principal Office is situated. Now Real Property tax, there is no doubt
So this only applies to Local Taxation the rule on tax that the description is ad valorem tax. Ad valorem
situs. The 70% of the tax shall go to the LGU where tax, that is a word you must remember, it is a levy on
such factory or plantation is situated. Good thing it is the fixed portion of the VALUE thats why it is an ad
clearly provided for in the last part of Section 150 and valorem tax with respect to the assessed value of
irrespective of the place of sale, this 70-30 allocation that real property. With respect to Customs duties,
rule will be applied. Real Property tax, the tax situs Ad valorem tax and specific tax, so there are 2 terms
note that it is the place where the Real Property is of customs duties description. Ad valorem tax, it
situated. Take note that Municipalities have no power must be based on value of the part then specific tax
except when they are situated within Metropolitan can be used and it is based on the physical unit of
Manila Area. measure. Thats a really probable bar question.
In regard to Customs Duties, the subject Sumptuary Purpose of Taxation

importation and exportation so it must be imported:
bringing the goods into the Philippines. Exportation is I noticed in my lecture that a lot of
the bringing of goods outside the Philippines. Now examinees are not familiar with this term Sumptuary
watch out for the meaning of importation. In a recent Purposes of Taxation, that is the same as secondary
case, importation commences from the time the purposes/non-revenue purposes, regulatory
vessel or aircraft enters the Jurisdiction of the purposes of taxation. I saw this in the syllabus you
Republic of the Philippines with the intention to should be familiar with Sumptuary purpose
unload the goods herein. So if such intention is Sumptuary theory, if you come across this you can
absent in the actual case, there is no importation to recall the other purposes, non-revenue purposes,
speak of, therefore we cannot impose Customs secondary purposes, regulatory purposes of taxation.
duties on these goods. There must be that intention
and to unload the goods here in the Philippines so it POER, check whether it applies to all. P to protect
terminates upon the payment of Customs Duties. our local industries from unfair competition. You
immediately recall these special customs duties.
Tax Rates What are these duties which may be imposed with
the end view of protecting out local industries from
Evolving trend in the Bar Exams, you must unfair competition? You read the bar questions:
be familiar with the Tax Code. This will not be asked Countervailing duties, Dumping Duties, you must also
in the problems but may be asked in the multiple not forget these marking duties and discriminatory
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Taxation Law
duties. Just remember that as regards that Proceeds of life insurance policy. We cannot tax
countervailing and dumping duties, these are that for the simple reason that there is no income,
precisely imposed to protect our local industries gain realized. Consider and mark also Consideration
against unfair foreign competition. These are always on injuries or sickness for the same reason that
asked in group thats why you cannot break this. there is no income or gain realized, you cannot tax
Discriminatory duties, when our goods are the same. And this principle applies to moral and
discriminated against by other countries, here it is the exemplary damages. We cannot tax the same for the
within the power of the President under the flexible obvious reason that there is no gain of profit realized.
clause of Section 41 of the Tariff and Customs Code Retirement Benefits, that must be understood in
to impose what we call discriminatory duties. The so- relation to separation pay.
called Marking duties, the purpose there is very
obvious and that is to prevent public deception. Retirement benefits received from a private employer
is exempt if FORT is present.
As an implement of the Police Power of the
State so here let me remind you of that American 1. He must be at least Fifty years of age
Jurisprudence which we have adopted, it says that:
the power of taxation can also be used as an 2. Availed of Only Once
implement of the Power of Eminent Domain. So
3. Reasonable benefit plan approved by the
recall here the 20% grant of discount to Senior
BIR
Citizens, that is where this Jurisprudence is applied.
So in the exercise of the power of eminent domain 4. Ten years of Service.
these 3 conditions must concur:
Once such benefits have been received on
1. There must be expropriation of property. the account of causes beyond the control of the
(The law requires these covered employees/officials, disregard all of these because
establishment to impose 20%)
that may be exempt under the separation pay as the
requisite for exemption is that separation pay is
2. Public use/Public purpose. That applies to
exempt from tax if it is received on account of cause
these Senior citizens though this may be for
beyond the control of the employee or official. The
the benefit of a person. Remember the rule
Supreme Court said, compulsory retirement is
that public purpose does not mean that it
considered cause beyond the control of the
must be used solely for that particular
employee or official. All those benefits received under
purpose, it may then be a particular
that compulsory retirement is exempt. And dont
individual. Its the ultimate result, not the
forget also these exempt prizes and awards. You
immediate result. and
read the problem hardly. If these prizes and awards
3. Just Compensation, that is the deductible are given the in a sports tournament recall these
tax, the 20% here can be claimed as a requisite for exemption. To be exempt such sports
deductible tax, no longer as a tax credit. tournaments or competition must be sanctioned by
the National Sports Associations. That award is
It encourages the growth of local industries likewise exempt from donors tax. Or the problem
then reduces social inequalities and that is the may state that this is received on account of
promotion of social justice according to the recent SCRALEC. There must be a combination of:
case decided by the Court also within the purpose of
taxation under the Sumptuary purpose. (1) Scientific, (2) Charitable, (3) Religious, (4) Artistic;
and (5) Literary, (6) Educational, (7) Civic
Exemptions achievement.
Now find out also in the problem if he performed an

Exemptions are granted under these: (a) Tax
act. No action on his part to enter in the contest and
Law under the NIRC you will find these provisions
these 3 conditions must concur.
on exemption, Sec. 32(b), and Sec. 30 as far as
corporate taxpayers are concerned. I will tell you the In Section 30, take note of the YMCA
possible questions here based on my survey. Under doctrine which is the last paragraph thereof. In this
the law on Estate Tax, it is stated on Section 87. YMCA Doctrine: Rent income received by religious
Donors tax, yes, there is such a provision on and charitable institutions is subject to Corporate
exemption, Section 101(a to b). Value-added tax, Income Tax and this rule on taxability applies also to
thats Section 109. Local Government Taxation, interest income for whichever the reason. It is
Section 193. Real Property Taxation, Section 234. likewise subject to tax. As well as that sale derived
And Tariff and Customs Code, Section 105 of TCC. from the sale or exchange of property. So these are
So its clear that there are really exemptions. So the items of income covered by the last paragraph of
exemption from income tax, lets zero in on these 4 Section 30. So, all these are subject to corporate
possible questions in here. In section 32(b), mark income tax. But if the recipient is a non-stock non-
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Taxation Law
profit educational institution, apply the Constitutional of P1,919,500. You focus on this because the
test of exemption and it is the Use. As long as the problem will try to mislead you suppose the gross
income is Actually, Directly and Exclusively used for receipts exceed P1,919,500, that is still exempt
educational purposes, you are talking here of non- because this is a special provision. As long as it does
stock non-profit educational institution, it is exempt not exceed P12,800 ignore, forget about the general
from income tax. threshold limitation. You can only apply this if the
monthly rent is more than P12,800 in which case to
In Section 87 of the law on Estate tax, 1-2- be exempt, it must not exceed P1,919,500. In regard
3-4; if you come across usufruct, merger of to that sale of real property, consider this, expect the
usufruct with the owner of the naked title, it is unexpected. It must involve that residential lot, the
exempt. If you come across in the problem, threshold amount was increased from P1.25m to
fiduciary then fideicommisary that is exempt. If P1,919,500, this is now the threshold amount. Now,
you come across in the problem in accordance with sale of residential house and lot, the P2.5M has
the desire of the predecessor, that is likewise been increased to P3,199,200. Youre examiner is a
exempt. Those are the keywords there that you must CPA, I hope he will not ask figures but expect the
look into the problem so that you may apply the unexpected. Now, we have the so-called
exemption. If the Donee is an institution, remember Socialized housing, the threshold amount has not
Civil Service Commission (CSC). Find out if the been changed, it remains at P225,075. Low-cost
institution is a (1) Charitable institution (2) Social Housing of the Government, the threshold amount
Welfare Organization or (3) Cultural Organization. If it has not been changed, it remains at P750,075. All
is not one of this CSC, it is subject to Estate tax. others, you apply the threshold limitation of not more
than P1,919,500. Export sale is exempt if the seller is
In regard to Donors tax, and Im very very
a non vat-registered person. If the seller is a vat-
confident. A final reminder, CARTER-CPS, These are
registered person, it is subject to 0%. It is
exempt donations under the NIRC. These are the
considered a zero-rated transaction. The rule is basic
qualified donees:
here: Transactions that are subject to percentage tax
are automatically exempted from Value-added tax.
1. Charitable institutions
Now this threshold amount of P1,919,500 is exempt
2. Accredited Non-Government Organizations from value-added tax but take not that this taxpayer
is subjected to percentage tax under Section 116. So
3. Religious Organizations exempted from value-added tax but it may be
subjected to percentage tax. Although it is excluded,
4. Trust Foundation just be prepared for eventuality.
5. Educational Institution which must be non- In the case of exemption from Local Tax, I
stock, non-profit according to the recent law developed this keyword last night so I hope this will
Government Educational Institution is be of help to you. Take note that the exemptions
likewise covered by this exemption by virtue have been withdrawn with the effectivity of RA 7160
of RA9500 except: (CHEW)
6. Research Organization 1. Cooperatives RA6938.

2. Non-stock, non-profit Hospitals
7. Cultural Organization 3. Non-stock, non-profit Educational institution
4. Local Water District.
8. Philanthropic Organization
Exemption from Real Property Tax. Local
9. Social Welfare Organization.
Government Corp then Professional Regulation
You must include here the donation given to Commission, that is the keyword you must
an athlete who participated in a sports contest, so remember. Section 234, there is no doubt that this is
that will supplement these. So again, the requisite for always asked in the bar exams that this pertains to
exempt donations is that the sports contest is a
1. Charitable Institutions, this is just a
sanctioned national sports competition (National
reiteration of that Constitutional exemption
Sports Associations).
under Article VI Section 28 Par (3) of the
Constitution, indeed it is exempt from Real
Threshold Values in VAT
Property Tax. Take note of the requisites for
the exemption ADE. It must be Actually,
Value-added tax, in my mind, these are the
Directly, and exclusively used for REC,
probable bar questions here. The favourite question
Religious Educational or Charitable
of the rumoured examiner is this P12,800/month rent
purposes.
income. Take note that this applies to residential
unit. Here, disregard the general threshold amount
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Taxation Law
2. Local Water Districts, such equipment must Limitations:
be actually, directly and exclusively used in
the supply and distribution of water (1) Not more than 50% of his salaries for the last 4
years of his of assignment and (2) this may be availed
3. This must be a Government-Owned and of only once in 4 years so these are the exemptions
Controlled Corporation and the qualification from customs of that personal effects including
is that this must be engaged in the vehicles by returning officials or officers particularly
generation and transmission of electric those officers of the DFA. You are safe if there will be
power.(May be distribution of water and/or a question on exemption.
electricity)
Principle of Strictissimi Juris
Note: NAPOCOR falls under this.
Remember the basic principle of Strictissimi Juris
4. Machinery and equipment is merely used for
which means that exemptions must be strictly
pollution control and environmental
construed against the taxpayer and liberally in favour
protection
of the Government.
5. Properties of the Republic of the Philippines
These are the exceptions to the rule that exemptions
must be strictly construed against the taxpayer:
6. Cooperatives registered under RA6938.
(SALT)
Now take note of the test of exemption,
1. If the subject is a Special person which
ownership has been used under two situations: (1)
must be granted under special
real property owned by the Republic of the
circumstances
Philippines (2) real property owned by the
Cooperatives. All the rest apply the use as basis for
2. Agency of the Government
such exemption.
3. When the law provides for liberal
Exemption from Customs Duties, Section 105, let us
interpretation.
zero in on this personal effects that may be imported
or purchased by returning residents. Returning 4. Traditionally exempt.
residents refer to those citizens of the Philippines
who stayed abroad for a period of at least 6 months, Take note of these exceptions because
some say 3 months only. They must have stayed these may be the subject of a multiple-choice
abroad for at least 6 months then S-T-O. question. S-A-L-T Salt.
1. Sixty day period - It must accompany this Inherent Limitations (PINET)

returning resident within the 60-day period.
Lets try to find out the specific limitation that applies
2. Ten Thousand Pesos. The exempt amount
to these 8 taxes.
must not be more than P10,000
1. It should be for a Public purpose
3. Once in every calendar year.
2. International Comity
In excess of P10,000 that is subject to a
reduced ad valorem duties of 50%. So just remember
3. Non-delegation of the power to tax
STO, Santo, these are the requisites for the
exemption from customs duties of these personal 4. Exemption from tax of government agencies
effects which may be brought by returning residents. instrumentalities political subdivisions of
Special Law RA8047: Importation of materials that State
may be used for book publication, exempt. Another
special law RA 7157 section 81: vehicles that may be 5. Territoriality.
brought by returning officials particularly the officials
of the DFA. Requisites for exemption: (POM) Exemption from taxation of Government
agencies and instrumentalities: this squarely applies
1. Consists of personal effects and that may to this exemption from real property tax of these
cover a vehicle. instrumentalities of the National Government.
Considered, declared, recognized by the Supreme
2. One vehicle Court as instrumentality of the National Government
therefore its Real Properties are exempt, this Manila
3. must be registered in his name for at least 6 International Airport Authority (MIAA) and you must
months also include the Airport Transit Buildings of this
Mactan Cebu International Airport Authority (MCIAA).
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Taxation Law
Here, there is this doctrine cited by the Court which make the House superior to the Senate. So these are
is incorporated in Section 133 of RA7160 prepare for the important reasons cited by the Court.
this that is the Supremacy of National Governments
over Local Governments. That is precisely the We have pointed out a while ago this Article VI
doctrine cited by the Supreme Court that LGUs may Section 28 Par (3) which is a Constitutional provision
not impose tax on National Government so these that applies an exemption to Real Property Tax. As I
Mactan Cebu International Airport Authority, Manila have said this has been reiterated statutorily by
International Airport Authority are considered Section 234 (b) of RA7610. Article VI Section 28 Par
instrumentalities of the National Government. (2): this squarely applies to tariff rates. And prepare
for this, the implementing law on this is Section 401
Non-delegation of the power to tax: this admits to of the Tariff and Customs Code. This law is the
an exception under Article X Section 5 of the Flexible Power Clause. These are the criteria upon
Constitution. The power of taxation may be which this may be exercised by the President. The
delegated to Local Government Units. So that is a President upon the word Flexible commands and
Constitutional exception of the power to delegate the implies, may increase of decrease tariff rates it must
power to tax which can only be withdrawn by be based on these following grounds: (WES)
amending the Constitution. Any law passed by
Congress withdrawing such an exception is 1. To promote the General Welfare of the
unconstitutional. So on the basis of this people
Constitutional delegation of the power to tax, we
2. Economy, to promote National Economy
have these provisions under RA7160 conferring this
power of taxation on Local Government Units and
3. To promote National Security.
they can now impose local taxes subject to
limitations. Constitutional Limitations with respect to Insofar as income tax is concerned, Article
the limitation on due process just remember this XIV Section 4 Par (3), it is the favourite bar question, I
pronouncement of the Court because it applies to all. hope that this will be asked again. It applies to non-
It is therefore a common limitation to justify the stock, non-profit educational institutions. These are
nullification of a tax law: there must be a clear or the taxes covered by this Constitutional exemption:
unequivocal breach of the Constitution. In a problem, (1) Income tax (2) Property tax and (3) Customs
it may be asked in the multiple-choice or in a duties. In other words, a non-stock non-profit
problem that relative to equal protection clause educational institution is exempt not only from
remember your friend SAGA. Youre never misled, income tax but also from Real Property Tax and
remember this that there is no violation of equal Customs Duties. The test of exemption must be
protection clause if these requisites are present, complied with: It must be shown that this is actually,
these are precisely the requisite of a valid directly, and exclusively used for educational
classification: S it must be based on substantial purposes. If it is an income derived in the nature of
distinction; A it must not apply only to the present an interest income from a bank deposit. It is exempt
conditions but also to the future conditions; G it from the 20% final tax if these 3 conditions are
must be germane to the purpose of the law; and then present: (CCP)
A it must apply to ALL the persons belonging to the
same class. 1. Certification as to the existence of the bank
deposit
Specific Constitutional provisions, we have pointed
out this, Article VI Section 24 which has been applied 2. Certification as to the utilization of that bank
in that case of Tolentino vs Secretary of Finance this deposit of that interest income
Value-Added Tax can be covered by this. So, the
Supreme Court ruled that there is no violation of this 3. Project the amount of interest income
Constitutional Procedural Requirement because what must be used to fund an educational project
the Constitution requires to originate exclusively from that may include expansion of educational
the House of Representatives is the Revenue bill. It is facilities as well as the purchase of
not the Revenue Statute. There are 2 important educational books, equipment and the like.
reasons cited by the Majority view, no violation of this
Constitutional provision: (1) The Senate has the Double Taxation. There are two kinds of double
power not only to concur in the amendments but to taxation, you all know that the one allowed is the
propose amendments, so to insist that it must be the Indirect Double Taxation. These are the requisites
house bill to be the source of the provision will be to according to Corpus Juris Secundum of Direct
deprive the Senate of such power conferred by the Double Taxation. You apply this, if one of that is
Constitution. And the other reason cited by the Court absent, it will amount to indirect double taxation that
is (2) to confirm the Principle of co-equality of is allowed. You ought to know this: (PASKY)
legislative powers. To insist that such revenue bill
1. the same Property
must be the same as the House Bill would be to
("
Taxation Law
2. the same taxing Authority output taxes to arrive at Value-added tax but here it
has no connection with that measure that may avoid
3. the same Subject matter the course of double taxation. I just mentioned that
because of this concept of tax credit.
4. the same Kind or nature of tax
Tax Avoidance
5. the same taxable Year.
If the taxes are of different kinds, that will Now, tax avoidance, lets find out if there are
amount to indirect double taxation. If the taxes are tax avoidance schemes provided for in these 8 tax
imposed by different taxing authorities, that will also laws. Yes, under the law for income. Prepare for this,
result in indirect double taxation. An example of if you make an investment you may not be subjected
indirect double taxation is the so-called international to income tax from the income derived therefrom. I
juridical double taxation. Johnson and Sons Inc hope that this will come out in the bar exam, we have
Doctrine, here comparable taxes are imposed by been waiting for this, long-term investment or
different taxing authorities of the same taxpayer in management certificate. If you come across this, you
respect of the same subject matter and for identical remember right away 5-year period. It must have a
periods but since the taxes are imposed by the term of at least 5 years. This tax avoidance scheme
United States it will just amount to indirect double applies only to individual taxpayers except that non-
taxation and that is really a lot. Are there measures resident alien not engaged in any trade or business.
and provisions under these 8 tax laws that may
prevent or that may minimize the effect of double Sale of Principal Residence
taxation? So measures that may minimize or prevent
the harshness of double taxation, recall this tax credit Another tax avoidance scheme, exemption
provision under the NIRC that is designed to from 6% Capital Gains Tax. Final reminder, you will
minimize, to reduce the effect of double taxation no longer be liable to pay the 6% Capital Gains tax if
because here, the taxes here paid to the country or you have complied with the following requisites: the
Government may be deducted from the Philippine first thing you have to check in the problem is the
Income Tax. In Estate Tax, yes there is such a thing subject of the sale so you can only apply this if the
as tax credit. Estate tax with respect to the foreign subject of sale is real property considered as capital
government where his properties were situated, that specifically principal residence. So the proceeds of
can be claimed as a deduction from Philippine Estate the sale must be used to purchase or construct a
Tax. new principal residence and then there is that 18-
month period which means that the purchase or
Now the actual favourite Bar Question here construction of the new principal residence must be
is the concept of vanishing deduction. So it is a rule made within that 18-month period then observe the
that only applies to Estate tax. Vanishing deduction, it 30-day notice to the BIR. And in a multiple-choice
is a deduction from exclusive property. Take note of question, they may ask you the limitation that is the
the: (FIPIN) 10-year period, this can be availed of only once every
10 years. In a multiple-choice question, you will be
1. Five-year period so the prior decedent asked on the new requisite for the exemption and
must have died within that 5-year period. that is the execution of that escrow agreement which
is required under revenue regulation 17-2003
2. Inclusion of the property whereby the 6% capital gains tax shall be deposited
under the escrow account and within 30 days from
3. Previous taxation
the lapse of the 18-month period, the seller must
present proof that all these requisites and if he can
4. Identity of the property, the same property;
present proof to that effect, he can withdraw that
5. No Previous vanishing deduction because deposit from the bank.
this can only be availed of once. In other
words, since it was taxed already, in order Foreign Currency Deposit
to minimize the harshness of double
taxation the law allows the present estate to Current event, what about this? If you intend
claim the so-called vanishing deduction. to deposit an amount in the bank, you may deposit
this in the foreign currency deposit system. But as
In a donors tax, yes there is such a amended, that tax avoidance is still in effect except it
provision on tax credit, Section 121(c), the same requires that the depositor must be a non-resident.
concept as that of income tax and estate tax. In Non-resident may cover individuals or corporations. If
Value-added tax remember the formula there and in the depositor is a resident, individual or corporate,
order to arrive at the Vat-due or payable, output tax this is the rate you must remember, it is subject to
[less] input tax. These are known as creditable input 7.5% tax, it is therefore taxable. It is only exempt
taxes. Creditable input taxes are deducted from
)"
Taxation Law
when the depositor is non-resident, whether Are these methods applicable, Gross or Net or
individual or corporate. Taxable under the Laws on Estate tax, lets try to find
out. There are deductions there. Yes, there is this
Estate-Planning concept of Gross Estate Taxation. Is there such a
concept? I stand corrected, Gross Estate Taxation,
In Estate Tax, the Supreme Court has given there is none because there are always deductions
imprimatur to this, Estate-planning scheme. This is a here; so in Estate Taxation, the concept here is Net
classic example of tax avoidance scheme under the Estate Taxation. Because even those so-called Non-
law on estate tax. Wherein applying Section 40 (c) (2), Resident Decedents can claim deductions, although
the properties before the death of the decedent may the deductions are limited. So Resident Decedents
be transferred to a family corporation so considering and Non-Resident Decedents can claim deductions.
the circumstances. That may not form part of the The difference is that in the case of Non-Resident
gross estate of the decedent because they are Decedents, they are entitled only to Limited
transferred to a family corporation and that is allowed Deductions. So again there is no such concept or
according to the case of Delpher trades vs IAC. That method [such as] Gross Estate Taxation because the
is the case that has recognized the Estate-planning method here is Net Estate Taxation.
scheme.
The same holds true insofar as Donors tax is
Deductions in Donors Tax concerned. Gross Gifts, there is no such thing or
system to that effect because deductions are always
In Donors tax, the classic example of tax avoidance allowed. Even that Non-Resident Donor can claim
is splitting of donation. Given that under Section 99, deductions although his deductions are limited. So
P100,000 is exempt. If you intend to give P200,000 the method here is Net Gift Taxation because
you may split that into two. P100,000 may be given deductions are always allowed.
as donation for this particular year, its exempt. And
In Value-added Tax, let me reiterate this basic
the other P100,000 may be given during the
formula: Output tax [less] Input tax and the result is
succeeding year, that is likewise exempt because of
Value-added Tax due or payable. The basis of this
this statutory exemption under Section 99.
12% in determining output tax is Gross, Gross
There may be no clear tax avoidance scheme under Selling Price or Gross Receipts. So the system there
other laws, Value-added tax, Local tax, Real Property as to the basis of the value-added tax of 12%, it is
tax and Tariff and Customs Code. Gross Sales or Gross Receipts as the case may be.
This input tax may pertain to the so-called
Methods/Concepts under these 8 tax laws Creditable Input Taxes. The concept really is the
Tax Credit Method. So tax credit method is the one
Gross Income, Gross receipt System; Net Income that has been adopted in value-added tax system
Tax System, let us find out those specific methods of which can be easily explained by this formula. To
taxation under these 8 tax laws and different kinds of arrive at the Value-added Tax due or payable, you
tax systems. Under the law on income, you must can credit the so-called input taxes from the output
have to know this, that we have adopted the Gross tax so the phrase tax credit has something to do
Income Taxation, and final reminder, when it says with these creditable input taxes.
Gross income these taxpayers are not allowed to
In Local Government Taxation, under Section 143,
claim deductions. So Gross Income Taxation applies
the basis for that Local Business Tax is Gross
to Non-Resident Aliens Not Engaged in Trade or
Receipts or Gross Sales as the case may be. So
Business. It also applies to NRFC, Non-Resident
thats the Gross receipts or Gross sales method for
Foreign Corporation. Net Income Taxation applies to
Local Government Taxation. Decided case, that is the
the following taxpayers there may be 6. It simply
Ericsson Telecommunications Case, suppose the
means that these taxpayers can claim deductions.
Local Government Units such as the City
Individuals, there are four (4), Corporate there are two
Government of Pasig imposes the said Local
(2), so all-in-all there are Six (6). Resident Citizen,
Business Tax of adopting the gross revenue, the
Non-Resident Citizen, Resident Alien Individual, and
Supreme Court said that they have amounted to
Non-Resident Alien Engaged in Trade or Business,
direct double taxation. Thats an erroneous
thats the most favourite bar question. Recall the
application of the law. It must be based on the Gross
more than 180 day period. Its not 180 days.
Receipts or the Gross Sales as the case may be. This
Aggregate is the word that more than aggregate
specifically applies to that of municipalities.
period of 180 days of stay in the Philippines. That is
really the test. And Domestic Corporations, Resident Real Property Tax. Real Property Tax, the basis
Foreign Corporations are also covered by this Net must be the Assessed value so thats the Assessed
Income Taxation for the simple reason that the tax Valuation Method. When we speak of assessed
base is Net or Taxable income. value, it is synonymous with taxable value. So basic
rule here, [Fair Market Value x Level of Assessment]
*"
Taxation Law
that must be the result. So you cannot avoid the price actually paid or payable on goods when sold for
definition of Fair Market Value here because that is export to the Philippines. Again Transaction
one of the factors that must be considered to arrive Valuation System as introduced by RA8181 simply
at assessed value which is precisely the basis of enunciates such rule that the basis of the Ad Valorem
those rates. Now, Fair Market Value based on Duties, Customs Duties is the Transaction Value. By
jurisprudence is now incorporated in Section 199(L) Transaction Value it is meant the price actually paid
of RA7160: It is the price that which a property may or payable for goods when sold for export to the
be sold by a seller who is not compelled to sell and Philippines. So those are the methods/systems of
bought by the buyer who is not compelled to buy. taxation that have been adopted under these 8
The important characteristic here is that there must different kinds of taxes.
be no compulsion. Now, I forgot to say these rates
and these are the favourite bar questions on Real The Concept of allowable deductions, yes
Property Taxation. The rates here range from 1% Section 34. Can you recall that? Ill give you my
value, these is the ad valorem here, taxed 1%, 2%; keyword: Land Transportation Regulatory Board,
1%, 5%, 60%. Now these 1% 2% based on the Development Bank of the Philippines, Division
assessed value, the 1% applies to provinces. The 2% [Commission] on Immigration and Deportation
ad valorem rate applies to cities and if they are (LTRB-DBP-CID). You need that in a multiple-choice
municipalities within the Metropolitan area, it also question: One of the following is an allowable
applies. These are what we call Basic Real Property deduction: The following are allowable deductions,
Tax Rates. Now what is this 1%, 5%, 60%? This 1% EXCEPT. These are the possible theory questions.
applies to this so-called additional levy and this must These are important. Lets complete these. Under
cover Special Education Fund or SEF. Again, the Section 34 of the NIRC there are 10 allowable
basis is the same, 1% of the assessed value of the deductions, they are as follows:
property. This 5% is also an additional levy based on
the assessed value and this must apply to idle lands. 1. Losses
And this is quite peculiar and mind you, this is the
2. Taxes
emerging favourite bar question: what is this 60% ad
valorem rate? Section 240, so here the basis is 3. Research and Development Expenditures
different, it is not the assessed value. Its quite
peculiar. This applies if such a real property or parcel 4. Business Expenses, these are Ordinary and
of land has received a benefit by virtue of these Necessary Expenses
public projects or improvements. So 60%, the word
used is Special Levy. Special levy on Real Property 5. Depreciation
so you recall this, the word special is always be
associated with this 60% of the cost of that public 6. Bad Debts Expense
projects including the cost of the land so that is the
7. Pension Trust Contribution Its not the
basis of this. Since the rate is quite high, he is
pension, class, it is the contribution
allowed to pay this in 5 years. So again, under the
Real Property Taxation, to say this so I apologize. 1,
8. Deductible Contribution, Charitable
2; 1, 5, 60% the first 1, 2% are the basic real
Contribution is one of them
property rates, ad valorem rates. 1, 5, 60%; 1% this
applies to Special Educational Additional Levy, and 9. Interest
this 5% applies to idle land, and last the 60% can
only be imposed if there are public projects which 10. Deflation.
may have brought about public benefit to that
particular parcel of land that is precisely the basis for Those are the 10 Itemized deductions.
the taxability of the same. Such improvements that
may be brought about by that public project, that is Optional Standard Deduction
precisely the basis for such taxability.
Theres such a thing as Optional Standard
What is this concept/method of taxation under the Deduction. It only applies to income tax. Optional
Tariff and Customs Code? One old bar question, I standard deduction is another form of allowable
hope that this will come out in the bar exam. The deduction. The word Optional implies that the
system or method has been changed. Before it was taxpayer may avail of this in lieu of the itemized
the Ad Valorem system, now it is valuation system. It deductions. Now that is when he has no receipts or
has been changed to Transaction Valuation documents to substantiate his receipt. Remember
System. So this is a system of taxation that the 40% rate. In the multiple-choice youll be misled
specifically applies to customs articles that are [by] the 10%, that is the old rule. The law imposes
subject to customs duties. RA8181 amended Section 40%. Multiple choice, tax base, individual this is the
201 of the Tariff and Customs Code and that it perennial error/mistake. Some would say Gross
defined this phrase Transaction Value to mean the Income, that is the old rule it is now gross receipts or
!+"
Taxation Law
gross sales - Individual. Multiple-choice, corporate 5. Taxes. Again, Expenses, judicial/funeral
taxpayer, basis, Gross Income, yes you are correct. expenses, Losses, Indebtedness, unpaid
And this be availed of by a corporation now? Yes, mortgages included in the taxes.
that is incumbent. Multiple-choice, is it revocable or
irrevocable? Irrevocable, during the taxable year. 6. Family Home deductable allowed to 1
Those are the questions on Optional Standard Million
Deduction.
7. Medical Expenses, deductible only up to
P500,000, it must be incurred in that 1-year
Tax Benefit Rule
period. And
Final reminder, there is such a thing as Tax Benefit
8. Death Benefit, it must arise from an
Rule. Its also known as Equitable Benefit Rule.
Employer-Employee Relationship.
Multiple-choice question it applies to, remember
these two: Tax Refund and Recovery of Bad Debts In Donors tax, deductible the notable
Written-off. These are the two items for which you deduction is donation given on account of marriage
apply the Tax Benefit Rule, very simple. Tax refund we call that as Dowry. It is exempt only up to
will result to a taxable income if that tax refunded has P10,000. It is deductible up to that P10,000. With
been claimed as deduction. It must be claimed as a respect to that donation given to the agencies of the
deduction thats why it must be a deductible tax. Bad Government not organized for profit of the National
debts recovered to be subject to tax, it must be Government, the full amount is deductible in effect.
claimed as deduction. Because thats the only way to
which the Tax Code may receive benefit that it must Value-added tax, well the concept is very limited
reduce his taxable income during the preceding here. You deduct input tax from output tax, thats the
taxable year. deductable item from output tax. And there is no
such item as allowable deduction under the Local
And there is such a thing here as All-events test I Government, Real Property Taxation, and Tariff and
think this will come out in the bar exam. All-events Customs Code.
test requires 2 requisites: (1) As said by the Supreme
Court in the Isabela Cultural Corporation Case, the
liability to pay must be fixed. It may be a contract
between the client and the lawyer, retainership
agreement will fix that. Thats one of the events and
then precise amount is not required. It need not be
completely accurate because what is required is only
reasonable accuracy. As said in this case, the receipt
of the debt instrument is not required; it is the year
where the services are rendered which is the event
that will establish that deductibility of such. Thats the
All-events Test.
Allowable Deduction in Estate Taxation
(ELIT-FMD)
1. Expenses which may either be Funeral

Expenses or Judicial Expenses.
2. Recall that with respect to funeral expenses,

there are limitations there, not more than 5%
of the Gross Estate but shall in no case
exceed P200,000. No limitations with regard
to Judicial Expenses.
3. Losses;
4. Indebtedness, this may include claims

against the estate, claims against insolvent
persons but that must first be included in
the gross estate, that is the requisite for
deductibility;
!!"
2013 Dimaampao Lecture II
Taxation Law
PART II SPECIFIC RULES But focus on the Clothing allowance and Uniform
allowance. It has been increased from P3,000 a year
There are what you call specific rules. It simply to P4,000 a year. That is the one which in my mind is
means that these rules apply only to these particular the probable one.
taxes: income tax, estate tax, donors tax, value-
added tax, local tax, real property tax or customs Another is the P5,000 Christmas Gift.
duties. This is one problem that may be asked, the
possible sources of problems. Let us start with Christmas Gift, that is the word because if what
Income Tax. Let me help you recall those special was used in the problem is Bonus, you apply
rules that apply to Individual Taxpayers. To my mind, another rule. Christmas Bonus is subject to the
these may be the probable bar questions. P30,000 Lump sum limitation and this must be added
to the other benefits: 13 month pay, productivity
th
FRINGE BENEFITS TAX incentive benefits, apply the P30,000 limitation.
The concept of Fringe Benefits you only apply to RULES APPLICABLE TO INDIVIDUAL TAXPAYERS
income tax under the NIRC. So here, these fringe
benefits are subject to final tax. The employees must Holding Period Rule
be managerial or supervisory employees. Since this is
You must realize that the Holding Period Rule is a
covered by the Final Withholding Tax system, they
form of tax avoidance that you dont sell your capital
need not include this or report this when they file
asset within that 12-month period. You sell it after the
their Income Tax Return. These Fringe Benefits are
12-month period because the taxable capital gain is
exempt under these 3 basis or grounds so CNN.
only 50%. Indeed it reduces your Taxable Capital
They are exempt if given for:
Gain by 50%, a form of tax [avoidance] it only applies
1. Convenience or advantage of the employer, to individuals. That doesnt apply to Corporate
Taxpayers.
2. Necessary to the conduct of employers
trade or business, or Net Capital Loss Carry-Over
3. Required by the Nature of the employers Individual Taxpayers can carry-over the so-called Net
trade or business. Capital Loss. Corporate taxpayers cannot carry-over
the Net Capital loss but both can carry-over the so
Thats why the perennial Bar Question here is called Net Operating Loss. Net Operating Loss is an
Housing Benefit. So how do you apply the improvisation of the rules by RA8424. So it applies to
Convenience-of-the-employer rule? It must be within both because the Law makes no exception.
the business premises of the employer and even
adjacent housing units according to Revenue Personal Exemptions
Regulation 3-98. It must be within that 50 meter
Still on Individual Taxpayers, this concept of Personal
perimeter from the business premises of the
Exemption applies only to them. So if the P50,000 is
employer. The concept has been expanded. It also
the Uniform Basic Personal Exemption. P25,000 for
includes the Temporary Housing Unit, 3 months or
every qualified dependent child not more than 4 So
less stay in the premises.
Multiple-choice, not more than 4. In other words, the
maximum additional exemption is P100,000. So
DE MINIMIS BENEFITS
Gainful employment of the dependent, Marriage of
the dependent during the taxable year, you ignore
Another special rule which can only be found in the
that event. Thats the simplest way to remember that
NIRC: the concept of De Minimis benefits. These are
because the parent can still claim that. As dependent
Rules which are provided for only by the NIRC. So
for the obvious reason based on the provision of law
dont forget CHEG. How do you know whether that
35(c) that such an event is deemed to have taken
benefits are de minimis and therefore exempt? It
place at the end of the taxable year. The effect is that
must be given to promote Contentment, Health,
the parents can still claim the P25,000 additional
Efficiency or Good Will.
personal exemption.
Not only that, you zero-in on these probable Bar
Questions here: Monetized Value of Leave Credits. RULES APPLICABLE TO CORPORATE
You read the problem. 1. Government employee - TAXPAYERS
Always EXEMPT. 2. Private employee - Exempt only
up to the 10-day Vacation-Leave Credits, in excess Minimum Corporate Income Tax
of that Taxable. Monetized Value of Sick-Leave
My fearless forecast is merely on Minimum Corporate
Credits of Private Employees, that is a different
Income Tax, this was last asked in 2001. Mr.
subject.
Examiner, its about time to ask the same. You
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Taxation Law
should know the purpose so that you will not be If it derived income from the sales of airplane tickets
misled. If you know the purpose, you can apply this we can tax that because that may be considered as
to all possible situations. Resident Foreign Corporation. And that the tax
treatment is that the tax base is taxable income it can
Since the purpose is to forestall the claim deductions the tax rate is 30%. On the other
prevailing practice of Corporations of overclaiming hand, if the problem categorically says this
Deductions, If the Corporation has no taxable income corporation has landing rights, that is when you can
can it be subject to MCIT? apply the concept of Gross Philippine Billings
because as a member, the test there is the origin of
Yes, because the tax base is 2% of Gross
the passengers so you can squarely apply this if such
Income.
an airlines has landing rights. Because thats the only
way to which you can apply this concept. It must
If a corporation had a Net Loss?
originate here in the Philippines. Now, what is now
Yes again because the tax base is Gross the tax rate? The tax rate is 2.5% because the base
Income so even if it continued such practice of is Gross Philippine Billings.
overclaiming deductions they cannot avoid the
Again, Offline International Airline such as BOAC
Minimum Corporate Income Tax of 2% of Gross
(British Overseas Airways Corporation), South-African
Income.
Airways can still be taxed even if they have no
This applies only on the 4 year of Corporate
th landing rights here because they derive income from
existence. It does not apply to the first 3 years of these sales of transport documents; and such being
corporate existence because in Corporation Law, the case apply the principle of benefits-protection we
that may be considered as the period for adjustment. can tax this one. That is precisely the basis for
Thats a fair provision. imposition of the same.
Branch Profit Remittance Tax Tax Sparing Rule
Branch Profit Remittance Tax, Its about time to ask This Tax Sparing Credit Rule, is the one that was
this because this was last asked in 1999. The asked in the Bar Exam eight times already. Its the
concept is this: You should know the tax base and it personality of the withholding agent to file written
is no longer the amount actually remitted, it is the claim for refunds. Right now, I doubt that it will be
amount applied. You look for that in a multiple-choice asked. Yes, in any case, it may be asked in a
if it is applied or earmarked for remittance. The Multiple-choice: withholding agent has a legal
word Actual is a distractor. personality to file a written claim for refunds such as
Proctor and Gamble Philippines because it is
The exempt profits are those profits that are remitted technically considered as taxpayer. It is not only an
by enterprises registered under the Philippine agent of the Government, it is also the agent of the
Economic Zone Authoriy. taxpayer here.
Problem: Remember the Marubeni Case But prepare for this question: The income covered by
here, now you try to know in the problem if it consists this, you may recall, is cash or property dividend. You
of 7 sentences. Look at this keyword, If an have here Non-Resident Foreign Corporation such as
investment is made directly by the parent Proctor and Gamble, USA. So if they have an
corporation that interest derived therefrom will investment here by establishing a subsidiary
definitely not form part of the Branch Profits. corporation; Thats Proctor & Gamble Philippines,
thats a domestic corporation. So definitely, it derives
To be branch profit taxes it must be effectively income here. So this domestic corporation will
connected to the conduct of trade or business. And transmit these so called cash or property dividend. Is
Made to the branch office, thats the one which will this subject to tax? Yes. How do you tax that? 15%.
qualify as branch profits. Very easy to answer, even if
you have no more time you just look for these Now,distractor. Suppose the source is a domestic
keywords and you can easily answer. Thats the corporation, that is exempt. Another distractor.
concept of Branch Profit Remittance Tax of 15%. Suppose the recipient is resident foreign
corporation? That is likewise exempt. So it is only
International Carriers subject to tax, subject to 15% if the source is a
domestic corporation and the recipient is a non-
Now this another probable bar question here. This resident foreign corporation.
tax on International Carriers/International Airlines,
lets focus on that. The misleading word is Off-line The tax code reduces the rate of 15% but there is a
International, dont be misled by that. You look for condition there There's the word tax credit. In the
this: Wander Case, no tax is imposed by the Government.
Yes it complies with the purpose. Now at least 15%
!$"
Taxation Law
must be allowed as tax. So, it may be more than this, 1. Transfer of goods to your residence not in
it must not be lower than 15 percent. So, no tax the ordinary course of trade or business
credit allowed, we will be compelled to impose the
2. Transfer, delivery and distribution these
30% corporate income tax. That is the concept of
goods to an investor
tax, this very rigid rule.
3. To a creditor dacion en pago
ESTATE TAXATION
4. Consignment of goods: After the lapse of
the sixty day period even if there was no
Donations Inter Vivos in Form but Mortis Causa in
sale it is deemed sold, therfore subject to
Substance
value added tax
Donations Inter Vivos in form but they are really 5. Even if you retire from business it is subject
Donations Mortis Causa in substance. Thats the value added tax : The tax base insofar as the
concept, which you can only find in Estate taxation. first four are concerned is the market value
So they cannot avoid the payment of Estate tax with respect to the last one, the retirement/
because even if they call this as donation inter vivos. cessation from business operations and this
is unfamiliar. Don't ever adopt the gross
Composition of the Gross Estate: (DILM-RT) sales because that is not correct, it's the
lower amount between the acquisition cost
1. Decedents Interest
of that inventory and the current market
2. Insufficient Consideration price and that is the basis of the 12 % VAT.
3. Life Insurance Policies

Presumptive Input VAT
4. General Power of Appointment as a Mode of
transfer There is another specific rule that you will only find in
VAT system: What is this concept of Presumptive
5. Revocable transfers (inter vivos in form BUT Input tax? Remember that VAT is an Indirect Tax, so
mortis causa in substance) output tax [less] input tax. Now here you must realize
that One: the seller of this agricultural inputs are
6. Transfers in contemplation of death. ]
exempt, so nothing can be transferred, now the laws
So the test there must be death, not says we allow you 4% of the gross value of that
imminent, so they may term this as inter vivos but it agricultural product, so thats the concept. So it is
may be proven to show in two cases that it will take the law that by fiction of law it is the tax that is
effect after his death. That is subject to Estate tax. deemed transferred to is 4% of this gross value of
The three-year presumptive period, which you might that agricultural product which may be used as
have read in all books, has already been repealed. inputs for the production of certain products.
There is no such thing as presumption; transfers
presumed made in contemplation of death. LOCAL GOVERNMENT TAXATION
Donations to Strangers Which of the LGUs may have possessed the widest
local taxing powers?
You can only find this word in donors tax, and the
word is stranger. What is meant by stranger? The answer is cities. The reason is this, Cities can
Multiple choice question: Not brother not sister, not impose the taxes that may be imposed by provinces
ascendant not descendant. Collateral relatives don't and municipalities. Next, municipalities, followed by
ever commit a mistake here within the 4 civil degree
th
provinces, and there is no doubt that barangays have
of consanguinity. What's the importance of this? If the least local taxing powers.
the donee stranger is subject to a high rate of 30%
donors tax. Residual Powers of LGUs
There is such rule here, residual powers of Local

VALUE-ADDED TAX
Government Units under Sections 186, all conditions
set for here, The title one of book 2 of Republic Act
Deemed-Sale Transactions
7160, enumerates those that can be imposed by
provinces, cities, municipalities, and barangays, even
You will only find this rule in Value-Added
if such imposition or subject is not mentioned therein,
Tax System, deemed-sale Transactions. Under Sec
106 (B) (1 to 5) there are really no actual sales they can still impose tax on that particular (BATI)
however the law says deemed-sales transaction by Business, Activity Transaction or Industry, as long as
fiction of law. they are not contrary to law and international policy.
Just simply said, they must not contravene
!%"
Taxation Law
Constitutional limitations and inherent limitations and consider/declare this as real property, therefore
there must be due notice of it. That is the residual subject to Real Property Tax. Very simple, thats the
powers of Local Government Units. business test. Even if it is temporarily attached to
the real property you ignore that. What is important
Doctrine of Pre-Emption here is it must installed therein and actually, directly
and exclusively for the business of such particular
You have come across this Pre-emption Doctrine,
enterprise. Decided cases relative to this - Caltex
which applies only to Local Taxation. What does this
case and Meralco Cases. In Caltex case this involved
doctrine dictate? In Victorias Milling Corporation vs
that an underground tank, this is considered as real
Municipality of Victorias, Negros Occidental, the
property, therefore subject to real property tax, even
Supreme Court explained this Pre-emption Doctrine
if it is not of the owner of that land. Remember that it
in the following manner: National Government may
is the use which is the basis for such tax.
elect to tax a particular area impliedly withholding
Regarding Meralco cases, the storage tank pipe lines
this power of the Local Government Unit to tax. If
these are also considered as real properties therefore
Congress allows Local Government Units to tax a
subject to Real Property Tax.
particular field of taxation, the Pre-emption Theory
Doctrine will not apply.
CUSTOMS LAWS
Lets give a concrete example here. Tax on
Now Customs Duties lets zero in on this. The
Amusement, you will recall, under Section 140 of
meaning of customs law is that it is only confined to
Republic Act 7160, may be imposed by Local
the provisions of the Tariff and Customs Code. Some
Government Units. There is nothing that can prevent
of the provisions of the NIRC are considered customs
the National Government to revoke that, but it allows
law. The meaning of Customs Law: those that are
Local Government Units to impose this so-called tax
subject to the supervision by the Bureau of Customs.
on Amusement. This Franchise tax, under Section
If you refer to the Tax code, Section 131, Excise tax
137, the National Government can withdraw that but
and importation, that is a Customs law. The
it allows the Local Government Units to impose the
regulations issued by the Central Bank of the
same. In this regard, it may pre-empt. So this is the
Philippines regarding such currencies that will be
Taxing Jurisdiction of the Local Government.
brought in or out of the Philippines, thats a customs
Therefore, apply the Rule of Territoriality. This can be
law.
the subject of Local Taxation but National
Government may withdraw that, and it can impose
Articles
the same, or it may no longer tax the same. In which
case, the Pre-emption doctrine will not apply. The meaning of articles, these are basic rules, may
include money or anything which may be the subject
Franchise Tax
of importation or exportation. So currency will be
considered as article, and when we speak of articles,
The Franchise Tax, I can sense that there will be a
there are what we call prohibited articles and this
question there by this magic phrase as provided by
(SWING)
the Supreme Court in several cases in lieu of other
taxes. Does that imply that it is no longer subject to
1. Those declared by Special Law as
Franchise Tax? No, because it is clearly provided for
Prohibited Articles
in 137 of the Local Government Code of 1991,
notwithstanding any exemption granted by any Law 2. Weapons of war
or Special Law, Provinces can impose this franchise
tax on businesses. It does not cover exemptions from 3. Insidious articles
Franchise Tax.
4. Narcotics or Prohibited Drugs
REAL PROPERTY TAX
5. Gambling devices.
Real Property Tax, the subjects: Land, Improvement,
Right of Pursuit
Machinery then Buildings (LIMB). You will now see
the distinction from Local Tax based on the subjects
There is this power of the Customs Commissioner
which are (BATI) Business, Activity, Transaction, or
and that is the extra-judicial jurisdiction, that is the
Industry.
right of pursuit. How does this rule apply? The first
thing that you should check is that there must be
Machinery
violation of the Tariff and Customs Code, so this may
You zero in on the meaning of machinery involve a vessel or aircraft as the case may be.
under Section 191 (o), this may be consistent with Vessel, if it smuggles goods, we can pursue the same
definition of machinery under Section 414(5) of the even on the high seas. What is required is that the
Civil Code. How do you know what is the test to violation must be committed within the Philippine
!&"
Taxation Law
Waters. If this vessel is within Philippines the more
reason, anywhere in the Philippines, it can be subject
of seizure.
Exclusive and Original Jurisdiction of Customs

Collector
The Exclusive and Original Jurisdiction of the

collector of Customs, in the first instance, whose
decisions are appealable to the Customs
Commissioner, cannot be restrained. These are
cases involving protest and seizure cases. These are
within the exclusive and original jurisdiction of the
Bureau of Customs that cannot be subject of
restraining order by the courts of competent
jurisdiction such as RTC.
Berthing Fees
What is now the rule on the imposition of Berthing

Fees? If you are reading an old book you might read
the old ruling here. Berthing fees can only be
imposed in these vessels.
!'"
2013 Dimaampao Lecture III
Taxation Law
PART III TAX REMEDIES Levy
(1) NIRC, (2) Local government code as local The levy on Real Property, under Sec. 207(B) of the
government taxation, (3) Real Property taxation in the NIRC, is an available administrative remedy. Under
laws of the local govt code of 1991, RA 7160, then (4) Local Govt Taxation, this is also recognized under
Tariff and customs code RA 1937 as amended by RA sec. 176 of RA 7160. Now here this is appropriate
1464. These are the four major tax laws. In the MCQ under Real Property Taxation given that the subject is
it is very possible, there will be a question asked on real property. That is why it is clearly provided for
whether these usual remedies that may be resorted under sec. 258 that there is such a remedy Levy on
to by the Government are available. Lets try to find real property. There is no such thing as levy on real
out. property under the Tariff and Customs Code,
because we deal with goods here. So no real
Enforcement of Tax Lien property can be the subject of the same.
Enforcement of tax lien, these are the well-known Compromise

administrative remedies that may be availed of by the
govt. Under the NIRC, it is duly provided for, check in Now compromise, this is the evolving
Sec. 209 thats an available administrative remedy. In favourite bar question. Lets try to find out whether
local govt taxation, check this is also available by this rule on compromise is available these four major
virtue of Sec. 173. Real Property Taxation its also an tax laws. Well under the NIRC it is clear under Sec.
available for remedy under Sec. 257. 204 that the BIR Commissioner has this power to
compromise tax liabilities. This may cover civil
Enforcement under the Tariff customs code, you liabilities and criminal liabilities. With respect to
should mark this because this remedy is quite Criminal liabilities, this cannot be compromised if it
peculiar though it is also in the form of tax lien. involved fraud. And it cannot also be compromised if
Enforcement of the tax lien according to Section the action has already been filed in court even if there
1204, this can only be resorted to by the Bureau of was no fraud involved. Now, these are 2 distinct
Customs if these 2 conditions are present. First, situations. Now, let us focus on the grounds because
these goods must be in the customs custody. And (2) this is where the question will be asked. Recall that
these are neither irregularly imported nor illegally there are 2 grounds here: doubtful validity and
imported. These are the two conditions that must financial incapacity cases. In the last Bar exam,
concur for the bureau of customs to avail or resort to asked already as one of the doubt from validity cases
this administrative remedy of enforcement of tax lien. is Jeopardy Assessment, strike-out that will no longer
be asked in your Bar Exam. The reason there is that
In the provisions of 209 of the NIRC, 173 of RA 7160, because there is no Audit done by the BIR. So it may
and 257 of RA 7160 there is a common provision be based on assumptions. That makes the same as
there. These must be superior to other claims or doubtful. The concept that may apply to this,
encumbrances. The one you should underscore is assessment made based on best evidence
Sec. 173 because here it may cover those properties obtainable. Remember that the rules on evidence are
that may be used in the business of a taxpayer. That relaxed here because hearsay evidence is admissible
is a special provision which you will only find in sec. here. So doubtful in the sense that it may be based
173 under this law on Local Government Taxation. on presumptions but the presumptions can be
rebutted. Thats why it falls under this doubtful
Distraint validity cases. So your remedy is to ask for
compromise and invoke this particular ground. Again,
Distraint, under the NIRC, Sec. 207(A) and assessment based on best evidence obtainable is
Local Government Taxation, under Sec. 175. And considered as doubtful assessment. Therefore, that
Dont ever commit to this line. If you read Sec. 254(B) can be the subject of compromise.
of RA 7160, it is a provision on Real Property
Taxation. It made mention of Distraint. Thats an Reminder: The Hantex case, while it is true
erroneous provision. There is no such remedy of that hearsay evidence may be admissible under the
Distraint of the personal property under the law on best evidence obtainable as this may come from a
Real Property Taxation. I made an annotation of this third person. However, the court said that Xerox
in the book I wrote entitled Essentials of Local Govt copies of consumption entries will not qualify, and
Taxation and Real Property Taxation. that they have no probative value therefore these are
considered inadmissible. Take note of that. While
Distraint of personal property under the hearsay evidence is admissible under the best
Tariff and Customs Code is the same as seizure of evidence obtainable, here in the Hantex case, xerox
good. So in the event that these enforcement of tax copies of the consumption entries have no probative
lien is not available, in that the goods are no longer in value, therefore this may be considered as
the custody of the Bureau of Customs, this is the inadmissible. Again, Withholding Tax cases cannot
appropriate remedy: Seizure. And it must be shown be compromised. Estate Tax Cases cannot be
that these goods are illegally imported or or in compromised if the request for compromise is based
another instance, an irregular importation of goods. on financial incapacity. But an opinion has been
This is sanctioned under Sec. 2301 of the Tariff and expressed: if the basis is doubtful validity estate
Customs Code. So the law on Real Property taxes can be compromised.
Taxation, Where this remedy of distraint is not
available. In a final judgment of default the issues are
all settled, thats why you cannot raise that ground or
request of doubtful validity. You must understand
!("
Taxation Law
that what cannot be raised there is doubtful validity. TAX REFUND
But you can still ask for compromise if your request is
founded on financial incapacity but because that
Tax refund, under the NIRC section 229, it
judgment has never passed on this financial
provides for 2-year prescriptive period. Now here,
incapacity. These are opinions expressed on that. you can easily recall this. Under Local Government
Taxation, Section 196, It also provides for 2-year
RA 7160 provides no provision on
period. Real Property Taxation under Section 253,
compromise. Regarding liabilities arising from local
also provides for 2-year period. Question mark
taxes it provides no provision on compromise
insofar as the Tariff and Customs Code is concerned.
regarding liabilities arising from Local Taxes. Likewise
Now, unfamiliar provision, Section 1702 to 1704,
provides no provision on compromise relative to that
there may be a claim for refund arising from the
liabilities arising from Real Property Tax. Under the
vessels and the goods destroyed or lost, or mistake.
Tariff and Customs Code, this is allowed under Sec.
So these are covered under 1702 to 1704. This is the
2316 under Exceptional Cases. So here, the
only prescriptive period, under 1707 manifest errors.
Commissioner of Customs may compromise such
In the case of manifest errors, it provides for 1-year
charges so fines, surcharges and forfeitures, subject
period. So before discovery, that can be refunded.
to the approval of the Secretary of Finance. So yes,
So within 1 year from the discovery, the Collector
there is such provision on compromise under the
may recommend to the Commissioner such refund.
Tariff and Customs Code, take note of the subject:
This only covers manifest errors. That is where you
Surcharges, fines, penalties and forfeitures, Subject
apply the 1-year period. In a decided case, what
to the approval of the Secretary of Finance.
about if it does not partake of the nature of manifest
error? The Supreme Court laid down this
Protest
Jurisprudence. Since refund is in the nature of a
Under the NIRC Section 228, you cannot avoid the quasi-contract apply the prescriptive period laid
prescriptive period. 30 days from receipt of the Final down under Article 1145 of the Civil Code so you
Notice of Assessment. And the Revenue Regulation apply the 6-year period. So thats the Philippine
12-99 tells us of Formal Notice and Assessment Phosphate Fertilizers case. The one-year period
Notice which is the same as Final Assessment applies only to manifest errors. Other than that, you
Notice. That will serve as a notice to you that before apply Article 1145 of the Civil Code which provides
the BIR will issue the same, it must pass these two that 6-year period for quasi-contract.
kinds of notices: (1) Informal notice of Conference
Doctrine of Supervening Event
15 days; And after which is no response is made (2)
Preliminary Assessment Notice, and that is PAN
So lets find out the difference, the 2-year period
another 15 days. Now note as many examinees are
applies to those refund of taxes under the NIRC,
misled, in that Final Notice of Assessment that is
Local Government Taxation, Real Property Taxation.
the 30-day period. So 15-15-30. This only applies to
Where lies the difference? This is the difference. It is
protests under the NIRC.
clearly provided for under the second paragraph of
Section 229 that the Doctrine of Supervening
What about protests on Local Government
Cause is inapplicable here. So you should always
Taxation? Under Section 195, thats also an available
count the 2-year period from the date of payment
remedy. So here, take note of the prescriptive period
regardless of any supervening cause that may arise
of 60 days. 60 days after such receipt of the
after payment. So the Doctrine of Supervening Cause
assessment protests may be lodged before the Local
is not applicable under the NIRC in refund of Internal
Treasurer. OK, I forgot, these protests may be in the
Revenue Taxes in the light of that categorical rule
form of requests for reinvestigation or
provided for under the Second paragraph, Section
reconsideration. Request for reinvestigation of it is
229. If you read Section 196 of the Local Government
based on newly discovered evidence. That must be
Taxation and Section 253 of Real Property Taxation,
filed before the BIR Commissioner.
there is that phrase, or from the time he is entitled
Now, Real Property Taxation, Section 252, thereto. Tax Authorities are of the view that such
provision implies that the Doctrine of Supervening
its quite peculiar because this is termed payment
Cause may apply to refund under Local Government
under protest. So payment must first be made and
taxation and Real Property Taxation.
thats where you apply the 30 day period. 30 days
from the date of payment you will lodge such protest
What may be an example of that Supervening cause?
before the Local Treasurer.
Payment was made in 2008. In 2009, there was a
Tariff and Customs Code under Section finding that this taxpayer who paid is exempt so in
which case, he may ask for a tax refund. So how do
2308. Now here you must understand, payment must
you apply the 2-year period? So you read the
first be made so within 15 days. That is the
problem: If it involves Internal Revenue Taxes, it must
prescriptive period. You pay Customs duties. And 15
days from payment, you may lodge a protest before always be counted from the date of payment, you
disregard this. On the other hand, if the problem
the Customs Commissioner.
covers Local tax or Real Property tax, you count the
So again, you must have noticed that the 2-year period from the happening of that event and
30-day period applies to Internal Revenue Taxes and that is in 2009 when a finding was made that this
that of Real Property Taxes. The 60-day period taxpayer was exempt, should not have paid the tax
applies to Local taxes and the 15-day period applies as it was exempt. That is an example of supervening
to Customs duties. So 15-30-60, these are the cause. It should be counted from the occurrence of
prescriptive periods so dont be confused about that. the same applying that provision from the time he is
!)"
Taxation Law
entitled thereto. So with that finding that he is 6. Decisions of the Regional Trial Court on tax
exempt, he is entitled to such tax refund. cases
Lets resort to Jurisprudence, you are all familiar that 7. BIR Commissioner
the 2-year period applies not only in case of NIRC.
Lets focus on this. The 2-year period applies not 8. Secretary of Finance.
only to the filing of refund before the BIR
Commissioner, it must also be observed in the filing
of a petition for review before the Court of Tax
Appeals. Thats the settled Jurisprudence on this. So Automatic Review Cases
that even if the Petition for Review under Rule 42 of
the Rules of Court was filed within the 30-day period, Now, the uniform period is 30 days.
if it was filed beyond the 2-year period, that may be Nevertheless, the procedures are different. Just
dismissed by the CTA on the ground that it has remember this, decisions of the Central Board of
already prescribed. However, if the subject of refund, Assessment Appeals and that of Regional Trial
you read it in the problem, is Value-Added Tax, this Courts may be appealed directly to the CTA en banc.
2-year period will not apply. If the subject of that tax Thats why the petition is Petition for Review under
refund is Value-added tax, the Supreme Court Rule 43. All other decisions must be raffled to CTA in
construed Section 112 (c) [that used to be d] to Division. In which case, the decision of the CTA in
mean that there is only one period there and that is Division is appealable to the CTA en banc. At this
the 30-day period. Dont apply the 2-year period. So juncture, let me emphasize this rule which only
how do you apply that? If you read Section 112 (c), applies to Customs Duties. Decisions of the
the BIR is given a 120-day period within which to Secretary of Finance on Automatic Review cases.
resolve such refund. So if a decision is rendered This is known as Automatic Review Procedure and it
within the 120-day period it is only one period, 30- only applies to that Customs Duties under the Tariff
days from receipt of that. If there is no decision and Customs Code. Ok, the word is Automatic
rendered within the 120-day period, 30 days from the Review. So you should start with this: the decision of
lapse of the 120-day period. That is the case of Aichi the Collector must be favourable to the Importer. So
Forging Company of Asia vs Commissioner. So thats this is Automatically Elevated. That is the word. So it
the probable bar question here. is Automatically Appealed to the Customs
Commissioner. Whats the purpose, the Supreme
Now the second rule here is that if the one Court said in Yaokasin vs Commissioner of Customs,
asking for refund is a corporate taxpayer, dont to protect the interest of the Government, because
construe literally Section 229. When it says from the there are those assigned in far-flunked areas that
date of payment, the Supreme Court Reminds us you may abuse his discretion, so to protect the
must read Section 76. And what does Section 76 Government from these corrupt public officials to be
say? It applies to Corporate Taxpayers, it is the filing bland about it. Then it may happen that the Decision
of the Final Adjustment Corporate Return. So of the Customs Commissioner is favourable to the
Jurisprudence dictates the 2-year period should importer. So at this, further level of the Customs
commence to run from the filing of that Final Commissioner, there are two situations which may
Adjustment Return. Thats the TMX Sales. occur. If it is favourable again to the importer, this is
automatically elevated to the Secretary of Finance.
Ill end this with these CTA then the Now, you should also explore this situation that
Supreme Court. What are those decisions appealable before the [Customs] Commissioner, he may reverse
to the CTA? There are 8. Keyword: Court of Tax that favourable decision of the Collector of Customs
Appeals Commissioner of Internal Revenue then BF. in favour of the importer, in which case it may be
(CTA-CIR-BF) These are the 8 decisions appealable adverse. And that is the time you apply the regular
to the Court of Tax Appeals. On the basis of Section procedure there. So if the Decision of the Customs
9 of Republic Act 9292, that is the Expanded Commissioner is adverse to the importer, 30 days.
Jurisdiction of the Court of Tax Appeals. I think the You may appeal that to the CTA, then CTA en banc
questions will revolve around this. In Multiple-choice, to the Supreme Court.
there may be possible questions in problems. Take
note of the Prescriptive Periods. Ok, lets complete So If it is favourable to the importer, it is
this, Decisions of the: automatically elevated to the Secretary of Finance.
Now what does the law say? The law says decisions
1. Central Board of Assessment Appeals of the Secretary of Finance on automatic review
cases adverse to the importer. So, it must be a
2. Secretary of Trade and Industry (Non-
Agricultural) *Involving imposition of decision that is adverse to the importer that is why
Countervailing & Dumping duties the importer can appeal that with the Court of Tax
Appeals within that 30-day period. Now, it is possible
3. Agriculture Secretary (Aricultural) that it may be favourable for the third time, opinion
*involving imposition of Countervailing and has been expressed, the decision shall become Final
Dumping duties.
and Executory. Otherwise there will be no end to the
4. Impositions of the Customs Commissioner Automatic Review. That is the concept of automatic
review procedure which only applies to custom
5. Inaction of the BIR against the Protest or duties.
Tax Refund as the case may be
!*"
Taxation Law
The decision of the CTA En Banc is appealable to the period within which to appeal with the Court of Tax
Supreme Court thats where you apply the 15-day Appeals.
period.
Exhaustion of Administrative Remedies
Before I end, what is the latest jurisprudence on that

decision of the BIR that is appealable to the CTA?
Ten decisions of the Court, (I will no longer mention
that) may be summarized by these. Decisions of the
BIR Commissioner that may be appealable to the
CTA need not to be decision on the merits. You recall
that case as in the Bar exam, Final Notice before
seizure, that is the decision appealable to the CTA.
The operative word is it must be one that may
constitute final determination of the taxpayers tax
liability may be in the form of Letter of Demand, and
that is the Ayala Doctrine reiterated in Oceanic
Wireless Network Case. The most recent case, to my
mind, may be a possible question in the bar exam is
the Allied Banking Corporation case. You must
understand that Section 228, which requires protest
before the BIR Commissioner before you can elevate
such assessment, is founded on settled principle of
exhaustion of all administrative remedies. We must
first give the BIR that chance or opportunity to rectify
such error or mistake if it committed an error or
mistake, so that must be the principle behind this.
The Supreme Court said in the recent case of Allied
Banking Corporation, that principle does not applied
here. Here, in the Formal Letter of Demand, the word
final has been mentioned to us. It is requested that
the above deficiency tax be paid immediately upon
receipt hereof, inclusive of penalties incident to
delinquency. This is our final decision based on
investigation. If you disagree, you may appeal such
final decision within thirty (30) days from receipt
hereof, otherwise said deficiency tax assessment
shall become final, executory and demandable. The
Court is correct. It reversed the decision of the CTA.
This is a case where the CTA, a specialized court,
committed an error because it was rectified by the
Supreme Court. You cannot apply that. Exhaustion of
administrative remedies, in simple language, that is
an exercise of futility because the BIR has made a
categorical pronouncement that this is its final
decision. So you may immediately appeal that. You
need not file, protest before the BIR Commissioner,
you may immediately appeal the same to the Court of
Tax Appeals.
One final reminder, because I notice in my lectures in

provinces, this obsolete note, I was told by the
examinees/bar reviewees: Sir can you clarify this
that before the BIR Commissioner, since the Tax
Code provides no clear prohibition as to the filing of a
Motion for Reconsideration of the BIR, there is this
view that is allowed. Now that is very clear, you
rectify your laws. In the recent case of Fishwealth
Corporation vs Commissioner, The Supreme Court
held that no motion for reconsideration of the BIR
Commissioner is allowed. That will not of the 30-day
#+"

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2013 Dimaampao Lecture I

1. Kind of property Payment of Taxes

3 cases for the filing or payment may be allowed.

In regard to Customs Duties, the subject Sumptuary Purpose of Taxation

Now find out also in the problem if he performed an

6. Research Organization 1. Cooperatives RA6938.

1. Sixty day period - It must accompany this Inherent Limitations (PINET)

Allowable Deduction in Estate Taxation

1. Expenses which may either be Funeral

2. Recall that with respect to funeral expenses,

4. Indebtedness, this may include claims

FRINGE BENEFITS TAX incentive benefits, apply the P30,000 limitation.

Branch Profit Remittance Tax Tax Sparing Rule

3. Life Insurance Policies

There is such rule here, residual powers of Local

Exclusive and Original Jurisdiction of Customs

The Exclusive and Original Jurisdiction of the

What is now the rule on the imposition of Berthing

Enforcement of tax lien, these are the well-known Compromise

Exhaustion of Administrative Remedies

Before I end, what is the latest jurisprudence on that

One final reminder, because I notice in my lectures in

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