1
Quezon City b) Rulings with established precedents - These refer to
October 22, 2001
REVENUE ADMINISTRATIVE ORDER NO. 2-2001
SUBJECT : Implementing the Provisions of
Department Order No. 23-01
TO : All Internal Revenue Officers and Others
Concerned
_______________________________________________________
________________________
STATEMENT OF POLICY:
It is the recognized policy under this Order that the
power to interpret the provisions of the Tax Code of
1997 (Tax Code) and other tax laws is under the
exclusive and original jurisdiction of the Commissioner
of Internal Revenue, subject to review by the Secretary
of Finance, as provided for in Section 4 of the Tax
Code.
The Bureau of Internal Revenue is under the
supervision and control of the Department of Finance
as provided for in Section 2 of the Tax Code and Book
IV, Title II, Chapter 4, Section 18 of the Administrative
Code of 1987.
There is a need for uniformity of rulings and issuances
in the interpretation and application of the provisions
of the Tax Code and other tax laws.
SECTION 1. Scope - This Revenue Administrative
Order (RAO) shall, in general, apply to all revenue
rulings and issuances of the Bureau of Internal
Revenue that pertain to the implementation of the
provisions of the Tax Code and other tax laws, and
shall include the following:
a) Rulings of first impression;
b) Rulings with established precedents;
c) Revenue Memorandum Ruling (RMR);
d) Revenue Travel Assignment Order (RTAO);
e) Revenue Special Order (RSO);
f) Revenue Memorandum Circular (RMC);
g) Revenue Memorandum Order (RMO);
h) Revenue Audit Memorandum Order (RAMO);
i) Revenue Delegation of Authority Order (RDAO); and
j) Revenue Administrative Order (RAO).
SECTION 2. Review Power of the Secretary of
Finance - In accordance with Section 4 of the Tax
Code, the Secretary of Finance shall have the power to
affirm, revise, modify or set aside rulings and
issuances of the Bureau of the Internal Revenue
concerning the implementation and application of the
provisions of the Tax Code and other tax laws.
SECTION 3. Classification of BIR Rulings and
Issuances - The following terms shall have the
meaning described below:
a) Rulings of first impression - These refer to the
rulings, opinions and interpretations of the
Commissioner of Internal Revenue with respect to the
provisions of the Tax Code and other tax laws without
established precedent, and which are issued in
response to a specific request for ruling filed by a
taxpayer with the Bureau of Internal Revenue.
Provided, however, that the term shall include reversal,
modification or revocation of any existing ruling.
mere reiteration of previous rulings, opinions and
interpretations of the Commissioner, as delegated to
duly authorized internal revenue officers (i.e., Deputy
Commissioner, Legal and Inspection Group; Assistant
Commissioner, Legal Service; Regional Directors) that
are issued in response to a specific request for ruling
filed by a taxpayer with the Bureau of Internal
Revenue.
c) Revenue Memorandum Rulings (RMR) - These
refer to the rulings, opinions and interpretations of the
Commissioner of Internal Revenue with respect to the
provisions of the Tax Code and other tax laws, as
applied to a specific set of facts, with or without
established precedents, and which the Commissioner
may issue from time to time for the purpose of
providing taxpayers guidance on the tax consequences
in specific situations.
d) Revenue Travel Assignment Orders (RTAO) - These
orders assign revenue personnel to specific functions
in specific units. Travel assignment orders specifically
mention the names of revenue personnel concerned.
e) Revenue Special Orders (RSO) - Instructions or
directives for the accomplishment of special
assignments or missions of significance which are
temporary in nature or for a definite period of time.
These issuances specifically mention the personnel or
units of organization concerned.
f) Revenue Memorandum Circulars (RMC) - These
issuances shall disseminate and embody pertinent and
applicable portions, as well as amplifications of the
rules, precedents, laws, regulations, opinions and other
orders and directives issued by or administered by the
Commissioner of Internal Revenue, and by offices and
agencies other than the Bureau of Internal Revenue,
for the information, guidance or compliance of revenue
personnel.
g) Revenue Memorandum Orders (RMO) - These are
directives or instructions outlining procedures,
techniques, methods, processes, operations, activities,
work flow, and the like, which are necessary to carry
out programs or to achieve policy goals and objectives.
These issuances may be of general or of limited scope
yet in any case require definite compliance by those
concerned. They are not addressed to any particular
group of employees or offices because they are for
general information, but those directly concerned with
the compliance of these provisions are either definitely
stated, or unmistakably implied thereat.
h) Revenue Audit Memorandum Orders (RAMO) - These
refer to the uniform audit procedures to be observed
by revenue officers in the conduct of audit of tax cases
and in their submission of reports of investigation.
i) Revenue Delegation of Authority Orders (RDAO) -
These refer to the functions delegated by the
Commissioner to revenue officers in accordance with
law.
j) Revenue Administrative Orders (RAO) - These refer to
matters that deal strictly with more or less permanent
administrative set-up of the Bureau. Delineation of
organizational structures, statements of functions
and/or responsibilities, definitions and delegations of
authority, staffing and personnel requirements,
standards of performance, establishment of Bureau-

wide programs, installation of systems, and the like,
are most likely subject matter of Revenue
Administrative Orders. These issuances are for general
guidance, compliance and/or information.
SECTION 4. Validity of Rulings and Issuances - All
rulings and issuances of the Commissioner of Internal
Revenue that pertain to the implementation and
interpretation of the Tax Code and other tax laws are
valid, unless revoked, reversed, modified, or
superseded by the Secretary of Finance pursuant to
Department Order No. 23-01.
SECTION 5. Effectivity - This Revenue Administrative
Order shall take effect immediately.
(Original Signed)
RENÉ G. BAÑEZ
Commissioner of Internal Revenue
CHAPTER III
RULES AND REGULATIONS
SEC. 244. Authority of Secretary of Finance to
Promulgate Rules and Regulations. - The
Secretary of Finance, upon recommendation of the
Commissioner, shall promulgate all needful rules and
regulations for the effective enforcement of the
provisions of this Code.
SEC. 245. Specific Provisions to be Contained in
Rules and Regulations. - The rules and regulations
of the Bureau of Internal Revenue shall, among other
thins, contain provisions specifying, prescribing or
defining:
(a) The time and manner in which Revenue
Regional Director shall canvass their respective
Revenue Regions for the purpose of
discovering persons and property liable to
national internal revenue taxes, and the
manner in which their lists and records of
taxable persons and taxable objects shall be
made and kept;
(b) The forms of labels, brands or marks to be
required on goods subject to an excise tax, and
the manner in which the labelling, branding or
marking shall be effected;
(c) The conditions under which and the manner
in which goods intended for export, which if not
exported would be subject to an excise tax,
shall be labelled, branded or marked;
(d) The conditions to be observed by revenue
officers respecting the institutions and conduct
of legal actions and proceedings;
(e) The conditions under which goods intended
for storage in bonded warehouses shall be
conveyed thither, their manner of storage and
the method of keeping the entries and records
in connection therewith, also the books to be
kept by Revenue Inspectors and the reports to
be made by them in connection with their
supervision of such houses;
(f) The conditions under which denatured
alcohol may be removed and dealt in, the
character and quantity of the denaturing
material to be used, the manner in which the
2
process of denaturing shall be effected, so as
to render the alcohol suitably denatured and
unfit for oral intake, the bonds to be given, the
books and records to be kept, the entries to be
made therein, the reports to be made to the
Commissioner, and the signs to be displayed in
the business or by the person for whom such
denaturing is done or by whom, such alcohol is
dealt in;
(g) The manner in which revenue shall be
collected and paid, the instrument, document
or object to which revenue stamps shall be
affixed, the mode of cancellation of the same,
the manner in which the proper books, records,
invoices and other papers shall be kept and
entries therein made by the person subject to
the tax, as well as the manner in which
licenses and stamps shall be gathered up and
returned after serving their purposes;
(h) The conditions to be observed by revenue
officers respecting the enforcement of Title III
imposing a tax on estate of a decedent, and
other transfers mortis causa, as well as on gifts
and such other rules and regulations which the
Commissioner may consider suitable for the
enforcement of the said Title III;
(i) The manner in which tax returns,
information and reports shall be prepared and
reported and the tax collected and paid, as well
as the conditions under which evidence of
payment shall be furnished the taxpayer, and
the preparation and publication of tax
statistics;
(j) The manner in which internal revenue taxes,
such as income tax, including withholding tax,
estate and donor's taxes, value-added tax,
other percentage taxes, excise taxes and
documentary stamp taxes shall be paid
through the collection officers of the Bureau of
Internal Revenue or through duly authorized
agent banks which are hereby deputized to
receive payments of such taxes and the
returns, papers and statements that may be
filed by the taxpayers in connection with the
payment of the tax: Provided, however, That
notwithstanding the other provisions of this
Code prescribing the place of filing of returns
and payment of taxes, the Commissioner may,
by rules and regulations, require that the tax
returns, papers and statements that may be
filed by the taxpayers in connection with the
payment of the tax. Provided, however, That
notwithstanding the other provisions of this
Code prescribing the place of filing of returns
and payment of taxes, the Commissioner may,
by rules and regulations require that the tax
returns, papers and statements and taxes of
large taxpayers be filed and paid, respectively,
through collection officers or through duly
authorized agent banks: Provided, further, That
the Commissioner can exercise this power
within six (6) years from the approval of
Republic Act No. 7646 or the completion of its
comprehensive computerization program,
whichever comes earlier: Provided, finally, That
separate venues for the Luzon, Visayas and
Mindanao areas may be designated for the

filing of tax returns and payment of taxes by
said large taxpayers.
For the purpose of this Section, "large taxpayer" means
a taxpayer who satisfies any of the following criteria;
(1) Value-Added Tax (VAT). - Business
establishment with VAT paid or payable of at least One
hundred thousand pesos (P100,000) for any quarter of
the preceding taxable year;
(2) Excise Tax. - Business establishment with excise
tax paid or payable of at least One million pesos
(P1,000,000) for the preceding taxable year;
(3) Corporate Income Tax. - Business establishment
with annual income tax paid or payable of at least One
million pesos (P1,000,000) for the preceding taxable
year; and
(4) Withholding Tax. - Business establishment with
withholding tax payment or remittance of at least One
million pesos (P1,000,000) for the preceding taxable
year.
Provided, however, That the Secretary of Finance, upon
recommendation of the Commissioner, may modify or
add to the above criteria for determining a large
taxpayer after considering such factors as inflation,
volume of business, wage and employment levels, and
similar economic factors.
The penalties prescribed under Section 248 of this
Code shall be imposed on any violation of the rules and
regulations issued by the Secretary of Finance, upon
recommendation of the Commissioner, prescribing the
place of filing of returns and payments of taxes by
large taxpayers.
RAO 01-03
Rulings of first impression, according to Revenue
Administrative Order No. 01-03, refer to rulings,
opinions and interpretations of the BIR Commissioner
with respect to the provisions of the Tax Code and
other tax laws without established precedent, and
which are issued in response to a specific request for a
ruling or an opinion filed by a taxpayer with the BIR.
The same includes reversals, modifications or
revocations of any existing rulings.
Tax 1, Lucenario
July 4, 2009 session (based on syllabus)
CONSTITUTIONAL LIMITATIONS
A. Due process Clause and Equal Protection Clause
Sec1, Art. III, 1987 Consti
No person shall be deprived of life, liberty, or property
without due process of law, nor shall any person be
denied the equal protection of the laws.
B. Equal Protection Clause
C. Rule of Taxation shall be uniform and equitable
Sec. 28 (1), Art VI, 1987 Consti
The rule of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation.
D. Non-impairment of contracts
Sec. 10, Art. III
3
No law impairing the obligation of contracts shall be
passed
Sec. 11, Art. XII
No franchise, certificate, or any other form of
authorization for the operation of a public utility shall
be granted except to citizens of the Philippines or to
corporations or associations organized under the laws
of the Philippines, at least sixty per centum of whose
capital is owned by such citizens; nor shall such
franchise, certificate, or authorization be exclusive in
character or for a longer period than fifty years.
Neither shall any such franchise or right be granted
except under the condition that it shall be subject to
amendment, alteration, or repeal by the Congress
when the common good so requires. The State shall
encourage equity participation in public utilities by the
general public. The participation of foreign investors in
the governing body of any public utility enterprise shall
be limited to their proportionate share in its capital,
and all the executive and managing officers of such
corporation or association must be citizens of the
Philippines.
E. Non-imprisonment for non-payment of poll tax
Sec 20, Art III. No person shall be imprisoned for debt
or non-payment of a poll tax.
F. Prohibition Against Taxation of Religious and
Charitable Institutions
Sec. 28 (3), Art VI. Charitable institutions, churches and
personages or convents appurtenant thereto,
mosques, non-profit cemeteries, and all lands,
buildings, and improvements, actually, directly, and
exclusively used for religious, charitable, or
educational purposes shall be exempt from taxation.
G. Prohibition Against Taxation of Non-stock Non-
profit Educational Institutions
Sec. 4 (3), Art XIV
All revenues and assets of non-stock, non-profit
educational institutions used actually, directly,
and exclusively for educational purposes shall
be exempt from taxes and duties. Upon the
dissolution or cessation of the corporate
existence of such institutions, their assets shall
be disposed of in the manner provided by law.
Proprietary educational institutions, including
those cooperatively owned, may likewise be
entitled to such exemptions, subject to the
limitations provided by law, including
restrictions on dividends and provisions for
reinvestment.
Sec. 28 (3), Art. VI
Charitable institutions, churches and personages or
convents appurtenant thereto, mosques, non-profit
 4

cemeteries, and all lands, buildings, and
improvements, actually, directly, and exclusively used
for religious, charitable, or educational purposes shall
be exempt from taxation.
Sec. 27 (B) NIRC
(B) Proprietary Educational Institutions and Hospitals. -
Proprietary educational institutions and hospitals which
are nonprofit shall pay a tax of ten percent (10%) on
their taxable income except those covered by
Subsection (D) hereof: Provided, that if the gross
income from unrelated trade, business or other activity
exceeds fifty percent (50%) of the total gross income
derived by such educational institutions or hospitals
from all sources, the tax prescribed in Subsection (A)
hereof shall be imposed on the entire taxable income.
For purposes of this Subsection, the term 'unrelated
trade, business or other activity' means any trade,
business or other activity, the conduct of which is not
substantially related to the exercise or performance by
such educational institution or hospital of its primary
purpose or function. A 'Proprietary educational
institution' is any private school maintained and
administered by private individuals or groups with an
issued permit to operate from the Department of
Education, Culture and Sports (DECS), or the
Commission on Higher Education (CHED), or the
Technical Education and Skills Development Authority
(TESDA), as the case may be, in accordance with
existing laws and regulations.
All appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local
application, and private bills, shall originate exclusively
in the House of Representatives, but the Senate may
propose or concur with amendments.
Sec 28 (4), Art VI
No law granting any tax exemption shall be passed
without the concurrence of a majority of all the
Members of the Congress.
J. Veto Power of the President
Sec 27 (2), Art VI
The Congress may, by law, authorize the President to
fix within specified limits, and subject to such
limitations and restrictions as it may impose, tariff
rates, import and export quotas, tonnage and wharfage
dues, and other duties or imposts within the framework
of the national development program of the
Government.
K. Non-impairment of SC jurisdiction
Sec 5(2)(b), Art VIII
Review, revise, reverse, modify, or affirm on appeal or
certiorari, as the law or the Rules of Court may provide,
final judgments and orders of lower courts in: (c) All
cases involving the legality of any tax, impost,
assessment, or toll, or any penalty imposed in relation
thereto.

Sec. 30 (H), NIRC

Exemptions from Tax on Corporations. - The following
organizations shall not be taxed under this Title in
respect to income received by them as such: (H) A
nonstock and nonprofit educational institution

DOF Order 137-87

DOF Order 149-95

BIR RMC 76-2003 (see pdf file)

BIR RMC 45-95

BIR RMC 13-98

H. Freedom of religious worship

Sec. 5, Art III

No law shall be made respecting an establishment of
religion, or prohibiting the free exercise thereof. The
free exercise and enjoyment of religious profession and
worship, without discrimination or preference, shall
forever be allowed. No religious test shall be required
for the exercise of civil or political rights

I. Passage of Tax Bills/ Granting of Exemptions

Sec 24, Art VI