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A Survey of Recent Jurisprudential Doctrines in Taxation Law

By Atty. Noel M. Ortega

GENERAL PRINCIPLES

Lifeblood Theory. Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance. (LASCONA LAND CO., INC. vs. CIR, 667 SCRA 455 (2012)]

Non-observance of administrative feasibility, as a principle of sound tax system, does not


invalidate a tax imposition. Administrative feasibility is one of the canons of a sound tax
system. It simply means that the tax system should be capable of being effectively administered
and enforced with the least inconvenience to the taxpayer. Non-observance of the canon,
however, will not render a tax imposition invalid except to the extent that specific
constitutional or statutory limitations are impaired. Thus, even if the imposition of VAT on
tollway operations may seem burdensome to implement, it is not necessarily invalid unless
some aspect of it is shown to violate any law or the Constitution. [DIAZ vs. SECRETARY OF
FINANCE, G.R. No. 193007, 19 July 2011]

Distinction between tax and fee. [I]f the generating of revenue is the primary purpose and
regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose,
the fact that incidentally revenue is also obtained does not make the imposition a tax. [SMART
COMMUNICATIONS, INC. vs. MUNICIPALITY OF MALVAR, G.R. No. 204429, February
18, 2014, citing Progressive Development Corporation v. Quezon City, 254 Phil. 635, 643
(1989), see also City of Iloilo v. Villanueva, 105 Phil. 337 (1959)]

When fees exacted are not taxes. Since the main purpose of Ordinance No. 18 is to regulate
certain construction activities of the identified special projects, which included cell sites or
telecommunications towers, the fees imposed in Ordinance No. 18 are primarily regulatory in
nature, and not primarily revenue-raising. While the fees may contribute to the revenues of the
Municipality, this effect is merely incidental. Thus, the fees imposed in Ordinance No. 18 are
not taxes. (SMART COMMUNICATIONS, INC. vs. MUNICIPALITY OF MALVAR, G.R. No.
204429, February 18, 2014)

Significance of the distinction between tax and fee; The nature of the imposition determines the
procedure for questioning the ordinance. Considering that the fees in Ordinance No. 18 are not
in the nature of local taxes, xxx Section 187 of the LGC, which outlines the procedure for
questioning the constitutionality of a tax ordinance, is inapplicable xxx. (SMART
COMMUNICATIONS, INC. vs. MUNICIPALITY OF MALVAR, G.R. No. 204429, February
18, 2014)

Significance of the distinction between tax and fee; Local ordinance imposing garbage fee
questioned for violating rule on double taxation. In the United States of America, it has been
held that the authority of a municipality to regulate garbage falls within its police power to
protect public health, safety, and welfare. x x x

The fee imposed for garbage collections under Ordinance No. SP-2235 is a charge fixed
for the regulation of an activity. The basis for this could be discerned from the foreword of said
Ordinance. x x x

In Georgia, U.S.A., assessments for garbage collection services have been consistently
treated as a fee and not a tax. In another U.S. case, the garbage fee was considered as a "service
charge" rather than a tax as it was actually a fee for a service given by the city which had
previously been provided at no cost to its citizens.
A Survey of Recent Jurisprudential Doctrines in Taxation Law 2
By Atty. Noel M. Ortega

Hence, not being a tax, the contention that the garbage fee under Ordinance No. SP-2235
violates the rule on double taxation must necessarily fail. (FERRER, JR. vs. BAUTISTA, G.R.
No. 210551, June 30, 2015, EN BANC)

An administrative regulation struck down as unconstitutional for violation of equal protection


clause. On 7 November 2003, petitioner Commissioner of Customs issued CMO 27-2003. Under
the Memorandum, for tariff purposes, wheat was classified according to the following: (1)
importer or consignee; (2) country of origin; and (3) port of discharge. The regulation provided
an exclusive list of corporations, ports of discharge, commodity descriptions and countries of
origin. Depending on these factors, wheat would be classified either as food grade or feed
grade. The corresponding tariff for food grade wheat was 3%, for feed grade, 7%.

HELD: Going now to the content of CMO 27-2003, we likewise hold that it is unconstitutional
for being violative of the equal protection clause of the Constitution.

The equal protection clause means that no person or class of persons shall be deprived of the
same protection of laws enjoyed by other persons or other classes in the same place in like
circumstances. Thus, the guarantee of the equal protection of laws is not violated if there is a
reasonable classification. For a classification to be reasonable, it must be shown that (1) it rests
on substantial distinctions; (2) it is germane to the purpose of the law; (3) it is not limited to
existing conditions only; and (4) it applies equally to all members of the same class.

Unfortunately, CMO 27-2003 does not meet these requirements. We do not see how the quality
of wheat is affected by who imports it, where it is discharged, or which country it came from.
(COMMISSIONER OF CUSTOMS vs. HYPERMIX FEEDS CORPORATION, G.R. No.
179579, February 1, 2012)

Legislative character of the power of taxation and the non-delegability principle. The power of
taxation is inherently legislative and may be imposed or revoked only by the legislature.
Moreover, this plenary power of taxation cannot be delegated by Congress to any other branch
of government or private persons, unless its delegation is authorized by the Constitution itself.
Hence, the discretion to ascertain the following (a) basis, amount, or rate of tax; (b) person or
property that is subject to tax; (c) exemptions and exclusions from tax; and (d) manner of
collecting the tax may not be delegated away by Congress. (LA SUERTE CIGAR &
CIGARETTE FACTORY vs. COURT OF APPEALS, G.R. No. 125346, November 11, 2014, EN
BANC)

Permissible delegation of taxing powers. [I]t is well-settled that the power to fill in the details
and manner as to the enforcement and administration of a law may be delegated to various
specialized administrative agencies like the Secretary of Finance in this case. (LA SUERTE
CIGAR & CIGARETTE FACTORY vs. COURT OF APPEALS, G.R. No. 125346. November
11, 2014, EN BANC citing Commissioner of Internal Revenue v. Solidbank Corporation, 462
Phil. 96, 117 [2003])

Rationale behind the permissible delegation of legislative powers to specialized agencies like
the Secretary of Finance. The latest in our jurisprudence indicates that delegation of legislative
power has become the rule and its non-delegation the exception. The reason is the increasing
complexity of modern life and many technical fields of governmental functions as in matters
pertaining to tax exemptions. This is coupled by the growing inability of the legislature to cope
directly with the many problems demanding its attention. The growth of society has ramified its
activities and created peculiar and sophisticated problems that the legislature cannot be
expected reasonably to comprehend. Specialization even in legislation has become necessary. To
many of the problems attendant upon present day undertakings, the legislature may not have
the competence, let alone the interest and the time, to provide the required direct and
efficacious, not to say specific solutions. (LA SUERTE CIGAR & CIGARETTE FACTORY vs.
COURT OF APPEALS, G.R. No. 125346, November 11, 2014, EN BANC) citing Maceda v.
Macaraig, Jr., 274 Phil. 1060 [1991])
A Survey of Recent Jurisprudential Doctrines in Taxation Law 3
By Atty. Noel M. Ortega

Excise tax as an internal revenue tax. Excise tax is a tax on the production, sale, or consumption
of a specific commodity in a country. x x x The excise tax based on weight, volume capacity or
any other physical unit of measurement is referred to as "specific tax." If based on selling price
or other specified value, it is referred to as "ad valorem" tax. (LA SUERTE CIGAR &
CIGARETTE FACTORY vs. COURT OF APPEALS, G.R. No. 125346, November 11, 2014, EN
BANC)

Excise tax as a privilege tax; Documentary stamp tax as an example. [I]t should be noted that a
documentary stamp tax is in the nature of an excise tax because it is imposed upon the
privilege, opportunity or facility offered at exchanges for the transaction of the business.
Documentary stamp tax is a tax on documents, instruments, loan agreements, and papers
evidencing the acceptance, assignment, or transfer of an obligation, right or property incident
thereto. Documentary stamp tax is thus imposed on the exercise of these privileges through the
execution of specific instruments, independently of the legal status of the transactions giving
rise thereto. Based on the foregoing, the transfer of real properties from SPPC to respondent is
not subject to documentary stamp tax considering that the same was not conveyed to or vested
in respondent by means of any specific deed, instrument or writing. There was no deed of
assignment and transfer separately executed by the parties for the conveyance of the real
properties. The conveyance of real properties not being embodied in a separate instrument but
is incorporated in the merger plan, thus, respondent is not liable to pay documentary stamp tax.
(CIR vs. PILIPINAS SHELL PETROLEUM CORPORATION, G.R. No. 192398. September 29,
2014)

Excise tax is an indirect tax. Excise taxes, which apply to articles manufactured or produced in
the Philippines for domestic sale or consumption or for any other disposition and to things
imported into the Philippines, is basically an indirect tax. [SILKAIR (SINGAPORE) PTE. LTD.
CIR, 664 SCRA 33 (2012)]

Meaning of indirect tax. Indirect taxes are taxes wherein the liability for the payment of the tax
falls on one person but the burden thereof can be shifted or passed on to another person, such
as when the tax is imposed upon goods before reaching the consumer who ultimately pays for
it. [CIR vs. PILIPINAS SHELL PETROLEUM CORPORATION, 671 SCRA 241 (2012)]

Requisites of double taxation. For double taxation in the objectionable or prohibited sense to
exist, "the same property must be taxed twice, when it should be taxed but once." "[B]oth taxes
must be imposed on the same property or subject-matter, for the same purpose, by the same . . .
taxing authority, within the same jurisdiction or taxing district, during the same taxing period,
and they must be the same kind or character of tax." (LA SUERTE CIGAR & CIGARETTE
FACTORY vs. COURT OF APPEALS, G.R. No. 125346, November 11, 2014, EN BANC, citing
Procter & Gamble Philippine Manufacturing Corporation v. Municipality of Jagna, 183 Phil.
453, 461 [1979] and Villanueva v. City of Iloilo, 135 Phil. 572, 588 [1968])

Are cigarette manufacturers doubly taxed because they are paying the specific tax on the raw
material and on the finished product in which the raw material was a part? NO. Excise taxes
are essentially taxes on property because they are levied on certain specified goods or articles
manufactured or produced in the Philippines for domestic sale or consumption or for any other
disposition, and on goods imported. In this case, there is no double taxation in the prohibited
sense because the specific tax is imposed by explicit provisions of the Tax Code on two different
articles or products: (1) on the stemmed leaf tobacco; and (2) on cigar or cigarette. (LA SUERTE
CIGAR & CIGARETTE FACTORY vs. COURT OF APPEALS, G.R. No. 125346. November
11, 2014, EN BANC)

No estoppel against the Government. The cigarette manufacturers contend that for a long time
prior to the transactions herein involved, the Collector of Internal Revenue had never subjected
their purchases and importations of stemmed leaf tobacco to excise taxes. This prolonged
practice allegedly represents the official and authoritative interpretation of the law by the
Bureau of Internal Revenue which must be respected. HELD: In Philippine Long Distance
A Survey of Recent Jurisprudential Doctrines in Taxation Law 4
By Atty. Noel M. Ortega

Telephone Co. v. Collector of Internal Revenue, this court has held that this principle is not
absolute, and an erroneous implementation by an officer based on a misapprehension of law
may be corrected when the true construction is ascertained. x x x Prolonged practice of the
Bureau of Internal Revenue in not collecting the specific tax on stemmed leaf tobacco cannot
validate what is otherwise an erroneous application and enforcement of the law. The
government is never estopped from collecting legitimate taxes because of the error committed
by its agents. (LA SUERTE CIGAR & CIGARETTE FACTORY vs. COURT OF APPEALS,
G.R. No. 125346. November 11, 2014, EN BANC)

No estoppel against the Government, another case. In matters of taxation, the government
cannot be estopped by the mistakes, errors or omissions of its agents for upon it depends the
ability of the government to serve the people for whose benefit taxes are collected. Thus, the
CIR is not estopped from assailing the validity of the Tax Credit Certificate which was issued by
her subordinates in the BIR. (CIR vs. Nippon Express (Phils.) Corp., G.R. No. 212920, 16
September 2015; citing Visayas Geothermal Power Company v. CIR, G.R. No. 197525, June 4,
2014, 725 SCRA 130, 149.)

Proper party in a taxpayers suit. A taxpayer is deemed to have the standing to raise a
constitutional issue when it is established that public funds from taxation have been disbursed
in alleged contravention of the law or the Constitution. [DELA LLANA vs. COA
CHAIRPERSON, G.R. No. 180989, 7 February 2012 citing Gonzales v. Narvasa, G.R. No.
140835, 392 Phil. 518 (2000); Uy v. Sandiganbayan, G.R. No. 111544, 6 July 2004, 433 SCRA 424]

Basis of taxpayers suit. [T]axpayer's suit is based on the theory that expenditure of public
funds for the purpose of executing an unconstitutional act is a misapplication of such funds.
[PETITIONER-ORGANIZATIONS vs. EXECUTIVE SECRETARY, 669 SCRA 49, 10 April
2012 citing Tan v. Macapagal, 150 Phil. 778, 783 (1972)]

INCOME TAXATION

Distinction between income and capital. It is a basic concept in taxation that income denotes a
flow of wealth during a definite period of time, while capital is a fund or property existing at
one distinct point in time. (BIR vs. COURT OF APPEALS, G.R. No. 197590, November 24, 2014
citing CREBA, Inc. v. Romulo, G.R. No. 160756, March 9, 2010)

Requisites for income to be taxable. In the case of income, for it to be taxable, there must be a
gain realized or received by the taxpayer, which is not excluded by law or treaty from taxation.
(BIR vs. COURT OF APPEALS, G.R. No. 197590, November 24, 2014 citing CREBA, Inc. v.
Romulo, G.R. No. 160756, March 9, 2010)

Capital gains tax is the sellers liability. [I]t has been held that since capital gains is a tax on
passive income, it is the seller, not the buyer, who generally would shoulder the tax.
Accordingly, the BIR, in its BIR Ruling No. 476-2013, dated December 18, 2013, constituted the
DPWH as a withholding agent to withhold the six percent (6%) final withholding tax in the
expropriation of real property for infrastructure projects. As far as the government is concerned,
therefore, the capital gains tax remains a liability of the seller since it is a tax on the seller's gain
from the sale of the real estate. [REPUBLIC vs. SORIANO, G.R. No. 211666, 25 February 2015
citing FBDC v. CIR, G.R. No. 173425, September 4, 2012 and Chua v. Court of Appeals, 449
Phil. 25, 50 (2003)]

Tax treatment of deposit substitutes. Under Sections 24 (B) (1), 27 (D) (1), and 28 (A) (7) of the
1997 National Internal Revenue Code, a final withholding tax at the rate of 20% is imposed on
interest on any currency bank deposit and yield or any other monetary benefit from deposit
substitutes and from trust funds and similar arrangements. (BDO v. REPUBLIC, G.R. No.
198756, 13 January 2015, EN BANC)
A Survey of Recent Jurisprudential Doctrines in Taxation Law 5
By Atty. Noel M. Ortega

What constitutes deposit substitute; consequence. When xxx funds are simultaneously obtained
from 20 or more lenders/investors, there is deemed to be a public borrowing and the bonds at
that point in time are deemed deposit substitutes. Consequently, the seller is required to
withhold the 20% final withholding tax on the imputed interest income from the bonds. (BDO
v. REPUBLIC, G.R. No. 198756, 13 January 2015, EN BANC)

Meaning of at any one time. Thus, from the point of view of the financial market, the phrase
at any one time for purposes of determining the 20 or more lenders would mean every
transaction executed in the primary or secondary market in connection with the purchase or
sale of securities. (BDO v. REPUBLIC, G.R. No. 198756, 13 January 2015, EN BANC)

Interest income v. gains from sale or redemption. The interest income earned from bonds is not
synonymous with the gains contemplated under Section 32 (B) (7) (g) of the 1997 National
Internal Revenue Code, which exempts gains derived from trading, redemption, or retirement
of long-term securities from ordinary income tax.

The term gain as used in Section 32 (B) (7) (g) does not include interest, which represents
forbearance for the use of money. Gains from sale or exchange or retirement of bonds or other
certificate of indebtedness fall within the general category of "gains derived from dealings in
property" under Section 32 (A) (3), while interest from bonds or other certificate of indebtedness
falls within the category of "interests" under Section 32 (A) (4). The use of the term "gains from
sale" in Section 32 (B) (7) (g) shows the intent of Congress not to include interest as referred
under Sections 24, 25, 27, and 28 in the exemption. (BDO v. REPUBLIC, G.R. No. 198756, 13
January 2015, EN BANC)

Remedy available to the government to determine a taxpayer's income tax liability when his
records are inadequate or inaccurate. The government is allowed to resort to all evidence or
resources available to determine a taxpayer's income and to use methods to reconstruct his
income. (BIR vs. CA, G.R. No. 197590, November 24, 2014 citing Li Yao v. Collector, 119 Phil.
207, 222 [1963])

Expenditure method as a method used in reconstructing income. A method commonly used by


the government is the expenditure method, which is a method of reconstructing a taxpayer's
income by deducting the aggregate yearly expenditures from the declared yearly income. The
theory of this method is that when the amount of the money that a taxpayer spends during a
given year exceeds his reported or declared income and the source of such money is
unexplained, it may be inferred that such expenditures represent unreported or undeclared
income. (BIR vs. COURT OF APPEALS, G.R. No. 197590, November 24, 2014 citing Collector
v. Jamir, 114 Phil. 650, 651-652 [1962]; see also Annex "A" of Revenue Memorandum Order
No. 15-95, Guidelines and Investigative Procedures in the Development of Tax Fraud Cases
for Internal Revenue Officers)

Meaning of gross income as tax base for the Minimum Corporate Income Tax. [T]he 2% MCIT
under Section 27(E) of the NIRC of 1997 shall be based on the gross income of the domestic
corporation. The Court notes that gross income, as the basis for MCIT, is given a special
definition under Section 27(E)(4) of the NIRC of 1997, different from the general one under
Section 34 of the same Code.

According to the last paragraph of Section 27(E)(4) of the NIRC of 1997, gross income of
a domestic corporation engaged in the sale of service means gross receipts, less sales returns,
allowances, discounts and cost of services. "Cost of services" refers to all direct costs and
expenses necessarily incurred to provide the services required by the customers and clients
including (a) salaries and employee benefits of personnel, consultants, and specialists directly
rendering the service; and (b) cost of facilities directly utilized in providing the service, such as
depreciation or rental of equipment used and cost of supplies. Noticeably, inclusions in and
exclusions/deductions from gross income for MCIT purposes are limited to those directly
A Survey of Recent Jurisprudential Doctrines in Taxation Law 6
By Atty. Noel M. Ortega

arising from the conduct of the taxpayer's business. It is, thus, more limited than the gross
income used in the computation of basic corporate income tax. (CIR vs. PAL, G.R. No. 179259,
September 25, 2013, citing CIR v. PAL, Inc., G.R. No. 180066, 7 July 2009, 592 SCRA 237, 250)

The basic corporate income tax is different from the MCIT. [E]ven if the basic corporate income
tax and the MCIT are both income taxes under Section 27 of the NIRC of 1997, and one is paid
in place of the other, the two are distinct and separate taxes. x x x [T]he MCIT is different from
the basic corporate income tax, not just in the rates, but also in the bases for their computation.
(CIR vs. PAL, G.R. No. 179259, September 25, 2013, citing CIR v. PAL, Inc., G.R. No. 180066, 7
July 2009, 592 SCRA 237, 250)

Proper tax treatment of senior citizens discount. The 20% sales discount granted by
establishments to qualified senior citizens is now treated as tax deduction and not as tax credit.
[MERCURY DRUG CORPORATION vs. CIR, 654 SCRA 124 (2012)]

No prescriptive period for carry-over of excess income tax; Irrevocability rule. Under the new
law, in case of overpayment of income taxes, the remedies are still the same; and the availment
of one remedy still precludes the other. But unlike Section 69 of the old NIRC, the carry-over of
excess income tax payments is no longer limited to the succeeding taxable year. Unutilized
excess income tax payments may now be carried over to the succeeding taxable years until fully
utilized. In addition, the option to carry-over excess income tax payments is now irrevocable.
Hence, unutilized excess income tax payments may no longer be refunded. [BELLE CORP. vs.
CIR, G.R. No. 181298, 10 January 2011]

Three-fold purpose of the withholding tax system. In Chamber of Real Estate and Builders
Associations, Inc. v. The Executive Secretary, the Court has explained that the purpose of the
withholding tax system is three-fold: (1) to provide the taxpayer with a convenient way of
paying his tax liability; (2) to ensure the collection of tax, and (3) to improve the governments
cashflow. Under the withholding tax system, the payor is the taxpayer upon whom the tax is
imposed, while the withholding agent simply acts as an agent or a collector of the government
to ensure the collection of taxes. [RCBC vs. CIR, G.R. No. 170257, 7 September 2011 citing
CREBA supra, G.R. No. 160756, March 9, 2010, and Bank of America NT & SA v. CA, G.R. Nos.
103092 and 103106, 21 July 1994, 234 SCRA 302, 310.]

The taxpayer is not absolved of liability in case of failure by the withholding agent to perform
his duty to withhold and remit tax. [T]he liability of the withholding agent is independent from
that of the taxpayer. The former cannot be made liable for the tax due because it is the latter
who earned the income subject to withholding tax. The withholding agent is liable only insofar
as he failed to perform his duty to withhold the tax and remit the same to the government. The
liability for the tax, however, remains with the taxpayer because the gain was realized and
received by him. X x x [The taxpayer] remains liable for the payment of tax as [he] shares the
responsibility of making certain that the tax is properly withheld by the withholding agent, so
as to avoid any penalty that may arise from the non-payment of the withholding tax due.
[RCBC vs. CIR, G.R. No. 170257, 7 September 2011]

When the duty of the withholding agent attaches. [T]he obligation of the payor/employer to
deduct and withhold the related withholding tax arises at the time the income was paid or
accrued or recorded as an expense in the payor's/employer's books, whichever comes first.

Petitioner ING Bank accrued or recorded the bonuses as deductible expense in its books.
Therefore, its obligation to withhold the related withholding tax due from the deductions for
accrued bonuses arose at the time of accrual and not at the time of actual payment. (ING BANK
N.V. vs. CIR, G.R. No. 167679, July 22, 2015)
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By Atty. Noel M. Ortega

TRANSFER TAXES

BIR-issued certificate of payment of, or exception from, estate tax is a legal requirement before
the deposit of a decedent is released. Section 97 of the 1997 National Internal Revenue Code
provides: x x x If a bank has knowledge of the death of a person who maintained a bank deposit
account alone, or jointly with another, it shall not allow any withdrawal from the said deposit
account, unless the Commissioner has certified that the taxes imposed thereon by this Title have
been paid. x x x Taxes are created primarily to generate revenues for the maintenance of the
government. However, this particular tax may also serve as guard against the release of
deposits to persons who have no sufficient and valid claim over the deposits. Based on the
assumption that only those with sufficient and valid claim to the deposit will pay the taxes for
it, requiring the certificate from the BIR increases the chance that the deposit will be released
only to them. (PNB vs. Santos, G.R. Nos. 208293 & 208295, December 10, 2014.)

Obligation of the heirs in the payment of estate tax. Estate tax is the ultimate responsibility of
the heirs having inchoate right in the estate, should there be assets remaining, to be partitioned
and distributed. The inheritance tax is an obligation of the estate, indirectly the heirs.
(MARCELO INVESTMENT AND MANAGEMENT CORP. vs. MARCELO, JR., G.R. No.
209651, November 26, 2014)

May the actual claims of the creditors be fully allowed as deductions from the gross estate
despite their reduction or condonation through compromise agreements entered into by the
Estate with its creditors? Yes. There is no law, nor do we discern any legislative intent in our
tax laws, which disregards the date-of-death valuation principle and particularly provides that
post-death developments must be considered in determining the net value of the estate.
(DIZON vs. CTA, G.R. No. 140944, April 30, 2008)

Want of donative intent is not a defense against liability for donors tax in case of sale or
disposition of property for insufficient consideration. The absence of donative intent, if that be
the case, does not exempt the sales of stock transaction from donor's tax since Sec. 100 of the
NIRC categorically states that the amount by which the fair market value of the property
exceeded the value of the consideration shall be deemed a gift. Thus, even if there is no actual
donation, the difference in price is considered a donation by fiction of law. (PHILAM LIFE vs.
SECRETARY OF FINANCE, G.R. No. 210987, November 24, 2014)

VALUE ADDED TAX

An isolated transaction may be considered incidental transaction and, hence, VATable. It does
not follow that an isolated transaction cannot be an incidental transaction for purposes of VAT
liability. Indeed, a reading of Section 105 of the 1997 Tax Code would show that a transaction
in the course of trade or business includes transactions incidental thereto. (MINDANAO II
GEOTHERMAL PARTNERSHIP vs. CIR, G.R. Nos. 193301 & 194637, March 11, 2013)
The VAT system allows the recovery of excess input tax over output tax. Our VAT Law
provides for a mechanism that would allow VAT-registered persons to recover the excess input
taxes over the output taxes they had paid in relation to their sales. In Panasonic Communications
Imaging Corporation of the Philippines v. Commissioner of Internal Revenue, this Court explained that
the VAT is a tax on consumption, an indirect tax that the provider of goods or services may
pass on to his customers. Under the VAT method of taxation, which is invoice-based, an entity
can subtract from the VAT charged on its sales or outputs the VAT it paid on its purchases,
inputs and imports. [APPLIED FOOD INGREDIENTS CO., INC. vs. CIR, G.R. No. 184266,
11 November 2013, citing Panasonic, supra, G.R. No. 178090, 8 February, 2010, 612 SCRA 28,
33, citing Commissioner of Internal Revenue v. Seagate Technology (Philippines), 491 Phil. 317,
332 (2005)]
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By Atty. Noel M. Ortega

Meaning and purpose of the tax credit method under the VAT system. [A] tax credit is allowed
for taxes previously paid when the same goods and services are sold further in the chain of
transactions. The purpose of this tax crediting system is to prevent double taxation in the
subsequent sale of the same product and services that were already previously taxed. Taxes
previously paid are thus allowed as input VAT credits, which may be deducted from the output
VAT liability. (CARPIO, J., dissenting: FORT BONIFACIO DEVELOPMENT
CORPORATION vs. CIR, G.R. No. 173425, September 4, 2012)

A refund claim under Sec. 112 of the NIRC is relevant only to a VAT-taxpayer that has zero-
rated or effectively zero-rated sale. A taxpayer engaged in zero-rated or effectively zero-rated
sale may apply for the issuance of a tax credit certificate, or refund of creditable input tax due or
paid, attributable to the sale. [WESTERN MINDANAO POWER CORPORATION vs. CIR,
672 SCRA 350 (2012)]

Requirement for zero-rating of sale of service. The recipient of the service must be doing
business outside the Philippines for the transaction to qualify for zero-rating under Section
110(B) of the Tax Code. [ACCENTURE, INC. vs. CIR, 676 SCRA 325 (2012)]

Applicable rules for tax refunds of unutilized creditable input VAT. [I]t is Section 112 of the
NIRC which is applicable specifically to claims for tax credit certificates and tax refunds for
unutilized creditable input VAT, and not Section 229. xxx [T]he two-year period under Section
229 does not apply to appeals before the CTA with respect to claims for a refund or tax credit
for unutilized creditable input VAT since input VAT is not considered "excessively" collected.
Instead, xxx it is Section 112 which applies, thereby making the 120+30 day period prescribed
therein mandatory and jurisdictional in nature. (TAGANITO MINING CORPORATION vs.
COMMISSIONER, G.R. No. 201195, November 26, 2014)

Input VAT is not excessively or erroneously paid or collected as to bring it within the
operation of Section 229. Section 229 pertains to the recovery of taxes erroneously, illegally, or
excessively collected. San Roque stressed that input VAT is not 'excessively' collected as
understood under Section 229 because, at the time the input VAT is collected, the amount paid
is correct and proper. It is, therefore, Section 112 which applies specifically with regard to
claiming a refund or tax credit for unutilized creditable input VAT.

Prescriptive period of 2 years in Section 112 is reckoned from the end of the quarter when the
zero-rated sale was made and NOT from the date the input VAT was paid. Section 112 (A) is
clear that for VAT-registered persons whose sales are zero-rated or effectively zero-rated, a
claim for the refund or credit of creditable input tax that is due or paid, and that is attributable
to zero-rated or effectively zero-rated sales, must be filed within two years after the close of the
taxable quarter when such sales were made. The reckoning frame would always be the end of
the quarter when the pertinent sale or transactions were made, regardless of when the input
VAT was paid. (CBK POWER CO. LTD. vs. COMMISSIONER, G.R. Nos. 198729-30, January
15, 2014)

The reckoning point of the 120-day period is NOT the date of the application for refund. Section
112 (C) categorically provides that the 120-day period is counted from the date of submission
of complete documents in support of the application. xxx

[Under RMC 49-2003, or prior to RMC 54-2014 issued on 11 June 2014], upon filing of his
application for tax credit or refund for excess creditable input taxes, the taxpayer-claimant is
given thirty (30) days within which to complete the required documents, unless given further
extension by the head of the processing unit [of the BIR]. If, in the course of the investigation
and processing of the claim, additional documents are required for the proper determination of
the legitimate amount of claim, the taxpayer-claimants shall submit such documents within
thirty (30) days from request of the investigating/processing office. Notice, by way of a request
from the tax collection authority to produce the complete documents in these cases, became
A Survey of Recent Jurisprudential Doctrines in Taxation Law 9
By Atty. Noel M. Ortega

essential. It is only upon the submission of these documents that the 120-day period would
begin to run. xxx

Thus, xxx it becomes apparent that, for purposes of determining when the supporting
documents have been completed it is the taxpayer who ultimately determines when complete
documents have been submitted for the purpose of commencing and continuing the running of the 120-
day period. After all, he may have already completed the necessary documents the moment he
filed his administrative claim, in which case, the 120-day period is reckoned from the date of
filing. The taxpayer may have also filed the complete documents on the 30th day from filing of
his application, pursuant to RMC No. 49-2003. He may very well have filed his supporting
documents on the first day he was notified by the BIR of the lack of the necessary documents. In
such cases, the 120-day period is computed from the date the taxpayer is able to submit the
complete documents in support of his application.

[However], under the current rule, the reckoning of the 120-day period has been
withdrawn from the taxpayer by RMC 54-2014, since it requires him at the time he files his
claim to complete his supporting documents and attest that he will no longer submit any other
document to prove his claim. Further, the taxpayer is barred from submitting additional
documents after he has filed his administrative claim. (PILIPINAS TOTAL GAS, INC. vs. CIR,
G.R. No. 207112, December 8, 2015, EN BANC)

Mandatory and jurisdictional nature of the 120-day period. In the Aichi case cited by both the
CTA Division and the CTA En Banc, the Court held that the observance of the 120-day period is
a mandatory and jurisdictional requisite to the filing of a judicial claim for refund/credit of
input VAT before the CTA. Consequently, its non-observance would lead to the dismissal of the
judicial claim on the ground of lack of jurisdiction. (MINDANAO II GEOTHERMAL
PARTNERSHIP vs. CIR, G.R. No. 204745, December 8, 2014; See also CIR v. Aichi Forging
Company of Asia, Inc., G.R. No. 184823, October 6, 2010; see also Taganito Mining Corp. vs.
Commissioner, G.R. No. 198076, November 19, 2014 and Visayas Geothermal Power
Company vs. Commissioner, G.R. No. 197525, June 4, 2014)

Exception to the mandatory 120-day waiting period. [I]n CIR v. San Roque Power Corporation
(San Roque), the Court recognized an exception to the mandatory and jurisdictional nature of
the 120-day period. It ruled that BIR Ruling No. DA-489-03 dated December 10, 2003 provided a
valid claim for equitable estoppel under Section 246 of the NIRC. In essence, the aforesaid BIR
Ruling stated that the "taxpayer-claimant need not wait for the lapse of the 120-day period
before it could seek judicial relief with the CTA by way of Petition for Review." (MINDANAO
II GEOTHERMAL PARTNERSHIP vs. CIR, G.R. No. 204745, December 8, 2014; see also CIR
v. San Roque Power Corporation, G.R. Nos. 187485, 196113, and 197156, February 12, 2013, 690
SCRA 336)

Exception to the mandatory and jurisdictional nature of the 120+30 day period. As an exception
to the mandatory and jurisdictional nature of the 120+30 day period, judicial claims filed from
the issuance of BIR Ruling No. DA-489-03 on December 10, 2003 up to its reversal in Aichi on
October 6, 2010, need not wait for the lapse of the 120+30 day period, in consonance with the
principle of equitable estoppel. (TAGANITO MINING CORPORATION vs.
COMMISSIONER, G.R. No. 201195, November 26, 2014; see also Taganito Mining
Corporation v. CIR, G.R. No. 197591, June 18, 2014)

Reconciliation of Aichi and San Roque. [I]n Taganito Mining Corporation v. CIR, the Court
reconciled the pronouncements in the Aichi and San Roque cases in the following manner: x x x
the rule must therefore be that during the period December 10, 2003 (when BIR Ruling No. DA-
489-03 was issued) to October 6, 2010 (when the Aichi case was promulgated), taxpayers-
claimants need not observe the 120-day period before it could file a judicial claim for refund of
excess input VAT before the CTA. Before and after the aforementioned period (i.e., December
10, 2003 to October 6, 2010), the observance of the 120-day period is mandatory and
jurisdictional to the filing of such claim. (MINDANAO II GEOTHERMAL PARTNERSHIP vs.
A Survey of Recent Jurisprudential Doctrines in Taxation Law 10
By Atty. Noel M. Ortega

CIR, G.R. No. 204745, December 8, 2014; see also Taganito Mining Corporation v. CIR, G.R.
No. 197591, June 18, 2014)

The two-year period in Sec. 112 of the NIRC applies to administrative claims only. Aichi also
clarified that the two (2)-year prescriptive period applies only to administrative claims and not
to judicial claims. Succinctly put, once the administrative claim is filed within the two (2)-year
prescriptive period, the claimant must wait for the 120-day period to end and, thereafter, he is
given a 30-day period to file his judicial claim before the CTA, even if said 120-day and 30-day
periods would exceed the aforementioned two (2)-year prescriptive period. (MINDANAO II
GEOTHERMAL PARTNERSHIP vs. CIR, G.R. No. 204745, December 8, 2014, citing Taganito
Mining Corporation v. CIR, G.R. No. 197591, June 18, 2014; see also NORTHERN
MINDANAO POWER CORP. vs. CIR, G.R. No. 185115, 18 February 2015)

Summary of rules on prescriptive periods for claiming credit/refund of input VAT. [T]he Court
summarized the rules x x x, to wit:

SUMMARY OF RULES ON PRESCRIPTIVE PERIODS FOR


CLAIMING REFUND OR CREDIT OF INPUT VAT

The [rules] may be summed up as follows:

A. Two-Year Prescriptive Period

1. It is only the administrative claim that must be filed within the two-year
prescriptive period. (Aichi)

2. The proper reckoning date for the two-year prescriptive period is the close of the
taxable quarter when the relevant sales were made. (San Roque)

3. The only other rule is the Atlas ruling, which applied only from 8 June 2007 to 12
September 2008. Atlas states that the two-year prescriptive period for filing a claim for
tax refund or credit of unutilized input VAT payments should be counted from the date
of filing of the VAT return and payment of the tax. (San Roque)

B. 120+30 Day Period

1. The taxpayer can file an appeal in one of two ways: (1) file the judicial claim
within thirty days after the Commissioner denies the claim within the 120-day period, or
(2) file the judicial claim within thirty days from the expiration of the 120-day period if
the Commissioner does not act within the 120-day period.

2. The 30-day period always applies, whether there is a denial or inaction on the
part of the CIR.

3. As a general rule, the 30-day period to appeal is both mandatory and


jurisdictional. (Aichi and San Roque)

4. As an exception to the general rule, premature filing is allowed only if filed


between 10 December 2003 and 5 October 2010, when BIR Ruling No. DA-489-03 was
still in force. (San Roque)

5. Late filing is absolutely prohibited, even during the time when BIR Ruling No.
DA-489-03 was in force. (San Roque) (SILICON PHILS., INC. vs. CIR, G.R. No. 173241,
25 March 2015, citing CIR vs. Mindanao II Geothermal Partnership, G.R. No. 191498,
January 15, 2014, 713 SCRA 645, 676-677)
A Survey of Recent Jurisprudential Doctrines in Taxation Law 11
By Atty. Noel M. Ortega

Substantiation requirements for tax refunds of unutilized creditable input VAT. The Supreme
Court has consistently held as fatal the failure to print the word zero-rated on the Value-
Added Tax (VAT) invoices or official receipts in claims for a refund or credit of input VAT on
zero-rated sales. [WESTERN MINDANAO POWER CORPORATION vs. CIR, 672 SCRA 350
(2012); see also EASTERN TELECOMMUNICATIONS PHIL., INC. vs. CIR, 679 SCRA 305
(2012)]

Substantiation requirements for tax refunds of unutilized creditable input VAT with regard to
importation of goods or properties. [U]nder Sections 110 (A) and 113 (A) of the NIRC, any input
tax that is subject of a claim for refund must be evidenced by a VAT invoice or official receipt.
With regard to the importation of goods or properties, however, Section 4.110-8 of R.R. No. 16-
05, as amended, further requires that an import entry or other equivalent document showing
actual payment of VAT on the imported goods must also be submitted, to wit:

SECTION 4.110-8. Substantiation of Input Tax Credits. (a) Input taxes for
the importation of goods or the domestic purchase of goods, properties or services made
in the course of trade or business, whether such input taxes shall be credited against
zero-rated sale, non-zero-rated sales, or subjected to the 5% Final Withholding VAT,
must be substantiated and supported by the following documents and must be reported
in the information returns required to be submitted to the Bureau:

(1) For the importation of goods import entry or other equivalent


document showing actual payment of VAT on the imported goods.

In relation to this requirement, Customs Administrative Order No. 2-95 provides:

2.3 The Bureau of Customs Official Receipt (BCOR) will no longer be issued
by the AABs (Authorized Agent Banks) for the duties and taxes collected. In lieu thereof,
the amount of duty and tax collected including other required information must be
machine validated directly on the following import documents and signed by the duly
authorized bank official:

2.3.1 Import Entry and Internal Revenue Declaration (IEIRD) for final
payment of duties and taxes.

xxx xxx xxx

From the foregoing, it is apparent that an IEIRD is required to properly substantiate the
payment of the duties and taxes on imported goods. (TAGANITO MINING CORPORATION
vs. COMMISSIONER, G.R. No. 201195, November 26, 2014)

Significance of the difference between a sales invoice and an official receipt as evidence for
zero-rated transactions. [T]his Court declared in KEPCO Philippines Corporation v.
Commissioner of Internal Revenue, that the VAT invoice is the seller's best proof of the sale of
the goods or services to the buyer while the VAT receipt is the buyer's best evidence of the
payment of goods or services received from the seller. Thus, the High Court concluded that
VAT invoice and VAT receipt should not be confused as referring to one and the same thing.
Certainly, neither does the law intend the two to be used interchangeably. (AT&T
COMMUNICATIONS SERVICES PHILIPPINES, INC. vs. COMMISSIONER, G.R. No.
185969, November 19, 2014 citing KEPCO Philippines Corporation v. Commissioner, G.R. No.
181858, 24 November 2010)

The claim for transitional/presumptive input tax credit under Section 105 of the old NIRC is
not limited only to "improvements" on real properties. On its face, there is nothing in Section
105 of the Old NIRC that prohibits the inclusion of real properties, together with the
improvements thereon, in the beginning inventory of goods, materials and supplies, based on
which inventory the transitional input tax credit is computed. (FORT BONIFACIO
A Survey of Recent Jurisprudential Doctrines in Taxation Law 12
By Atty. Noel M. Ortega

DEVELOPMENT CORPORATION vs. COMMISSIONER, G.R. No. 175707, November 19,


2014)

Prior payment of taxes - sales tax under the old law or VAT under the present law - is NOT
necessary for the availment of the 8% (now 2%) transitional input tax credit. [A]ll that is
required is for the taxpayer to file a beginning inventory with the BIR. To require prior payment
of taxes . . . is not only tantamount to judicial legislation but would also render nugatory the
provision in Section 105 of the old NIRC that the transitional input tax credit shall be "8% of the
value of [the beginning] inventory or the actual [VAT] paid on such goods, materials and
supplies, whichever is higher" because the actual VAT (now 12%) paid on the goods, materials,
and supplies would always be higher than the 8% (now 2%) of the beginning inventory which,
following the view of Justice Carpio, would have to exclude all goods, materials, and supplies
where no taxes were paid. Clearly, limiting the value of the beginning inventory only to goods,
materials, and supplies, where prior taxes were paid, was not the intention of the law.
Otherwise, it would have specifically stated that the beginning inventory excludes goods,
materials, and supplies where no taxes were paid. (FORT BONIFACIO DEVELOPMENT
CORPORATION vs. COMMISSIONER, G.R. No. 175707, November 19, 2014 citing Fort
Bonifacio Development Corporation v. CIR, G.R. No. 173425, September 4, 2012)

Rationale for the transitional input tax credit. During that period of transition from non-VAT
to VAT status, the transitional input tax credit serves to alleviate the impact of the VAT on the
taxpayer. At the very beginning, the VAT-registered taxpayer is obliged to remit a significant
portion of the income it derived from its sales as output VAT. The transitional input tax credit
mitigates this initial diminution of the taxpayer's income by affording the opportunity to offset
the losses incurred through the remittance of the output VAT at a stage when the person is yet
unable to credit input VAT payments. (FORT BONIFACIO DEVELOPMENT
CORPORATION vs. COMMISSIONER, G.R. No. 175707, November 19, 2014)

Application for refund/credit of input VAT under Sec. 112 (A) does not require that both the
administrative and judicial claims should fall within the two-year prescriptive period. In fine,
the taxpayer can file its administrative claim for refund or credit at any time within the two-
year prescriptive period. If it files its claim on the last day of said period, it is still filed on time.
The CIR will have 120 days from such filing to decide the claim. If the CIR decides the claim on
the 120th day, or does not decide it on that day, the taxpayer still has 30 days to file its judicial
claim with the CTA; otherwise, the judicial claim would be, properly speaking, dismissed for
being filed out of time and not xxx prescribed. (COMMISSIONER vs. BURMEISTER AND
WAIN SCANDINAVIAN CONTRACTOR MINDANAO, INC., G.R. No. 190021, October 22,
2014)

TAX REMEDIES UNDER THE NIRC

Meaning of the statute of limitations on assessment and collection. The statute of limitations
on the right to assess and collect a tax means that once the period established by law for the
assessment and collection of taxes has lapsed, the government's corresponding right to enforce
that action is barred by provision of law. (COMMISSIONER vs. THE STANLEY WORKS
SALES (PHILS.), INC., G.R. No. 187589, December 3, 2014)

Extension of the period to assess and collect; Requisites. The period to assess and collect
deficiency taxes may be extended only upon a written agreement between the CIR and the
taxpayer prior to the expiration of the three-year prescribed period in accordance with Section
222 (b) of the NIRC. In relation to the implementation of this provision, the CIR issued Revenue
Memorandum Order (RMO) No. 20-90 10 on 4 April 1990 to provide guidelines on the proper
execution of the Waiver of the Statute of Limitations. (COMMISSIONER vs. THE STANLEY
WORKS SALES (PHILS.), INC., G.R. No. 187589, December 3, 2014)
A Survey of Recent Jurisprudential Doctrines in Taxation Law 13
By Atty. Noel M. Ortega

Remedies of a taxpayer who protests an assessment. [The rule] gives a protesting taxpayer xxx
only three options:

1. If the protest is wholly or partially denied by the CIR or his authorized representative,
then the taxpayer may appeal to the CTA within 30 days from receipt of the whole or
partial denial of the protest.

2. If the protest is wholly or partially denied by the CIR's authorized representative, then
the taxpayer may appeal to the CIR within 30 days from receipt of the whole or partial
denial of the protest.

3. If the CIR or his authorized representative failed to act upon the protest within 180
days from submission of the required supporting documents, then the taxpayer may
appeal to the CTA within 30 days from the lapse of the 180-day period.

To further clarify the three options: A whole or partial denial by the CIRs authorized
representative may be appealed to the CIR or the CTA. A whole or partial denial by the CIR
may be appealed to the CTA. The CIR or the CIRs authorized representatives failure to act
may be appealed to the CTA. There is no mention of an appeal to the CIR from the failure to
act by the CIR's authorized representative. xxx

A textual reading of Section 228 and Section 3.1.5 [of RR No. 12-99] will readily show that
neither Section 228 nor Section 3.1.5 provides for the remedy of an appeal to the CIR in case of
the RDs failure to act. The third option states that the remedy for failure to act by the CIR or his
authorized representative is to file an appeal to the CTA within 30 days after the lapse of 180
days from the submission of the required supporting documents. (PAGCOR vs. BIR, G.R. No.
208731, 27 January 2016)

Requisites of a valid waiver. [J]urisprudence is replete with requisites of a valid waiver:

1. The waiver must be in the proper form prescribed by RMO 20-90. The phrase
"but not after _______ 19 ___", which indicates the expiry date of the period agreed upon
to assess/collect the tax after the regular three-year period of prescription, should be
filled up.

2. The waiver must be signed by the taxpayer himself or his duly authorized
representative. In the case of a corporation, the waiver must be signed by any of its
responsible officials. In case the authority is delegated by the taxpayer to a
representative, such delegation should be in writing and duly notarized.

3. The waiver should be duly notarized.

4. The CIR or the revenue official authorized by him must sign the waiver
indicating that the BIR has accepted and agreed to the waiver. The date of such
acceptance by the BIR should be indicated. However, before signing the waiver, the CIR
or the revenue official authorized by him must make sure that the waiver is in the
prescribed form, duly notarized, and executed by the taxpayer or his duly authorized
representative.

5. Both the date of execution by the taxpayer and date of acceptance by the Bureau
should be before the expiration of the period of prescription or before the lapse of the
period agreed upon in case a subsequent agreement is executed.

6. The waiver must be executed in three copies, the original copy to be attached to
the docket of the case, the second copy for the taxpayer and the third copy for the Office
accepting the waiver. The fact of receipt by the taxpayer of his/her file copy must be
indicated in the original copy to show that the taxpayer was notified of the acceptance of
A Survey of Recent Jurisprudential Doctrines in Taxation Law 14
By Atty. Noel M. Ortega

the BIR and the perfection of the agreement. (COMMISSIONER vs. THE STANLEY
WORKS SALES (PHILS.), INC., G.R. No. 187589, December 3, 2014, citing CIR v.
Kudos Metal Corporation, G.R. No. 178087, 5 May 2010, 620 SCRA 232, 243-244, citing
Philippine Journalists, Inc. v. Commissioner of Internal Revenue, 488 Phil. 218, 235
[2004])

Waiver of the statute of limitations is not a waiver of the right to invoke the defense of
prescription. A waiver of the statute of limitations, whether on assessment or collection, should
not be construed as a waiver of the right to invoke the defense of prescription but, rather, an
agreement between the taxpayer and the BIR to extend the period to a date certain, within
which the latter could still assess or collect taxes due. The waiver does not imply that the
taxpayer relinquishes the right to invoke prescription unequivocally. (COMMISSIONER vs.
THE STANLEY WORKS SALES (PHILS.), INC., G.R. No. 187589, December 3, 2014 citing
BPI v. CIR, 510 Phil. 1 [2005])

Consequence of an invalid waiver. Since the Waiver xxx is defective and therefore invalid, it
produces no effect; thus, the prescriptive period for collecting deficiency income tax xxx was
never suspended or tolled. Consequently, the right to enforce collection based on Assessment
Notice xxx has already prescribed. (COMMISSIONER vs. THE STANLEY WORKS SALES
(PHILS.), INC., G.R. No. 187589, December 3, 2014)

Significance of adopting a statute of limitation on tax assessment and collection. The law
prescribing a limitation of actions for the collection of the income tax is beneficial both to the
Government and to its citizens; to the Government because tax officers would be obliged to act
promptly in the making of assessment, and to citizens because after the lapse of the period of
prescription citizens would have a feeling of security against unscrupulous tax agents who will
always find an excuse to inspect the books of taxpayers, not to determine the latter's real
liability, but to take advantage of every opportunity to molest peaceful, law-abiding citizens.
Without such legal defense taxpayers would furthermore be under obligation to always keep
their books and keep them open for inspection subject to harassment by unscrupulous tax
agents. (COMMISSIONER vs. THE STANLEY WORKS SALES (PHILS.), INC., G.R. No.
187589, December 3, 2014 citing Republic of the Philippines v. Ablaza, 108 Phil. 1105, 1108
[1960])

The running of the statute of limitations is suspended only when the BIR is completely
unaware of the whereabouts of the taxpayer. It is true that, under Section 223 of the Tax Reform
Act of 1997, the running of the Statute of Limitations provided under the provisions of Sections
203 and 222 of the same Act shall be suspended when the taxpayer cannot be located in the
address given by him in the return filed upon which a tax is being assessed or collected. In
addition, Section 11 of Revenue Regulation No. 12-85 states that, in case of change of address,
the taxpayer is required to give a written notice thereof to the Revenue District Officer or the
district having jurisdiction over his former legal residence and/or place of business. However,
this Court agrees with both the CTA Special First Division and the CTA En Banc in their ruling
that the abovementioned provisions on the suspension of the three-year period to assess apply
only if the BIR Commissioner is not aware of the whereabouts of the taxpayer. x x x

Hence, despite the absence of a formal written notice of respondent's change of address, the fact
remains that petitioner became aware of respondent's new address as shown by documents
replete in its records. As a consequence, the running of the three-year period to assess
respondent was not suspended and has already prescribed. (COMMISSIONER vs. BASF
COATING + INKS PHILS., INC., G.R. No. 198677, November 26, 2014)

Deficiency assessment not a prerequisite for criminal prosecution for tax evasion. In Ungab v.
Judge Cusi, Jr., we ruled that tax evasion is deemed complete when the violator has knowingly
and willfully filed a fraudulent return with intent to evade and defeat a part or all of the tax.
Corollarily, an assessment of the tax deficiency is not required in a criminal prosecution for tax
evasion. However, in Commissioner of Internal Revenue v. Court of Appeals, we clarified that
A Survey of Recent Jurisprudential Doctrines in Taxation Law 15
By Atty. Noel M. Ortega

although a deficiency assessment is not necessary, the fact that a tax is due must first be proved
before one can be prosecuted for tax evasion. (BIR vs. COURT OF APPEALS, G.R. No. 197590,
November 24, 2014 citing Ungab supra, 186 Phil. 604 [1980] and CIR vs. CA, 327 Phil. 1 [1996])

7Distinction between tax credit and tax refund. Tax credit is not synonymous to tax refund. Tax
refund is defined as the money that a taxpayer overpaid and is thus returned by the taxing
authority. Tax credit, on the other hand, is an amount subtracted directly from one's total tax
liability. It is any amount given to a taxpayer as a subsidy, a refund, or an incentive to
encourage investment. (FORT BONIFACIO DEVELOPMENT CORPORATION vs.
COMMISSIONER, G.R. No. 175707, November 19, 2014 citing Fort Bonifacio Development
Corporation v. CIR, G.R. No. 173425, January 22, 2013)

The presentation of the succeeding quarterly ITRs to prove the fact of non-carrying over is NOT
indispensable in claims for refund of excess creditable income tax under Sec. 76 of the NIRC;
The presentation of the succeeding annual ITR is sufficient. What Section 76 requires, just like
in all civil cases, is to prove the prima facie entitlement to a claim, including the fact of not
having carried over the excess credits to the subsequent quarters or taxable year. It does not say
that to prove such a fact, succeeding quarterly ITRs are absolutely needed. xxx

Indeed, an annual ITR contains the total taxable income earned for the four (4) quarters of a
taxable year, as well as deductions and tax credits previously reported or carried over in the
quarterly income tax returns for the subject period. xxx Thus, the presentation of the annual ITR
would suffice in proving that prior year's excess credits were not utilized for the taxable year in
order to make a final determination of the total tax due. (WINEBRENNER & IIGO
INSURANCE BROKERS, INC. v. CIR, G.R. No. 206526, 28 January 2015)

Evidentiary value of BIR Form 2307 in claims for refund. In claims for excess and unutilized
creditable withholding tax, the submission of BIR Forms 2307 is to prove the fact of withholding
of the excess creditable withholding tax being claimed for refund. This is clear in the provision
of Section 58.3, RR 2-98, as amended, and in various rulings of the Court. In the words of
Section 2.58.3, RR 2-98, That the fact of withholding is established by a copy of a statement
duly issued by the payor (withholding agent) to the payee showing the amount paid and the
amount of tax withheld therefrom.

Hence, the probative value of BIR Form 2307, which is basically a statement showing the
amount paid for the subject transaction and the amount of tax withheld therefrom, is to
establish only the fact of withholding of the claimed creditable withholding tax. There is
nothing in BIR Form No. 2307 which would establish either utilization or non-utilization, as the
case may be, of the creditable withholding tax.

It must be noted that PNB had already presented the Withholding Tax Remittance Returns (BIR
Form No. 1606) relevant to the transaction. The said forms show that the amount of
P74,400,028.49 was withheld and paid by PNB in the year 2003. It contains, among other data,
the name of the payor and the payee, the description of the property subject of the transaction,
and the determination of the taxable base, and the tax rate applied. These are the very same key
information that would be gathered from BIR Form No. 2307.

While perhaps it may be necessary to prove that the taxpayer did not use the claimed creditable
withholding tax to pay for his/its tax liabilities, there is no basis in law or jurisprudence to say
that BIR Form No. 2307 is the only evidence that may be adduced to prove such non-use. (PNB
v. CIR, G.R. No. 206019, 18 March 2015)

Exception to the rule that it is the statutory taxpayer which has the legal personality to file a
claim for refund. The rule that it is the statutory taxpayer which has the legal personality to file
a claim for refund finds no applicability in this case. In Philippine Airlines, Inc. v.
Commissioner of Internal Revenue, the Court distinguished between the kinds of exemption
enjoyed by a claimant in order to determine the propriety of a tax refund claim. If the law
A Survey of Recent Jurisprudential Doctrines in Taxation Law 16
By Atty. Noel M. Ortega

confers an exemption from both direct or indirect taxes, a claimant is entitled to a tax refund
even if it only bears the economic burden of the applicable tax. On the other hand, if the
exemption conferred only applies to direct taxes, then the statutory taxpayer is regarded as the
proper party to file the refund claim.

In PASAR's case, Section 17 of P.D. No. 66, as affirmed in Commissioner of Customs,


specifically declared that supplies, including petroleum products, whether used directly or
indirectly, shall not be subject to internal revenue laws and regulations. Such exemption
includes the payment of excise taxes, which was passed on to PASAR by Petron. PASAR,
therefore, is the proper party to file a claim for refund. (COMMISSIONER vs. PHILIPPINE
ASSOCIATED SMELTING AND REFINING CORPORATION, G.R. No. 186223, October 1,
2014, citing Philippine Airlines, Inc. v. Commissioner, G.R. No. 198759, July 1, 2013, 700
SCRA 322.)

The OSG represents the government in appeals concerning tax cases. Parenthetically, petitioner
is not represented by the Office of the Solicitor General (OSG) in instituting the present petition,
which contravenes established doctrine that the OSG shall represent the Government of the
Philippines, its agencies and instrumentalities and its officials and agents in any litigation,
proceeding, investigation, or matter requiring the services of lawyers. (BUREAU OF
CUSTOMS vs. SHERMAN, G.R. No. 190487, April 13, 2011 citing Section 35 (1), Chapter 12,
Title III, Book IV of the Administrative Code of 1987)

THE COURT OF TAX APPEALS

CTA is a highly specialized body that reviews tax cases. The Court of Tax Appeals (CTA) is a
highly specialized court dedicated exclusively to the study and consideration of reveue-related
problems, in which it has necessarily developed an expertise. [WESTERN MINDANAO
POWER CORPORATION vs. CIR, 672 SCRA 350 (2012)]

CTA is a court of special jurisdiction. It has long been established that the CTA is a court of
special jurisdiction. As such, it can only take cognizance of such matters as are clearly within its
jurisdiction. (AT&T COMMUNICATIONS SERVICES PHILIPPINES, INC. vs.
COMMISSIONER, G.R. No. 185969, November 19, 2014 citing Ker & Company, Ltd. v. Court
of Tax Appeals, 114 Phil. 1220 [1962])

Effect of an ADMINISTRATIVE appeal from inaction of the CIRs authorized representative. In


a case, the taxpayer appealed to the CIR when his protest was not acted upon by the Regional
Director (RD). When the CIR also failed to act, the taxpayer appealed to the CTA. The Supreme
Court ruled that the CTA did not acquire jurisdiction as the appeal was filed prematurely. The
taxpayer should have waited for the decision of the RD or the CIR before filing an appeal to the
CTA. (PAGCOR vs. BIR, G.R. No. 208731, 27 January 2016)

Appeal from inaction distinguished from appeal due to dismissal at the administrative level
due to the failure of the taxpayer to submit supporting documents. If an administrative claim
was dismissed by the CIR due to the taxpayer's failure to submit complete documents despite
notice/request, then the judicial claim before the CTA would be dismissible, not for lack of
jurisdiction, but for the taxpayer's failure to substantiate the claim at the administrative level.
When a judicial claim for refund or tax credit in the CTA is an appeal of an unsuccessful
administrative claim, the taxpayer has to convince the CTA that the CIR had no reason to deny
its claim. It, thus, becomes imperative for the taxpayer to show the CTA that not only is he
entitled under substantive law to his claim for refund or tax credit, but also that he satisfied all
the documentary and evidentiary requirements for an administrative claim. It is, thus, crucial
for a taxpayer in a judicial claim for refund or tax credit to show that its administrative claim
should have been granted in the first place. Consequently, a taxpayer cannot cure its failure to
submit a document requested by the BIR at the administrative level by filing the said document
A Survey of Recent Jurisprudential Doctrines in Taxation Law 17
By Atty. Noel M. Ortega

before the CTA. (PILIPINAS TOTAL GAS, INC. vs. CIR, G.R. No. 207112, December 8, 2015,
EN BANC)

The CTA has jurisdiction over collection suit for unpaid taxes and customs duties filed before
the RTC. Section 3, Rule 4 of the Revised Rules of the Court of Tax Appeals xxx explicitly
provide that the CTA has exclusive appellate jurisdiction over tax collection cases originally
decided by the RTC. (MITSUBISHI MOTORS PHILS. CORP. v. BOC, G.R. No. 209830, 17
June 2015)

The CTA jurisdiction over other matters arising under [the NIRC]; Meaning of the phrase
other matters. [T]he phrase other matters arising under this Code, as stated in the second
paragraph of Section 4 of the NIRC, should be understood as pertaining to those matters
directly related to the preceding phrase disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto and must therefore not be
taken in isolation to invoke the jurisdiction of the CTA. In other words, the subject phrase
should be used only in reference to cases that are, to begin with, subject to the exclusive
appellate jurisdiction of the CTA, i.e., those controversies over which the CIR had exercised her
quasi-judicial functions or her power to decide disputed assessments, refunds or internal
revenue taxes, fees or other charges, penalties imposed in relation thereto, not to those that
involved the CIR's exercise of quasi-legislative powers. (CIR vs. CTA and PETRON
CORPORATION, G.R. No. 207843, July 15, 2015)

The CTA has jurisdiction over appeals from the Secretary of Finances review of the CIRs
ruling as other matters arising under the NIRC. [A BIR ruling is the] Commissioner's exercise
of power under the first paragraph of Sec. 4 of the NIRC the power to interpret tax laws. x x x
Sec. 4 of the NIRC readily provides that the Commissioner's power to interpret the provisions of
this Code and other tax laws is subject to review by the Secretary of Finance. x x x Admittedly,
there is no provision in law that expressly provides where exactly the ruling of the Secretary of
Finance under the adverted NIRC provision is appealable to. However, We find that Sec. 7 (a)
(1) of RA 1125, as amended, addresses the seeming gap in the law as it vests the CTA, albeit
impliedly, with jurisdiction over the CA petition as "other matters" arising under the NIRC or
other laws administered by the BIR. x x x Even though the provision suggests that it only
covers rulings of the Commissioner, We hold that it is, nonetheless, sufficient enough to include
appeals from the Secretary's review under Sec. 4 of the NIRC. (PHILAMLIFE vs. SECRETARY
OF FINANCE, G.R. No. 210987, 24 November 2014)

The CTA has jurisdiction over a petition for certiorari under Rule 65 questioning the propriety
of an interlocutory order issued by the RTC in a local tax case. [T]he power of the CTA includes
that of determining whether or not there has been grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling
within the exclusive appellate jurisdiction of the tax court. It, thus, follows that the CTA, by
constitutional mandate, is vested with jurisdiction to issue writs of certiorari in these cases.

[T]he authority of the CTA to take cognizance of petitions for certiorari questioning
interlocutory orders issued by the RTC in a local tax case is included in the powers granted by
the Constitution as well as inherent in the exercise of its appellate jurisdiction. (THE CITY OF
MANILA vs. HON. CARIDAD H. GRECIA-CUERDO, G.R. No. 175723, February 4, 2014)

The CTA has no jurisdiction when the questioned ordinance imposes a fee which is not in the
nature of a tax. Considering that the fees in Ordinance No. 18 are not in the nature of local
taxes, and Smart is questioning the constitutionality of the ordinance, the CTA correctly
dismissed the petition for lack of jurisdiction. Likewise, Section 187 of the LGC, which outlines
the procedure for questioning the constitutionality of a tax ordinance, is inapplicable, rendering
unnecessary the resolution of the issue on non-exhaustion of administrative remedies. (SMART
COMMUNICATIONS, INC. vs. MUNICIPALITY OF MALVAR, G.R. No. 204429, February
18, 2014)
A Survey of Recent Jurisprudential Doctrines in Taxation Law 18
By Atty. Noel M. Ortega

An instance when the CTA acquires jurisdiction over an appeal from a decision of the RTC in a
real property tax case. [T]he issue is whether or not the CTA has jurisdiction to review the
decision of the RTC which concerns a petition for declaratory relief involving real property
taxes. The Supreme Court held in the affirmative, explaining thus

First, xxx the general meaning of local taxes should be adopted in relation to
Paragraph (a) (3) of Section 7 of R.A. 9282, which necessarily includes real property taxes. Xxx

Second, xxx when the legality or validity of the assessment is in question, and not its
reasonableness or correctness, appeals to the LBAA, and subsequently to the CBAA, pursuant
to Sections 226 and 229 of the LGC, are not necessary. Stated differently, in the event that the
taxpayer questions the authority and power of the assessor to impose the assessment, and of the
treasurer to collect the real property tax, resort to judicial action may prosper.

In the case at bar, the claim of petitioner essentially questions the very authority and power of
the Municipal Assessor to impose the assessment and of the Municipal Treasurer to collect the
real property tax with respect to the machineries and equipment located in the Navotas I and II
power plants. Certainly, it does not pertain to the correctness of the amounts assessed but
attacks the validity of the assessment of the taxes itself. (NATIONAL POWER
CORPORATION vs. MUNICIPAL GOVERNMENT OF NAVOTAS, G.R. No. 192300,
November 24, 2014)

CTA has authority to issue writ of injunction and to dispense with the requirement of
depositing the money or posting of a bond. [W]henever it is determined by the courts that the
method employed by the Collector of Internal Revenue in the collection of tax is not sanctioned
by law, the bond requirement under Section 11 of R.A. No. 1125 should be dispensed with. The
purpose of the rule is not only to prevent jeopardizing the interest of the taxpayer, but more
importantly, to prevent the absurd situation wherein the court would declare that the
collection by the summary methods of distraint and levy was violative of law, and then, in the
same breath require the petitioner to deposit or file a bond as a prerequisite for the issuance of a
writ of injunction. (SPS. PACQUIAO vs. CTA, G.R. No. 213394, 6 April 2016)

LOCAL AND REAL PROPERTY TAX

Source of local government units taxing powers. The power of the local government units to
impose and collect taxes is derived from the Constitution itself which grants them the power to
create its own sources of revenues and to levy taxes, fees and charges subject to such guidelines
and limitation as the Congress may provide. (CITY OF IRIGA vs. CASURECO III, G.R. No.
192945, 5 September 2012; See Section 5, Article X, 1987 Constitution)

Situs of taxation with regard to excise or privilege tax in local taxation. It should be stressed
that what the petitioner seeks to collect from CASURECO III is a franchise tax, which as
defined, is a tax on the exercise of a privilege. As Section 137 of the LGC provides, franchise tax
shall be based on gross receipts precisely because it is a tax on business, rather than on persons
or property. Since it partakes of the nature of an excise tax, the situs of taxation is the place
where the privilege is exercised, in this case in the City of Iriga, where CASURECO III has its
principal office and from where it operates, regardless of the place where its services or
products are delivered. (CITY OF IRIGA vs. CASURECO III, G.R. No. 192945, 5 September
2012; See Section 5, Article X, 1987 Constitution)

Double taxation as a ground to invalidate the assessment and collection of local tax. Facts: The
City of Manila assessed and collected taxes from the individual petitioners pursuant to Section
15 (Tax on Wholesalers, Distributors, or Dealers) and Section 17 (Tax on Retailers) of the
Revenue Code of Manila. At the same time, the City of Manila imposed additional taxes upon
the petitioners pursuant to Section 21 of the Revenue Code of Manila, as amended, as a
A Survey of Recent Jurisprudential Doctrines in Taxation Law 19
By Atty. Noel M. Ortega

condition for the renewal of their respective business licenses for the year 1999. Section 21 of the
Revenue Code of Manila stated: Section 21. Tax on Business Subject to the Excise, Value-Added or
Percentage Taxes under the NIRC. xxx A) On person who sells goods and services in the course of
trade or businesses; . . .

Held: [A]ll the elements of double taxation concurred upon the City of Manila's assessment on
and collection from the petitioners of taxes for the first quarter of 1999 pursuant to Section 21 of
the Revenue Code of Manila.

Firstly, because Section 21 of the Revenue Code of Manila imposed the tax on a person
who sold goods and services in the course of trade or business based on a certain percentage of
his gross sales or receipts in the preceding calendar year, while Section 15 and Section 17
likewise imposed the tax on a person who sold goods and services in the course of trade or
business but only identified such person with particularity, namely, the wholesaler, distributor
or dealer (Section 15), and the retailer (Section 17), all the taxes being imposed on the
privilege of doing business in the City of Manila in order to make the taxpayers contribute to
the city's revenues were imposed on the same subject matter and for the same purpose.

Secondly, the taxes were imposed by the same taxing authority (the City of Manila) and
within the same jurisdiction in the same taxing period (i.e., per calendar year).

Thirdly, the taxes were all in the nature of local business taxes. (NURSERY CARE
CORPORATION vs. ACEVEDO and THE CITY OF MANILA, G.R. No. 180651, July 30, 2014)

The tax on manufacturers pursuant to Sec. 143(a) cannot be simultaneously imposed on the
same manufacturer with the tax on other business subject to excise tax, VAT and percentage tax
under the NIRC pursuant to Sec. 143(h). The Court revisits Section 143 of the LGC, the very
source of the power of municipalities and cities to impose a local business tax, and to which any
local business tax imposed by petitioner City of Manila must conform. It is apparent from a
perusal thereof that when a municipality or city has already imposed a business tax on
manufacturers, etc. of liquors, distilled spirits, wines, and any other article of commerce,
pursuant to Section 143(a) of the LGC, said municipality or city may no longer subject the same
manufacturers, etc. to a business tax under Section 143(h) of the same Code. Section 143(h) may
be imposed only on businesses that are subject to excise tax, VAT, or percentage tax under the
NIRC, and that are "not otherwise specified in preceding paragraphs." (NURSERY CARE
CORPORATION vs. ACEVEDO and THE CITY OF MANILA, G.R. No. 180651, July 30, 2014
citing Swedish Match Philippines, Inc. vs. The Treasurer of the City of Manila, G.R. No.
181277, July 3, 2013, 700 SCRA 428, 439-442)

A LGU is not empowered under the LGC to impose business taxes on persons or entities
engaged in the business of manufacturing and distribution of petroleum products. [P]etitioners
assert that any activity that involves the production or manufacture and the distribution or
selling of any kind or nature as a means of livelihood or with a view to profit can be taxed by
the LGUs. They posit that the authority granted to them by Section 143 (h) of the LGC is so
broad that it practically covers any business that the sanggunian concerned may deem proper to
tax, even including businesses which are already subject to excise, value-added or percentage
tax under the National Internal Revenue Code (NIRC).

HELD: Indisputably, the power of LGUs to impose business taxes derives from Section 143 of
the LGC. However, the same is subject to the explicit statutory impediment provided for under
Section 133 (h) of the same Code which prohibits LGUs from imposing "taxes, fees or charges on
petroleum products." x x x Strictly speaking, as long as the subject matter of the taxing powers
of the LGUs is the petroleum products per se or even the activity or privilege related to the
petroleum products, such as manufacturing and distribution of said products, it is covered by
the said limitation and thus, no levy can be imposed. (BATANGAS CITY vs. PILIPINAS
SHELL PETROLEUM CORP., G.R. No. 187631, July 8, 2015)
A Survey of Recent Jurisprudential Doctrines in Taxation Law 20
By Atty. Noel M. Ortega

A government instrumentality is exempt from payment of real property tax. Philippine


Reclamation Authority (PRA) is a government instrumentality vested with corporate powers
and performing an essential public service x x x. Being an incorporated government
instrumentality, it is exempt from payment of real property tax. [REPUBLIC vs. CITY OF
PARAAQUE, 677 SCRA 246 (2012)]

Governing law on what constitutes real property for purposes of the real property tax. As
between the Civil Code, a general law governing property and property relations, and the Local
Government Code, a special law granting local government units the power to impose real
property tax, then the latter shall prevail. xxx Therefore, for determining whether machinery is
real property subject to real property tax, the definition and requirements under the Local
Government Code are controlling. (MERALCO v. CITY ASSESSOR, G.R. No. 166102, 5
August 2015)

MERLACOs transformers, electric posts, transmission lines, insulators, and electric meters
may qualify as "machinery" subject to real property tax under the Local Government Code.
While the Local Government Code still does not provide for a specific definition of "real
property," Sections 199 (o) and 232 of the said Code, respectively, gives an extensive definition
of what constitutes "machinery" and unequivocally subjects such machinery to real property
tax. The Court reiterates that the machinery subject to real property tax under the Local
Government Code "may or may not be attached, permanently or temporarily to the real
property;" and the physical facilities for production, installations, and appurtenant service
facilities, those which are mobile, self-powered or self-propelled, or are not permanently
attached must (a) be actually, directly, and exclusively used to meet the needs of the particular
industry, business, or activity; and (2) by their very nature and purpose, be designed for, or
necessary for manufacturing, mining, logging, commercial, industrial, or agricultural purposes.
(MERALCO v. CITY ASSESSOR, G.R. No. 166102, 5 August 2015)

Appraisal and assessment of machinery for purposes of real property tax; Consequence of non-
compliance. When it comes to machinery, its appraisal and assessment are particularly
governed by Sections 224 and 225 of the Local Government Code xxx. It is apparent from these
two provisions that every machinery must be individually appraised and assessed depending
on its acquisition cost, remaining economic life, estimated economic life, replacement or
reproduction cost, and depreciation. xxx

The Court cannot help but attribute the lack of a valid notice of assessment to the apparent lack
of a valid appraisal and assessment conducted by the City Assessor of Lucena in the first place.
It appears that the City Assessor of Lucena simply lumped together all the transformers, electric
posts, transmission lines, insulators, and electric meters of MERALCO located in Lucena City
under Tax Declaration Nos. 019-6500 and 019-7394, contrary to the specificity demanded under
Sections 224 and 225 of the Local Government Code for appraisal and assessment of machinery.
The City Assessor and the City Treasurer of Lucena did not even provide the most basic
information such as the number of transformers, electric posts, insulators, and electric meters or
the length of the transmission lines appraised and assessed under Tax Declaration Nos. 019-
6500 and 019-7394. There is utter lack of factual basis for the assessment of the transformers,
electric posts, transmission lines, insulators, and electric meters of MERALCO. (MERALCO v.
CITY ASSESSOR, G.R. No. 166102, 5 August 2015)

Mactan Cebu International Airport Authority (MCIAA) is not liable for real property tax.
[MCIAA] is an instrumentality of the government; thus, its properties actually, solely and
exclusively used for public purposes, consisting of the airport terminal building, airfield,
runway, taxiway and the lots on which they are situated, are not subject to real property tax and
respondent City is not justified in collecting taxes from petitioner over said properties. x x x

[I]n 2006, the Court en banc decided a case that in effect reversed the 1996 Mactan ruling.
The 2006 MIAA case had x x x reached finality and had in fact been either affirmed or cited in
numerous cases by the Court. x x x
A Survey of Recent Jurisprudential Doctrines in Taxation Law 21
By Atty. Noel M. Ortega

To recall, in the 2006 MIAA case, we held that MIAA's airport lands and buildings are
exempt from real estate tax imposed by local governments; that it is not a GOCC but an
instrumentality of the national government, with its real properties being owned by the
Republic of the Philippines, and these are exempt from real estate tax. (MCIAA vs. CITY OF
LAPU-LAPU, G.R. No. 181756, June 15, 2015; see also Mactan-Cebu International Airport
Authority v. Marcos, 330 Phil. 392, 414 [1996] and Manila International Airport Authority v.
CA, 528 Phil. 181 [2006])

Beneficial use principle in real property taxation. Section 234 (a) of Republic Act No. 7160 states
that properties owned by the Republic of the Philippines are exempt from real property tax
except when the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person. Thus, the portions of the properties not leased to taxable entities are exempt
from real estate tax while the portions of the properties leased to taxable entities are subject to
real estate tax. [CITY OF PASIG vs. REPUBLIC, G.R. No. 185023, 24 August 2011]

Liability to pay real estate tax on properties owned by the Republic. The law imposes the
liability to pay real estate tax on the Republic of the Philippines for the portions of the
properties leased to taxable entities. It is, of course, assumed that the Republic of the Philippines
passes on the real estate tax as part of the rent to the lessees. [CITY OF PASIG vs. REPUBLIC,
G.R. No. 185023, 24 August 2011]

Delinquent patrimonial properties of the State may be levied upon and sold at public auction.
In the present case, the parcels of land are not properties of public dominion because they are
not intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads. Neither are they intended for some public
service or for the development of the national wealth. MPLDC leases portions of the properties
to different business establishments. Thus, the portions of the properties leased to taxable
entities are not only subject to real estate tax, they can also be sold at public auction to satisfy
the tax delinquency. [CITY OF PASIG vs. REPUBLIC, G.R. No. 185023, 24 August 2011]

Payment under protest is indispensable in protesting an assessment for real property tax. [T]he
requirement of payment under protest is a condition sine qua non before a protest or an
appeal questioning the correctness of an assessment of real property tax may be entertained. x x
x [I]f the property being taxed has not been dropped from the assessment roll, taxes must be
paid under protest if the exemption from taxation is insisted upon. (CAMP JOHN HAY
DEVELOPMENT CORPORATION vs. CENTRAL BOARD OF ASSESSMENT APPEALS,
G.R. No. 169234, 2 October 2013)

Posting of a surety bond before filing an appeal of the assessment with the LBAA constitutes
substantial compliance with the requirement of payment under protest in Section 252 of the
Local Government Code. By posting the surety bond, MERALCO may be considered to have
substantially complied with Section 252 of the Local Government Code for the said bond
already guarantees the payment to the Office of the City Treasurer of Lucena of the total
amount of real property taxes and penalties due on Tax Declaration Nos. 019-6500 and 019-7394.
(MERALCO v. CITY ASSESSOR, G.R. No. 166102, 5 August 2015)

Is the one (1) year redemption period of forfeited tax delinquent properties purchased by the
local government for want of a bidder reckoned from the date of the auction or sale or from the
date of the issuance of the declaration of forfeiture? It is without question that Section 263 of the
LGC lacks definiteness as to the reckoning point for the redemption of tax delinquent
properties. It merely employs the phrase, within one (1) year from the date of such forfeiture. x x x
The contemplated forfeiture in the provision points to the situation where the local
government ipso facto forfeits the property for want of a bidder. x x x the date of the x x x
forfeiture is rightfully the point in time when the owner is divested of certain attributes of
ownership over the property albeit only until the redemption of the property. This translates to
A Survey of Recent Jurisprudential Doctrines in Taxation Law 22
By Atty. Noel M. Ortega

no other event but to the date of the public auction. (CITY OF DAVAO vs. INTESTATE
ESTATE OF DALISAY, G.R. No. 207791, 15 July 2015)

The no-injunction rule does not apply to local taxes. [T]here is no express provision in the LGC
prohibiting courts from issuing an injunction to restrain local governments from collecting
taxes. x x x Nevertheless, it must be emphasized that although there is no express prohibition in
the LGC, injunctions enjoining the collection of local taxes are frowned upon. Courts therefore
should exercise extreme caution in issuing such injunctions. (ANGELES CITY vs. ANGELES
ELECTRIC CORPORATION, G.R. No. 166134, 29 June 2010)

TARIFF AND CUSTOMS

Acts constituting unlawful importation under Section 3601 of the TCCP. [U]nlawful
importation under Section 3601 of the TCCP [can be] committed [by] any of the following acts:
(1) fraudulently imported or brought into the Philippines the subject petroleum products,
contrary to law; (2) assisted in so doing; or (3) received, concealed, bought, sold or in any
manner facilitated the transportation, concealment or sale of such goods after importation,
knowing the same to have been imported contrary to law. (BOC v. DEVANADERA, G.R. No.
193253, 8 September 2015, EN BANC)

Acts constituting fraudulent practices under Section 3601 of the TCCP. [The] various
fraudulent practices against customs revenue under Section 3602 of the TCCP [may be] any of
the following acts or omissions xxx: (1) making or attempting to make any entry of imported or
exported article: (a) by means of any false or fraudulent invoice, declaration, affidavit, letter,
paper or by any means of any false statement, written or verbal; or (b) by any means of any false
or fraudulent practice whatsoever; or (2) knowingly effecting any entry of goods, wares or
merchandise, at less than the true weight or measures thereof or upon a false classification as to
quality or value, or by the payment of less than the amount legally due; or (3) knowingly and
willfully filing any false or fraudulent entry or claim for the payment of drawback or refund of
duties upon the exportation of merchandise; or (4) making or filing any affidavit, abstract,
record, certificate or other document, with a view to securing the payment to himself or others
of any drawback, allowance or refund of duties on the exportation of merchandise, greater than
that legally due thereon. (BOC v. DEVANADERA, G.R. No. 193253, 8 September 2015, EN
BANC)

Outright smuggling (Section 3601, TCCP) and technical smuggling (Section 3602, TCCP)
explained. In unlawful importation, also known as outright smuggling, goods and articles of
commerce are brought into the country without the required importation documents, or are
disposed of in the local market without having been cleared by the BOC or other authorized
government agencies, to evade the payment of correct taxes, duties and other charges. Such
goods and articles do not undergo the processing and clearing procedures at the BOC, and are
not declared through submission of import documents, such as the import entry and internal
revenue declaration.
In various fraudulent practices against customs revenue, also known as technical smuggling, on
the other hand, the goods and articles are brought into the country through fraudulent, falsified
or erroneous declarations, to substantially reduce, if not totally avoid, the payment of correct
taxes, duties and other charges. Such goods and articles pass through the BOC, but the
processing and clearing procedures are attended by fraudulent acts in order to evade the
payment of correct taxes, duties, and other charges. Often committed by means of
misclassification of the nature, quality or value of goods and articles, undervaluation in terms of
their price, quality or weight, and misdeclaration of their kind, such form of smuggling is made
possible through the involvement of the importers, the brokers and even some customs officials
and personnel. (BOC v. DEVANADERA, G.R. No. 193253, 8 September 2015, EN BANC)
A Survey of Recent Jurisprudential Doctrines in Taxation Law 23
By Atty. Noel M. Ortega

Exclusive jurisdiction of the Bureau of Customs over seizure cases. It is well settled that the
Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings, and
regular courts cannot interfere with his exercise thereof or stifle or put it at naught. The
Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to
hear and determine all questions touching on the seizure and forfeiture of dutiable goods.
Regional trial courts are devoid of any competence to pass upon the validity or regularity of
seizure and forfeiture proceedings conducted by the BOC and to enjoin or otherwise interfere
with these proceedings. Regional trial courts are precluded from assuming cognizance over
such matters even through petitions for certiorari, prohibition or mandamus. (AGRIEX CO.,
LTD. vs. VILLANUEVA, G.R. No. 158150, September 10, 2014 citing Subic Bay Metropolitan
Authority v. Rodriguez, G.R. No. 160270, April 23, 2010, 619 SCRA 176)

BOC acquires jurisdiction over imported goods even without a previously issued warrant of
seizure or detention (WSD). Verily, the rule is that from the moment imported goods are
actually in the possession or control of the Customs authorities, even if no warrant for seizure or
detention had previously been issued by the Collector of Customs in connection with the
seizure and forfeiture proceedings, the BOC acquires exclusive jurisdiction over such imported
goods for the purpose of enforcing the customs laws, subject to appeal to the Court of Tax
Appeals whose decisions are appealable to this Court. As we have clarified in Commissioner of
Customs v. Makasiar, the rule that RTCs have no review powers over such proceedings is
anchored upon the policy of placing no unnecessary hindrance on the government's drive, not
only to prevent smuggling and other frauds upon Customs, but more importantly, to render
effective and efficient the collection of import and export duties due the State, which enables the
government to carry out the functions it has been instituted to perform. (AGRIEX CO., LTD. vs.
VILLANUEVA, G.R. No. 158150, September 10, 2014 citing Subic Bay Metropolitan
Authority v. Rodriguez, G.R. No. 160270, April 23, 2010, 619 SCRA 176)

The BOC Commissioner has no power to regulate and supervise the customs broker profession.
CAO 3-2006 was issued by the then Commissioner of the Bureau of Customs (BOC) Napoleon
L. Morales, with the approval of then Secretary of Finance Margarito B. Teves, on March 2, 2006.
It covers the Rules and Regulations Governing the Accreditation of the Customs Brokers
Transacting with the BOC and essentially requires the accreditation by the BOC of customs
brokers who intend to practice before the BOC. x x x

Although we cannot deny that the BOC Commissioner has the mandate to enforce tariff laws
and prevent smuggling, these powers do not necessarily include the power to regulate and
supervise the customs broker profession through the issuance of CAO 3-2006.

The BOC Commissioner's power under Section 608 of the TCCP is a general grant of power to
promulgate rules and regulations necessary to enforce the provisions of the TCCP. x x x [T]his
general rule-making power gives way to the specific grant of power to promulgate rules and
regulations on the practice of customs brokers profession to the CSC Commissioner under
Section 3409 of the TCCP. x x x With the repeal of Section 3409 of the TCCP by RA 9280, this
specific rule-making power was transferred to the [Professional Regulatory Board for Customs
Brokers] to complement its supervisory and regulatory powers over customs brokers. (AIRLIFT
ASIA CUSTOMS BROKERAGE, INC. vs. CA, G.R. No. 183664. July 28, 2014)